<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1999
REGISTRATION NO. 333-77665
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MEDSCAPE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7375 13-3879679
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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134 WEST 29TH STREET
NEW YORK, NEW YORK 10001-5399
(212) 760-3100
------------------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAUL T. SHEILS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MEDSCAPE, INC.
134 WEST 29TH STREET
NEW YORK, NEW YORK 10001-5399
(212) 760-3100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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JOHN P. SCHMITT, ESQ. STEVEN A. MUSELES, ESQ.
PATTERSON, BELKNAP, WEBB & TYLER LLP HOGAN & HARTSON L.L.P.
1133 AVENUE OF THE AMERICAS 555 13TH STREET, N.W.
NEW YORK, NEW YORK 10036-6710 WASHINGTON, D.C. 20004-1109
(212) 336-2000 (202) 637-5600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN
DECLARED EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THAT WOULD NOT BE PERMITTED.
SUBJECT TO COMPLETION -- JULY 8, 1999
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PROSPECTUS
, 1999
MEDSCAPE LOGO
MEDSCAPE, INC.
SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
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MEDSCAPE, INC.: THE OFFERING:
- - We operate Medscape.com, a leading - We are offering shares of
professional healthcare Web site our common stock.
that provides comprehensive,
authoritative and timely medical - CBS Corporation has indicated an
information and interactive interest in purchasing
programs, and plan to launch a shares from us in the offering at
separate consumer Web site under the initial offering price less
the name CBS.Medscape.com. underwriting fees.
- - Medscape, Inc. - The underwriters have an option to
134 West 29th Street purchase an additional shares
New York, New York 10001-5399 from us to cover over-allotments.
(212) 760-3100
- We anticipate that the initial
MARKET/PROPOSED SYMBOL: public offering price will be between
- - We have applied for listing on the $ and $ per share.
Nasdaq National Market under the
symbol MSCP. - Closing: , 1999
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<TABLE>
<CAPTION>
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Per Share Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Medscape:
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THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
WIT CAPITAL CORPORATION
DLJDIRECT INC.
<PAGE> 3
------------------------
[ARTWORK TO BE INCLUDED WILL INCLUDE MEDSCAPE'S LOGO, SCREEN SHOTS OF MEDSCAPE'S
WEB SITE, A DESCRIPTION OF SOME OF OUR SERVICE AND CONTENT OFFERINGS AND THE
TRADEMARK AND "EYE" DESIGN OF CBS.]
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary................ 3
Risk Factors...................... 8
Forward Looking Statements........ 21
Use of Proceeds................... 22
Dividend Policy................... 22
Capitalization.................... 23
Dilution.......................... 25
Pro Forma Consolidated Statement
of Operations................... 26
Selected Consolidated Financial
Data............................ 27
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 28
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PAGE
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Business.......................... 36
Management........................ 50
Transactions with Related
Parties......................... 58
Principal Stockholders............ 63
Description of Capital Stock...... 65
Shares Eligible for Future Sale... 67
Underwriting...................... 69
Validity of the Shares............ 71
Experts........................... 71
Where You Can Find More
Information..................... 71
Index to Consolidated Financial
Statements...................... F-1
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PROSPECTUS SUMMARY
The information below is only a summary of more detailed information
included in other sections of this prospectus. This summary may not contain all
the information that is important to you or that you should consider before
buying shares in the offering. The other information is important, so please
read this entire prospectus carefully.
MEDSCAPE, INC.
OUR BUSINESS
We operate Medscape.com, a leading healthcare Web site that provides
comprehensive, authoritative and timely medical information and interactive
programs targeted toward physicians and allied healthcare professionals, such as
pharmacists and nurses. We offer a wide range of high-quality medical
information, including original, proprietary articles written for us by renowned
medical experts. We also offer what we believe is one of the Web's largest
collection of free, peer-reviewed, full-text medical journal articles and one of
the Web's most extensive libraries of continuing medical education accredited
programs. We supplement our medical content with a variety of non-medical
information, community features and interactive programs that make Medscape.com
a full-service professional healthcare destination Web site. We plan to launch
our separate consumer site, CBS.Medscape.com, in the third quarter of 1999. As
of May 31, 1999, Medscape.com had more than 1,100,000 registered members
worldwide, including over 200,000 registered as physicians, 550,000 registered
as allied healthcare professionals and 380,000 registered as consumers.
Medscape.com is designed to meet the needs of our members in a personalized
and easy-to-use manner. We organize our professional information by medical
specialty area, such as oncology and cardiology, to make it easier for our
members to access the information most relevant to them. Our extensive and
up-to-date medical content and easy-to-use searching features assist medical
professionals in keeping abreast of medical advances and obtaining fast, online
answers to medical questions, helping them to make more informed diagnoses.
Through our strategic relationship with National Data Corporation, we will
integrate selected clinical data interchange and data management services
provided by NDC into Medscape.com. We will also serve as the principal content
provider to NDC's physician practice management system and become an online
distributor of some of NDC's other online clinical products.
We believe our current consumer members view Medscape.com as a trusted
source of healthcare information because of our high-quality content and our
credibility with physicians. To enhance and personalize the consumer experience,
we plan to launch a separate consumer site. We have agreed to enter into a
strategic relationship with CBS Corporation under which our consumer site will
be branded CBS.Medscape.com, which will be the exclusive Internet healthcare
site integrated into CBS News programming and will be promoted on CBS media
properties. We are designing our CBS.Medscape.com consumer site to help
consumers make better informed healthcare decisions and to simplify management
of their healthcare needs. Our consumer site will provide personalized,
authoritative medical content written for the consumer, access to our
professional content on Medscape.com and interactive personal health management
tools, such as health diaries.
Our database of registered members, coupled with our ability to deliver
advertisements to specific demographic groups within our membership base,
enables pharmaceutical, healthcare and other consumer product companies to reach
substantially all segments of their target audience. Our advertisers and
sponsors include over 30 of the world's largest pharmaceutical companies.
OUR MARKET OPPORTUNITY
We believe the $1 trillion healthcare industry is being changed by the
emergence of the Internet as a global medium for communications, news,
information and commerce. In particular, we believe that the Internet can
cost-effectively address the increasing need for timely, comprehensive and
authoritative medical information caused by:
- the accelerated development of new medical and pharmaceutical therapies;
- increased time constraints on physicians who are faced with an
ever-increasing volume of information; and
- consumers taking greater interest in health-related issues.
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<PAGE> 6
We address these needs by providing high-quality, timely and well-organized
medical content on Medscape.com and will further address these needs on our soon
to be launched consumer site, CBS.Medscape.com. We design our Web sites to be
conveniently accessible wherever and whenever our members choose. The
organization of our sites and breadth of our membership base enables our
advertisers and sponsors, including pharmaceutical, healthcare and other
consumer product companies, to deliver marketing programs and interactive
services targeted directly to specific healthcare constituencies.
OUR STRATEGY
Our objective is to operate the premier online healthcare destination Web
sites where physicians, allied healthcare professionals and consumers find
reliable and comprehensive information that enables them to make better and more
informed medical and health decisions. We believe we are positioned to become a
preferred online advertising medium and e-commerce partner in the healthcare
sector. We intend to achieve our objective by pursuing the following strategies:
- strengthening the Medscape brands;
- expanding and enhancing our content;
- growing membership;
- developing strategic relationships and enhancing distribution; and
- developing additional revenue sources.
OUR HISTORY
Medscape, Inc. was incorporated in New York in March 1996 and commenced
operations in April 1996. Medscape, Inc. was reincorporated in Delaware in
December 1998. In October 1998, we purchased Healthcare Communications Group,
LLC, which operated a leading HIV Web site.
Our executive offices are located at 134 West 29th Street, New York, New
York, 10001-5399. Our telephone number is (212) 760-3100. Our Web site is
located at www.medscape.com. Information contained on our Web site is not part
of this prospectus.
Medscape is our registered service mark. Each other trademark, trade name
or service mark of any other company appearing in this prospectus is the
property of its holder.
RECENT DEVELOPMENTS
Since March 31, 1999, we have consummated or entered into agreements to
consummate several strategic relationships.
On June 15, 1999, we entered into a License and Web Site Development
Agreement with Softwatch Ltd. and its subsidiary, Softwatch, Inc., under which
we licensed software from Softwatch to support our consumer Web site and
Softwatch agreed to provide ongoing technical and development support. As part
of this transaction, we also purchased 1,040,170 of Softwatch's Series A
Preferred Shares for $2,999,954.
On July 7, 1999, we agreed to enter into agreements with CBS Corporation
under which we will receive approximately $150 million in advertising and
promotion in the United States and a license to the "CBS" trademark and "Eye"
design and selected health-related news content during the next seven years,
together valued at $7 million, in exchange for 7,397,208 shares of our Class A
Common Stock and 6,541,160 shares of our Class B Common Stock, which will
represent approximately % of our outstanding capital stock upon completion
of this offering. Under our agreements with CBS, they have rights to maintain
their then current capital stock interest by purchasing shares in our future
stock issuances and have the right to designate three of our directors.
On July 7, 1999, we agreed to enter into a strategic development and
marketing agreement with National Data Corporation, a leading provider of
healthcare information services and electronic commerce solutions. As part of
this transaction, NDC will invest $10 million cash in Medscape and has agreed to
provide $10 million in licensing and promotional value, product purchase
amounts, and credits against future
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<PAGE> 7
commissions due by us to NDC under the agreement in exchange for 1,000,000
shares of our Class A Common Stock and 400,000 shares of our Series E Preferred
Stock.
Upon completion of this offering, the Series E stock will convert into
common stock and the Class A Common Stock and Class B Common Stock will be
redesignated as common stock. The consummation of each of the CBS transaction
and the NDC transaction is subject to closing conditions, including our
obtaining necessary regulatory approval.
THE OFFERING
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Common stock offered by Medscape............ shares
Common stock to be outstanding after this
offering.................................. shares
Use of proceeds............................. We intend to use the net proceeds of this
offering for general corporate purposes,
including funding operating losses, working
capital and capital needs. We may use a
portion to acquire or invest in
complementary businesses or technologies.
Proposed Nasdaq National Market Symbol...... MSCP
</TABLE>
The outstanding share information is based on our shares outstanding as of
May 31, 1999. This information excludes:
- 5,111,770 shares of common stock underlying options granted under our
1996 Stock Option Plan and outstanding as of May 31, 1999 at a weighted
average exercise price of $0.84 per share; and
- 14,887.5 shares of common stock reserved for exercise of outstanding
warrants at an exercise price of $0.004 per share.
ASSUMPTIONS WHICH APPLY TO THIS PROSPECTUS
Unless we indicate otherwise, all information in this prospectus reflects
the following:
- the conversion of our outstanding Class B Common Stock on a one-for-one
basis into Class A Common Stock, and the redesignation of our Class A
Common Stock as common stock, both of which will occur concurrently with
the completion of this offering;
- the conversion of our Series A Preferred Stock, Series C-1 Preferred
Stock, Series D Preferred Stock, and Series E Preferred Stock all on a
2.5-for-one basis, and our Series C Preferred Stock, on a 2.68-for-one
basis, into Class A Common Stock, and the redesignation of our Class A
Common Stock as common stock, all of which will occur immediately prior
to the completion of this offering;
- an increase in the number of our authorized shares of common stock to
100,000,000 to be effected concurrently with this offering; and
- no exercise by the underwriters of their over-allotment option to
purchase up to additional shares of common stock.
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<PAGE> 8
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes our financial data for the nine months ended
December 31, 1996 and for each of the two years in the period ended December 31,
1998 and the three month periods ended March 31, 1998 and 1999, which have been
derived from our consolidated financial statements and their notes. The pro
forma data for the year ended December 31, 1998 have been prepared as though the
acquisition of Healthcare Communications Group, LLC had occurred on January 1,
1998. The pro forma data gives effect to the NDC and CBS transactions as if they
had occurred on March 31, 1999. For a more detailed explanation of these
financial data, see "Selected Consolidated Financial Data" and our financial
statements located elsewhere in this prospectus.
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HISTORICAL
-----------------------------------------
YEAR ENDED PRO FORMA THREE MONTHS ENDED
NINE MONTHS ENDED DECEMBER 31, YEAR ENDED MARCH 31,
DECEMBER 31, --------------------- DECEMBER 31, ---------------------
1996 1997 1998 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues.................. $ 1,015 $ 1,522 $ 3,069 $ 5,654 $ 550 $ 1,644
--------- --------- --------- --------- --------- ---------
Operating expenses:
Editorial, production,
content and
technology........... 1,182 1,790 2,563 4,300 396 1,231
Sales and marketing..... 278 1,201 2,344 2,344 299 1,081
General and
administration....... 830 1,823 1,775 2,643 360 765
Depreciation and
amortization......... 41 160 280 399 47 88
--------- --------- --------- --------- --------- ---------
Total operating
expenses...... 2,331 4,974 6,962 9,686 1,102 3,165
--------- --------- --------- --------- --------- ---------
Loss from operations...... (1,316) (3,452) (3,893) (4,032) (552) (1,521)
Interest expense
(income)............. 28 12 (249) (251) (49) (82)
--------- --------- --------- --------- --------- ---------
Net loss.................. $ (1,344) $ (3,464) $ (3,644) $ (3,781) $ (503) $ (1,439)
========= ========= ========= ========= ========= =========
Basic net loss per
share(1)................ $ (0.66) $ (1.26) $ (1.00) $ (0.57) $ (0.18) $ (0.21)
Weighted average number of
shares of common stock
outstanding............. 2,026,233 2,750,552 3,636,558 6,628,100 2,820,402 6,871,318
</TABLE>
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MARCH 31, 1999
------------------------------------------
PRO FORMA FOR
CBS AND NDC
TRANSACTIONS(2)
ACTUAL --------------- AS ADJUSTED(3)
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CONSOLIDATED BALANCE SHEET DATA:
Current assets.......................................... $22,985 $33,124
Working capital......................................... 19,302 29,441
Total assets............................................ 25,403 49,042
Stockholders' equity.................................... 21,720 45,359
</TABLE>
- ---------------
(1) We calculate loss per common share by dividing the loss attributable to
common shares by the weighted average number of shares outstanding. We do
not include outstanding common stock options and warrants in the loss per
common share calculation, as their effect is anti-dilutive.
(2) On July 7, 1999, we agreed to enter into agreements with CBS Corporation
under which we will receive approximately $150 million in advertising and
promotion in the United States and a license to the "CBS" trademark and
"Eye" design and selected health-related news content during the next seven
years, together valued at $7 million, in exchange for 7,397,208 shares of
our Class A Common Stock and 6,541,160 shares of our Class B Common Stock,
which will represent approximately % of our capital stock upon
completion of this offering.
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<PAGE> 9
On July 7, 1999, we agreed to enter into a development and marketing
agreement with National Data Corporation. As part of this transaction, NDC
will invest $10 million cash in Medscape, and has agreed to provide $10
million in licensing and promotional value, product purchase amounts and
credits against future commissions due by Medscape to NDC under the
agreement in exchange for 1,000,000 shares of our Class A Common Stock and
400,000 shares of our Series E Preferred Stock.
(3) Adjusted to give effect to this offering, assuming net proceeds of
$ .
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<PAGE> 10
RISK FACTORS
You should consider carefully the risks described below and the other
information in this prospectus before deciding to invest in shares of our common
stock. If any of the following risks actually occurs, our business, financial
condition and results of operations would likely suffer. In this case, the
market price of our common stock could decline, and you may lose all or a part
of the money you pay to buy our common stock.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
We initiated our operations in April 1996 and have not yet launched our
consumer site. As a result, we have only a limited operating history on which
you can base an evaluation of our business and prospects. Our prospects must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets like ours. We may not
be successful in addressing these risks and uncertainties. Our failure to do so
could have a material adverse effect on our financial condition. Some of these
risks and uncertainties relate to our ability to:
- attract and maintain a large base of users;
- develop and introduce desirable services and compelling and original
content to members and users;
- establish and maintain strategic relationships with distribution partners
and service and content providers;
- establish and maintain relationships with sponsors and with advertisers
and their advertising agencies;
- respond effectively to competitive and technological developments; and
- build an infrastructure, including additional hardware and software,
customer support, personnel and facilities, to support our business.
IF THE LAUNCH OF OUR CONSUMER SITE IS DELAYED OR UNSUCCESSFUL, OUR FINANCIAL
PERFORMANCE WOULD FAIL TO MEET EXPECTATIONS.
We plan to launch our separate consumer site, CBS.Medscape.com, in the
third quarter of 1999. If the launch is delayed or is unsuccessful, we may fail
to attract the additional users that will be required to increase our
sponsorship and advertising revenues and, as a result, our financial performance
would fail to meet expectations.
WE ARE NOT PROFITABLE AND EXPECT TO CONTINUE TO INCUR LOSSES.
We have not achieved profitability. We expect to continue to incur net
losses for the foreseeable future and may never become profitable. We have
incurred net losses of approximately $9.9 million during the period from our
inception through March 31, 1999.
Our ability to generate significant revenues is uncertain. Our growth to
date may not continue. Almost all of our revenues to date have been derived from
advertising sales and sponsorships. As our business evolves, we expect to
introduce a number of new products and services. With respect to both current
and future product and service offerings, including to a large extent our
consumer site, we expect to increase significantly our operating expenses to
increase our customer base, enhance our brand image and support our
infrastructure. To achieve profitability, our revenues and gross profit margins
will need to increase sufficiently to cover these and other future costs.
Otherwise, we may never make a profit. Even if we become profitable, we may not
sustain or increase our profits on a quarterly or annual basis in the future.
WE DEPEND ON THE PHARMACEUTICAL INDUSTRY FOR A SIGNIFICANT PORTION OF OUR
REVENUES.
Our revenues could seriously decrease if there were adverse developments in
the pharmaceutical industry. Our near-term and long-term prospects depend upon
selling our services to the pharmaceutical
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<PAGE> 11
industry. In 1998, 92% of our revenues were derived from services provided to
pharmaceutical companies, and three pharmaceutical companies in particular
provided 48% of our 1998 revenues. Accordingly, our success is highly dependent
on the sales and marketing expenditures of pharmaceutical companies and our
ability to attract these expenditures. Some of the adverse developments in the
pharmaceutical industry that could affect our revenues would be:
- a reduction in sales and marketing expenditures of pharmaceutical
companies;
- public or private market initiatives or reforms designed to regulate the
manner in which pharmaceutical companies promote their products;
- regulatory or legislative developments that discourage or prohibit
pharmaceutical companies' promotional activities;
- a decrease in the number of new drugs being developed; or
- the adoption of current legislative and regulatory proposals to control
drug costs for Medicare and Medicaid patients, including proposals in the
U.S. Congress.
OUR BUSINESS MODEL IS UNPROVEN AND THE MARKET MAY NOT ACCEPT IT.
Our success depends upon achieving significant market acceptance of our
services by physicians, allied healthcare professionals and consumers. Failure
to achieve or maintain market acceptance of Medscape.com and CBS.Medscape.com
would result in a loss of revenues. Medical professionals or consumers may not
accept Medscape.com and CBS.Medscape.com, or even the Internet, as a replacement
for traditional sources of healthcare information. Market acceptance of
Medscape.com and CBS.Medscape.com depends upon continued growth in the use of
the Internet generally and, in particular, as a source of healthcare information
services for medical professionals and consumers. The Internet may not prove to
be a viable channel for these services due to:
- inadequate development of necessary reliable network infrastructure or
complementary services, such as high-speed modems and security procedures
for the transmission of confidential healthcare information;
- development and acceptance of a competing method for delivering
healthcare information services to medical professionals and consumers;
- delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity; and
- governmental regulation.
WE RELY UPON OUR CBS AGREEMENTS WHICH MAY BE TERMINATED UNDER SOME
CIRCUMSTANCES.
If our agreements with CBS are terminated prior to the end of their term,
our financial results and stock price could be adversely affected.
Under a license agreement, we will license the "CBS" trademark, and "Eye"
design and other health-related news content from CBS. The "CBS" trademark and
"Eye" design are very important to our marketing and brand building activities
for our consumer Web site. This agreement also has a number of risks associated
with it. CBS can require us to remove any content on our consumer Web site which
it determines conflicts with, interferes with or is detrimental to its
reputation or business or for other reasons. We are also required to conform to
CBS's guidelines for the use of its trademarks. CBS has the right to approve all
materials, such as marketing materials, that include the "CBS" trademarks and
"Eye" design. CBS also has control over the visual and editorial presentation of
its television news content on our consumer Web site. Because of these
restrictions, we may not be able to perform our desired marketing activities.
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Our license agreement with CBS will expire on July 7, 2006, and CBS will
have no obligation to renew it. CBS will also have the right to terminate this
agreement if:
- we breach a material term or condition of the agreement;
- we become insolvent or file for bankruptcy or commence similar
proceedings; or
- we issue voting securities to a CBS competitor which results in that
competitor directly or indirectly owning 9% or more of our voting power.
If CBS terminates the license agreement under any of these provisions, CBS
will be allowed to keep the stock received from us.
CBS has agreed, with some limitations, to provide us with approximately
$150 million of advertising and on-air promotions during the period from July 7,
1999 through July 4, 2006. However, CBS has discretion as to the timing and
placement of these advertisements and promotions. CBS could change the manner in
which it promotes us. CBS also makes no guarantees to us as to the demographic
composition or size of the audience that views these advertisements or
promotions. This advertising and on-air promotion, as well as our association
with the CBS brand, are important elements of our strategy to increase our brand
awareness. This obligation to provide advertising and promotion may terminate at
CBS's option if our license agreement with CBS terminates.
WE DEPEND ON REVENUES FROM ADVERTISING AND SPONSORSHIPS, AND THE ACCEPTANCE AND
EFFECTIVENESS OF INTERNET ADVERTISING AND SPONSORSHIP IS UNCERTAIN.
Our future success depends on an increase in the use of the Internet as an
advertising medium. We derive most of our revenues from the sale of
advertisements and sponsorships on our site, and we expect to continue to do so
for the foreseeable future. The market for Internet advertising may not continue
to emerge or become sustainable. If the market for Internet advertising and
sponsorships fails to develop or develops more slowly than we expect, our
revenues will decline.
The Internet advertising market is new and rapidly evolving. It cannot yet
be compared with the traditional advertising market to gauge its effectiveness.
As a result, there is significant uncertainty about the demand and market
acceptance for Internet advertising. Many of our advertising customers and
sponsors have limited experience with Internet advertising and sponsorship, and
may ultimately conclude that Internet advertising and sponsorship are not
effective relative to traditional advertising media and sponsorship
opportunities. Different pricing models are used to sell advertising on the Web,
and it is difficult to predict which model, if any, will emerge as the industry
standard. This makes it difficult to project our future advertising and
sponsorship rates and revenues.
In addition, widespread adoption or increased use by Internet users of
filter software programs that allow them to limit or remove advertising from
their desktops or the adoption of this type of software by Internet access
providers could have a material adverse effect on the viability of advertising
on the Internet and on our financial condition.
OUR OPERATING RESULTS WILL BE SEASONAL AND MAY FLUCTUATE FROM QUARTER TO
QUARTER, WHICH MAY NEGATIVELY AFFECT OUR STOCK PRICE.
Because a substantial portion of our revenues comes from sponsorships
associated with major medical conferences that occur less frequently in the
summer months, our results of operations have historically been seasonal. Our
limited operating history makes it difficult to assess the impact of this
seasonal factor on our business and our stock price. Should the major medical
conferences' schedule change, our operating results would be affected
accordingly.
Because of seasonality and other factors, our operating results will likely
continue to vary from quarter to quarter. Since a substantial portion of our
current and future costs are fixed, if our revenues fall short of expectations,
we may not be able to adjust our fixed expenses to compensate for this shortfall
on a timely basis.
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OUR MEDSCAPE BRANDS MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY FOR US TO
CONTINUE TO GROW OUR MEMBERSHIP AND TRAFFIC AND ATTRACT ADVERTISERS AND
SPONSORS.
We believe that broad recognition and a favorable audience perception of
the Medscape brands are essential to our future success. If we fail to increase
our membership and traffic, we may be unable to attract advertisers and
sponsors. Successful positioning of the Medscape brands will largely depend on:
- the success of our advertising and promotional efforts; and
- our ability to continue to provide a high-quality experience for our
audience.
We incurred sales and marketing expenses of $2.3 million during the year
ended December 31, 1998. To increase awareness of the Medscape brand, we expect
to spend significantly more on sales and marketing in the future. As part of our
agreements with CBS, CBS will provide approximately $150 million in advertising
and promotion and a license to the "CBS" trademark and "Eye" design and selected
health-related news content over seven years. If our brand enhancement strategy
is unsuccessful, these expenses may never be recovered and we may not receive
appropriate value for the stock issued to CBS and we may be unable to increase
future revenues. In addition, even if brand recognition increases, the number of
Medscape.com and CBS.Medscape.com users may not increase. Furthermore, even if
the number of new users increases, those users may not become registered members
or use Medscape.com or CBS.Medscape.com regularly.
IF WE ARE UNABLE TO RETAIN ANY OF OUR MAJOR ADVERTISERS OR SPONSORS, OUR
REVENUES MAY DECLINE.
The loss of any of the advertisers or sponsors that account for a material
portion of our total revenues, or the non-payment or late payment of amounts due
from significant advertisers and sponsors, could seriously harm our financial
results. Roche Laboratories, Bristol-Myers Squibb Company and AstraZeneca PLC
together accounted for approximately 35% of our advertising and sponsorship
revenues for the quarter ended March 31, 1999. In 1998, we derived approximately
27% of our revenue from Genentech Incorporated, 14% from Roche Laboratories and
7% from Johnson & Johnson. We believe that a substantial amount of revenue from
advertising and sponsorship sales in any given future period may continue to
come from a relatively small number of advertisers and sponsors. If any of our
major advertisers or sponsors were to substantially cut back on advertising or
sponsorship expenditures or stop using our services, our revenues would decline.
We typically sell advertisements and sponsorships for a one-year period or
less. As a result, our current advertisers or sponsors may not purchase
advertising or sponsorships from us in the future, and we may not be able to
successfully attract additional advertisers or sponsors.
WE MAY LOSE BUSINESS IF WE ARE UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL OR
OTHER CHANGES.
If we are unable to keep up with changing technology and other factors
related to our market, we may be unable to attract and retain users, advertisers
and sponsors, which would reduce our revenues. The markets in which we compete
are characterized by rapidly changing technology, evolving technological
standards in the industry, frequent new service and product announcements and
changing consumer demands. Our future success will depend on our ability to
adapt to these changes and to continuously improve the performance, features and
reliability of our service in response to competitive services and product
offerings and the evolving demands of the marketplace. In addition, the
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require us to incur
substantial expenditures to modify or adapt our services or infrastructure,
which might impact our ability to become or remain profitable.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
The market for Internet content, products, services and advertising is new,
rapidly evolving and intensely competitive. We expect this competition to
increase significantly and our financial results and share value would be
adversely affected if we are unable to compete successfully. We currently
compete, or potentially compete, with many providers of Web content, information
services and products, as well as traditional media and promotional efforts, for
audience attention and advertising and sponsorship expenditures. We expect
competition to intensify in the future. Barriers to entry are not significant,
and current and new
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competitors may be able to launch new Web sites at a relatively low cost. We
compete, directly and indirectly, for members, consumers, content providers,
advertisers, sponsors and acquisition candidates with:
- companies and organizations providing or maintaining online services or
Web sites targeted to physicians or the healthcare industry;
- companies and organizations providing or maintaining general purpose
consumer online services which provide access to healthcare content and
services;
- companies and organizations providing or maintaining public sector and
non-profit Web sites that provide healthcare information and services
without advertising or commercial sponsorships;
- companies and organizations providing or maintaining Web search and
retrieval services and other high-traffic Web sites;
- publishers and distributors of traditional media, including those
targeted to medical professionals, many of which have established or may
establish Web sites; and
- vendors of healthcare information, products and services distributed
through other means, including direct sales, mail and fax messaging.
Competition for members, users and advertisers, as well as competition in
the electronic commerce market, is intense and is expected to increase
significantly.
WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR RAPID GROWTH.
If we are unable to manage growth effectively, our financial results would
be seriously harmed. Our ability to successfully offer services and products and
implement our business plan in a rapidly evolving market requires an effective
planning and management process. We have increased, and plan to continue to
increase, the scope of our operations. These expansion efforts could be
expensive and may put a strain on management, and, if we do not manage growth
properly, could adversely affect our business. To manage our future growth, we
will need to:
- improve existing or implement new operational and financial systems,
procedures and controls;
- expand, train and manage our employee base; and
- maintain close coordination among our technical, finance, marketing,
sales and editorial staffs.
WE ARE CURRENTLY DEPENDENT UPON ONLINE MARKETING PARTNERS, AND OUR FUTURE
SUCCESS DEPENDS UPON FURTHER DEVELOPING AND ENHANCING OUR STRATEGIC
RELATIONSHIPS.
If we are not successful in developing and enhancing our strategic
relationships, we could become less competitive and our revenues could decline.
Although we have a variety of sources of traffic to our Web site, we expect a
growing percentage of our traffic to be generated by strategic distribution
partners, which are third party healthcare service vendors that facilitate
distribution of our Web site content to their customer base. One example is our
strategic relationship with National Data Corporation under which we will be the
preferred content supplier to NDC's LYTEC physician practice management product
and become an online distributor of some of NDC's other clinical information
products targeted at physicians and allied health professionals.
We formed our existing relationships recently and our distribution partners
may not view their relationships with us as significant to their own business.
As a result, they may reassess their commitment to us or decide to compete
directly with us in the future. We generally do not have agreements that
prohibit our distribution partners from competing against us directly or from
contracting with our competitors. Our arrangements with our distribution
partners generally do not establish minimum performance requirements, but
instead rely on the voluntary efforts of our distribution partners. As a result,
these relationships may not be successful.
WE DEPEND UPON CONTENT PROVIDERS, AND OUR REVENUES MAY DECLINE IF WE ARE UNABLE
TO MAINTAIN OUR EXISTING RELATIONSHIPS WITH CONTENT PROVIDERS, TO BUILD NEW
RELATIONSHIPS WITH OTHER CONTENT PROVIDERS AND TO CONTINUE TO OBTAIN ORIGINAL
CONTENT FROM MEDICAL EXPERTS.
Our agreements with expert medical professionals who provide us with a
majority of our original proprietary content are generally short-term and
project-based. We may not be able to attract expert medical
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professionals to provide us with original proprietary content in the future. Our
failure to acquire original proprietary content written by expert medical
professionals would have a negative effect on our content, resulting in a likely
decline in our revenues.
We have entered into relationships with approximately 45 companies
representing over 100 publications, medical databases and newsfeeds to obtain
content for Medscape.com, and we intend to enter into additional relationships
in the future. Our success depends significantly on our ability to maintain our
existing relationships with these content providers, to build new relationships
with other content providers and to continue to obtain original content from
medical experts.
Many of our agreements with content providers are non-exclusive, and
competitors offer, or could offer, content that is similar or the same as ours.
If content providers, including our current providers, offer information to
users or our competitors on more favorable terms than offered to us, we could
become less competitive and our profit margins and prospects could be harmed. In
addition, the failure by our content providers to deliver high-quality content
from reliable sources and to continuously upgrade their content in response to
user demand and evolving healthcare industry trends could result in user
dissatisfaction and inhibit our ability to attract users and add members.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND WE MAY BE LIABLE FOR
INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our revenues and share price could be adversely affected if unauthorized
parties infringe upon or misappropriate our products, services or proprietary
information. Our intellectual property is important to our business. Our efforts
to protect our intellectual property may not be adequate. In the future,
litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others, which
could be time consuming and costly.
Intellectual property infringement claims could be made against us as the
number of our competitors grows. These claims, even if not meritorious, could be
expensive and divert our attention from operating our company. In addition, 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
comparable non-infringing intellectual property or obtain a license or cease
providing the services that contain the infringing intellectual property. We may
be unable to develop non-infringing intellectual property or obtain a license on
commercially reasonable terms, or at all.
OUR SYSTEMS MAY EXPERIENCE FAILURES.
Any significant interruption in our operations would negatively affect our
business and cause our revenues to decline. We have experienced periodic system
interruptions in the past, which may occur again. Any significant interruptions
in our services or an increase in response time could result in a loss of
potential or existing users and members, strategic partners or advertisers and
sponsors and, if sustained or repeated, could reduce the attractiveness of our
Web sites to these parties in the future. Our insurance policies have low
coverage limits and, therefore, cannot adequately compensate us for any material
losses that may occur due to disruptions in our service.
Our Web sites may be required to accommodate a high volume of traffic and
deliver frequently updated information. We may experience slower response times
or system failures due to increased traffic on our Web sites or for a variety of
other reasons. We depend on content providers to provide information and data
feeds on a timely basis. Our Web sites could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. In addition, our members and consumers depend on
Internet service providers and other Web site operators for access to our Web
sites. These providers and operators 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. Moreover, the Internet
infrastructure may not be able to support continued growth in its use. We do not
maintain redundant systems or facilities for all of our services. To operate
with limited interruption, our service and content providers must guard against:
- damage from fire, power loss and other natural disasters;
- communications failures;
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- software and hardware errors or failures;
- security breaches, computer viruses and similar disruptive problems; and
- other potential interruptions.
IF OUR MEMBERS DO NOT PROVIDE US WITH ACCURATE REGISTRATION INFORMATION ABOUT
THEMSELVES WE MAY BE LESS ATTRACTIVE TO ADVERTISERS.
If we are unable to accurately classify our members, we may be less
attractive to advertisers and our revenues may decline. We classify our members
as physicians, allied healthcare professionals and consumers based on the
information that members supply to us at the time of registration, and this
information may not be accurate. In addition, possible changes in state or
federal confidentiality laws may make it more costly and more difficult to
verify the accuracy of information about our members. We are conducting an
ongoing verification effort that may result in some members being reclassified
because of incomplete or inaccurate information that they supplied at the time
of registration. A significant amount of reclassifications may also make us less
attractive to advertisers, and revenues may decrease.
WE MAY INCUR LIABILITY FOR CONTENT AND USER DATA.
As a content provider, we may face potential liability for intellectual
property infringement, defamation, indecency and other claims. In addition, we
may incur liability for unauthorized duplication or distribution of third-party
content or materials or for information collected from and about our users.
Third parties or users may bring claims against us relating to proprietary
rights or use of personal information. Our general liability insurance may not
cover or be adequate for potential claims of this type.
WE HAVE LIMITED EXPERIENCE WITH INTERNATIONAL OPERATIONS, WHICH MAY RESULT IN
OUR INABILITY TO SUCCEED ON AN INTERNATIONAL LEVEL.
Our revenues could be adversely affected if we or our future foreign
business associates are unable to successfully market and operate our online
services in foreign markets. To date, we have had limited experience in
developing localized versions of our online services and in marketing and
operating our online services internationally. One element of our strategy is to
develop our online service brands in international markets. To achieve this, we
intend to enter into relationships with foreign business partners. We may
experience difficulty in obtaining these partners and managing international
operations because of distance, trade regulation, language barriers and cultural
differences.
WE WOULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR MATERIAL
THIRD-PARTY SYSTEMS ARE NOT YEAR 2000 COMPLIANT.
The failure of our internal systems or material third-party systems to be
Year 2000 compliant could cause a significant number of business disruptions and
inefficiencies for us, our service and content providers and our members and
users that may divert our time and attention and financial and human resources
from our ordinary business activities. The Year 2000 issue is the potential for
system and processing failures of date-related data as the result of
computer-controlled systems using two digits rather than four to define the
applicable year. For example, computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. Medscape may be affected by Year 2000 issues related to non-compliant
information technology systems or non-information technology systems operated by
Medscape or by third parties.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be Year 2000 compliant. The failure by these entities to be Year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, that could also
prevent us from delivering our services to our customers, decrease the use of
the Internet or prevent users from accessing our Web site, which would lead to a
decline in our revenues.
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WE MAY FAIL TO EFFECTIVELY INTEGRATE AND MANAGE OUR RECENT ACQUISITIONS.
We have recently acquired two medical Web sites. The successful integration
of these acquisitions is critical to our future success. Our systems,
procedures, controls and existing space may not be adequate to support the
integration of these acquisitions into our operations. We are now finalizing the
integration of the technologies, service offerings, operations and systems of
our recently acquired sites. Potential challenges to the successful integration
of Web sites we acquired include:
- our ability to attract their users to our Web sites;
- our ability to market and sell these Web sites' services to our clients;
- centralization and consolidation of financial, operational and
administrative functions;
- elimination of unnecessary costs;
- the technological integration of these Web sites' services with ours; and
- the integration of these Web sites' personnel with ours.
The process of integrating the acquisitions is complex and will place
significant demands on our management, technical, financial and other resources.
POTENTIAL ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS,
DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.
We may make investments in or acquire complementary products, technologies
and businesses. These acquisitions and investments could disrupt our ongoing
business, distract our management and employees and increase our expenses. Some
of the factors that will affect our ability to successfully integrate an
acquired company include:
- our ability to assimilate the personnel and operations of the acquired
company;
- whether the personnel of the acquired company decide to work for us; and
- the extent to which newly acquired services or technologies are
incompatible with and must be integrated into our existing services and
marketing, sales and support efforts.
In addition, if we finance the acquisitions by issuing equity securities, this
could dilute our existing stockholders. Any amortization of goodwill or other
assets, or other charges resulting from the costs of these acquisitions, could
adversely affect our operating results.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS.
Based on our current operating plan, we anticipate that the net proceeds of
this offering, together with our available funds and the $10 million cash
investment to be made by National Data Corporation, will be sufficient to
satisfy our anticipated needs for working capital, capital expenditures and
business expansion for at least the next 12 months. After that time, we may need
additional capital. Alternatively, we may need to raise additional funds sooner
to fund more rapid expansion, to develop new or enhanced services, or to respond
to competitive pressures. Except for the investment to be made by NDC, we
currently do not have any commitments for additional financing. If adequate
funds are not available on acceptable terms, we may not be able to fund our
expansion, develop or enhance our products or services or respond to competitive
pressures. If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our stockholders will be diluted.
Furthermore, any new securities could have rights, preferences and privileges
senior to those of the common stock.
RISKS RELATED TO ONLINE HEALTHCARE SERVICES AND THE INTERNET
OUR ACTIVITIES MAY EXPOSE US TO MALPRACTICE LIABILITY AND OTHER LIABILITY
INHERENT IN HEALTHCARE DELIVERY.
We may be exposed to malpractice or other liability against which we may
not be adequately insured, resulting in a decline in our financial results.
Patients who file lawsuits against doctors often name as defendants all persons
or companies with any relationship to the doctors. As a result, patients may
file lawsuits against us based on treatment provided by physicians who maintain
Web pages at our site. In addition, a
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court or government agency may take the position that our delivery of health
information directly, including through licensed physicians, or information
delivered by a third-party site that a consumer accesses through our Web site,
exposes us to malpractice or other personal injury liability for wrongful
delivery of healthcare services or erroneous health information. The amount of
insurance we maintain with insurance carriers may not be sufficient to cover all
of the losses we might incur from these claims and legal actions. In addition,
insurance for some risks is difficult, impossible or too costly to obtain, and
as a result, we may not be able to purchase insurance for some types of risks.
STATE RESTRICTIONS ON THE PRACTICE OF MEDICINE MAY NEGATIVELY AFFECT OUR
ACTIVITIES.
Any finding in a state that we are not in compliance with its laws could
require us to restructure our services, which could adversely affect our
revenues or share price. The laws in some states prohibit some business
entities, such as our company, from practicing medicine. This is commonly
referred to as the prohibition against the "corporate practice of medicine."
These laws generally prohibit us from employing physicians to practice medicine
or from directly furnishing medical care to patients. Each state requires
licensure for the practice of medicine within that state, and some states
consider the receipt of an electronic transmission of selected healthcare
information in that state to be the practice of medicine. These laws restrict
our activities and the extent to which we can provide medical advice to
consumers, physicians and others. If challenged, our activities may not be found
to be in compliance with these laws.
HEALTHCARE REFORMS AND THE COST OF REGULATORY COMPLIANCE COULD NEGATIVELY AFFECT
OUR BUSINESS.
The healthcare industry is heavily regulated. Various laws, regulations and
guidelines promulgated by government, industry and professional bodies affect,
among other matters, the provision, licensing, labeling, marketing, promotion
and reimbursement of healthcare services and products, including pharmaceutical
products. Our failure or our clients' failure to comply with any applicable
regulatory requirements or industry guidelines could:
- limit or prohibit business activities;
- subject us or our clients to adverse publicity; or
- increase the costs of regulatory compliance or subject us or our clients
to monetary fines or other penalties.
A federal law commonly known as the Medicare/Medicaid antikickback law, and
several similar state laws, prohibit payments that are intended to induce
physicians or others either to refer patients or to acquire or arrange for or
recommend the acquisition of healthcare products or services, including
pharmaceuticals. Another federal law, commonly known as the "Stark" law,
prohibits physicians from referring Medicare and Medicaid patients for
designated health services to entities with which they have a financial
relationship, unless that relationship qualifies for an explicit exception to
the referral ban. Some of these laws have been applied to the marketing and
promotional practices of pharmaceutical manufacturers and to payments to
physicians for services, and could constrain our financial and marketing
relationships with our sponsors and advertisers and with any physicians who
perform services for us. It is possible that additional or changed laws,
regulations or guidelines could be adopted in the future.
In addition, implementation of government healthcare reform may adversely
affect promotional and marketing expenditures by pharmaceutical companies, which
could decrease the business opportunities available to us. Healthcare reform
measures have been considered by the U.S. Congress and other federal and state
bodies during recent years. The intent of the proposals generally has been to
reduce the growth of total healthcare expenditures and expand healthcare
coverage.
THE INTERNET IS SUBJECT TO MANY GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES
THAT MAY AFFECT OUR ABILITY TO CONDUCT BUSINESS.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease demand for our services,
increase our cost of doing business or otherwise have a material adverse effect
on our financial results and prospects.
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Laws and regulations may be adopted in the future that address
Internet-related issues, including online content, user privacy, pricing and
quality of products and services. For example, although it was held
unconstitutional, the Communications Decency Act of 1996 prohibited the
transmission over the Internet of various types of information and content. In
addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission in the same manner as other telecommunications services. Because the
growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure in many areas, local exchange carriers have
petitioned the FCC to regulate Internet service providers in a manner similar to
long distance telephone carriers and to impose access fees on the Internet
service providers.
The United States or foreign nations may adopt legislation aimed at
protecting Internet users' privacy. Any such legislation could increase our cost
of doing business and negatively affect our financial results. Moreover, it may
take years to determine the extent to which existing laws governing issues like
property ownership, libel, negligence and personal privacy are applicable to the
Internet. Currently, U.S. privacy law consists of disparate state and federal
statutes regulating specific industries that collect personal data. Most of them
predate and therefore do not specifically address online activities. However,
European nations are now implementing a European Union Data Privacy Directive
regulating the transmission and storage of personal information and data. In
addition, a number of comprehensive legislative and regulatory privacy proposals
are now under consideration by federal, state and local governments in the
United States.
STATE AND FEDERAL LAWS THAT PROTECT INDIVIDUAL HEALTH INFORMATION MAY LIMIT OUR
PLANS TO COLLECT, USE AND DISCLOSE THAT INFORMATION.
If we fail to comply with current or future laws or regulations governing
the collection, dissemination, use and confidentiality of patient health
information, this failure could have a material adverse effect on our business,
operating results and financial condition.
Consumers sometimes enter private health information about themselves or
their family members when using our services. Also, our systems record use
patterns when consumers access our databases that may reveal health-related
information or other private information about the user. Numerous federal and
state laws and regulations govern collection, dissemination, use and
confidentiality of patient-identifiable health information, including:
- state privacy and confidentiality laws;
- state pharmacy laws;
- Medicaid laws;
- the Health Insurance Portability and Accountability Act of 1996 and
related rules proposed by the Health Care Financing Administration; and
- Health Care Financing Administration standards for Internet transmission
of health data.
The U.S. Congress has been considering proposed legislation that would
establish a new federal standard for protection and use of health information.
In addition, the laws of other countries also govern the use of and disclosure
of health information. Our systems for safeguarding patient health information
from unauthorized disclosure or use may not preclude successful claims against
us for violation of applicable law. Other third-party sites that consumers
access through our site also may not maintain systems to safeguard this health
information. In addition, future laws or changes in current laws may necessitate
costly adaptations to our systems.
We intend to develop medical information systems and market research
services that we will use to collect, analyze and report aggregate medical care,
medical research, outcomes and financial data pertaining to items such as
prescribing patterns and usage habits. Some states have enacted legislation
regulating the aggregation of health information and the manipulation, use and
ownership of that aggregated data, even when this data does not reveal the
patient's identity. Because this area of the law is rapidly changing, our
collection, analysis and reporting of aggregate healthcare data maintained in
our database may not at all times and in all respects comply with laws or
regulations governing the ownership, collection and use of this data.
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Future laws or changes in current laws governing the ownership, collection and
use of aggregate healthcare data may necessitate costly adaptations to our
systems or limit our ability to use this data.
FDA AND FTC REGULATIONS MAY HAVE AN ADVERSE IMPACT ON OUR FINANCIAL RESULTS.
We face both current and potential Food and Drug Administration and Federal
Trade Commission regulation of our business. Any current or future regulatory
requirements that the FDA or the FTC impose on us or our advertisers and
sponsors could harm us by:
- making it harder to persuade pharmaceutical and medical device companies
to advertise or promote their products on our Web sites;
- restricting our ability to continue to provide some of our services or
content, or to introduce new services or content in a timely manner;
- damaging our relationships with pharmaceutical and medical device
companies, particularly if programs we recommend or endorse result in FDA
or FTC enforcement action directed against us these companies; or
- making it more expensive and time-consuming to comply with new
requirements.
As a consequence of these harms, we might lose advertising or sponsorship
revenue, spend significant amounts of our limited resources on regulatory
experts in the area of FDA or FTC compliance, or receive adverse publicity that
negatively affects share value.
In addition to existing FDA and FTC regulation of advertising and promotion
by pharmaceutical and medical device companies, our business faces a potential
risk of increased FDA and FTC regulation of these activities in an online
context.
While the FDA's policies regarding the regulation of software are evolving,
based on the FDA's informal policy statements regarding the scope of its
regulation of stand-alone software, we believe that our current and intended
software applications are not subject to regulation as medical devices because
they do not meet the statutory definition of a device. However, the FDA may take
the view that some of our current or future applications or services do in fact
meet the definition of a medical device and, therefore, are subject to
regulation. If the FDA finds that the software is subject to regulation as a
medical device, the applicable regulatory controls could include both premarket
and postmarket requirements and the FDA might require us:
- to obtain premarket clearance or approval of the medical device software,
which might include the conduct of supporting clinical trials or other
studies;
- to register ourselves as a medical device manufacturer and to list our
devices with the FDA;
- to create our software in compliance with the FDA design and
manufacturing standards;
- to permit the FDA to inspect our facilities and records; and
- to make periodic reports to the FDA.
INTERNET SALES MAY BECOME LESS DESIRABLE TO CONSUMERS IF THEY BECOME TAXABLE.
The tax treatment of the Internet and e-commerce is currently unsettled and
any legislation that substantially impairs the growth of e-commerce could
seriously harm our revenues and prospects. A number of proposals have been made
at the federal, state and local level and by some foreign governments that could
impose taxes on the sale of goods and services and some other Internet
activities. The Internet Tax Freedom Act of 1998 placed a three-year moratorium
on selected types of taxation on Internet commerce. This moratorium expires on
October 21, 2001. We cannot predict the effect of current attempts at taxing or
regulating commerce over the Internet.
ONLINE SECURITY BREACHES COULD HARM OUR BUSINESS.
Our security measures may not prevent security breaches. Substantial or
ongoing security breaches on our system or other Internet-based systems could
reduce user confidence in our Web sites leading to reduced usage and lower
revenues. The secure transmission of confidential information over the Internet
is essential in maintaining confidence in our Web sites and will be increasingly
important as we expand our consumer-
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oriented offerings. Consumers generally are concerned with security and privacy
on the Internet and any publicized security problems could inhibit the growth of
the Internet and, therefore, our services.
We will need to incur significant expense to protect and remedy against
security breaches when we identify a significant business risk. Currently, we do
not store sensitive information, like patient information or credit card
information, on the site. When we launch services that require us to gather
sensitive information, our security expenditures will increase significantly. We
are in the process of moving our systems to an external server and site hosting
facility operated by Exodus Communications. As part of this service, Exodus will
provide various upgraded security features, including firewall protection.
A party that is able to circumvent our security systems could steal
proprietary information or cause interruptions in our operations. Security
breaches could also damage our reputation and expose us to a risk of loss or
litigation and possible liability. Our insurance policies carry low coverage
limits, which may not be adequate to reimburse us for losses caused by security
breaches. We also face risks associated with security breaches affecting third
parties conducting business over the Internet.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE IS LIKELY TO BE VOLATILE.
The market prices of the securities of Internet-related companies have been
very volatile. Our investors may not be able to sell their shares at or above
the initial public offering price. In the past, following periods of volatility
in the market price for a company's securities, stockholders have often
instituted securities class action litigation. If a lawsuit were to be filed
against us, it could result in substantial costs and the diversion of our
management's attention and resources, which could seriously harm our financial
results.
CBS WILL OWN A % EQUITY INTEREST IN MEDSCAPE AND ITS INTERESTS MAY DIFFER
FROM THAT OF OTHER SHAREHOLDERS.
CBS's significant equity interest and other rights could delay or prevent a
change in control, which could negatively affect our stock price. CBS will own
13,938,368 shares of our common stock, which will constitute approximately %
of our outstanding common stock following completion of this offering. CBS has
rights to designate members of our board of directors generally based upon the
percentage of our voting securities that it holds. Initially, CBS will have
three representatives on our expanded ten-member board. If we issue voting
securities, or securities convertible into or exchangeable for voting securities
in the future, with some limitations, CBS will have the right to purchase for
cash securities from us so it can maintain its percentage ownership. As a result
of its share ownership and the other rights described in this prospectus, CBS
may be able to influence our management and affairs.
OUR EXISTING STOCKHOLDERS WILL MAINTAIN CONTROL OF OUR COMPANY.
Our existing stockholders control may have the effect of delaying or
preventing a change in control of Medscape, which could negatively affect our
stock price. Upon completion of this offering, our present directors and
executive officers, holders of more than 5% of our common stock, including CBS,
and their affiliates will beneficially own approximately % of the
outstanding common stock. Furthermore, our current board has been elected in
accordance with the terms of shareholders agreements which provided specified
shareholders, or classes of shareholders, with rights to elect directors. While
these rights in the shareholders agreements terminate at the effective time of
this offering, except the right of CBS to designate three of our directors, the
incumbent board of directors will continue to be composed of the representatives
of our pre-existing stockholders until they resign or are removed. As a result,
these stockholders, if they act as a group, will be able to control all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions.
A SIGNIFICANT NUMBER OF SHARES ARE ELIGIBLE FOR RESALE, AND THEIR SALE COULD
REDUCE OUR STOCK PRICE.
Sales of substantial amounts of common stock in the public market following
this offering, or the perception that those sales will occur, could negatively
affect the market price of our common stock. After the completion of this
offering, shares of common stock will be outstanding. Of these
outstanding
19
<PAGE> 22
shares, only of shares sold in this offering will be tradable in the
public market without restriction. The remaining 36,377,403 shares of common
stock that will be outstanding after this offering are "restricted securities"
within the meaning of Rule 144 under the Securities Act, and may not be publicly
resold, except in compliance with the registration requirements of the
Securities Act or under an exemption from registration, including that provided
by Rule 144.
Beginning 90 days after the date of this prospectus, 18,191,705 shares and
shares issuable upon exercise of options will be eligible for resale in the
public market, subject to compliance with volume, timing and other requirements
of Rule 144 and Rule 701 under the Securities Act and to the lock-up agreements
described below. The remaining 14,938,368 shares of currently outstanding common
stock and 5,394,208 shares issuable upon conversion of currently outstanding
preferred stock and 2,964,893 shares issuable upon exercise of options which
will vest after the 90-day period will become eligible for resale under Rule 144
and Rule 701 at various times within the next year, and some of these shares
could be sold earlier if the holders exercise their registration rights
described below.
We and substantially all of our existing stockholders holding an aggregate
of 36,010,418 shares of common stock have agreed not to offer, sell or contract
to sell or otherwise dispose of any common stock for a period of 180 days after
the date of this prospectus without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, except under limited circumstances. In
its sole discretion, and at any time without notice, Donaldson, Lufkin &
Jenrette Securities Corporation may release all or any portion of the shares
subject to these lock-ups.
CBS has agreed with us not to offer, sell or contract to sell or otherwise
dispose of the 13,938,368 shares of stock to be issued to them, or any other of
our securities that may be held by them, for a period of 12 months following the
date of its purchase.
The holders of 17,169,490 shares of common stock have the right in
specified circumstances to require us to register their shares under the
Securities Act, for resale to the public. If these stockholders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, those sales could negatively affect the market price
for our common stock. Specifically, the holders of approximately 13,538,752.5
shares of common stock have the right to demand registration of their shares
beginning on the date 180 days after the effective date of the registration
statement relating to an initial public offering. If we were required to include
shares held by these stockholders in a registration statement filed by us, those
sales could negatively affect our ability to raise needed capital. In addition,
within approximately 90 days after the date of this prospectus, we expect to
register under the Securities Act a total of 6,804,007.5 shares of common stock
reserved for issuance upon exercise of outstanding stock options or reserved for
issuance under our stock option plans.
In connection with entering into acquisitions and strategic relationships,
we have issued and may continue to issue options and warrants to purchase
significant amounts of common stock. The issuance of significant amounts of
options and warrants in the future, particularly options and warrants with
exercise prices below the fair market value of the common stock at the time of
issuance, could cause the market price of our stock to decline.
WE HAVE ANTI-TAKEOVER DEFENSES AND OTHER CONTRACTUAL PROVISIONS AND
RELATIONSHIPS THAT COULD DELAY OR PREVENT AN ACQUISITION OF MEDSCAPE.
We have anti-takeover provisions and other contractual obligations and
relationships that could serve to limit our stockholders' voting power and may
negatively affect our stock price. Our certificate of incorporation and bylaws
provide for staggered terms for members of our board of directors and give the
board the power to issue shares of preferred stock which could make it more
difficult for a third party to acquire us, even if a change in control would be
beneficial to our stockholders. Also, our agreement with CBS provides that we
will not increase our board beyond ten members and that CBS will have the right
to designate three directors so long as CBS owns more than 30% of our
outstanding voting securities, two directors so long as CBS owns more than 20%
of our outstanding voting securities and one director so long as CBS owns more
than 12.5% of our outstanding voting securities. If CBS's holdings of our
outstanding voting securities fall below 12.5% but the reduction is not caused
by the sale of any securities by CBS, CBS will continue to have the right to
20
<PAGE> 23
designate one individual to our board of directors. The staggered board and
CBS's rights to designate directors could make it more difficult to remove
incumbent directors. Additionally, CBS's obligation to provide us with
approximately $150 million in advertising and promotion may be terminated by CBS
if we issue more than 9% of our common stock to a competitor of CBS. This
provision may dissuade potential acquirers from pursuing a transaction, even if
that acquisition would be beneficial to our stockholders, which could negatively
affect our stock price.
OUR SECURITIES HAVE NO PRIOR PUBLIC MARKET, AND OUR STOCK PRICE MAY DECLINE
AFTER THIS OFFERING.
Before this offering, there has not been a public market for our common
stock. The trading market price of our common stock may decline below the
initial public offering price. In addition, an active public market for our
common stock may not develop or be sustained after this offering. The initial
public offering price has been determined by negotiations between us and the
representatives of the underwriters. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The price you will pay for our common stock will be substantially higher
than the pro forma tangible book value per share of outstanding common stock. As
a result, you will experience immediate and substantial dilution in tangible
book value per share, and the current stockholders of our company will
experience an immediate increase in the tangible book value per share of their
shares of common stock. The dilution that you will experience in this offering
will be approximately per share. Furthermore, to the extent that
we issue additional shares of common stock in connection with acquisitions or
any strategic partner agreements, or other outstanding options or warrants to
purchase common stock are exercised, there will be further dilution. For more
detailed information, see "Dilution."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Medscape and our
industry. We generally identify forward-looking statements in this prospectus
using words like "believe," "intend," "expect," "may," "will," "should," "plan,"
"project," "contemplate," "anticipate" or similar statements. These statements
are based on our beliefs as well as assumptions we made using information
currently available to us. Because these statements reflect our current views
concerning future events, these forward-looking statements involve risks and
uncertainties. Medscape's actual results could differ materially from those
anticipated in these forward-looking statements as a result of many factors, as
more fully described in "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and elsewhere in
this prospectus. Medscape undertakes no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
21
<PAGE> 24
USE OF PROCEEDS
Assuming an initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and our estimated
offering expenses, the net proceeds from the sale of the shares
of common stock in this offering are estimated to be approximately $
million. The net proceeds will be approximately $ million if the
underwriters' over-allotment option is exercised in full. The principal purposes
of this offering are to:
- obtain additional capital;
- create a public market for our common stock;
- enhance our ability to acquire other businesses, products or
technologies; and
- facilitate future access by us to public equity markets.
We currently expect to use the net proceeds of this offering for general
corporate purposes, including funding operating losses, working capital and
capital needs. We also may use a portion of the net proceeds of this offering to
acquire or invest in complementary businesses or technologies, although we have
no present commitments or agreements with respect to any material acquisition or
investment. Pending the application of the proceeds towards one of the above
uses, we intend to invest the net offering proceeds in short-term,
interest-bearing, investment-grade securities.
The forgoing represents our present intentions based upon our present plans
and business conditions. The occurrence of unforeseen events or changed business
conditions, however, could result in the application of the proceeds of this
offering in a manner other than as described in this prospectus.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock or
other securities and we do not intend to pay any cash dividends with respect to
our common stock in the foreseeable future. We intend to retain any earnings for
use in the operation of our business and to fund future growth.
22
<PAGE> 25
CAPITALIZATION
The following shows the cash and cash equivalents and capitalization of
Medscape as of March 31, 1999 (1) on an actual basis, (2) as adjusted on a
proforma basis to give effect to the issuance of 7,397,208 shares of Class A
Common Stock and 6,541,160 shares of Class B Common Stock to CBS and 1,000,000
shares of Class A Common Stock and 400,000 shares of Series E Preferred Stock to
NDC, and (3) as adjusted to give effect to the sale of shares of
common stock offered by Medscape at the initial public offering price and the
application of the estimated net proceeds as described in "Use of Proceeds," the
authorization of 5,000,000 shares of preferred stock effective as of the closing
of the offering, and the automatic conversion of securities into common stock to
occur upon the closing of this offering. The table should be read together with
the financial statements and the related notes and the other information
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------------------------
PRO FORMA
FOR CBS AND
ACTUAL NDC TRANSACTIONS(1) AS ADJUSTED
------- ------------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $20,633 $ 30,772 $
======= ========= =======
Shareholders' equity:
Series A Preferred Stock, par value $.01; 788,200 shares
authorized, issued and outstanding (actual); 788,200
shares authorized, issued and outstanding (proforma);
no shares authorized, issued or outstanding (as
adjusted)............................................. $ 8 8 $
Series C Preferred Stock, par value $.01 1,478,359
shares authorized, issued and outstanding (actual);
1,478,359 shares authorized, issued and outstanding
(proforma); no shares authorized, issued or
outstanding (as adjusted)............................. 15 15
Series C-1 Preferred Stock, par value $.01; 932,401
shares authorized, issued and outstanding (actual);
932,401 shares authorized, issued and outstanding
(proforma); no shares authorized, issued or
outstanding (as adjusted)............................. 9 9
Series D Preferred Stock, par value $.01; 1,757,683
shares authorized, issued and outstanding (actual);
1,757,683 shares authorized, issued and outstanding
(proforma); no shares authorized, issued or
outstanding (as adjusted)............................. 18 18
Series E Preferred Stock, par value $.01; no shares
authorized, issued and outstanding (actual); 400,000
shares authorized, issued and outstanding (proforma);
no shares authorized, issued or outstanding (as
adjusted)............................................. -- 4
Preferred Stock, par value $.01; no shares authorized,
issued or outstanding (actual); no shares authorized,
issued or outstanding (proforma); 5,000,000 shares
authorized, no shares issued or outstanding (as
adjusted)............................................. -- --
Class A Common Stock, par value $.01; 27,500,000 shares
authorized, 1,079,000 issued and outstanding (actual);
9,476,208 shares authorized, issued and outstanding
(proforma); 1,079,000 shares issued and outstanding
and redesignated as common stock (as adjusted)........ 11 95
Class B Common Stock, par value $.01; 15,000,000 shares
authorized, 5,792,317.5 shares issued and outstanding
(actual); 12,333,477.5 shares authorized, issued and
outstanding (proforma); no shares authorized, issued
or outstanding (as adjusted).......................... 58 123
Common Stock, par value $.01; no shares authorized,
issued and outstanding (actual), no shares authorized,
issued or outstanding (proforma); 21,809,685.5 shares
issued or outstanding (as adjusted)................... -- --
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------------------------
PRO FORMA
FOR CBS AND
ACTUAL NDC TRANSACTIONS(1) AS ADJUSTED
------- ------------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Warrants................................................ 85 85
Additional paid-in capital.............................. 32,037 208,883
Treasury stock.......................................... (3) (3)
Notes receivable........................................ (628) (628)
Distribution of services................................ (153,360)
Accumulated deficit..................................... (9,890) (9,980)
------- --------- -------
Total shareholders' equity......................... 21,720 45,359
------- --------- -------
Total capitalization............................... $21,720 $ 45,359
======= ========= =======
</TABLE>
- ---------------
(1) On July 7, 1999, we agreed to enter into agreements with CBS Corporation
under which we will receive approximately $150 million of advertising and
promotion in the United States and a license to the "CBS" trademark and
"Eye" design and selected health-related news content during the next seven
years, together valued at $7 million, in exchange for 7,397,208 shares of
our Class A Common Stock and 6,541,160 shares of our Class B Common Stock,
which will represent approximately % of our capital stock upon
completion of this offering.
On July 7, 1999, we agreed to enter into a development and marketing
agreement with National Data Corporation. As part of this transaction, NDC
will invest $10 million cash in Medscape and has agreed to provide $10
million in licensing and promotional value, product purchase amounts, and
credits against future commissions due by Medscape to NDC under the
agreement in exchange for 1,000,000 shares of Class A Common Stock and
400,000 of Medscape Series E Preferred Stock.
The outstanding share information is based on our shares outstanding as of March
31, 1999. This information excludes:
- 5,111,770 shares of common stock subject to options granted under our
1996 Stock Option Plan and outstanding as of May 31, 1999 at a weighted
average exercise price of $0.84 per share; and
- 14,887.5 shares of common stock reserved for outstanding warrants at an
exercise price of $0.004 per share.
24
<PAGE> 27
DILUTION
Our net tangible book value as of March 31, 1999 was approximately $19.7
million, or $0.96 per share of common stock. Net tangible book value per share
is equal to Medscape's total net tangible book value, which is total tangible
assets less total liabilities, divided by the number of shares of common stock
outstanding on that date after giving pro forma effect to the 2.5-for-one stock
split which we effected on May 17, 1999, and preferred stock conversion.
Dilution per share equals the difference between the amount per share paid by
purchasers of shares of common stock in this offering and the net tangible book
value per share of shares of common stock offered by us in this
offering. Assuming an initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, and the application of the estimated net
proceeds from this offering, Medscape's net tangible book value as of March 31,
1999 would have been $ million, or $ per share. This
represents an immediate increase in pro forma net tangible book value to
existing stockholders of $ per share and an immediate dilution to purchasers
in this offering of $ per share. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price................ $ --
Pro forma net tangible book value per share prior to
this offering...................................... $ --
Increase per share attributable to this offering..... --
Adjusted pro forma net tangible book value per share
after this offering................................ --
Dilution per share to new investors(1)............... $ --
</TABLE>
- ---------------
(1) Assuming the exercise in full of the underwriters' over allotment option,
the adjusted pro forma net tangible book value of Medscape at March 31, 1999
would have been approximately $ per share, representing an immediate
increase in net tangible book value of $ per share to our existing
stockholders and an immediate dilution in net tangible book value of $
per share to purchasers in this offering.
The following table illustrates, on a pro forma basis, as of March 31,
1999, the difference between the number of shares of common stock purchased from
Medscape, the total consideration paid and the average price per share paid by
existing stockholders and by the purchasers in this offering at an assumed
initial public offering price of $ per share and before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 20,439,035 % % $
Purchasers in this
offering................
-------- --- --------- ---
Total........... 100% $ 100%
======== === ========= ===
</TABLE>
The discussion and table assume no exercise of options outstanding under
our 1996 Stock Option Plan. As of March 31, 1999, there were options outstanding
to purchase a total of 5,939,190 shares of common stock at a weighted average
price of $0.84 per share and 14,887.5 shares issuable upon exercise of
outstanding warrants with a weighted average exercise price of $0.004 per share.
To the extent that any of these options and warrants are exercised, there will
be further dilution to new investors.
25
<PAGE> 28
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma consolidated statements of operations
present Medscape's consolidated results of operations for the year ended
December 31, 1998, after giving effect to the Healthcare Communications Group,
LLC acquisition and the other adjustments referred to below, in each case as if
this transaction had occurred on January 1, 1998. The pro forma data does not
give effect to this offering. The pro forma data is not necessarily indicative
of the results that would have been achieved, nor is it indicative of Medscape's
future results.
<TABLE>
<CAPTION>
HEALTHCARE
COMMUNICATIONS
HISTORICAL GROUP, LLC PRO FORMA
YEAR ENDED JANUARY 1, 1998 YEAR ENDED
DECEMBER 31, TO PRO FORMA DECEMBER 31,
1998 OCTOBER 27, 1998 ADJUSTMENTS(1) 1998
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues.................................... $ 3,069 $2,585 $ -- $ 5,654
--------- ------ ----- ---------
Operating expenses:
Editorial, production, content and
technology............................. 2,563 1,737 -- 4,300
Sales and marketing....................... 2,344 -- -- 2,344
General and administration................ 1,775 868 -- 2,643
Depreciation and amortization............. 280 9 110 399
--------- ------ ----- ---------
Total operating expenses.......... 6,962 2,614 110 9,686
--------- ------ ----- ---------
Loss from operations........................ (3,893) (29) (110) (4,032)
Interest expense (income)................. (249) (2) -- (251)
--------- ------ ----- ---------
Net loss.................................... $ (3,644) $ (27) $(110) $ (3,781)
========= ====== ===== =========
Basic net loss per share(2)................. $ (1.00) $ (0.57)
Weighted average number of shares of common
stock outstanding......................... 3,636,558 6,628,100
</TABLE>
- ---------------
(1) Adjustment represents amortization of goodwill for the 10 months ended
October 27, 1998.
(2) We calculate loss per common share by dividing the loss attributable to
common shares by the weighted average number of shares outstanding. We do
not include outstanding common stock options and warrants in the loss per
common share calculation, as their effect is anti-dilutive.
26
<PAGE> 29
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Shown below are selected financial data for the nine months ended December
31, 1996 and for each of the years in the two year period ended December 31,
1998 and for the three months ended March 31, 1998 and 1999. The selected
consolidated financial data presented below with respect to the nine months
ended December 31, 1996 and for the years ended December 31, 1997 and 1998 and
the three months ended March 31, 1998 and 1999 have been derived from the
financial statements appearing elsewhere in this prospectus. Deloitte & Touche
LLP, independent auditors, have audited the consolidated financial statements
for the nine months ended December 31, 1996 and two year period ended December
31, 1998. In our opinion the unaudited consolidated financial statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, which consist only of normal recurring adjustments, necessary
for a fair presentation of the financial position and the results of operations
for these periods. Operating results for the three months ended March 31, 1998
and 1999 are not necessarily indicative of the results that may be expected for
the full year. The information shown below is qualified by reference to and
should be read together with the financial statements and their notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
YEARS ENDED THREE MONTHS ENDED
NINE MONTHS ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------- ---------------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues........................... $ 1,015 $ 1,522 $ 3,069 $ 550 $ 1,644
--------- --------- --------- --------- ---------
Operating expenses:
Editorial, production, content
and technology................ 1,182 1,790 2,563 396 1,231
Sales and marketing.............. 278 1,201 2,344 299 1,081
General and administration....... 830 1,823 1,775 360 765
Depreciation and amortization.... 41 160 280 47 88
--------- --------- --------- --------- ---------
Total operating
expenses............... 2,331 4,974 6,962 1,102 3,165
--------- --------- --------- --------- ---------
Loss from operations............... (1,316) (3,452) (3,893) (552) (1,521)
Interest expense (income)........ 28 12 (249) (49) (82)
--------- --------- --------- --------- ---------
Net loss........................... $ (1,344) $ (3,464) $ (3,644) $ (503) $ (1,439)
========= ========= ========= ========= =========
Basic loss per share(1)............ $ (0.66) $ (1.26) $ (1.00) $ (0.18) $ (0.21)
Weighted average number of shares
of common stock outstanding...... 2,026,233 2,750,552 3,636,558 2,820,402 6,871,318
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------- ----------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Current assets.................................. $ 560 $4,294 $3,038 $7,409 $22,985
Working capital................................. (1,570) 2,350 1,368 5,874 19,302
Total assets.................................... 836 4,633 5,414 7,723 25,403
Stockholders' equity............................ (1,294) 2,689 3,744 6,188 21,720
</TABLE>
- ---------------
(1) We calculate loss per common share by dividing the loss attributable to
common shares by the weighted average number of shares outstanding. We do
not include outstanding common stock options and warrants in the loss per
common share calculation as their effect is anti-dilutive.
27
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and operations should
be read in conjunction with the consolidated financial statements and the
related notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including but not limited to, those
described under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
We operate Medscape.com, a leading healthcare Web site for physicians,
allied healthcare professionals, such as pharmacists and nurses. To enhance and
personalize the consumer experience, we plan to launch a separate consumer site,
CBS.Medscape.com, in the third quarter of 1999. Medscape, Inc. commenced
operations in April 1996. In October 1998, we acquired Healthcare Communications
Group, LLC, which operated a leading HIV Web site. In the first quarter of 1999,
we acquired the trademarks and hired key employees of Bonehome.com, a leading
orthopedic Web site, and CompuRx, Inc., a healthcare market research company
serving pharmaceutical and other healthcare companies. The Bonehome.com and
CompuRx transactions were not material to our financial statements. These
transactions are consistent with our strategy to be the leading online
information source for selected medical specialties and to broaden our revenue
streams.
Since our inception, we have derived substantially all of our revenues from
advertising and sponsorships from pharmaceutical companies. We also generate
revenues from our e-commerce partners who either provide us with a placement fee
or a commission on sales of their products generated through our Web site. We
offer banner advertising to third-party advertisers and generally guarantee
delivery of a specified number of advertising impressions. We derive sponsorship
revenues from the development of client-sponsored content, including modules on
disease topics and editorial coverage of medical conferences. We expect our
revenues to be seasonal due to the scheduling of major medical conferences.
We recognize banner advertising revenues in the period that we display the
advertisement, provided that no significant obligations remain and collection of
the resulting receivable is probable. We recognize revenues from modules on a
cost of completion basis and editorial coverage of medical conferences in the
period in which the conference was held. We recognize revenues from e-commerce
based on commissions when earned from our third-party partners or, in cases
where third-party partners pay placement fees to us, over the life of the
product placement. We generally invoice for our services at the inception of a
project and record a receivable. Accordingly, our receivables have increased in
connection with our increase in revenues and due to an increase in the number of
large scale sponsored programs which have become a more prominent part of our
business following our acquisition of Healthcare Communications Group, LLC.
To date, we have incurred substantial costs to create and enhance our
content, build brand awareness, develop our infrastructure and grow our
business, and have yet to achieve significant revenue. As a result, we have
incurred operating losses in each fiscal quarter since we were formed. We expect
operating losses and negative cash flow to continue for the foreseeable future
as we intend to significantly increase our operating expenses to grow our
business. These costs could have an adverse effect on our future financial
condition or operating results. We believe that period-to-period comparison of
our financial results is not necessarily meaningful and you should not rely upon
them as an indication of our future performance.
RESULTS OF OPERATIONS
The following descriptions of the components of revenues and expenses apply
to the Comparison of Results of Operations:
- Revenues. Revenues consist primarily of sales of advertising banners and
sponsorships for developing content for modules and medical conferences.
Revenues also include commission revenues or
28
<PAGE> 31
placement fees from product sales, such as medical books, and market
research services to pharmaceutical and other healthcare companies.
- Editorial, Production, Content and Technology. Product development
expenses consist primarily of salaries, third-party content acquisition
costs, the development of sponsored content and expenditures associated
with maintaining and enhancing our Web site.
- Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, advertising, promotions and related marketing
costs.
- General and Administration. General and administration expenses consist
primarily of salaries, facility costs and fees for professional services.
- Depreciation and Amortization. Depreciation expense reflects the charge
for depreciation of capitalized fixed assets, including computer
equipment, Web site servers and related equipment, and the amortization
of office leasehold improvements. Additionally, this category includes
goodwill amortization related to corporate acquisitions.
- Interest Expense/Income. Interest expense is related to loans that a
related party provided to Medscape, which were fully repaid by the end of
1998. Interest income consists primarily of interest earned on cash and
cash equivalents generated from private placements of equity securities.
The following tables present, for the periods given, selected data from
Medscape's statements of operations and this data as a percentage of net
revenues. We have derived our statements of operations data for 1996, 1997 and
1998 periods from our audited financial statements. We have derived the
statement of operations data for the first quarters of 1998 and 1999 from our
unaudited financial statements which, in our opinion, have been prepared on
substantially the same basis as the audited financial statements and includes
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information. This information should be
read together with the financial statements and their notes included elsewhere
in this prospectus. The operating results in any period are not necessarily
indicative of the results that may be expected for any future period.
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------
NINE MONTHS YEAR ENDED THREE MONTHS
ENDED DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, ----------------------- ----------------
1996 1997 1998 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues................................ $ 1,015 $ 1,522 $ 3,069 $ 550 $ 1,644
------- ------- ------- ------ -------
Operating Expenses:
Editorial, production, content and
technology....................... 1,182 1,790 2,563 396 1,231
Sales and marketing................ 278 1,201 2,344 299 1,081
General and administration......... 830 1,823 1,775 360 765
Depreciation and amortization...... 41 160 280 47 88
------- ------- ------- ------ -------
Total operating expenses...... 2,331 4,974 6,962 1,102 3,165
------- ------- ------- ------ -------
Loss from operations.................... (1,316) (3,452) (3,893) (552) (1,521)
Interest expense (income).......... 28 12 (249) (49) (82)
------- ------- ------- ------ -------
Net loss................................ $(1,344) $(3,464) $(3,644) $ (503) $(1,439)
======= ======= ======= ====== =======
</TABLE>
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<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
NINE MONTHS YEAR ENDED THREE MONTHS ENDED
ENDED DECEMBER 31, MARCH 31,
DECEMBER 31 ----------------- ------------------
1996 1997 1998 1998
(IN THOUSANDS) 1999
<S> <C> <C> <C> <C> <C>
Revenues.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------ -------
Operating expenses:
Editorial, production, content and
technology......................... 116.5 117.6 83.5 72.0 74.9
Sales and marketing.................. 27.4 78.9 76.4 54.4 65.8
General and administration........... 81.8 119.8 57.8 65.5 46.5
Depreciation and amortization........ 4.0 10.5 9.1 8.5 5.4
------- ------- ------- ------ -------
Total operating expenses........ 229.7 326.8 226.8 200.4 192.5
------- ------- ------- ------ -------
Loss from operations...................... (129.7) (226.8) (126.8) (100.4) (92.5)
Interest expense (income)............ 2.8 0.8 (8.1) (8.9) (5.0)
------- ------- ------- ------ -------
Net loss.................................. (132.4)% (227.6)% (118.7)% (91.5)% (87.5)%
======= ======= ======= ====== =======
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1999
Revenues and operating expenses for the first quarter of 1999 include
Healthcare Communications Group, which we acquired in October 1998.
Revenues. Revenues increased 199% from $550,000 for the three months ended
March 31, 1998 to $1.6 million for the three months ended March 31, 1999. The
increase in revenues was driven by the inclusion of Healthcare Communications
Group revenues during the first quarter of 1999 and an increase in the number of
advertisers and sponsors on our Web site.
Editorial, Production, Content and Technology. Product development
expenses increased 211% from $396,000 for the three months ended March 31, 1998
to $1.2 million for the three months ended March 31, 1999. The increase in costs
was primarily due to increased variable costs related to the development of
sponsored content and costs associated with expanding and enhancing editorial
content and the functionality of our Web site.
Sales and Marketing. Sales and marketing expenses increased 262% from
$299,000 for the three months ended March 31, 1998 to $1.1 million for the three
months ended March 31, 1999. The increase in costs was primarily due to
increased costs related to the continued development and implementation of our
marketing and branding campaigns and additional sales and marketing personnel.
General and Administration. General and administration expenses increased
113% from $360,000 for the three months ended March 31, 1998 to $765,000 for the
three months ended March 31, 1999. The increase in costs was primarily a result
of expenses related to increased personnel, professional service fees and
facility expenses necessary to support our growth.
Depreciation and Amortization. Depreciation and amortization expenses
increased 87% from $47,000 for the three months ended March 31, 1998 to $88,000
for the three months ended March 31, 1999. The increase in costs was
attributable to increased purchases of fixed assets and amortization of goodwill
related to the Healthcare Communications Group acquisition in October 1998.
Interest Expense/Income. Net interest income for the three months ended
March 31, 1999 was $82,000 compared to $49,000 for the three months ended March
31, 1998. The higher interest income was due to a higher average of net cash and
cash equivalents balance as a result of our issuance of preferred stock during
the three months ended March 31, 1999.
Income Taxes. As of March 31, 1999, Medscape had federal net operating
loss carryforwards of approximately $10.1 million which will be available to
reduce future taxable income. The federal net operating loss carryforwards
expire beginning in 2011 through 2019. A valuation allowance has been recorded
for the
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entire deferred tax asset as a result of uncertainties regarding the realization
of the asset due to our lack of earnings history.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998
Operating results for the year ended December 31, 1998 include the results
of Healthcare Communications Group, which we acquired in October 1998.
Revenues. Revenues increased 102% from $1.5 million for the year ended
December 31, 1997 to $3.1 million for the year ended December 31, 1998. The
increase in revenues was driven by the inclusion of Healthcare Communications
Group revenues for November and December 1998 and an increase in the number of
advertisers and sponsors on our Web site.
Editorial, Production, Content and Technology. Product development
expenses increased 43% from $1.8 million for the year ended December 31, 1997 to
$2.6 million for the year ended December 31, 1998. The increase in costs was
primarily due to increased variable costs associated with the development of
sponsored content as well as from additional editorial, production and
technology personnel.
Sales and Marketing. Sales and marketing expenses increased 95% from $1.2
million for the year ended December 31, 1997 to $2.3 million for the year ended
December 31, 1998. The increase in costs was primarily due to the expansion of
our sales force and client services staff and costs related to marketing and
branding campaigns.
General and Administration. General and administration expenses remained
essentially flat at $1.8 million for the years ended December 31, 1997 and 1998.
General and administration costs in 1997 included certain non-recurring service
fees charged by a related party. Recurring costs increased in 1998 as a result
of hiring several senior managers and related recruitment fees and increased
support costs in line with the increase in our number of personnel.
Depreciation and Amortization. Depreciation and amortization expenses
increased 75% from $160,000 for the year ended December 31, 1997 to $280,000 for
the year ended December 31, 1998. The increase in costs was largely attributable
to increased purchases of fixed assets and amortization of goodwill resulting
from the Healthcare Communications Group acquisition in October 1998.
Interest Expense/Income. Net interest expense for the year ended December
31, 1997 was $12,000. Net interest income for the year ended December 31, 1998
was $249,000. The improvement was due to higher average net cash and cash
equivalents balances as a result of the issuance of preferred stock at the end
of 1997 and in 1998, as well as the payment in full of all outstanding loans in
1998.
COMPARISON OF NINE MONTHS ENDED DECEMBER 31, 1996 AND YEAR ENDED DECEMBER 31,
1997
Revenues. Revenues increased 50% from $1.0 million for the period from
April 1, 1996, when we commenced operations, to December 31, 1996 to $1.5
million, for the year ended December 31, 1997. The increase in revenues was
driven primarily by an increase in the number of advertisers and sponsors on our
Web site and the inclusion of twelve months of revenues for the year ended
December 31, 1997 versus nine months for the prior period.
Editorial, Production, Content and Technology. Product development
expenses increased 51% from $1.2 million for the nine months ended December 31,
1996 to $1.8 million for the year ended December 31, 1997. The increase in costs
was primarily due to increased number of personnel required to develop our core
product offerings and the inclusion of twelve months of costs for the year ended
December 31, 1997 versus nine months for the prior period.
Sales and Marketing. Sales and marketing expenses increased 332% from
$278,000 for the nine months ended December 31, 1996 to $1.2 million for the
year ended December 31, 1997. The increase in costs was primarily due to
increased sales and marketing personnel and promotional costs and inclusion of
twelve months of costs for the year ended December 31, 1997 versus nine months
for the prior period.
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General and Administration. General and administration expenses increased
120% from $830,000 for the nine months ended December 31, 1996 to $1.8 million
for the year ended December 31, 1997. The increase in costs was primarily a
result of non-recurring items in 1997, including service fees paid to a related
party and the twelve month period versus nine months of operations.
Depreciation and Amortization. Depreciation and amortization expenses
increased 290% from $41,000 for the nine months ended December 31, 1996 to
$160,000 for the year ended December 31, 1997. The increase in costs was
primarily attributable to increased purchases of fixed assets and the inclusion
of twelve months of costs for the year ended December 31, 1997 versus nine
months for the prior year.
Interest Expense/Income. Interest expense for the nine months ended
December 31, 1996 was $28,000 as compared with $12,000 for the year ended
December 31, 1997. We earned income on net cash and cash equivalents balances
from the issuance of preferred stock offset by interest paid, at commercial
rates, on a loan to Medscape.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have largely financed our operations through the
private placement of equity securities and, to a lesser extent, from revenues
generated from advertising and sponsorship sales and loans received from a
related party.
Net cash used in operating activities was $80,000, $3.6 million and $4.2
million for the period from April 1, 1996 through December 31, 1996 and for the
years ended December 31, 1997 and 1998, respectively. Net cash used in operating
activities for the three months ended March 31, 1999 was $1.4 million. Cash used
in operating activities from April 1, 1996 through March 31, 1999 was
attributable to funding net operating losses and increases in accounts
receivable and prepaid expenses, which were partially offset by increases in
deferred revenues, accrued expenses and accounts payable.
Net cash used in investing activities was $318,000, $222,000 and $1.5
million for the period from April 1, 1996 through December 31, 1996 and for the
years ended December 31, 1997 and 1998, respectively. Net cash used in investing
activities for the three months ended March 31, 1999 was $130,000. Cash used in
investing activities related primarily to the purchase of tangible fixed assets
and the acquisition of Healthcare Communications Group in October of 1998.
Cash provided by financing activities was $597,000, $7.3 million and $3.6
million for the period from April 1, 1996 through December 31, 1996 and for the
years ended December 31, 1997 and 1998, respectively. For the quarter ended
March 31, 1999, gross proceeds provided by financing activities were $20.6
million.
As of March 31, 1999, the primary source of liquidity for Medscape was
$20.6 million of cash and cash equivalents. As of this date, we had no bank
credit facility.
We expect to incur significantly higher costs, particularly content
creation costs and sales and marketing costs to grow our business. We plan to
launch CBS.Medscape.com, our separate consumer site, in the third quarter of
1999. CBS.Medscape.com will provide consumer-oriented information organized by
health topic and offer community features and interactive healthcare information
programs. A large portion of our promotional expenditures for both
CBS.Medscape.com and Medscape.com will be funded through the approximately $150
million in advertising and promotion to be provided by CBS.
On June 15, 1999, we entered into a License and Web Site Development
Agreement with Softwatch Ltd., an Israeli company, and its U.S. subsidiary,
Softwatch, Inc., under which we licensed software from Softwatch to support our
consumer site and to provide ongoing support services for our consumer site. At
the same time we purchased 1,040,170 Series A Preferred Shares of Softwatch
Ltd., an Israeli company, for $2,999,954.
We believe that the net proceeds from this offering, together with current
cash and cash equivalents and any cash generated from operations, will be
sufficient to meet anticipated cash needs for working capital and
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<PAGE> 35
capital expenditures for at least the next 12 months following the offering.
However, if during or following that period we are not successful in generating
sufficient cash flow from operations or in raising additional capital when
required in sufficient amounts and on terms acceptable to us, these failures
could have a material adverse effect on our business, results of operations and
financial condition. If we raise additional funds through the issuance of equity
securities, the percentage ownership of our then current stockholders would be
reduced.
SUBSEQUENT FINANCING EVENTS
On July 7, 1999, we agreed to enter into a strategic development and
marketing agreement with National Data Corporation, an electronic data
interchange and data management company for medical practices. As part of this
transaction, NDC will invest $10 million cash in Medscape, and has agreed to
provide $10 million in licensing and promotional value and credits against
future commission and product purchase amounts due by us to NDC under the
agreement in exchange for 1,000,000 shares of our Class A Common Stock and
400,000 shares of our Series E Preferred Stock.
On July 7, 1999, we agreed to enter into agreements with CBS Corporation
under which we will receive approximately $150 million in advertising and
promotion in the United States and a license to the "CBS" trademark and "Eye"
design and selected health-related news content during the next seven years in
exchange for 7,397,208 shares of our Class A Common Stock and 6,541,160 shares
of our Class B Common Stock, which will represent approximately % of our
outstanding capital stock upon completion of this offering.
The consummation of each of the CBS transaction and the NDC transaction
remains subject to closing conditions, including our obtaining necessary
regulatory approval.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income" and SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information."
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. We have no elements of comprehensive
income; we operate in one segment in the United States.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments and hedging activities for our year ended
December 31, 2000. Generally, it requires that a entity recognize all
derivatives as either an asset or liability and measure those instruments at
fair value, as well as identify the conditions for which a derivative may be
specifically designed as a hedge. We currently do not have any derivative
instruments and we do not engage in any hedging activities.
During 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Policy No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This statement is applicable to our 1999 financial statements and
will require us to capitalize various payroll and payroll-related costs and
other costs that are directly related to the development of some of our systems.
Amortization of these costs will be over the life of the systems. We are
currently evaluating the effect of this statement on our financial statements.
YEAR 2000
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from dates prior to the year
2000. Many software and computer systems used by companies and governmental
agencies may need to be upgraded or replaced in order to correctly process dates
beginning in 2000 and comply with Year 2000 requirements.
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We are conducting a comprehensive review of both information technology and
non-information systems to ensure that they are, or prior to the end of 1999
will be, Year 2000 compliant. Significant information technology systems include
our production system, composed of the servers, networks and software that
comprise the underlying technical infrastructure that runs our business, and
various internal office systems. Our significant non-information technology
systems include the telephone systems, air conditioning and security system. Our
Year 2000 review project includes the following phases:
- conducting a comprehensive inventory of our internal systems and the
systems acquired or to be acquired by us;
- assessing and prioritizing any required remediation;
- remediating any problems by repairing or, if appropriate, replacing the
non-compliant systems; and
- testing all remediated systems for Year 2000 compliance.
With the exception of one element of our production system, which is in
remediation stage now, all other elements of our information technology systems
have been certified as Year 2000 compliant. We expect to complete remediation
for the one outstanding element by end of the third quarter of 1999. We are in
the process of completing our testing and review of all non-information
technology systems and expect to complete this work by end of the third quarter.
Based upon the results of our review to date, it appears that there are no
significant Year 2000 issues within our systems that would have a negative
effect on our ability to conduct business.
In addition to assessing the readiness of our systems, we have gathered
information from, and have directly communicated through written correspondence,
telephone calls and in face-to-face meetings with our third-party systems and
software vendors, as well as other suppliers, to identify and, to the extent
possible, resolve issues involving the Year 2000 problem. Based on
representations made to us by applicable suppliers, we believe that the
third-party software and systems that are material to our business are Year 2000
compliant. We have approximately six major vendors with whom we have met and/or
corresponded to determine Year 2000 issues and appropriate compliance. However,
we have limited or no control over the actions of our third-party suppliers.
Thus, while we expect that we will be able to resolve any significant Year 2000
problems with our systems, we cannot guarantee that our third-party suppliers
will resolve all Year 2000 problems with their systems before the occurrence of
a material disruption to our business. Any failure of material third-party
suppliers to resolve Year 2000 problems with their systems in a timely manner
would have a negative effect on our ability to conduct business.
To date, we have spent an immaterial amount on Year 2000 compliance issues
but expect to incur approximately an additional $50,000 in connection with
evaluating and addressing these issues. We expect to pay for these expenses from
our working capital. Most of our expenses have related to operating costs
associated with the time spent by employees and consultants in the evaluation
process and Year 2000 compliance matters generally. These expenses, if higher
than anticipated, could have a negative effect on our financial condition.
We expect to identify and resolve by September 30, 1999 all Year 2000
problems that could materially adversely affect our business, financial
condition or operating results. We cannot assure you, however, that we will
achieve full Year 2000 compliance before the end of 1999. A failure of our
computer systems or the failure of our suppliers or customers to effectively
upgrade their software and systems for transition to the year 2000 could have a
material adverse effect on our business, financial condition and results of
operations.
In addition, we cannot be certain that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be Year 2000 compliant. The failure by these
entities to be Year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet, telecommunications or electrical failure,
that could prevent us from delivering our services to our customers, decrease
the use of the Internet or prevent users from accessing our Web site, any of
which could have a material adverse effect on our business, financial condition
and results of operations.
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We completed an acquisition during 1998 and are finalizing the integration
of the systems of the acquired business into our operations. Those systems are
included in our Year 2000 review. For any other acquisitions that we may
complete prior to the end of 1999, we will evaluate the extent of the Year 2000
problems associated with the potential acquisitions and the cost and timing of
remediation. This work will be done as part of the due diligence process as well
as post-acquisition integration. We cannot assure you, however, that the systems
of any acquired business will be Year 2000 compliant when we acquire them or
will be capable of timely remediation.
As discussed above, we are engaged in an ongoing Year 2000 assessment and
have not yet developed any contingency plans. We will take the results of our
assessment into account in determining the nature and extent of any contingency
plans. We have established a contingency plan to remedy issues for a key element
of our production system. If the planned remediation is not successful by the
end of the third quarter of 1999, we will execute the contingency plan. This
plan will involve outsourcing the service and could be implemented within a
reasonable time frame.
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BUSINESS
MEDSCAPE
We operate Medscape.com, a leading healthcare Web site targeted at
physicians and allied healthcare professionals, such as pharmacists and nurses.
Our Web site is a valuable resource that enables our members to make better
informed healthcare decisions. We provide comprehensive, authoritative and
timely medical information, including original proprietary articles written for
us by renowned medical experts. We supplement our medical content with a variety
of non-medical information, community features and interactive programs that
make Medscape.com a full-service professional healthcare destination site. We
plan to launch our separate consumer site, CBS.Medscape.com, in the third
quarter of 1999. As of May 31, 1999, Medscape.com had more than 1,100,000
registered members worldwide, including over 200,000 registered as physicians,
550,000 registered as allied healthcare professionals and 380,000 registered as
consumers. Our registered member base allows us to provide pharmaceutical,
healthcare and other consumer product companies with direct access to their
target audiences.
Medscape.com is currently organized by medical specialty area, such as
oncology and cardiology, to make it easier for our members to access the
information most relevant to them. Our medical content and interactive programs
assist medical professionals in keeping abreast of medical advances. Our
original, exclusive and proprietary content includes such innovative features as
next day summaries of major medical conferences and online, peer-reviewed
medical journals. We also provide proprietary interactive programs that test a
medical professional's diagnostic skills and understanding of recent medical
developments. We provide access to extensive online medical databases and what
we believe is one of the Web's largest collection of free, peer-reviewed,
full-text medical articles. In addition, we offer physicians the opportunity to
earn continuing medical education credits that are required by most states'
licensing boards. Through our strategic relationship with National Data
Corporation, a leading provider of healthcare information services and
electronic commerce solutions, we will integrate selected clinical data
interchange and data management services provided by NDC into Medscape.com. We
will also serve as the principal content provider to NDC's physician practice
management system and become an online distributor of some of NDC's other online
clinical products.
We believe our current consumer members view Medscape.com as a trusted
source of healthcare information because of our high-quality content and our
credibility with physicians. To enhance and personalize the consumer experience,
we plan to launch a separate consumer site. We have agreed to enter into a
strategic relationship with CBS Corporation under which our consumer site will
be branded CBS.Medscape.com, which will be the exclusive Internet healthcare
site integrated into CBS News programming and will be promoted on CBS media
properties. We will design our CBS.Medscape.com consumer site to help consumers
make better informed healthcare decisions and to simplify management of their
healthcare needs. Our consumer site will provide personalized, authoritative
medical content written for the consumer, access to our professional content on
Medscape.com and interactive health management tools, such as health diaries.
All visitors to CBS.Medscape.com will be able to access our general content and
features. However, visitors will be required to register as members in order to
have full access to all the content and features of CBS.Medscape.com.
Medscape was incorporated in New York in March 1996 and commenced
operations in April 1996. Medscape was reincorporated in Delaware in December
1998. In October 1998, we purchased Healthcare Communications Group, which
operated a leading HIV Web site.
INDUSTRY BACKGROUND
THE INTERNET
The Internet has emerged as a global medium for communications, news,
information and commerce. International Data Corporation estimates that the
number of Web users worldwide will increase from approximately 97 million at the
end of 1998 to 320 million by the end of 2002. IDC also estimates that the
number of Web users in the United States will increase from approximately 52
million at the end of 1998 to 136 million by the end of 2002. A number of
factors drive the Internet's continued growth, including the
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<PAGE> 39
large and growing installed base of personal computers, a rapidly expanding and
improving Internet delivery infrastructure and an explosion of content and
commerce offerings on the Web.
The Internet allows content delivery in a manner not possible through
traditional broadcast and print media. These traditional media can have large
audiences but generally are limited to a specific geographic area, can deliver
only limited content and are not effective for distributing detailed information
quickly. The Internet is distinct from traditional media in that it offers
immediate access to dynamic and interactive content and enables instantaneous
communication among users. As a result, the Internet has become an important
alternative to traditional media, enabling users to seek current information and
to communicate with one another. These characteristics, combined with the fast
growth of the Internet, have created a powerful, rapidly expanding direct
marketing and sales channel. Advertisers can target very specific demographic
groups, measure the effectiveness of advertising campaigns and quickly revise
them in response to the prompt feedback allowed by the Internet's technology.
As users increasingly rely on the Internet for their information needs,
they have sought more detailed content on a wide variety of specific subjects.
Utilizing subject-specific sites, users can find information on selected topics
quickly, easily and cost effectively, making these sites a very attractive
resource for users. In addition to offering detailed and comprehensive content,
many of these subject-specific sites have developed online communities that
allow users to communicate with each other and to engage in other interactive
activities. We believe these community features are attractive to users who want
to express themselves and who seek to interact with other users who have similar
interests.
RELEVANT DYNAMICS IN THE HEALTHCARE INDUSTRY
Healthcare is the largest sector of the U.S. economy, accounting for
approximately $1 trillion in annual spending. As the focal point of the
healthcare delivery system, the approximately 620,000 prescribing physicians in
the United States directly or indirectly control approximately 80% of the $1
trillion in annual expenditures. This makes physicians attractive marketing
targets for pharmaceutical companies, medical device manufacturers and other
healthcare companies. According to IMS Health, in 1998, pharmaceutical companies
spent over $10 billion on promotional and educational activities targeting
physicians in the United States. According to Scott-Levin, approximately $5.7
billion of these expenditures were on 59 million face-to-face product details, a
process in which a sales representative explains to a physician the therapeutic
benefits and adverse effects of new or existing drugs. This amount represents an
increase of 14.6% over 1997 detailing expenditures. In addition, pharmaceutical
companies spent approximately $1.9 billion on medical journal print advertising,
promotional meetings and events.
Continuing changes in the healthcare industry, including the increasing
adoption of managed care plans and the need to keep informed about rapidly
emerging medical and pharmaceutical therapies, are placing increasing pressures
on physicians' time. Physicians must keep abreast of the latest developments
within their medical specialty to provide their patients with the best possible
care and to meet continuing medical education requirements. There is a vast flow
of information from many sources, including traditional medical journals,
medical textbooks, industry conferences and other trade literature. The sheer
volume of medical information and the time constraints that physicians face make
it extremely difficult for them to stay current and to quickly and efficiently
access the information most relevant to their practice. We believe that
physicians value services that allow them to easily find and manage information
they are seeking.
Consumers are taking a more active role in seeking information sources on
health and wellness topics and educating themselves on available treatment
options. This trend is driven by the proliferation of new therapies and the
increased oversight of treatment options by payors. Traditional media have
sought to meet this demand for consumer-oriented healthcare information by
introducing magazines focused on health and wellness and by increasing news
coverage of healthcare-related issues. We believe that consumers, like
physicians, value a comprehensive healthcare site with high-quality content,
community features and interactive programs that help them make better informed
healthcare decisions and simplify management of their healthcare needs.
Pharmaceutical, medical device and other healthcare companies recently have
increased their efforts to influence consumer behavior with targeted advertising
and promotions. This trend has been influenced in part
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by new guidelines for direct-to-consumer advertising of pharmaceuticals issued
by the U.S. Food and Drug Administration in August 1997. As a result, according
to Scott-Levin, pharmaceutical companies spent an estimated $1.3 billion on
direct-to-consumer advertising for prescription drugs in 1998, an increase of
30% over 1997.
CONVERGENCE OF THE INTERNET AND THE HEALTHCARE INDUSTRY
The Internet is an effective medium for accessing timely and relevant
medical information. Health and medical information is a rapidly growing area of
interest on the Internet. According to Cyber Dialogue, one-third of all Web
users in the United States use the Internet to locate healthcare information,
half of whom are searching for information on a specific disease or health
condition.
Physicians are using the Internet as a valuable source of the latest
medical information. According to a June 1998 PERQ/HCI report, over 52% of
physicians accessed medical information online, up from 37% in the prior year.
The Internet allows physicians to access, at their convenience, recent
healthcare articles and reports, link to authoritative medical databases and
earn continuing medical education credits.
Consumers are also using the Internet to find information that will enable
them to better understand and manage their own, their family's and their
friends' healthcare needs and to interact with other users who have similar
healthcare interests. According to Cyber Dialogue, during the 12-month period
ending June 1998, approximately 17 million adults in the United States searched
online for health and medical information. It is estimated that this number will
grow to over 33 million by 2000. We believe that community features are
particularly important to healthcare consumers, because medical information is
often complex and intimidating and consumers value communication, information
and testimonials from peers who share similar health concerns. According to
Cyber Dialogue, 70% of consumers who access healthcare information on the
Internet feel more empowered to make healthcare decisions. In addition,
approximately 50% of such consumers make offline purchases after seeking
information on the Internet. Cyber Dialogue also reports that Web users seeking
healthcare information are typically better educated, have higher household
incomes and are more experienced with the Internet than the general population
of Internet users.
THE MEDSCAPE SOLUTION
Medscape.com is a healthcare destination site that provides medical
professionals and consumers with comprehensive, authoritative and timely medical
information and interactive programs. We believe Medscape.com is positioned to
help users make better informed healthcare decisions and change the way people
access information and communicate about healthcare.
We believe the following factors drive our success:
We provide high-quality, timely and original medical information. We
provide high-quality, timely and original content on important healthcare trends
and disease topics. Using the real-time publishing capabilities of the Internet,
we can deliver this content to our audience faster and more cost effectively
than traditional print media, which is limited by publication schedules and
physical distribution. Many of our articles are written by industry-leading
medical experts and are peer-reviewed by other physicians to insure they meet
the highest standards of medical integrity. Our experienced editorial staff is
headed by Medscape's Editor in Chief, Dr. George D. Lundberg, who was the Editor
of the prestigious Journal of the American Medical Association for 17 years. We
supplement our extensive original content with one of the Web's largest
collections of free, peer-reviewed, full-text medical articles, one of the Web's
most extensive libraries of continuing medical education accredited programs,
and exclusive third-party Web access to the National Drug Data File, a leading
drug and disease database of Hearst Corporation's First DataBank. Our medical
specialty areas are carefully designed and their features are regularly updated
by our editorial and quality control staff.
Our sites are well organized and easy-to-use. We design our Web sites to
meet the needs of our members in a personalized and easy-to-use manner. We
organize our professional information on Medscape.com by medical specialty area,
the way physicians practice, and we plan to organize CBS.Medscape.com by health
topic like diabetes and asthma. In addition to high-quality medical content, our
consumer site will provide community features and interactive programs to help
consumers make better informed healthcare decisions and to simplify management
of their healthcare needs. Unlike many other
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healthcare Web sites, by including content from our professional site at
CBS.Medscape.com, we will allow consumers to access the same high-quality
medical information as physicians.
We provide our clients with cost-effective access to our audience. Our
membership registration profiles give us the ability to segment our audience
based on their medical specialty or healthcare interest. In addition, our
proprietary membership profile and traffic database enables us to provide
advertising and sponsored content targeted to the specific profile our clients
seek to reach. Medscape.com also offers online programs that complement many of
the pharmaceutical companies' off-line promotional and educational efforts. For
example, we expand the audience of sponsored medical conferences by making
next-day summaries of the proceedings available to members who were unable to
attend. In addition, we believe Medscape.com creates and CBS.Medscape.com will
create an attractive e-commerce environment for health-related products because
they will have a large audience with a focused interest on healthcare issues and
related products.
We have a strategic relationship with CBS. We believe that our strategic
relationship with CBS will position our consumer Web site, CBS.Medscape.com, as
a preeminent branded source of consumer-oriented health and wellness information
on the Web. We will receive approximately $150 million in advertising and
promotion across all CBS media properties and a license to the "CBS" trademark
and "Eye" design and selected health-related news content during the next seven
years in exchange for 7,393,208 shares of our Class A Common Stock and 6,541,160
shares of our Class B Common Stock, which will represent approximately % of
our outstanding capital stock upon completion of this offering. We believe that
CBS's equity stake in us aligns CBS's incentives with ours in building consumer
traffic for CBS.Medscape.com. CBS.Medscape.com will be the exclusive Internet
healthcare Web site integrated into CBS News programming. This integration will
be accomplished by CBS News, when appropriate and at its discretion, directing
viewers of CBS News programs to CBS.Medscape.com for more information regarding
health-related news stories and features.
GROWTH STRATEGY
Our objective is to operate the premier online healthcare destination Web
sites where physicians, allied healthcare professionals and consumers find
reliable and comprehensive information that enables them to make better and more
informed medical and health decisions. We believe we are positioned to become a
preferred online advertising medium and e-commerce partner in the healthcare
sector. We intend to achieve this objective by pursuing the following
strategies:
Strengthening the Medscape Brands. We intend to establish Medscape.com as
the leading single brand for online professional healthcare information and
CBS.Medscape.com as the leading single brand for online consumer healthcare
information. We believe that strengthening our brand awareness is critical to
attracting and retaining members, advertisers, sponsors and strategic partners.
To achieve this objective, we have entered into agreements with CBS Corporation
under which we will receive approximately $150 million in advertising and
promotion and a license to the "CBS" trademark and "Eye" design and selected
health-related news content over seven years. We plan to pursue an aggressive
brand development strategy through strategic distribution relationships, online
and off-line advertising, promotions, media coverage and word-of-mouth support.
We believe our brand visibility will significantly benefit from promotion on CBS
media properties.
Expanding and Enhancing Our Content. We intend to expand the content on
both our professional and consumer sites by adding new medical specialty areas,
enlarging our editorial staff and utilizing our extensive relationships with
leading medical experts. We intend to enhance the consumer experience by adding
consumer-oriented health condition and general health and wellness information,
community features and interactive programs that take advantage of our
credibility with medical professionals and our existing professional medical
specialty content.
Growing Membership. We intend to grow our medical professional membership
and increase the frequency and length of their visits to our site by
establishing Medscape.com as an integral part of the medical professional's
daily work flow and by continuing to offer compelling content, providing
interactive programs and services and building relationships with relevant
healthcare organizations. We plan to attract
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CBS.Medscape.com members by offering a superior consumer experience with
compelling content, community features and interactive programs that we believe
will increase member loyalty, repeat usage and time spent on our site.
Developing Strategic Relationships and Enhancing Distribution. We plan to
increase traffic, market share and revenues through strategic relationships,
distribution relationships and selected acquisitions. We are pursuing
distribution relationships with high-traffic Web sites that target both medical
professionals and consumers. We are also pursuing professional distribution
relationships with healthcare companies to provide medical content to their
medical professionals and become a part of their daily work flow. For example,
we are a content provider to PhyCor Online, the private physician intranet of
PhyCor, the United States' largest physician practice management company with
over 27,000 physicians. Through our strategic relationship with National Data
Corporation, we will be the preferred content supplier to NDC's LYTEC physician
practice management product and become an online distributor of some of NDC's
other clinical information products.
Developing Multiple Revenue Sources. We believe our attractive audience
demographics and high-quality content offerings provide us with significant
opportunities to develop multiple sources of revenue. In addition to advertising
and sponsorships, we have begun to generate e-commerce revenues from our online
medical bookstore, drugstore, and pay-per-view services for selected full-text
articles, and from our online market research services. We plan to expand our
e-commerce offerings to include medical supplies and other health-related
offerings. We are also developing other research products that we expect will
complement pharmaceutical companies' product detailing efforts. In addition, we
plan to introduce products and services that appeal directly to our
international and allied healthcare members.
THE MEDSCAPE.COM SITE
MEDICAL SPECIALTY AREAS
We designed our professional Web site to meet the needs of our members in a
personalized and easy-to-use manner. We currently organize our professional
information by the following medical specialty and subject areas:
<TABLE>
<CAPTION>
<S> <C>
Cardiology Orthopedics
Diabetes and Pediatrics
Endocrinology Pharmacotherapy
Gastroenterology Primary Care
HIV/AIDS Psychiatry
Infectious Diseases Respiratory Care
Internal Medicine Surgery
Managed Care Urology
Molecular Medicine Women's Health
Multispecialty
Oncology
</TABLE>
Each of the medical specialty and subject areas will have a program
director and a scientific advisory board dedicated to developing the content for
that area. We plan to expand into new medical specialty areas that appeal to our
current membership base and attract new members. Our objective is to be the
category leader in each of our medical specialty areas by delivering the highest
quality specialty-based content and selectively acquiring other high-quality
medical specialty Web sites. As part of this strategy, we acquired Healthcare
Communications Group, which operated a leading HIV Web site, in October 1998,
and Bonehome.com, a leading orthopedic site, in February 1999.
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OUR CONTENT
Medscape.com offers three distinct types of high-quality content to
members:
Original, exclusive and proprietary content. Our original content is
written exclusively for Medscape by medical experts, many of whom are
internationally renowned in their specialties. This content includes:
- Next Day Summaries(SM) -- highlights of selected presentations at major
medical conferences, published on our site the day after the
presentations are delivered, providing physicians and other members with
immediate, easy-to-read authoritative summaries of new data, therapies
and procedures discussed at the meeting;
- Medscape General Medicine(SM) -- pioneering, primary-source,
peer-reviewed general medical journal launched in March 1999. Published
exclusively online and accessible free of charge to all Medscape.com
members, Medscape General Medicine will provide prompt delivery of
articles relating to important new clinical research and trials, public
health studies and other significant medical developments;
- Clinical Management Series -- interactive practice modules that include
state-of-the-art treatment information and clinical cases for particular
diseases, each of which is accredited for continuing medical education;
- Treatment Updates -- authoritative evaluations of significant new changes
in therapies; and
- eMed Journals -- peer-reviewed, electronic medical journals written
exclusively for Medscape.com covering HIV/AIDS, cardiology, oncology,
psychiatry, orthopedics, respiratory medicine and women's health. Two of
our eMed Journals, Clinical Care Options in HIV and Medscape Women's
Health, have already been indexed in Index Medicus, the National Library
of Medicine's prestigious MEDLINE database.
We have also developed innovative, proprietary interactive medical programs
that allow physicians to enter clinical data points and obtain feedback on
available treatment options. We also offer an array of proprietary, challenging
and instructional interactive features to test a physician's medical knowledge.
Interactive self-assessment elements include:
- PicTours(R) -- image-based case challenges testing the physician's
diagnostic skills;
- Today's Question -- testing the physician's understanding of recent
developments in the physician's medical specialty; and
- ECG of the Week -- images of cardiograms with case histories testing the
physician's diagnostic skills, supplied by leading cardiologists.
High-quality, third-party content. We believe Medscape.com contains one of
the Web's largest collection of free, peer-reviewed, full-text medical articles
and one of the Web's most extensive libraries of continuing medical education
accredited programs. Medscape.com also provides exclusive third-party Web access
to the National Drug Data File, a leading drug and disease database of Hearst
Corporation's First DataBank. Numerous prestigious medical publishers,
universities, hospitals and professional organizations are part of our strategic
content partner program known as Medscape Publishers' Circle(R). Through this
program, Medscape.com aggregates, organizes, and places in context content from
over 100 medical journals, textbooks, news services and other publications, and
offers integrated, easy-to-use searching of vast medical databases, including
over nine million abstracts of medical journals available in the National
Library of Medicine's MEDLINE, AIDSLINE and TOXLINE databases. In addition,
through an agreement with Dow Jones & Company, Medscape.com provides free
searching of more than 500 leading medical publications, including the Journal
of the American Medical Association, the British Medical Journal, The Lancet,
and abstracts from the New England Journal of Medicine. Members can immediately
retrieve online a full-text copy of the article or abstract for a fee.
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Non-medical content. We also provide an array of non-medical content on
subjects of particular interest to medical professionals and health-conscious
consumers. Medscape Money & Medicine offers personal finance features, including
stock quotes, portfolio tracking and business news, and valuable practice
management features that provide business information that is directly relevant
to a medical practice. Members can also learn about the developments in managed
care in a special Managed Care topic area. The Medscape Humor & Medicine section
provides readers with medical jokes, cartoons, DeFUNitions, crossword puzzles
and other entertaining features that generate traffic to and increase usage of
our site.
OUR MEMBER SERVICES
We offer a number of services that complement our high-quality content
offerings and make Medscape.com a preferred professional destination site,
including:
Continuing Medical Education. Approximately half the states require
physicians and selected other medical professionals to certify annually that
they have accumulated a minimum number of continuing medical education hours to
maintain licensure. Medscape.com offers our professional members what we believe
is one of the Web's largest libraries of continuing medical education programs.
Our extensive continuing medical education programs are produced in association
with entities accredited by the Accreditation Council for Continuing Medical
Education. From the convenience of their home or office computer, our
professional members can obtain continuing medical education credits by
accessing a variety of accredited editorial resources and programs including
online journal articles, our Next Day Summaries of medical conferences, in-depth
Treatment Updates and our state-of-the-art Clinical Management Series.
Physician Web Sites. We offer our members registered as physicians the
opportunity to create home pages for their medical practices that can be
accessed by their patients and the general public. In addition to details about
their practice, including office address, phone number, medical specialty, types
of insurance accepted, hospital affiliations and languages spoken, our Physician
Web Sites will soon permit a physician to offer links to disease-specific
information from Medscape.com as well as the general searching capability of
Medscape.com. We believe these Physician Web Sites will keep Medscape's
high-quality medical information at the center of the communication between
physician and patient, and keep the physician at the center of the healthcare
dialogue.
e-Commerce and Services. Through a series of strategic partners, we offer
our audience the opportunity to purchase a variety of goods and services. The
Medscape MedBookstore offers members the opportunity to purchase discounted
medical texts from a collection of over 90,000 titles through our partner
MedSite Publishing Inc. The Medscape Job Center offers a comprehensive
job-listing/posting service for medical professionals through our partner
NetMed, Inc. The Medscape Drugstore offers our members the ability to purchase
online a wide range of health, beauty and wellness products through
drugstore.com. Through our strategic relationship with National Data
Corporation, we will become an online distributor of some of NDC's clinical
information products.
Community Features. Medscape Mail, a free service, enables members to send
and receive Web-based email. Medscape Mail, powered by CommTouch, is especially
useful for mobile professionals like physicians, who often require email access
from multiple locations, such as their homes, offices, clinics and hospitals or
during travel. Discussion areas on many medical articles and physician-only
discussion groups are also available. Our new Ask-the-Expert feature, which will
allow members registered as physicians to present interesting cases to leading
experts online for comments, is expected to be launched later this year.
OUR HEALTHCARE COMPANY SERVICES
We offer healthcare companies many value-added online services including:
Medscape Profiles. The Internet offers significant advantages over
traditional mail surveys and focus groups in terms of speed and cost savings.
U.S. pharmaceutical and other healthcare companies are estimated to spend as
much as $1 billion annually on custom and syndicated market research. Medscape
Profiles, our online market research division, has already successfully piloted
several custom research projects and has
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recruited a 1,000+ physician panel from our member base to conduct custom and
syndicated online research quickly and efficiently. In addition, our
registration and traffic pattern database provides us with a valuable and
expanding source of proprietary data about viewing habits and usage patterns.
This database helps pharmaceutical companies correlate prescribing behavior with
promotions and content seen by physicians and consumers.
Medscape MedPyx. We plan to introduce Medscape MedPyx as an educational
research program that will assist pharmaceutical companies in better
understanding the physician's knowledge base and prescribing patterns. In 1998,
pharmaceutical company sales representatives conducted more than 59 million
details to office- and hospital-based physicians. We believe that Medscape
MedPyx will provide pharmaceutical companies with a cost-effective method of
evaluating and improving their existing detailing activities.
THE CBS.MEDSCAPE.COM SITE
We plan to launch CBS.Medscape.com in the third quarter of 1999. We are
designing our CBS.Medscape.com consumer site to help consumers make better
informed healthcare decisions and to simplify management of their healthcare
needs. Our consumer site will provide personalized, authoritative medical
content written for the consumer, access to our professional content on
Medscape.com and interactive personal health management tools, such as health
diaries.
In addition to general health and wellness information, CBS.Medscape.com
will offer information organized around specific health conditions, such as
diabetes or asthma. In an effort to simplify the consumer experience we plan to
include convenient links to health sites operated by the consumer's physician,
employer and health insurer.
REGISTERED MEMBERS
To utilize all of Medscape.com's and CBS.Medscape.com's features, users
must register as members. This enables us to deliver targeted medical content
based on our members' registration profiles. As of May 31, 1999, Medscape.com
had over 1,100,000 registered members worldwide, an increase of 28% from January
1, 1999 and 181% from January 1, 1998.
The registration process enables professional members to choose a home page
tailored to their medical specialty or interest. Accordingly, a cardiologist
accessing Medscape.com is automatically directed to Medscape Cardiology, rather
than a more generic home page. Every member, however, regardless of medical
specialty or professional status, has access to the full suite of exclusive,
original and licensed content through a uniform, easy-to-use interface.
To encourage initial use, CBS.Medscape.com will allow visitors to access
selected features without registering as members. Visitors, however, will have
to register as members to have access to all the features of CBS.Medscape.com,
including the interactive programs such as health diaries.
Registration information also enables us to deliver targeted advertising
messages to the specific audience profile our clients seek to reach either
through Medscape.com or CBS.Medscape.com, or both. For example, through
Medscape.com, an oncologist in New York can be targeted with different messages
than a cardiologist in Chicago. The same targeting capabilities will be offered
on CBS.Medscape.com, where a consumer interested in diabetes can be targeted
with different messages than a consumer interested in cancer.
EDITORIAL, DESIGN AND PRODUCTION
Our editorial staff is headed by Dr. George D. Lundberg, Medscape Editor in
Chief and the former Editor of the Journal of the American Medical Association.
As of March 31, 1999, our editorial, design and production staff consisted of 28
professionals who are all experienced medical editors, writers and producers. We
intend to significantly increase our number of editors as we add additional
medical specialty areas. We have assembled specialty-specific editorial boards
for Medscape.com and have also assembled a Medscape.com scientific advisory
board consisting of 16 of the world's leading physicians, academicians and
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healthcare experts, who will also serve as the editorial board of Medscape
General Medicine, our newly launched primary source online medical journal.
We have an easy-to-use interface that incorporates original and proprietary
content written by medical experts with an extensive library of licensed content
and medical databases. Each medical specialty area is headed by a program
director responsible for building and continuously updating that area's content.
We seek to be the premier online information resource in each of our medical
specialty areas. To support this effort, we cover major medical conferences in
many specialties and plan to attend over 20 different conferences in 1999, with
our editors and medical experts summarizing and reporting on the breaking
medical research and news delivered at these events.
SALES
As of March 31, 1999, we had a direct sales organization consisting of six
sales professionals, with an average of 16 years experience, and seven sales
operations staff employees. We plan to hire additional sales professionals, many
of whom will be focused on selling banner advertisements and sponsorships in our
expanded CBS.Medscape.com consumer site. We generally seek to hire individuals
with significant experience selling to pharmaceutical, other healthcare and
consumer companies and their advertising agencies.
MARKETING AND PUBLIC RELATIONS
We employ a variety of methods to promote the Medscape brand and to attract
traffic and new members, including advertising on other Internet sites and in
medical journals, pharmaceutical and other healthcare publications, and other
targeted publications. To extend the Medscape brand, we encourage other
healthcare sites to integrate our branded search box directly into their
services. This feature permits a Web site viewer in another healthcare site full
searching capability across all the Medscape.com databases by clicking on our
branded search box appearing by agreement in the other site. Under our agreement
with CBS, we will receive approximately $150 million in advertising and
promotion in the United States over seven years. We believe our brand visibility
will significantly benefit from promotion on CBS media properties. In addition,
CBS.Medscape.com will be the exclusive healthcare Internet site integrated into
CBS News programming. This integration will be accomplished by CBS News, when
appropriate and at its discretion, directing viewers of CBS News programs to
CBS.Medscape.com for more information regarding health-related news stories and
features.
We believe in the value of direct, in-person marketing and plan to staff a
Medscape.com booth at over 13 major medical meetings and conferences in 1999. We
use our booth presence to cross promote our Next Day Summaries(SM) of the
medical conferences. We have also effectively used Medscape Academies, in which
we offer free Internet training for physicians at major medical meetings, as a
way to introduce physicians to the power of the Internet as a communications and
educational medium, and to Medscape.com as a premier source of high-quality
medical information on the Internet.
We supplement these efforts with direct mail campaigns targeted at medical
professionals, and plan to significantly increase these activities in 1999.
Our professional distribution strategy is designed to have Medscape.com's
medical content be available within major Internet-accessible healthcare
information system platforms like hospital intranets, electronic medical record
systems and physician practice management company intranets. This strategy
integrates Medscape.com into the daily workflow of their medical professionals
with frequent reminders of and easy access to our selection of medical content.
Consistent with this strategy in 1998, we signed a content distribution
agreement with PhyCor, the largest physician practice management organization in
the United States. Most recently, we agreed to enter into a License and Product
Development Agreement with National Data Corporation under which we will be the
preferred content supplier to NDC's LYTEC physician practice management product
and become an online distributor of some of NDC's other clinical information
products.
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Our internal public relations staff oversees a comprehensive public
relations program which we believe is a key component of our marketing and brand
recognition strategy. We target key business, medical and healthcare marketing
publications, and encourage their reporters to use Medscape.com for their
medical news and research needs, in an effort to build both brand awareness and
loyalty among news organizations.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
Our business is supported by a reliable, expandable and secure system
platform. Using a combination of proprietary online solutions and commercially
available licensed technologies, we have deployed systems for online content
dissemination, site analysis, and Web- and email-based member support.
We have developed a database management and online publication system to
index, retrieve and display information. This system allows for rapid searching,
viewing and distribution of content including text, photos, graphics and other
images. Our hardware and software systems are based on a distributed processing
model that allows applications to be distributed among multiple parallel
servers. Our hardware servers, storage systems, Internet connections and
networks allow our online systems to operate continuously 24 hours a day and
seven days a week. We do not maintain offsite redundant systems and facilities
but we have taken initial steps to outsource our Web-hosting. This outsourcing
will provide faster and more reliable connections to the Internet and enhanced
reliability and expandability.
COMPETITION
We face competition both in attracting visitor traffic and in generating
revenue across all our business lines. We compete with numerous companies and
organizations for the attention of medical professionals and consumers including
traditional off-line media such as print journals, conferences, continuing
medical education programs and symposia. We also face significant competition
from online information resources. There are thousands of healthcare-related
sites on the Internet. Also, several large consumer sites offer specialized
healthcare channels as part of their general services. In addition, there are
many companies that provide non-Internet based marketing and advertising
services to the healthcare industry. These competitors include advertising
agencies, consulting firms, marketing and communications companies and contract
sales and marketing organizations. We believe that competition for our audience
and sources of revenue will continue to increase.
Some of our current and potential competitors may have competitive
advantages compared to us, including:
- greater resources to devote to the development, promotion and sale of
their services;
- greater financial, technical and marketing resources;
- greater brand recognition and larger marketing budgets; and
- larger customer and user bases.
We believe that the principal competitive factors in attracting and
retaining members are the depth, breadth and timeliness of services and brand
recognition. Other important factors in attracting and retaining members include
ease of use, quality of service and cost. We believe that the principal
competitive factors that will continue to attract advertisers and sponsors to
Medscape.com and CBS.Medscape.com include price, the number of medical
professionals and consumers who use our Web sites, the demographics of our
member base and the creative implementation of advertisement placements.
Competition is likely to increase significantly as new companies enter the
market and current competitors expand their services. There can be no assurance
that we will be able to compete successfully against current and future
competitors or that the competitive pressures we face will not seriously harm
our business.
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GOVERNMENT REGULATION OF THE INTERNET AND HEALTHCARE INDUSTRIES
THE INTERNET
We are subject to various laws and regulations relating to our business.
Currently, few laws or regulations are directly applicable to access to the
Internet. Because of the Internet's popularity and increasing use, however, new
laws and regulations may be adopted. These laws and regulations may cover issues
such as:
- user privacy;
- pricing;
- content;
- copyrights and other intellectual property rights;
- distribution; and
- characteristics and quality of products and services.
Currently, U.S. privacy law consists of disparate state and federal
statutes regulating specific industries that collect personal data. Most of them
pre-date and therefore do not specifically address online activities. However,
European nations are now implementing a European Union Data Privacy Directive
regulating the transmission and storage of personal information and data. In
addition, a number of comprehensive legislative and regulatory privacy proposals
are now under consideration by federal, state and local governments in the
United States. For example, the Federal Trade Commission's recently published
proposed regulations implementing the Children's On-line Privacy Protection Act
of 1998 and, under authority established in the Health Insurance Portability and
Accountability Act of 1996, regulations are being prepared by the Secretary of
Health and Human Services that will be applicable to electronically transmitted
or stored health information. These regulations are scheduled to be published in
late 1999, absent intervening Congressional action.
The growth of the Internet and e-commerce, coupled with publicity regarding
Internet fraud, may lead to the enactment of more stringent consumer protection
laws. These laws may impose additional burdens on our business. For example, the
Department of Commerce is actively developing safe harbors for activities in
various industry sectors to help U.S. companies meet standards for conducting
electronic commerce with EU countries as they implement the EU Data Privacy
Directive. In addition, the Federal Trade Commission has informed Congress of
its intentions to use its general consumer protection authority to protect
online consumers from deceptive practices that jeopardize online consumers'
privacy. In addition, state legislatures are considering and are likely to adopt
more protective consumer and health privacy legislation. States also may elect
to use their consumer protection statutes in ways that are analogous to the FTC
activities. The enactment of any additional laws or regulations may impede the
growth of the Internet, which could decrease our potential revenues from
e-commerce or otherwise adversely affect our business, financial condition and
operating results.
Laws and regulations directly applicable to e-commerce and Internet
communications are becoming more prevalent. The most recent session of Congress
enacted Internet laws regarding online copyright infringement. Although not yet
enacted, Congress is considering laws regarding Internet taxation. These are
recent enactments, and there is uncertainty regarding their marketplace impact.
In addition, various jurisdictions already have enacted laws that are not
specifically directed to e-commerce but that could affect our business. The
applicability of many of these laws to the Internet is uncertain and could
expose us to substantial liability.
Any new legislation or regulation regarding the Internet, or the
application of existing laws and regulations to the Internet, could negatively
affect us. If we were alleged to violate federal, state or foreign, civil or
criminal law, even if we could successfully defend such claims, it could
negatively affect us.
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THE U.S. FOOD AND DRUG ADMINISTRATION AND THE FEDERAL TRADE COMMISSION
Current FDA and FTC rules and enforcement actions and regulatory policies
or those that the FDA or the FTC may develop in the future could have a material
adverse effect on our ability to provide existing or future applications or
services to our audience or obtain the necessary corporate sponsorship to do so.
We believe that complying with FDA and FTC regulations may be time consuming,
burdensome and expensive and could negatively affect our ability to continue
providing some applications or services, or to introduce new applications or
services in a timely manner. If we fail to comply with applicable FDA or FTC
requirements, the FDA or FTC might pursue an enforcement action against us. An
FDA enforcement action might include:
- warning letters or notices or adverse publicity;
- fines, injunctions, recall or seizure of our products or total or partial
suspension of production;
- failure of the government to grant premarket clearance or premarket
approval for our devices, withdrawal of marketing clearances or
approvals;
- imposition of civil or criminal liability on us or our corporate
officers; and
- direction to the advertiser or sponsor to correct or remove information
on our Website and to convey FDA required corrective information to our
audience.
An FTC enforcement action might include:
- cease and desist orders;
- corrective advertising;
- civil penalties, consumer redress; and
- injunctions.
The FDA and the FTC regulate the form, content and dissemination of
labeling, advertising and promotional materials, including direct-to-consumer
prescription drug and medical device advertising, prepared by, or for,
pharmaceutical or medical device companies. The FTC regulates over-the-counter
drug advertising and, in some cases, medical device advertising. Generally,
regulated companies must limit their advertising and promotional materials to
discussions of the FDA-approved claims and, in limited circumstances, to a
limited number of claims not approved by the FDA. Therefore, any information
that promotes the use of pharmaceutical or medical device products that is put
on our Web site is subject to the full array of the FDA and FTC requirements and
enforcement actions. Areas of our Web site that we believe are subject to FDA or
FTC regulation include banner advertisements, sponsorship links, and any
educational programs that lack independent editorial control. The FDA and the
FTC place the principal burden of compliance with advertising and promotional
regulations on the advertiser that places materials on our Web site. If the FDA
or FTC find that any regulated information on our site violates FDA or FTC
regulations, they may take regulatory action against us or the advertiser or
sponsor of that information.
Following a public meeting in October 1996, the FDA announced it would
develop a guidance document expressing a broad set of policies dealing with the
promotion of pharmaceutical and medical device products on the Internet.
Although the FDA has yet to issue that guidance document, agency officials
continue to predict its eventual release. The FDA guidance document may reflect
new regulatory policies that more tightly regulate the format and content of
promotional information on the Internet.
Another regulatory issue that we face involves increased FDA regulation of
direct-to-consumer advertising of prescription drugs. Because part of our
business involves direct-to-consumer advertising, any increase in FDA regulation
of these advertisements or the enforcement of these regulations or policies
could make it more difficult for us to provide existing or future applications
or services to our audience or obtain the necessary corporate sponsorship to do
so. In the last 15 years, the FDA has gradually relaxed its formerly restrictive
policies on direct-to-consumer advertising of prescription drugs. Companies can
now advertise prescription drugs for serious conditions to consumers in any
medium. However, physician groups and others have criticized the FDA's current
policies, and have called for restrictions on any advertising of prescription
drugs to consumers. These critics point to both public health concerns and to
the laws of many other countries that make direct-to-consumer advertising of
prescription drugs a criminal offense. In response to
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these critics, the FDA or FTC may alter its present policies on the
direct-to-consumer advertising of prescription drugs or medical devices in a way
that would reduce or restrict the amount of this information available to
consumers.
We also face potential regulation of software that we develop for use on
our Web sites. Some computer applications and software are considered medical
devices and are subject to regulation by the FDA. In some cases, while the FDA
has found the product to qualify as a medical device, the agency has decided to
exempt the device from most regulatory requirements. Many types of medical
software are regulated as components of or accessories to other medical devices,
like software that controls an implanted pacemaker and is regulated as a
component of the pacemaker. In some instances the FDA also has asserted
jurisdiction over stand-alone software if it is used in the diagnosis,
treatment, mitigation or cure of a disease. While the FDA's policies regarding
the regulation of software are evolving, based on the FDA's informal policy
statements regarding the scope of its regulation of stand-alone software, we
believe that our current and intended software applications are not subject to
regulation as medical devices because they do not meet the statutory definition
of a device. However, the FDA may take the view that some of our current or
future applications or services do in fact meet the definition of a medical
device and, therefore, are subject to regulation. If the FDA does regard some of
our applications as medical devices, the level of FDA regulation would depend on
several characteristics of the programs such as the degree to which there is
competent human intervention between the software output and the diagnosis or
treatment of the party. If the FDA finds that the software is subject to
regulation as a medical device, the applicable regulatory controls could include
both premarket and postmarket requirements and the FDA might require us:
- to obtain premarket clearance or approval of the medical device software,
which might include the conduct of supporting clinical trials or other
studies;
- to register ourselves as a medical device manufacturer and to list our
devices with the FDA;
- to create our software in compliance with the FDA design and
manufacturing standards;
- to permit the FDA to inspect our facilities and records; and
- to make periodic reports to the FDA.
The FDA's regulations and policies on the regulation of software products
and the transmission of medical information are evolving.
Changes in existing regulatory requirements, our failure to comply with
current or future requirements or adoption of new requirements could negatively
affect us. We may face additional FDA or FTC regulation if the FDA or the FTC
adopt new regulatory policies.
INTELLECTUAL PROPERTY AND DOMAIN NAME
We protect our intellectual property through a combination of license
agreements, trademark, service mark, copyright and trade secret laws and other
methods. We obtain the majority of our content under license agreements with
publishers, through assignments or work for hire arrangements with third parties
and from internal staff development. Generally, our license agreements are for a
period of one to three years and we consider the materials obtained through
these agreements as important to the continued enhancement of the content on our
Web site. We currently have no patents or patents pending for our current online
services and do not anticipate that patents will become a significant part of
our intellectual property in the foreseeable future. We also enter into
confidentiality agreements with our employees, consultants, vendors and
customers and license agreements with third parties and we generally seek to
control access to and distribution of our technology, documentation and other
proprietary information. We currently hold the domain name Medscape.com. The
legal status of intellectual property on the Internet is currently subject to
various uncertainties. The current system for registering, allocating and
managing domain names has been the subject of litigation and proposed regulatory
reform. Additionally, legislative proposals have been made by the federal
government that would afford broader protection to owners of databases of
information, such as stock quotes. This protection of databases already exists
in the European Union.
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LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
EMPLOYEES
As of March 31, 1999, we had 83 full-time employees. None of our employees
is covered by a collective bargaining agreement. We consider our employee
relations to be good.
FACILITIES
We are headquartered in New York, New York, where we lease approximately
17,975 square feet of office space, under two leases that expire June 30, 2004
and June 30, 2009. To accommodate our rapid growth, we recently rented 5,537
square feet of office space located near our headquarters on a short-term basis.
We are in the process of renovating our New York headquarters to ensure that our
space will meet our business and technological needs as we grow in 1999. We
expect to spend approximately $250,000 in 1999 on these renovations. We have
also leased offices in Fairfield, New Jersey, where some of our employees work.
Other of our employees work remotely, frequently in home offices, in Potomac,
Maryland; Aurora, Colorado; Chicago, Illinois; London, England; and Milford,
Massachusetts. We currently anticipate that we will require additional space as
we hire more personnel.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Shown below are the names, ages and positions of the executive officers and
directors of Medscape:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Paul T. Sheils............................. 44 President, Chief Executive Officer and
Director
Peter M. Frishauf.......................... 50 Executive Committee Chairman, Founder and
Director
Jeffrey L. Drezner, M.D., Ph.D............. 51 Executive Vice President and Director
Steven R. Kalin............................ 35 Chief Operating Officer and Chief Financial
Officer
George D. Lundberg, M.D.................... 66 Editor in Chief
Meg Walsh.................................. 36 President, Medscape Consumer
David Yakimischak.......................... 37 Chief Technology Officer
Mark E. Boulding........................... 38 General Counsel and Vice President of
Regulatory Affairs
Marc Butlein............................... 60 Director
Esther Dyson............................... 47 Director
Alan J. Patricof........................... 64 Director, Chairman of the Board
Carlo A. von Schroeter..................... 35 Director
Oakleigh Thorne............................ 41 Director
</TABLE>
PAUL T. SHEILS, President, Chief Executive Officer and Director. Prior to
joining Medscape in February 1998, Mr. Sheils was Vice President of Dow Jones
Interactive Publishing from 1994 to 1998 and was Executive Director from 1993 to
1994. Mr. Sheils was responsible for all of Dow Jones' corporate and consumer
online businesses including The Wall Street Journal Interactive Edition, the
largest subscription-based publication on the Web, and Dow Jones Interactive, an
award-winning online business intelligence and research service. Mr. Sheils
holds a BA from Williams College and a JD from Fordham Law School.
PETER M. FRISHAUF, Executive Committee Chairman, Founder and Director. Mr.
Frishauf has over 20 years of experience in the medical information field. In
1982, Mr. Frishauf founded the predecessor of SCP Communications, Inc., a
medical publishing, education and clinical trial company, and served as SCP's
President and Chief Executive Officer until April 1996. Mr. Frishauf continues
to serve on the board of directors of SCP Communications, Inc. From April 1996
through February 1998, Mr. Frishauf served as the Chief Executive Officer of
Medscape. In addition to being a director of Medscape since it commenced
operations in 1996, he holds the executive position of Executive Committee
Chairman. Mr. Frishauf holds a BA from New York University and an MS in
Journalism from Columbia University.
JEFFREY L. DREZNER, M.D., Ph.D., Executive Vice President and
Director. Dr. Drezner practiced medicine for 14 years before founding
Integrated Care Systems, Inc., an HIV-focused, alternate-site healthcare
delivery company, in 1987. From 1992 to 1995, Dr. Drezner was Vice President of
Clinical Programs at Homedco, Inc., a home and alternate-site healthcare
delivery company. In 1995, Dr. Drezner founded Healthcare Communications Group,
LLC, which developed one of the first online continuing medical education
programs and summaries of next day medical conferences programs on the Internet,
operated the highly acclaimed Clinical Care Options for HIV and Oncology Web
sites and is now a wholly owned subsidiary of Medscape. Dr. Drezner became a
director and officer of Medscape when Medscape acquired Healthcare
Communications Group in October 1998. Dr. Drezner holds a BS from the University
of California at Berkeley, an MD degree from the University of Southern
California School of Medicine and a Ph.D. from the Southern California
Psychoanalytic Institute.
STEVEN R. KALIN, Chief Operating Officer and Chief Financial
Officer. Prior to joining Medscape in October 1998, Mr. Kalin was with ESPN
since 1995, most recently as Vice President of Business Development for ESPN
Internet Ventures, where he was responsible for ESPN.com's strategic
partnerships. From 1990 to 1995, Mr. Kalin was a Senior Engagement Manager with
McKinsey & Co., specializing in the media industry. Mr. Kalin holds a BA from
Brown University and an MBA from Harvard Business School.
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GEORGE D. LUNDBERG, M.D., Editor in Chief. Prior to joining Medscape in
February 1999, Dr. Lundberg served as Editor of the Journal of the American
Medical Association for 17 years. Dr. Lundberg also served as the Editor in
Chief of Scientific Information and Multimedia, a publication of the American
Medical Association, from 1982 until 1999. Dr. Lundberg holds an MS degree from
Baylor University and BS and MD degrees from the University of Alabama. Dr.
Lundberg holds honorary degrees from four U.S. universities.
MEG WALSH, President, Medscape Consumer. Prior to joining Medscape in
March 1999, Ms. Walsh founded HealthTech Digital, a leading interactive consumer
healthcare agency, in 1996 and sold that company to Lowe McAdams
Healthcare/Interpublic Group in September 1997 after which she continued as
Managing Director until joining Medscape. From 1995 to 1996, Ms. Walsh was
Director of Marketing for Time Life Medical. Ms. Walsh also held positions as
Assistant V.P. of Sales for Physicians World, a professional healthcare
communications organization, from 1992 to 1995, and before that was a Sales
Manager for Johnson & Johnson. Ms. Walsh holds a BA from Rider University.
DAVID YAKIMISCHAK, Chief Technology Officer. Prior to joining Medscape in
March 1999, Mr. Yakimischak was the Director of Product Development at Dow Jones
Interactive Publishing where he was responsible for bringing all new electronic
products to market. Mr. Yakimischak had been with Dow Jones since 1994. Mr.
Yakimischak studied engineering and computer science at the University of
Toronto.
MARK E. BOULDING, General Counsel and Vice President of Regulatory
Affairs. Prior to joining Medscape in June, 1999, Mr. Boulding was a partner of
Long Aldridge & Norman LLP since 1998, specializing in healthcare and technology
law, with a particular focus on Internet-based companies and healthcare
e-commerce. From 1991 to 1998, Mr. Boulding was an associate and then a partner
with the firm of Fox, Bennett & Turner in Washington, D.C. Mr. Boulding is a
co-founder and sits on the board of directors of the Internet Healthcare
Coalition and co-chair of the Internet Law Subcommittee of the American Bar
Association's Cyberspace Law Committee. Mr. Boulding holds a BA from Yale
University and a JD from University of Michigan Law School.
MARC BUTLEIN, Director. Mr. Butlein is Chairman of MAS Communications, an
e-commerce consulting business. In 1989, he co-founded META Group, a leading
worldwide information technology market assessment and consulting firm. Mr.
Butlein served as Chairman of META Group until April 1998. Mr. Butlein is a
director of META Group and Aeneid, an Internet software business. Mr. Butlein
joined the Medscape board in October 1997 as a designee of Media Technology
Ventures. Mr. Butlein received a BA from the University of Connecticut and
worked on his doctorate in political science at the Maxwell School of
Citizenship and Public Affairs at Syracuse University.
ESTHER DYSON, Director. Ms. Dyson has been the chairman of EDventure
Holdings, publisher of the newsletter Release 1.0, since 1982. Ms. Dyson is the
author of Release 2.0, an acclaimed book about cyberspace. Ms. Dyson joined the
Medscape board in June 1996. She is also interim chairman of the Internet
Corporation for Assigned Names and Numbers and is a director of three software
companies -- Accent Software, Graphisoft and Scala Business Solutions. She also
sits on the boards of directors of Uproar.com, an online game company, and PRT
Group, a systems integrator. Ms. Dyson holds a BA from Harvard College.
ALAN J. PATRICOF, Chairman of the Board. Mr. Patricof is co-Chairman of
Patricof & Co. Ventures, Inc., a venture capital firm with operations in eight
countries and over $6 billion under management, which he founded in 1969. Mr.
Patricof joined as Chairman of the Board in 1996. Mr. Patricof serves on the
boards of directors of Boston Properties, a real estate investment trust; NTL
Corp., a communications company; and CORECOMM, Inc., a telecommunications
company. In 1995, he served as Chairman of the White House Conference on Small
Business Commission. Mr. Patricof holds a BS in finance from Ohio State
University and an MS from Columbia University Graduate School of Business.
CARLO A. VON SCHROETER, Director. Mr. von Schroeter is a General Partner
of Weston Presidio Capital, a private equity and venture capital firm. Prior to
joining Weston Presidio Capital at its inception in September 1992, Mr. von
Schroeter was a Vice President with Security Pacific Capital. Mr. von Schroeter
has served as a director of Medscape since March 1999 as a designee of Weston
Presidio Capital. Mr. von
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Schroeter also serves on the boards of directors of MapQuest.com, Inc., a
leading online provider of mapping and destination information, and several
private companies. Mr. von Schroeter holds a BS from Queen's University, Canada
and an MBA from Harvard Business School.
OAKLEIGH THORNE, Director. Since October 1996, Mr. Thorne has served as
the Chairman and Chief Executive Officer of TBG Information Investors, LLC, a
private equity partnership, and as the Co-President of Blumenstein/Thorne
Information Partners I, L.P., a private equity partnership. From April 1995 to
August 1996, Mr. Thorne was President and CEO, and from January 1991 to April
1995, the Executive Vice President, of Commerce Clearing House, Inc., a leading
provider of tax and business law information, software and services. Mr. Thorne
joined the Medscape board in March 1998 as TBG Information Investors LLC's
designee. He also serves as the Chairman of the Board of SCP Communications,
Inc. Mr. Thorne holds a BS from Boston University School of Journalism and an
MBA from Columbia University Graduate School of Business.
BOARD COMPOSITION
We currently have eight directors. Under our restated certificate of
incorporation, which will become effective upon the closing of this initial
public offering, the terms of office of the directors will be divided into three
classes: Class I, whose term will expire at the annual meeting of stockholders
to be held in 2000; Class II, whose term will expire at the annual meeting of
stockholders to be held in 2001; and Class III, whose term will expire at the
annual meeting of stockholders to be held in 2002. The Class I directors will be
Paul T. Sheils, Peter M. Frishauf and Marc Butlein, the Class II directors will
be Esther Dyson, Oakleigh Thorne and Jeffrey D. Drezner, M.D., Ph.D. and the
Class III directors will be Alan J. Patricof and Carlo A. von Schroeter. At each
annual meeting of stockholders after the initial classification or special
meeting held in place of an annual meeting, the successors to directors whose
terms will then expire will be elected to serve from the time of election and
qualification until the third annual meeting following election or similar
special meeting. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one third of the directors. This
classification of our board of directors may have the effect of delaying or
preventing changes in control or management of Medscape. Upon the consummation
of the CBS transaction, the size of our board will be increased to ten directors
and CBS will be entitled to designate three of the directors. CBS intends to
designate Fredric Reynolds, its Executive Vice President and Chief Financial
Officer, Andrew Heyward, the President of CBS News, and one of our current
directors, yet to be determined, as its designees.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has established an audit committee and a
compensation committee. The audit committee assists the board of directors in
fulfilling its responsibilities of ensuring that management is maintaining an
adequate system of internal controls to assure:
- that assets are safeguarded and that financial reports are properly
prepared;
- consistent application of generally accepted accounting principles; and
- compliance with management's policies and procedures.
In performing these functions, the audit committee meets periodically with
the independent auditors and management to review their work and confirm that
they are properly discharging their respective responsibilities. The audit
committee also:
- recommends an independent audit firm to audit financial statements and to
perform services related to the audit;
- reviews the scope and results of the audit with the independent
accountants;
- reviews with management and the independent accountants our annual
operating results;
- considers the adequacy of the internal accounting control procedures; and
- considers accountants' independence.
The audit committee currently consists of Oakleigh Thorne and Marc Butlein.
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The primary function of the compensation committee is to determine
management and executive compensation and establish fringe benefit and other
compensation policies. The compensation committee is also responsible for the
administration of our stock option plan, including reviewing management
recommendations with respect to option grants and taking other actions as may be
required in connection with our compensation and incentive plans. The
compensation committee currently consists of Esther Dyson and Alan J. Patricof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Patricof, a member of the compensation committee, is Co-Chairman of
Patricof & Co. Ventures, Inc., that manages APA Excelsior IV, L.P., Coutts & Co.
Cayman Ltd. c/o APA Excelsior IV/Offshore L.P., Patricof Private Investment Club
and APA Excelsior Fund. In our March 5, 1999 private placement of Series D
Preferred Stock, APA Excelsior IV, L.P. purchased 71,365 shares, Coutts & Co.
Cayman Ltd. c/o APA Excelsior IV/Offshore, L.P. purchased 12,595 shares and
Patricof Private Placement Investment Club, L.P. purchased 1,365 shares, all at
a purchase price of $11.72 per share.
DIRECTOR COMPENSATION
Medscape reimburses its directors for out-of-pocket expenses related to
attending meetings of the board of directors. Non-employee directors are also
entitled to stock option grants under our stock option plan. Medscape currently
does not intend to pay cash fees to directors for attendance at meetings.
EXECUTIVE COMPENSATION
The following table shows the total compensation paid for the year ended
December 31, 1998 for our Chief Executive Officer and the Executive Committee
Chairman, the only other executive officer whose annual salary and bonus
exceeded $100,000 in 1998. Our Chief Executive Officer, Paul T. Sheils, joined
Medscape in February 1998. His annualized salary for 1998 was $195,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
<S> <C> <C> <C>
Paul T. Sheils.............................. $171,750 $85,000 750,000
President and Chief Executive Officer
Peter M. Frishauf........................... $ 80,000 -- 152,617.5
Executive Committee Chairman
</TABLE>
In accordance with the terms of his employment agreement, Mr. Frishauf
elected to receive options to purchase 152,617.5 shares of common stock instead
of a cash bonus of $35,000 to which he would have otherwise been entitled.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows grants of stock options to Medscape's Chief
Executive Officer and to the Executive Committee Chairman for the year ended
December 31, 1998. We have never granted any stock appreciation rights. The
percentages in the table below are based on options to purchase an aggregate of
1,990,117.5 shares of common stock granted under our stock option plan in the
year ended December 31, 1998 to our employees, consultants and directors. The
exercise price per share of each option was equal to the fair market value of
the common stock on the date of grant as determined by the board of directors.
Potential realizable values are net of exercise price before taxes, and are
based on the assumption that our common stock appreciates at the annual rate
shown, compounded annually, from the date of grant until the expiration
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of the ten-year term. These numbers are calculated based on the requirements of
the SEC and do not reflect our estimate of future stock price growth.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
INDIVIDUAL GRANTS ANNUAL
---------------------------------------------------------- RATES OF STOCK
NUMBER OF PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OPTION
NAME OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------
- ---- GRANTED FISCAL YEAR(%) SHARE($/SH) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Paul T. Sheils....... 750,000 37.7% .172 2/15/08 $210,177 $334,593
Peter M. Frishauf.... 152,617.5 7.7% .344 12/14/08 85,516 136,173
</TABLE>
FISCAL YEAR END OPTION VALUES
The following table provides summary information concerning stock options
held as of December 31, 1998 by our Chief Executive Officer and by the Executive
Committee Chairman. The value realized by our Executive Committee Chairman,
Peter M. Frishauf, is based on a value of $0.172 per share, the fair market
value of the common stock at August 18, 1998, as determined by the board of
directors, less the exercise price per share. The value of unexercised
in-the-money options at fiscal year-end is based on $0.344 per share, the
assumed fair market value of the common stock at December 31, 1998, less the
exercise price per share.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF
UNEXERCISED OPTIONS UNEXERCISED IN-THE MONEY
SHARES AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Paul T. Sheils....... -- -- -- 750,000 $ -- $ 258,000
Peter M. Frishauf.... 161,125 -- 162,617.5 88,375 55,940 30,401
</TABLE>
1996 STOCK OPTION PLAN
The following is a summary description of the Medscape, Inc. 1996 Stock
Option Plan. You may refer to the exhibits that are part of the registration
statement for a copy of the stock option plan.
Types of Awards. The stock option plan provides for grants of incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code of
1986 and stock options which are not intended to qualify as incentive stock
option, or nonqualified stock options.
Shares Subject to the Stock Option Plan. The total number of shares of
common stock that may be issued under the stock option plan is 8,250,000 shares.
These shares may be authorized but unissued common stock or authorized and
issued common stock that has been reacquired by Medscape and held in our
treasury. If any grant expires or for any reason is terminated or unexercised,
the shares of common stock relating to that grant again become available for
issuance with respect to grants under the stock option plan.
The compensation committee has the authority to make appropriate
adjustments to the total number of shares available for issuance under the stock
option plan and to the number of shares that may be purchased and the exercise
price applicable to outstanding stock options under the stock option plan in the
event of a merger, consolidation, reorganization, stock dividend, stock split,
or other similar change affecting our capital structure.
Eligibility. Grants may be made to any full or part-time employee of
Medscape and of our current or future subsidiaries, and to any consultant,
director or independent contractor providing services to Medscape or any of our
subsidiaries, in each case as determined by the compensation committee.
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Administration. Our compensation committee administers the stock option
plan. The compensation committee has the authority to make grants under the
stock option plan, including the authority, in its discretion, to select the
individuals to receive grants, to determine, consistent with the stock option
plan, the terms of the grant, and the terms and provisions of each option
agreement under the stock option plan reflecting awards, and to prescribe rules
and make interpretations regarding the stock option plan which are final and
conclusive.
Stock Options. The compensation committee may grant incentive stock
options and nonqualified stock options to eligible persons that permit the
optionee to purchase shares of common stock from Medscape at a fixed price and
in accordance with terms, as determined by the compensation committee, relating
to, among others, option exercise price, exercisability, method of payment of
the option exercise price, and the option exercise periods applicable after the
optionee's termination of service, with all terms set forth in the option
agreement and not otherwise inconsistent with the stock option plan. The term of
any nonqualified stock option granted under the stock option plan may not exceed
15 years from the grant date.
In the case of any grant intended to constitute an incentive stock option,
the exercise price will be no less than the fair market value of the common
stock on the date of grant and the option term may not exceed 10 years from the
grant date. Further, the aggregate fair market value, determined at the date the
option is granted, of stock with respect to which incentive stock options
granted under the stock option plan are exercisable for the first time in any
calendar year by any eligible employee may not exceed $100,000.
Unless otherwise provided in an option agreement, if we undergo a "change
in control," as defined in the stock option plan, then all outstanding options
will become fully exercisable.
Nonassignability. Except as may otherwise be provided in a option
agreement with respect to the grant of a nonqualified stock option, no grant is
assignable or transferable by an optionee other than by will or the laws of
descent and distribution and during the optionee's lifetime the grant may be
exercisable only by the optionee.
Amendment and Termination. Our board of directors may amend or discontinue
the stock option plan at any time, provided that any stock option plan amendment
that would increase the maximum number shares of common stock available for
issuance under the stock option plan, modify the eligibility requirements for
participation in the stock option plan, decrease the minimum option price, or
extend the maximum option term will require stockholder approval. In addition,
the board of directors may not change the terms of any outstanding grant if a
change would be materially adverse to the optionee without the optionee's
consent.
Federal Income Tax Consequences. The following is a brief description of
various U.S. federal income tax consequences of grants under the stock option
plan based upon the laws in effect on the date of this Prospectus.
Incentive Stock Options. No federal taxable income should be recognized by
the employee upon the grant or exercise of an incentive stock option. If the
shares of common stock acquired upon exercise of an incentive stock option are
not disposed of within two years of the date of grant or within one year after
the transfer of the shares to the employee upon exercise of the incentive stock
option, then:
- upon the sale of the shares, any amount realized in excess of the
exercise price of the option will be taxed as long-term capital gain; and
- no deduction will be allowed to us for federal income tax purposes.
The exercise of an incentive stock option may result in an alternative minimum
tax liability to the employee.
If the stock acquired upon the exercise of an incentive stock option is
disposed of prior to the expiration of the holding periods described above,
then, generally:
- the employee will recognize ordinary income in an amount equal to the
excess, if any, of the fair market value of the shares at exercise, or,
if less, the amount realized on the disposition of the shares, over the
exercise price of the option; and
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- we will be entitled to a tax deduction in the same amount.
Any further gain recognized by the employee will be taxed as short-term or
long-term capital gain, depending upon the length of time the employee held the
shares, and this amount will not be deductible by Medscape.
Nonqualified Stock Options. With respect to nonqualified stock options:
- no federal taxable income should be recognized by the optionee at the
time the option is granted;
- generally upon exercise of the option, the optionee will recognize
ordinary income in an amount equal to the difference between the exercise
price of the option and the fair market value of the shares purchased on
the date of exercise and we generally will be entitled to a tax deduction
in the same amount; and
- upon disposition of the shares acquired, generally any appreciation or
depreciation after the date of exercise is treated by the optionee either
as long-term or short-term capital gain or loss, depending upon the
length of time that the optionee held the shares.
Section 162(m) Limitations. The stock option plan is subject to a special
initial public offering-related transition rule under Internal Revenue Code
Section 162(m). Medscape's tax deduction upon the exercise of a nonqualified
stock option by certain executive officers would be subject to the limitations
of Section 162(m) of the Code if a nonqualified stock option is granted after
this offering with an exercise price less than the fair market value of the
common stock on the date of grant.
As of May 31, 1999, there were options to purchase 5,111,770 shares
outstanding and 1,692,237.5 shares available for future grant. As of May 31,
1999, 1,445,992.5 shares had been issued upon exercise of options granted under
the option plan.
EMPLOYMENT AGREEMENTS
Agreement with Paul T. Sheils. Under a three-year employment agreement
dated January 26, 1998, Paul T. Sheils became our President and Chief Executive
Officer on February 16, 1998 at an initial base salary of $195,000. Mr. Sheils'
base salary was increased to $225,000 effective February 16, 1999. The
employment agreement includes a $35,000 signing bonus, a 1998 performance bonus
of up to $52,500 based on reaching performance targets, and 1999 and 2000
performance bonuses, the target amounts of which cannot be less than $35,000 per
year and are based on meeting performance targets developed by our compensation
committee.
The employment agreement also granted Mr. Sheils incentive stock options to
purchase 750,000 shares of our common stock at $0.172 per share. These incentive
stock options are subject to the provisions of our stock option plan and an
incentive stock option agreement between Mr. Sheils and Medscape. One-third of
Mr. Sheils' incentive stock options vested on the first anniversary of his
employment and the remaining incentive stock options will vest after that date
in equal monthly installments until the third anniversary of Mr. Sheils'
employment. Regardless of these vesting provisions, the incentive stock options
are 100% exercisable on the date of a "corporate change," which is defined in
the stock option plan.
On February 16, 1999, Mr. Sheils was granted options to purchase an
additional 250,000 shares of common stock at an exercise price of $1.00 per
share.
If Mr. Sheils' employment is terminated for any reason other than his
death, disability or serious misconduct, he may exercise any vested incentive
stock options within 90 days of his termination. However, the incentive stock
options are forfeited if Mr. Sheils is terminated for serious misconduct. Also,
if Mr. Sheils' employment is terminated because of his death or disability, Mr.
Sheils or his estate may exercise any vested incentive stock options within one
year after termination.
Under his employment agreement, Mr. Sheils agreed not to compete with
Medscape and not to solicit our customers or employees for one year after the
termination of his employment, with limited exceptions. However, if he is
terminated without cause, the noncompetition and nonsolicitation restrictions
are limited to
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six months and the noncompetition restrictions will apply only to his employment
by certain healthcare-oriented Web sites. Mr. Sheils is also entitled to six
months' salary if he is terminated by us without cause, and may himself
terminate the employment agreement for any reason upon 60 days' notice. In
accordance with the terms of the employment agreement, Mr. Sheils was also
elected as a director of Medscape.
Agreement with Peter M. Frishauf. Under a three-year employment agreement
dated February 16, 1998, Peter M. Frishauf became Chairman of the executive
committee of Medscape at a base salary of $80,000. Under the employment
agreement, Mr. Frishauf has agreed to dedicate at least one-half of his business
time to Medscape. His employment agreement provides for performance bonuses of
up to $50,000 per year if performance targets are met. The performance bonuses
may be paid, at Mr. Frishauf's option in cash, in shares of our common stock,
the fair market value of which will be equal to the performance bonus amount, or
options for shares of our common stock, the fair market value of which will be
equal to 150% of the performance bonus amount. Mr. Frishauf also agreed not to
compete with Medscape and not to solicit our customers or employees for one year
following the termination of his employment, with limited exceptions. Mr.
Frishauf may terminate the employment agreement for any reason upon 60 days'
notice to us.
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TRANSACTIONS WITH RELATED PARTIES
Since January 1, 1998, there has not been nor is there currently proposed
any transaction or series of similar transactions to which Medscape or any of
its subsidiaries was or is to be a party in which the amount involved exceeds
$60,000 and in which any director, executive officer, holder of more than 5% of
the common stock of Medscape or any member of the immediate family of any of
those people had or will have a direct or indirect material interest other than
(a) compensation agreements and other arrangements that are described above for
the named executive officers and (b) the transactions described below.
SERIES D TRANSACTION
On March 5, 1999, we sold 1,757,683 shares of Series D Preferred Stock at a
purchase price of $11.72 per share, which was paid in cash. The purchasers of
the Series D Preferred Stock included the following holders of more than 5% of
the common stock, assuming the conversion of outstanding preferred shares:
- Media Technology Ventures, L.P. -- 75,568 shares.
- MTV Entrepreneurs Fund, L.P. -- 9,757 shares.
- CSK Venture Capital Co. Ltd. (CSK-1(A)) -- 28,442 shares.
- CSK Venture Capital Co., Ltd. (CSK-1(B)) -- 28,442 shares.
- CSK Venture Capital Co., Ltd. (CSK-2) -- 28,441 shares.
- Weston Presidio Capital II, L.P. -- 255,973 shares.
- Weston Presidio Capital III, L.P. -- 406,392 shares.
- WPC Entrepreneur Fund, L.P. -- 20,229 shares.
- Highland Capital Partners IV -- 655,290 shares.
- Highland Entrepreneurs Fund IV -- 27,304 shares.
- APA Excelsior IV, L.P. -- 71,365 shares.
- Patricof Private Investment Club, L.P. -- 1,365 shares.
- Coutts & Co. Cayman Ltd. c/o APA Excelsior IV/Offshore, L.P. -- 12,595
shares.
Alan J. Patricof, the Chairman of Medscape's board, is a Co-Chairman at
Patricof & Co. Ventures, Inc., that manages APA Excelsior IV, L.P., Coutts & Co.
Cayman Ltd. c/o APA Excelsior IV/Offshore, L.P., Patricof Private Investment
Club and APA Excelsior Fund. Carlo A. von Schroeter, a director of Medscape and
designee of Weston Presidio Capital, is a General Partner at Weston Presidio
Capital, that manages Weston Presidio Capital II, L.P., Weston Presidio Capital
III, L.P. and WPC Entrepreneur Fund, L.P. Mr. von Schroeter was elected as a
director as a condition to the investment by these entities.
ACQUISITION OF HEALTHCARE COMMUNICATIONS GROUP, LLC
In October 1998 we acquired all the membership interests of Healthcare
Communications Group, LLC for 1,825,435 shares of our Class B Common Stock, and
$1,075,000 in cash. Dr. Jeffrey L. Drezner owned the majority of the membership
interests of Healthcare Communications Group. Contemporaneously with our
acquisition of Healthcare Communication Group, we hired Dr. Drezner as Executive
Vice President with an initial base salary of $195,000 and, as a condition to
the acquisition, Dr. Drezner was elected as a director of Medscape. In
connection with Dr. Drezner's employment agreement, he purchased 1,825,435
restricted shares of Class B Common Stock in exchange for a promissory note in
the principal amount of $627,950 with 5.12% interest per annum. This note is
secured by a pledge of the stock and the principle remains outstanding. These
restricted shares will vest in yearly installments over a three year period
through December 31, 2001, based upon the achievement of targeted revenue
performance goals. Restricted shares which do not vest are subject to
forfeiture.
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SERIES C TRANSACTION
On March 17, 1998, pursuant to amendments to an earlier financing agreement
entered into by various investors in October 31, 1997 involving the purchase of
1,478,359 shares of Series C Preferred Stock at $4.60 per share, we sold an
additional 932,401 shares of Series C Preferred Stock at a purchase price of
$4.29 per share, which was paid in cash. This investment triggered anti-dilution
provisions inherent in the outstanding 1,478,359 shares of Series C Preferred
Stock, making them convertible into 1,585,186 shares of common stock upon
conversion. The 932,401 shares of Series C Preferred Stock, which are
convertible into 932,401 shares of common stock upon conversion, were
redesignated as Series C-1 Preferred Stock on March 5, 1999, in connection with
the Series D Transaction described above to distinguish their conversion rate
from that of the March 1997 investors. The purchasers of the 932,401 shares of
Series C Preferred Stock included the following holders of more than 5% of the
common stock, assuming the conversion of outstanding preferred shares:
- TBG Information Investors, LLC -- 699,301 shares.
- Media Technology Ventures, L.P. -- 206,433 shares.
- Media Technology Ventures Entrepreneurs Fund, L.P. -- 26,667 shares.
Oakleigh Thorne, a director of Medscape, is Chairman and Chief Executive
Officer of TBG Information Investors, LLC. Mr. Thorne was elected as a director
as a condition to the investment by TBG Information Investors, LLC. Marc
Butlein, a designee of Media Technology Ventures, L.P. and Media Technology
Ventures Entrepreneurs Fund, L.P., was elected as a director as a condition to
the earlier investment by Media Technology Ventures, L.P. and Media Technology
Entrepreneurs Fund, L.P. in March 1997.
TRANSACTIONS WITH SCP COMMUNICATIONS, INC.
On April 1, 1996, we entered into an agreement with SCP Communications,
Inc. for administrative and support services, including accounting, clerical,
secretarial and receptionist assistance. We renewed this agreement in each of
1997 and 1998. From April 1, 1996 until March 31, 1997, we paid SCP
Communications $35,000 per month for these services. Beginning on April 1, 1997
through June 30, 1998, as we expanded our own administrative and support
services, this amount was reduced to $12,000 per month. The service agreement
increased to $14,950 for the period July 1, 1998 to April 30, 1999 to reflect
additional services. Under this agreement, we agreed to reimburse out-of-pocket
costs incurred by SCP Communications in connection with these services. We
terminated the agreement on April 30, 1999.
On April 1, 1996, we also entered into a financing agreement with SCP
Communications that provided that they would advance funds to us under specified
circumstances. The agreement provided for financing of up to $1 million, payable
on demand, with interest at SCP Communications' borrowing rate plus 2%, payable
quarterly. We received loan proceeds of $550,000 in 1996 and further proceeds of
$1 million in 1997. In 1997 we repaid $1.15 million to SCP Communications
reducing the balance to $359,000 at December 31, 1997. We fully repaid this
balance in 1998.
Peter M. Frishauf and Oakleigh Thorne currently serve as directors of SCP
Communications. Peter M. Frishauf was the Chief Executive Officer of SCP
Communications until April 1996, and an employee of SCP Communications until
January 15, 1999. TBG Information Investors, LLC owns a majority of the
outstanding voting stock of SCP Communications. Alan J. Patricof resigned as a
director of SCP Communications, Inc. on November 25, 1997.
TRANSACTIONS WITH CBS
On July 7, 1999, we entered into a common stock purchase agreement and
agreed to enter into an advertising and promotion agreement, a trademark and
content agreement, a stockholders' agreement and a registration rights agreement
with CBS Corporation.
Stock Purchase Agreement. Under the stock purchase agreement, we will
issue 7,397,208 shares of Class A Common Stock and 6,541,160 shares of Class B
Common Stock to CBS for an aggregate purchase
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price of $139,383.68, to be paid in cash, and $156,860,616.32, to be paid
through the provision by CBS of advertising services under the advertising and
promotion agreement and a license to the "CBS" trademark and "Eye" design and
selected health-related news content under the trademark and content agreement.
Advertising and Promotion Agreement. Over the term of the advertising and
promotion agreement, CBS will arrange for the placement of approximately $150
million worth of advertising and promotion in the United States for our consumer
and professional Web sites and our other products and services. The possible
media categories in which this advertising and promotion will be placed include:
- CBS television network programming;
- CBS owned and operated television and radio station programming;
- CBS outdoor billboards;
- CBS Internet sites; and
- CBS cable.
All advertising and promotional materials are subject to CBS's advertising
guidelines and preemption policies and CBS is not required to make any ad
placements if the exigencies of time or contractual obligations prevent or
restrict CBS from doing so.
The term of the advertising and promotion agreement will expire on July 4,
2006. In addition, CBS may terminate the agreement and have no further
obligation to us under the agreement if:
- we issue to a CBS competitor a number of voting securities that result in
the competitor owning or controlling 9% or more of our voting securities;
- we materially breach a material term of the advertising and promotion
agreement or any of the other agreements with CBS of the same date;
- we become insolvent or commence bankruptcy or similar proceedings, or
- our consumer Web site ceases to operate for specified periods of time.
In addition, in the event of a breach by CBS of the advertising and
promotion agreement, Medscape may terminate the agreement in which case CBS's
obligation to provide advertising and promotion would continue unless CBS elects
to pay us, over the remaining term of the agreement, the cash equivalent of the
difference between approximately $150 million and the value of advertising and
promotion already provided, or unless CBS is required to pay such amount because
it is unable to provide the advertising and promotion because the parties cannot
agree on a media plan for a contract year which is consistent with prior media
plans.
Trademark and Content Agreement. Under the trademark and content
agreement, CBS will grant us a non-exclusive license to use on our consumer Web
site the "CBS" trademark and "Eye" design and selected health-related news
content contained in CBS network television news programs. Under the agreement,
CBS will retain significant control over the use and presentation of the CBS
health content and CBS trademarks. For example:
- our use of the CBS health-related news content and trademarks must
conform to CBS's guidelines; and
- CBS may refuse to deliver, or require us to cease using, content that CBS
determines conflicts with, or interferes with or is detrimental to CBS's
interests, reputation or business or which might subject CBS to legal
liability or regulatory action.
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During the term of the agreement, our consumer Web site will be the
exclusive healthcare Internet site integrated into CBS News programming. This
integration will be accomplished by CBS News, when appropriate and at its
discretion, directing viewers of CBS News programs to CBS.Medscape.com for more
information regarding health-related news stories and features. In addition,
during the term of the agreement, with limited exceptions, CBS may not:
- license the CBS trademarks in connection with the branding of any
competitive Web site; or
- make available any CBS health content on any competitive Web site.
The term of the trademark and content agreement expires on July 4, 2006. In
addition, CBS may terminate the agreement if:
- we issue to a CBS competitor a number of voting securities that result in
the competitor owning or controlling 9% or more of our voting securities;
- we breach a material term of the trademark and content agreement or any
of the other agreements with CBS of the same date; or
- we become insolvent or subject to bankruptcy or similar proceedings.
Stockholders' Agreement. The stockholders' agreement provides that CBS
will be entitled to designate up to three members to our board of directors so
long as it holds at least 30% of our outstanding voting securities; two, so long
as it holds at least 20% but less than 30% of our outstanding voting securities;
or one, so long as it holds at least 12.5% but less than 20%, of our outstanding
voting securities. If CBS's holdings of our outstanding voting securities fall
below 12.5% but the reduction is not caused by the sale of any securities by
CBS, CBS will continue to have the right to designate one individual to our
board of directors. If the size of our board of directors is increased, the
number of individuals that CBS is entitled to designate will be adjusted to
reflect the percentage of our outstanding voting securities that it holds. We
have agreed to use our best efforts to cause any shares of our stock for which
our management or board of directors hold proxies or are otherwise entitled to
vote, to be voted in favor of the CBS designees. As a condition to the closing
of the transaction with CBS, substantially all holders of more than 5% of our
common stock and our Chief Executive Officer, Executive Vice President and
Executive Committee Chairman are required to have entered into a joinder
agreement to the CBS stockholders' agreement under which they agree to the above
provisions relating to CBS's rights to designate members of our board of
directors.
In addition, if we propose to issue new voting securities, or securities
convertible into or exchangeable for voting securities that would reduce CBS's
percentage of ownership of our voting securities, CBS will have the right to
purchase for cash a number of securities on the same terms in an amount
necessary to maintain its percentage ownership of voting securities, not to
exceed a percentage equal to the percentage of the outstanding voting securities
held by CBS upon the consummation of this offering. If we receive non-cash
consideration for an issuance, the purchase price for CBS will be a per share
price equal to the "fair market value" of the non-cash consideration.
This purchase right will not apply to issuances by us in any calendar year
of:
- up to an aggregate of 7.5% of our outstanding common stock pursuant to
stock option plans approved by our board of directors, plus shares issued
upon the exercise of outstanding option and warrants, conversion of or
exchange for any outstanding convertible or exchangeable securities or
the effectuation of a stock split or dividend payable in shares of common
stock or other securities or rights convertible into our common stock;
- up to an aggregate of 7.5% of our outstanding common stock in follow-on
public offerings, the proceeds of which are to be used for general
corporate purposes; and
- up to 5% of our outstanding common stock per acquisition in connection
with acquisitions approved by our board of directors, provided we do not
issue, in the aggregate, more than 10% of our outstanding common stock in
connection with these acquisitions in any year.
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Furthermore, if we consummate an acquisition by issuing more than 5% of our
outstanding common stock and the price for our common stock is below a specified
level, we will be required to issue CBS a warrant to purchase the number of
shares of our common stock necessary to maintain CBS's then current percentage
ownership. The warrant will expire on the third anniversary of the acquisition.
Registration Rights Agreement. Under the registration rights agreement,
CBS will have "piggyback" registration rights. If we propose to register any
common stock under the Securities Act, CBS may require us to include all or a
portion of its securities in the registration. However, the managing
underwriter, if any, of any common stock offering has rights to limit the number
of CBS's securities proposed to be included in the registration.
We would bear all registration expenses incurred in connection with these
registrations. CBS would pay all underwriting discounts, selling commissions and
stock transfer taxes applicable to the sale of its securities.
The registration rights of CBS under the registration rights agreement will
terminate when CBS may sell all of its shares in a three-month period under Rule
144 promulgated under the Securities Act.
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PRINCIPAL STOCKHOLDERS
The following table shows information with respect to beneficial ownership
of our common stock, as of May 31, 1999, after giving pro forma effect to the
preferred stock conversion and as adjusted to reflect the sale of the common
stock offered by Medscape in this offering, for:
- each person known by Medscape to beneficially own more than 5% of the
common stock;
- each director of Medscape;
- each executive officer named in the Summary Compensation Table; and
- all directors and executive officers of Medscape as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and includes voting or investment power with respect to the
securities.
Unless indicated otherwise below, the address for each listed director and
officer is Medscape, Inc., 134 West 29th Street, New York, New York 10001-5399.
Except as indicated by footnote, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares of common stock outstanding
used in calculating the percentage for each listed person includes the shares of
common stock underlying options held by that person that are exercisable within
60 days of May 31, 1999 but excludes shares of common stock underlying options
held by any other person. Percentage of beneficial ownership is based on
20,690,112 shares of common stock outstanding as of May 31, 1999, after giving
effect to the conversion of the convertible preferred stock, and shares of
common stock outstanding after completion of this offering.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE BENEFICIALLY OWNED
COMMON STOCK BEFORE AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
<S> <C> <C> <C>
Entities associated with Patricof & Co. Ventures,
Inc.(1)............................................ 3,506,062.5 16.9%
Entities associated with CSK Venture Capital Co.,
Ltd.(2)............................................ 1,378,812.5 6.7%
Entities associated with Highland Capital Partners,
Inc.(3)............................................ 1,706,485.0 8.2%
Entities associated with Media Technology
Ventures(4)........................................ 1,961,825.0 9.5%
TBG Information Investors, LLC....................... 1,748,252.5 8.4%
Entities associated with Weston Presidio Capital
Funds(5)........................................... 1,706,485.0 8.2%
Paul T. Sheils(6).................................... 354,166.7 1.7%
Jeffrey L. Drezner, M.D., Ph.D.(7)................... 3,431,817.5 16.6%
Peter M. Frishauf(8)................................. 1,790,117.5 8.7%
Marc Butlein(9)...................................... 23,750.0 *
Esther Dyson(10)..................................... 74,137.5 *
Alan J. Patricof(11)................................. 3,607,722.5 17.4%
Carlo A. von Schroeter(12)........................... 1,706,485.0 8.2%
Oakleigh Thorne(13).................................. 1,767,002.5 8.5%
All executive officers and directors as a group
(13 persons)(14)................................... 12,755,199.2 61.6%
</TABLE>
- ---------------
* Less than one percent.
(1) Represents 661,500 shares held in record by APA Excelsior IV, L.P.,
117,502 shares held of record by Coutts & Co. Cayman Ltd. c/o APA
Excelsior IV/Offshore, L.P., 12,735 shares held of record by Patricof
Private Investment Club, L.P., 2,636,325 shares held of record by APA
Excelsior Fund and 78,000 shares held of record by Patricof & Co.
Ventures, Inc. Each of the above funds disclaims ownership of any other
above fund. Patricof & Co. Ventures, Inc. manages APA Excelsior IV, L.P.,
Coutts & Co. Cayman Ltd. c/o APA Excelsior IV/Offshore, L.P., Patricof
Private Investment Club and APA Excelsior Fund. The address for Patricof &
Co. Ventures, Inc. is c/o Alan J. Patricof, 445 Park Avenue, New York, NY
10021.
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(2) Represents 459,605 shares held of record by CSK Venture Capital Co., Ltd.,
as investment manager for CSK-1(B) Investment Fund, 459,602.5 shares held
of record by CSK Venture Capital Co., Ltd., as investment manager for CSK-2
Investment Fund, 459,605 shares held of record by CSK Venture Capital Co.,
Ltd., as investment manager for CSK-1(A) Investment Fund. Each of the above
funds disclaims ownership of any other above fund. The address for the CSK
Venture Capital Co., Ltd. is CSK Corporation, Kenchikukaikan, 7F, 5-26-20
Shiba, Minato-Ku, Tokyo 108-0014, Japan.
(3) Represents 1,638,225 shares held of record by Highland Capital Partners IV
Limited Partnership and 68,260 shares held of record by Highland
Entrepreneurs' Fund IV Limited Partnership. Each of the above funds
disclaims ownership of any other above fund. Highland Capital Partners,
Inc. manages Highland Capital Partners IV Limited Partnership and Highland
Entrepreneurs' Fund IV Limited Partnership. The address for the Highland
Capital Partners, Inc. is Two International Place, Boston, MA 02100.
(4) Represents 1,737,455 shares held in record by Media Technology Ventures,
L.P. and 224,370 shares held of record by Media Technology Ventures
Entrepreneurs Fund, L.P. Each of the above funds disclaims ownership of any
other above fund. The address for the Media Technology Ventures entities is
One First Street, Los Angeles, CA 94022.
(5) Represents 639,932.5 shares held of record by Weston Presidio Capital II,
L.P., 1,015,980 shares held of record by Weston Presidio Capital III, L.P.
and 50,572.5 shares held of record by WPC Entrepreneur Fund, L.P. Each of
the above funds disclaims beneficial ownership of any other above fund.
Weston Presidio Capital manages Weston Presidio Capital II, L.P., Weston
Presidio Capital III, L.P. and WPC Entrepreneur Fund, L.P. The address for
Weston Presidio Capital is One Federal Street, 21st Floor, Boston, MA
02110-2004.
(6) Includes 41,666.7 shares of common stock issuable upon the exercise of
options exercisable within 60 days of May 31, 1999.
(7) Includes 1,825,435 shares of restricted stock issued pursuant to the terms
of Dr. Drezner's employment agreement.
(8) Includes 78,375 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 31, 1999.
(9) Includes 23,750 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 31, 1999.
(10) Includes 1,875 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 31, 1999.
(11) Represents 665,825 shares held in record by APA Excelsior IV, L.P.,
117,502.5 shares held of record by Coutts & Co. Cayman Ltd. c/o APA
Excelsior IV/Offshore, L.P., 12,735 shares held of record by Patricof
Private Investment Club, L.P., 2,632,000 shares held of record by APA
Excelsior Fund, 78,000 shares held of record by Patricof & Co. Ventures,
Inc. and 15,000 shares held of record by Mr. Patricof's sons. Also includes
86,660 shares of common stock issuable upon exercise of options exercisable
within 60 days of May 31, 1999. Mr. Patricof disclaims beneficial ownership
to the shares held of record by his sons, and disclaims beneficial
ownership of the shares held of record by the above entities except to the
extent of his pecuniary interest. The address for all of the above is c/o
Alan J. Patricof, 445 Park Avenue, New York, NY 10021.
(12) Includes 639,932.5 shares held of record by Weston Presidio Capital II,
L.P., 1,015,980 shares held of record by Weston Presidio Capital III, L.P.
and 50,572.5 shares held of record by WPC Entrepreneur Fund, L.P., for both
of which Mr. von Schroeter is a general partner of the managing partner.
Mr. von Schroeter disclaims beneficial ownership of the shares held of
record by the above entities except to the extent of his pecuniary
interest.
(13) Includes 18,750 shares of common stock issuable upon exercise of options
exercisable within 60 days of March 31, 1999. Also includes 1,748,252.5
shares held of record by TBG Information Investors, LLC, for which Mr.
Thorne serves as Chairman and CEO. Mr. Thorne disclaims beneficial
ownership of the shares held of record by TBG Information Investors, LLC
except to the extent of his pecuniary interest.
(14) Includes 251,076 shares issuable upon the exercise of options exercisable
within 60 days of May 31, 1999.
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DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our amended and restated certificate of
incorporation will authorize the issuance of up to 100,000,000 shares of common
stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par
value $0.01 per share, the rights and preferences of which may be established
from time to time by our board of directors. As of May 31, 1999, 7,780,362.5
shares of common stock were outstanding and 4,956,643 shares of convertible
preferred stock convertible into 12,658,672.5 shares of common stock upon the
completion of this offering were issued and outstanding. As of May 31, 1999, we
had 86 stockholders.
COMMON STOCK
Upon the closing of this offering, all shares of Class B Common Stock will
automatically convert on a one-for-one basis into Class A Common Stock, which
will be redesignated as common stock. Each holder of common stock is entitled to
one vote for each share on all matters to be voted upon by the stockholders and
there are no cumulative voting rights. Subject to preferences that may be
applicable to any preferred stock outstanding at the time, holders of common
stock are entitled to receive ratable dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available for that
purpose. In the event of a liquidation, dissolution or winding up of Medscape,
holders of common stock would be entitled to share in our assets remaining after
the payment of liabilities and liquidation preferences on any outstanding
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and shares of common stock offered by Medscape in this offering, when
issued and paid for, will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred
stock will convert into shares of common stock. Upon the closing of this
offering, the board of directors will be authorized, subject to Delaware law,
without stockholder approval, from time to time to issue up to an aggregate of
5,000,000 shares of preferred stock in one or more series. The board of
directors can fix the rights, preferences and privileges of the shares of each
series and any qualifications, limitations or restrictions. Issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of our outstanding voting
stock. We have no present plans to issue any shares of preferred stock.
WARRANTS
Upon the completion of this offering, we will have outstanding warrants to
purchase 14,887.5 shares of common stock at a weighted average exercise price of
$0.004 per share. These warrants will become exercisable on March 5, 2000 and
expire on March 5, 2002.
REGISTRATION RIGHTS
After the offering, the holders of 17,169,490 shares of our common stock
will be entitled to registration rights. These rights include demand
registration rights and rights to require us to include their common stock in
future registration statements we file with the SEC. The holders may also
require us to register their common stock once we are eligible to use a
short-form registration statement. However, holders of substantially all of
these shares have agreed not to exercise their registration rights until 180
days after the date of this prospectus. Registration of shares of common stock
upon the exercise of demand registration rights would result in the covered
shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of this registration.
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CHARTER AND BYLAW PROVISIONS AND DELAWARE ANTI-TAKEOVER STATUTE
Under Delaware law, we may not engage in a "business combination," which
includes a merger or sale of more than 10% of the corporation's assets, with any
"interested stockholder," namely, a stockholder who owns 15% or more of
Medscape's outstanding voting stock, as well as affiliates and associates of any
of these such persons, for three years following the time that stockholder
became an interested stockholder unless:
- the transaction in which the stockholder became an interested stockholder
is approved by our board of directors prior to the time the interested
stockholder attained that status;
- upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of Medscape outstanding at the time the
transaction commenced, excluding those shares owned by persons who are
directors and also officers; or
- at or after the time the stockholder became an interested stockholder the
business combination is approved by the board of directors and authorized
at an annual or special meeting of stockholders by the affirmative vote
of at least two-thirds of the outstanding voting stock which is not owned
by the interested stockholder.
The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
Medscape. These and other provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of Medscape.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Medscape's certificate of incorporation limits the liability of directors
to the fullest extent permitted by the Delaware law. In addition, the
certificate of incorporation and Bylaws provide that Medscape will indemnify
directors and officers of Medscape to the fullest extent permitted by Delaware
law. We believe that the provisions in our certificate of incorporation and
bylaws are necessary to attract and retain qualified persons as directors and
officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
66
<PAGE> 69
SHARES ELIGIBLE FOR FUTURE SALE
If our stockholders sell substantial amounts of common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future and at a time and price that we deem appropriate.
Upon completion of this offering, we will have outstanding an aggregate of
shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. As of
May 31, 1999, we had approximately 86 holders of common stock, after giving
effect to the conversion of the convertible preferred stock. Of these shares,
all of the shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, unless these
shares are purchased by "affiliates" as that term is defined in Rule 144 under
the Securities Act. This leaves shares eligible for sale in the public
market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
<S> <C>
............................. After the date of this prospectus.
............................. After 180 days from the date of this
prospectus (subject, in some cases, to
volume limitations).
............................. At various times after 180 days from the
date of this prospectus.
</TABLE>
LOCK-UP AGREEMENTS
All of our officers and directors and stockholders holding substantially
all of our outstanding stock have signed lock-up agreements with our
underwriters under which they agreed not to transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible into or
exercisable or exchangeable for shares of our common stock, for a period of 180
days after the date of this prospectus. Transfers or dispositions can be made
sooner with the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering;
or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to that sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
Medscape, Inc.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, Rule 144(k) shares may be sold immediately upon the
completion of this offering.
67
<PAGE> 70
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares of our common
stock from us in connection with a compensatory stock or option plan or other
written agreement is eligible to resell those shares 90 days after the effective
date of this offering in reliance on Rule 144, but without compliance with some
of the restrictions, including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
After this offering, the holders of 33,107,858 shares of our common stock,
or their transferees, will be entitled to rights with respect to the
registration of those shares under the Securities Act. After this registration,
these shares of our common stock become freely tradeable without restriction
under the Securities Act. These sales could have a material adverse effect on
the trading price of our common stock.
STOCK OPTIONS
Shortly after this offering, we intend to file a registration statement on
Form S-8 covering the shares of common stock reserved for issuance under our
stock option plan. Shares of common stock registered under any registration
statement will, subject to Rule 144 volume limitations applicable to affiliates,
be available for sale in the open market, unless the shares are subject to
vesting restrictions or the lock-up agreements described above.
68
<PAGE> 71
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, dated as
of , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Credit Suisse First Boston
Corporation, Bear, Stearns & Co. Inc., Wit Capital Corporation and DLJdirect
Inc. have severally agreed to purchase from Medscape the respective number of
shares of common stock shown opposite their names below.
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Credit Suisse First Boston Corporation......................
Bear, Stearns & Co. Inc.....................................
Wit Capital Corporation.....................................
DLJdirect Inc...............................................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered in this prospectus require the approval by their counsel of legal
matters and other conditions. The underwriters must purchase and accept delivery
of all the shares of common stock offered through this prospectus, other than
those shares covered by the over-allotment option described below, if any are
purchased.
The underwriters propose to initially offer some of the shares of common
stock directly to the public at the public offering price on the cover page of
this prospectus and some of the shares of common stock to dealers, including the
underwriters, at the public offering price less a concession not in excess of
$ per share. The underwriters may allow, and these dealers may
re-allow, to other dealers a concession not in excess of $ per share.
After the initial offering of the common stock, the representatives of the
underwriters may change the public offering price and other selling terms at any
time without notice. The underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by us in this offering. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares of common stock.
<TABLE>
<CAPTION>
NO FULL
EXERCISE EXERCISE
<S> <C> <C>
Per Share............................................
Total................................................
</TABLE>
We will pay the offering expenses, estimated to be $ .
An electronic prospectus is available on the Web sites maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation, Wit Capital Corporation, and other dealers and selected dealers
designated by Wit Capital Corporation. Other than the prospectus in electronic
format, the information on these Web sites relating to the offering is not part
of this prospectus and has not been approved and/or endorsed by Medscape or the
underwriters, and should not be relied on by prospective investors.
Wit Capital Corporation, a member of the National Association of Securities
Dealers, Inc., will participate in the offering as one of the underwriters. The
NASD approved the membership of Wit Capital on September 4, 1997. Since that
time, Wit Capital has acted as an underwriter in over 100 public offerings,
including 80 initial public offerings. Wit Capital's Chairman and co-Chief
Executive Officer has made an
69
<PAGE> 72
indirect investment in our Series C Preferred Stock, par value $0.01, which will
represent less than 1% of our outstanding shares after this offering. Except for
its participation as an underwriter in this offering and the indirect ownership
of our shares by one of its Chairman and co-Chief Executive Officer, Wit Capital
has no relationship with us or any of our affiliates.
Credit Suisse First Boston Corporation acted as placement agent in
connection with a private placement of our Series D Preferred Stock, for which
it received customary compensation.
Medscape has granted to the underwriters an option, exercisable within 30
days after the date of this prospectus, to purchase, from time to time, in whole
or in part, up to an aggregate of additional shares of common
stock at the public offering price less underwriting discounts and commissions.
The underwriters may exercise this option solely to cover over-allotments, if
any, made in connection with the offering. To the extent that the underwriters
exercise this option, each underwriter will become obligated, under conditions
specified in the underwriting agreement, to purchase its pro rata portion of the
additional shares based on that underwriter's percentage underwriting commitment
as indicated in the preceding table.
Medscape has agreed to indemnify the underwriters against liabilities
specified in the underwriting agreement, including liabilities under the
Securities Act, or to contribute to payments that the underwriters may be
required to make because of these liabilities.
Each of Medscape, our executive officers and directors and substantially
all of our stockholders has agreed, for a period of 180 days after the date of
this prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation, not to:
- 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 shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.
The underwriting agreement contains limited exceptions to these lock-up
agreements.
In addition, during this 180-day period, Medscape has also agreed not to
file any registration statement for, and each of its executive officers,
directors and several stockholders of Medscape has agreed not to make any demand
for, or exercise any right for, the registration of any shares of common stock
or any securities convertible into or exercisable or exchangeable for common
stock without Donaldson, Lufkin & Jenrette Securities Corporation's prior
written consent.
Prior to the offering, there has been no established trading market for the
common stock. Medscape and the underwriters negotiated the public offering price
for the shares of common stock offered by this prospectus. The factors they
considered in determining the public offering price included:
- the history of and the prospects for the industry in which Medscape
competes;
- the past and present operations of Medscape;
- the historical results of operations of Medscape;
- the prospects for future earnings of Medscape;
- the recent market prices of securities of generally comparable companies;
and
- the general condition of the securities markets at the time of the
offering.
Other than in the United States, no action has been taken by Medscape or
the underwriters that would permit a public offering of the shares of common
stock offered by this prospectus in any jurisdiction where action for that
purpose is required. The shares of common stock offered through this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or
any other offering material or advertisements associated with the offer and sale
of any the shares of common stock offered through this prospectus be
70
<PAGE> 73
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of that
jurisdiction. You should inform yourself and observe any restrictions relating
to the offering of the common stock and the distribution of this prospectus.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any shares of common stock offered in this prospectus in any
jurisdiction in which an offer or a solicitation is unlawful.
As a result of the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may over-allot the offering, creating a syndicate
short position. The underwriters may bid for and purchase shares of common stock
in the open market to cover a syndicate short position or to stabilize the price
of the common stock. In addition, the underwriting syndicate may reclaim selling
concessions from syndicate members if the syndicate repurchases previously
distributed common stock in syndicate covering transactions, in stabilization
transactions or in some other way or if Donaldson, Lufkin & Jenrette Securities
Corporation receives a report that indicates clients of such syndicate members
have "flipped" the common stock. These activities may stabilize or maintain the
market price of the common stock above independent market levels. The
underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The underwriters, at our request, have reserved for sale at the initial
public offering price up to ten percent of the shares of common stock to be sold
in this offering for sale to our employees and other persons designated by us.
The number of shares available for sale to the general public will be reduced to
the extent that any reserved shares are purchased. Any reserved shares not so
purchased will be offered by the underwriters on the same basis as the other
shares offered through this prospectus.
VALIDITY OF THE SHARES
The validity of the shares of common stock offered through this prospectus
will be passed upon for us by Patterson, Belknap, Webb & Tyler LLP, New York,
New York. Selected legal matters in connection with this offering will be passed
upon for the underwriters by Hogan & Hartson L.L.P., Washington, D.C.
EXPERTS
The financial statements of Medscape as of and for the years ended December
31, 1998 and December 31, 1997 and the nine months ended December 31, 1996, and
Healthcare Communications Group, LLC as of and for the period ended October 27,
1998 and as of and for the year ended December 31, 1997 included in this
prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing in this prospectus and are included in
reliance upon the reports of that firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, including
amendments to it, relating to the common stock offered by us. This prospectus
does not contain all of the information in the registration statement and its
exhibits and schedules. For further information with respect to Medscape and our
common stock, you should review the registration statement and its exhibits and
schedules. A copy of the registration statement may be inspected without charge
at the SEC's principal office in Washington, D.C. and copies of all or any part
of the registration statement may be obtained from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, the New York
Regional Office located at Seven World Trade Center, New York, New York 10048,
and the Chicago Regional Office located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, upon payment of fees
prescribed by the SEC. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the SEC's Web site is http://www.sec.gov.
Medscape intends to furnish its stockholders with annual reports containing
audited financial statements certified by its independent auditors.
71
<PAGE> 74
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
MEDSCAPE, INC.
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and
December 31, 1998......................................... F-3
Consolidated Statements of Operations for Nine Months Ended
December 31, 1996, and for the Years Ended December 31,
1997 and December 31, 1998................................ F-4
Consolidated Statements of Shareholders' Equity (Deficiency)
for the Nine Months Ended December 31, 1996, and for the
Years Ended December 31, 1997 and December 31, 1998....... F-5
Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 1996, and for the Years Ended December
31, 1997 and December 31, 1998............................ F-6
Notes to Consolidated Financial Statements.................. F-7
Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of December 31,
1998 and March 31, 1999 (unaudited)....................... F-17
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and March 31, 1999
(unaudited)............................................... F-18
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and March 31, 1999
(unaudited)............................................... F-19
Notes to the Condensed Consolidated Financial Statements.... F-20
HEALTHCARE COMMUNICATIONS GROUP, LLC
Independent Auditors' Report................................ F-23
Balance Sheets as of December 31, 1997 and October 27,
1998...................................................... F-24
Statements of Operations for the Year Ended December 31,
1997 and the Ten Months Ended October 27, 1998............ F-25
Statements of Member's Capital for the Year Ended December
31, 1997 and the Ten Months Ended October 27, 1998........ F-26
Statements of Cash Flows for the Year Ended December 31,
1997 and the Ten Months Ended October 27, 1998............ F-27
Notes to Financial Statements............................... F-28
</TABLE>
F-1
<PAGE> 75
INDEPENDENT AUDITORS' REPORT
Medscape, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Medscape,
Inc. and its subsidiary ("Medscape") as of December 31, 1997 and 1998, and the
related consolidated statements of operations, shareholders' equity
(deficiency), and cash flows for the nine months ended December 31, 1996 and
each of the two years in the period ended December 31, 1998. These consolidated
financial statements are the responsibility of Medscape's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Medscape at
December 31, 1997 and 1998 and the results of its operations and its cash flows
for the nine months ended December 31, 1996 and the two years then ended
December 31, 1998, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 12, 1999 (May 17, 1999 as to Note 13)
F-2
<PAGE> 76
MEDSCAPE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 2)........................ $ 3,627,903 $ 1,594,939
Accounts receivable....................................... 634,200 1,350,194
Prepaid expenses and other assets......................... 31,691 92,911
----------- -----------
Total current assets.............................. 4,293,794 3,038,044
Property and equipment -- Net............................... 279,005 379,588
Intangible assets -- Net.................................... 59,831 46,144
Goodwill -- Net............................................. -- 1,950,268
----------- -----------
Total assets...................................... $ 4,632,630 $ 5,414,044
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 90,948 $ 330,402
Accrued expenses.......................................... 154,529 308,394
Accrued compensation...................................... 13,000 152,248
Accrued vacation.......................................... 56,679 28,812
Due to related party...................................... 465,918 50,862
Loan payable.............................................. 358,949 --
Deferred revenue.......................................... 803,884 799,523
----------- -----------
Total current liabilities......................... 1,943,907 1,670,241
----------- -----------
Commitments (Notes 10 and 12)
Shareholders' Equity:
Common stock, Class A -- par value $.01; 15,000,000 shares
authorized, 1,079,000 issued and outstanding........... 10,790 10,790
Common stock, Class B -- par value $.01; 15,000,000 shares
authorized, 1,726,645 and 5,792,318 issued and
outstanding............................................ 17,265 57,923
Preferred stock, Series A -- par value $.01; 1,000,000
shares authorized, 788,200 shares issued and
outstanding............................................ 7,882 7,882
Preferred stock, Series B -- par value $.01; 1,000,000
shares authorized, 0 issued and outstanding............ -- --
Preferred stock, Series C -- par value $.01; 4,000,000
shares authorized, 1,478,359 and 2,410,760 issued and
outstanding............................................ 14,784 24,108
Additional paid-in-capital................................ 7,446,406 12,726,241
Treasury stock............................................ -- (3,277)
Notes receivable.......................................... -- (627,950)
Accumulated deficit....................................... (4,808,404) (8,451,914)
----------- -----------
Total shareholders' equity........................ 2,688,723 3,743,803
----------- -----------
Total liabilities and shareholders' equity........ $ 4,632,630 $ 5,414,044
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 77
MEDSCAPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND
THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------
1996 1997 1998
<S> <C> <C> <C>
Revenues............................................. $ 1,015,358 $ 1,522,183 $ 3,069,045
----------- ----------- -----------
Operating expenses:
Editorial, production, content and technology...... 1,181,783 1,790,588 2,563,419
Sales and marketing................................ 278,269 1,200,745 2,343,962
General administration............................. 830,354 1,822,595 1,774,649
Depreciation and amortization...................... 41,325 159,862 279,528
----------- ----------- -----------
Total Operating Expenses................... 2,331,731 4,973,790 6,961,558
----------- ----------- -----------
Loss from operations................................. (1,316,373) (3,451,607) (3,892,513)
Interest (income) expense.......................... 28,117 12,307 (249,003)
----------- ----------- -----------
Net loss............................................. $(1,344,490) $(3,463,914) $(3,643,510)
=========== =========== ===========
Basic net loss per shares............................ $ (0.66) $ (1.26) $ (1.00)
Weighted average number of shares of common stock
outstanding........................................ 2,026,233 2,750,552 3,636,558
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 78
MEDSCAPE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
CLASS A CLASS B SERIES A SERIES B
COMMON STOCK COMMON STOCK PREFERRED STOCK PREFERRED STOCK
------------------- ------------------- ---------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1996............ -- $ -- -- $ -- -- $ -- -- $ --
Initial capitalization -- April
1, 1996........................ 1,079,000 10,790 1,604,500 16,045 788,200 7,882 -- --
Exercise of stock options........ -- -- 22,500 225 -- -- -- --
Net loss......................... -- -- -- -- -- -- -- --
--------- ------- --------- ------- ------- ------ -------- -------
Balance, December 31, 1996........ 1,079,000 10,790 1,627,000 16,270 788,200 7,882 -- --
Issuance of Preferred B Stock.... -- -- -- -- -- -- (123,974) 1,240
Conversion of Preferred Stock.... -- -- -- -- -- -- (123,974) (1,240)
Issuance of Preferred C Stock.... -- -- -- -- -- -- -- --
Exercise of stock options........ -- -- 99,645 995 -- -- -- --
Contributed capital.............. -- -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- -- --
--------- ------- --------- ------- ------- ------ -------- -------
Balance, December 31, 1997........ 1,079,000 10,790 1,726,645 17,265 788,200 7,882 -- --
Purchase of Treasury Stock....... -- -- -- -- -- -- -- --
Options issued to nonemployees... -- -- -- -- -- -- -- --
Issuance of Preferred C Stock.... -- -- -- -- -- -- -- --
Issuance of Common B Stock
(acquisition).................. -- -- 3,650,870 36,510 -- -- -- --
Exercise of stock options........ -- -- 414,803 4,148 -- -- -- --
Net loss......................... -- -- -- -- -- -- -- --
--------- ------- --------- ------- ------- ------ -------- -------
Balance, December 31, 1998........ 1,079,000 $10,790 5,792,318 $57,923 788,200 $7,882 -- $ --
========= ======= ========= ======= ======= ====== ======== =======
<CAPTION>
SERIES C
PREFERRED STOCK ADDITIONAL
------------------- PAID-IN ACCUMULATED TREASURY NOTES
SHARES AMOUNT CAPITAL DEFICIT STOCK RECEIVABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1996............ -- $ -- $ -- $ -- $ -- $ -- $ --
Initial capitalization -- April
1, 1996........................ -- -- 15,283 -- -- -- 50,000
Exercise of stock options........ -- -- 18 -- -- -- 243
Net loss......................... -- -- -- (1,344,490) -- -- (1,344,490)
--------- ------- ----------- ----------- ------- --------- -----------
Balance, December 31, 1996........ -- -- 15,301 (1,344,490) -- -- (1,294,247)
Issuance of Preferred B Stock.... -- -- 1,498,760 -- -- -- 1,500,000
Conversion of Preferred Stock.... 326,087 3,261 (2,021) -- -- -- --
Issuance of Preferred C Stock.... 1,152,272 11,523 5,288,924 -- -- -- 5,300,447
Exercise of stock options........ -- -- 3,078 -- -- -- 4,073
Contributed capital.............. -- -- 642,364 -- -- -- 642,364
Net loss......................... -- -- -- (3,463,914) -- -- (3,463,914)
--------- ------- ----------- ----------- ------- --------- -----------
Balance, December 31, 1997........ 1,478,359 14,784 7,446,406 (4,808,404) -- -- 2,688,723
Purchase of Treasury Stock....... -- -- -- -- (3,277) -- (3,277)
Options issued to nonemployees... -- -- 65,000 -- -- -- 65,000
Issuance of Preferred C Stock.... 932,401 9,324 3,990,675 -- -- -- 3,999,999
Issuance of Common B Stock
(acquisition).................. -- -- 1,219,390 -- -- (627,950) 627,950
Exercise of stock options........ -- -- 4,770 -- -- -- 8,918
Net loss......................... -- -- -- (3,643,510) -- -- (3,643,510)
--------- ------- ----------- ----------- ------- --------- -----------
Balance, December 31, 1998........ 2,410,760 $24,108 $12,726,241 $(8,451,914) $(3,277) $(627,950) $ 3,743,803
========= ======= =========== =========== ======= ========= ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 79
MEDSCAPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED
DECEMBER 31, -------------------------
1996 1997 1998
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $(1,344,490) $(3,463,914) $(3,643,510)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 41,325 159,862 279,528
Recruiting fees -- issuance of options.......... -- -- 65,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable...... (350,733) (283,467) 474,365
Increase in prepaid expenses.................... (10,431) (21,260) (6,489)
Increase in accounts payable and accruals....... 225,979 89,178 149,742
Increase (decrease) in due to related party..... 645,758 (179,840) (415,056)
Increase (decrease) in deferred revenue......... 712,224 91,660 (1,125,556)
----------- ----------- -----------
Net cash used in operating activities...... (80,368) (3,607,781) (4,221,976)
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of property and equipment................. (245,543) (221,850) (262,350)
Acquisition of intangible assets................... (72,632) -- --
Payments for business acquired, net of cash
acquired (note 1)............................... -- -- (1,195,330)
----------- ----------- -----------
Net cash used in investing activities...... (318,175) (221,850) (1,457,680)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from loan................................. 546,667 962,283 --
Payment of loan.................................... -- 1,150,000 358,949
Proceeds from issuance of preferred stock.......... 7,882 6,800,447 3,999,999
Proceeds from exercise of stock options............ 42,361 4,073 8,918
Purchase of treasury stock......................... -- -- (3,276)
Contributed capital................................ -- 642,364 --
----------- ----------- -----------
Cash provided by financing activities...... 596,910 7,259,167 3,646,692
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents..... 198,367 3,429,536 (2,032,964)
Cash and cash equivalents, beginning of period....... -- 198,367 3,627,903
----------- ----------- -----------
Cash and cash equivalents, end of period............. $ 198,367 $ 3,627,903 $ 1,594,939
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 80
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1998
1. ORGANIZATION AND NATURE OF BUSINESS
Medscape, Inc. was formed and incorporated under the laws of the State of
New York in March 1996, and commenced operations in April 1996. Medscape was
reincorporated in Delaware in December 1998. Medscape operates Medscape.com, a
leading healthcare Web site for physicians, allied healthcare professionals such
as pharmacists and nurses, and consumers. The Medscape Web site is a valuable
resource that enables members to make better informed healthcare decisions.
Medscape provides comprehensive, authoritative and timely medical information,
including original proprietary articles written by renowned medical experts.
Medscape sells advertising and sponsorship, market research and other services
to pharmaceutical, medical device and other healthcare companies. Medscape also
sells products, such as medical books, to physicians, allied healthcare
professionals and consumers.
Effective October 27, 1998, Medscape consummated an acquisition in
accordance with a purchase agreement with Healthcare Communications Group, LLC,
("HCG") a Maryland corporation. HCG is a medical communications/education
company that develops, produces and distributes unique live, print, digital and
Internet-based programs for healthcare professionals funded by pharmaceutical
companies. The agreement provided for the purchase of the membership interests
of HCG.
The purchase price of $1,837,359 was allocated principally to working
capital and assets, including accounts receivable and goodwill (see below).
The acquisition of HCG has been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on their respective estimated fair
values at the date of acquisition. The excess of the purchase price over the
aggregated estimated fair values of the net tangible assets acquired has been
recorded as goodwill, which is being amortized over fifteen years.
The purchase price was allocated in the following manner:
<TABLE>
<S> <C> <C>
Purchase price:
Cash at closing........................................... $ 1,075,000
Legal and accounting fees................................. 134,410
Common stock 1,825,435 shares at $.344 (Note 8)........... 627,949
-----------
1,837,359
Liabilities assumed:
Accounts payable.......................................... $ 74,777
Demand note, Medscape..................................... 275,000
Deferred revenue.......................................... 1,121,193
Payroll tax liabilities................................... 5,182 1,476,152
----------
Assets purchased:
Cash...................................................... 14,081
Accounts receivable....................................... 1,190,359
Prepaid expenses.......................................... 54,730
Fixed assets.............................................. 76,777
Intangibles............................................... 5,383 (1,341,330)
---------- -----------
Total goodwill.............................................. $ 1,972,181
===========
</TABLE>
F-7
<PAGE> 81
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following presents, on a pro forma basis, Medscape's operations as if
Medscape and HCG were combined as of the beginning of the periods presented.
<TABLE>
<CAPTION>
JANUARY 1,
-------------------------
1997 1998
(UNAUDITED)
<S> <C> <C>
Total revenue.............................................. $ 4,677,687 $ 5,653,660
=========== ===========
Net loss................................................... $(3,086,341) $(3,671,093)
=========== ===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Medscape and
its subsidiary, HCG. The results of the subsidiary acquired are included from
the date of acquisition. All significant intercompany accounts and transactions
have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, Medscape considers all highly
liquid short-term cash investments purchased with maturities of three months or
less as cash and cash equivalents.
CONCENTRATION OF CREDIT RISK
Medscape's financial instruments that are exposed to concentration of
credit risks consist primarily of cash and cash equivalents and trade accounts
receivable. Medscape maintains its cash and cash equivalents in bank accounts
which, at times exceeds federally insured limits. Medscape has not experienced
any losses in these accounts. Medscape believes it is not exposed to any
significant credit risk on cash and cash equivalents. Concentrations of credit
risks with respect to accounts receivable are limited because of Medscape's
expanding customer base and the credit worthiness of its three major customers
(see Note 11), making up the majority of the accounts receivable balance.
DEPRECIATION AND AMORTIZATION
Medscape provides for depreciation of property and equipment based on the
estimated useful lives of the applicable assets and the life of leases or the
life of the leasehold improvement if less, using the straight-line method.
Expenditures for renewals and improvements which extend the useful lives of
assets are capitalized, while maintenance and repairs are charged to operations
as incurred.
GOODWILL, INTANGIBLE ASSETS AND RELATED AMORTIZATION
Goodwill represents the excess of cost over the fair value of the net
assets acquired of HCG and is being amortized using the straight-line method
over fifteen years. Medscape periodically reviews the value of its
F-8
<PAGE> 82
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
goodwill to determine if impairment has occurred. Medscape measures the
potential impairment of recorded goodwill by comparing the undiscounted value of
estimated future cash flows to the carrying amount of goodwill. If indicated
cash flows are less than the carrying amount of goodwill, Medscape would reduce
the carrying value of goodwill. Based on its review, Medscape does not believe
an impairment of goodwill has occurred.
Intangible assets consist of trademarks and organization costs, which are
being amortized using the straight-line method over their estimated useful life.
IMPAIRMENT OF ASSETS
Medscape's long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the net
carrying amount may not be recoverable. When these events occur, Medscape
measures impairment by comparing the carrying value of the long-lived asset to
the estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. If the sum of the expected undiscounted
future cash flows is less than the carrying amount of the assets, Medscape would
recognize an impairment loss. Medscape determined that, as of December 31, 1997
and 1998, there had been no impairment in the carrying value of the long-lived
assets.
REVENUE RECOGNITION
Income is derived from a variety of sources including advertising,
sponsorship of on-line journals, medical conferences, market research and
e-commerce. Revenues from advertising are recognized in the period in which the
advertisement is displayed. Revenue from sponsored programs, such as medical
conferences, are recognized when the conference is completed and the next-day
conference summary is published on the Medscape Web site. Revenues from
sponsored content is recognized on a percentage of completion basis. (At
December 31, 1998 and 1997, there were no uncompleted projects.) Revenues from
market research are recognized upon completion of the project.
DEFERRED REVENUE
Deferred revenue represents amounts billed in excess of revenues
recognized. Included in accounts receivable are amounts due (under contract)
relating to deferred revenue.
INCOME TAXES
Medscape accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
SFAS No. 109 establishes financial accounting and reporting standards for the
effect of income taxes that result from activities during the current and
preceding years. SFAS No. 109 requires an asset and liability approach for
financial reporting for income taxes.
NET LOSS PER COMMON SHARE
Basic loss per common share was computed by dividing net loss by the
weighted average number of shares of common stock outstanding. Diluted loss per
common share has not been presented since the impact for options, warrants and
conversion of preferred shares would have been anti-dilutive(see notes 8 and 9).
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information. SFAS No. 130 establishes new rules for the
F-9
<PAGE> 83
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
reporting and display of comprehensive income and its components. Medscape has
no elements of comprehensive income. Medscape operates in one segment in the
United States.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities for Medscape's year
ended December 31, 2000. Generally, it requires that an entity recognize all
derivatives as either an asset or liability and measure those instruments at
fair value, as well as identify the conditions for which a derivative may be
specifically designed as a hedge. Medscape currently does not have any
derivative instruments and is not engaged in hedging activities.
During 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP No. 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use. This
statement is applicable to Medscape's 1999 financial statements and will require
Medscape to capitalize various payroll and payroll related costs and other costs
that are directly related to the development of some of the systems of Medscape.
Medscape will amortize these costs over the anticipated life of the systems.
Management is currently evaluating the effect of this statement on Medscape's
financial statements.
RECLASSIFICATIONS
Certain prior years' amounts have been reclassified to conform to the
current year presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- USEFUL LIFE
DESCRIPTION 1997 1998 (IN YEARS)
<S> <C> <C> <C>
Computers.......................................... $ 268,032 $ 601,501 3
Furnitures and fixtures............................ 62,196 66,163 5
Leasehold improvements............................. 137,163 138,855 2
--------- ---------
467,391 806,519
Less accumulated depreciation...................... (188,386) (426,931)
--------- ---------
Property and equipment -- net...................... $ 279,005 $ 379,588
========= =========
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- USEFUL LIFE
DESCRIPTION 1997 1998 (IN YEARS)
<S> <C> <C> <C>
Trademarks........................................... $ 50,000 $ 55,383 15
Organization costs................................... 22,632 22,632 5
-------- --------
72,632 78,015
Less accumulated amortization........................ (12,801) (31,871)
-------- --------
Intangible assets -- net............................. $ 59,831 $ 46,144
======== ========
</TABLE>
In 1997, Medscape changed the useful life of intangible assets from 40
years for Trademarks and 15 years for Organization costs to 15 and 5 years,
respectively, to more properly reflect their expected useful lives in the
current business environment. The impact of the change was not material to
Medscape's financial statements.
F-10
<PAGE> 84
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. GOODWILL
Goodwill consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, USEFUL LIFE
DESCRIPTION 1998 (IN YEARS)
<S> <C> <C>
Goodwill.................................................... $1,972,181 15
Less accumulated amortization............................... (21,913)
----------
Goodwill -- net............................................. $1,950,268
==========
</TABLE>
6. INCOME TAXES
No provision for income taxes has been made because Medscape has sustained
cumulative losses since the commencement of its operations.
At December 31, 1998, Medscape had net operating loss carryforwards
("NOLs") of approximately $8,619,000 which will be available to reduce future
taxable income. The NOLs are scheduled to expire in the following years:
<TABLE>
<S> <C>
2011..................................................... $1,344,000
2012..................................................... $3,306,000
2018..................................................... $3,969,000
</TABLE>
In accordance with SFAS No. 109, Medscape has computed the components of
deferred income taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
<S> <C> <C>
Deferred tax assets........................................ $ 1,961,000 $ 3,447,510
Less valuation allowance................................... (1,961,000) (3,447,510)
----------- -----------
Net deferred tax assets.................................... $ -- $ --
=========== ===========
</TABLE>
Medscape's net operating losses primarily generated the deferred tax
assets. At December 31, 1998 and 1997, a valuation allowance is provided as the
realization of the deferred tax benefits is not likely.
7. RETIREMENT PLAN
Medscape has a 401(k) Retirement/Savings Plan (the "Plan") for all eligible
employees. Employees are eligible to participate after they have completed three
months of service. Medscape is not required to, but may match employee
contributions. In addition, Medscape may make a discretionary contribution to
the Plan. Medscape did not make any voluntary contributions to the Plan for the
year ended December 31, 1997 or December 31, 1998.
8. SHAREHOLDERS' EQUITY (DEFICIENCY)
The authorized capital stock of Medscape consists of Class A Common Stock,
Class B Common Stock (collectively the "Common Stock") and Series A, Series B
and Series C Preferred Stock (collectively the "Preferred Stock"). Class A and
Class B Common Stock have identical powers except that Class B Common Stock does
not have any voting power, including voting for the election of directors or for
any other purpose except as required by law.
The Series A Preferred Stock has a liquidation preference equivalent to
$0.02686 per share. The Series C Preferred Stock has a liquidation preference
equivalent to $4.60 per share, except that the first
F-11
<PAGE> 85
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2,517,586 shares of the Preferred Stock issued shall have a liquidation
preference of $10,800,446 plus cumulative dividends thereon at the rate of 6%
per annum. If upon liquidation, Medscape's assets are insufficient to permit the
payment of this amount, the entire assets shall be distributed ratably among the
holders of the Preferred Stock. After payment of the liquidation preference,
Medscape's remaining assets shall be distributed among the holders of the Common
and Preferred Stock according to the number of shares held by each shareholder.
The Preferred Stock is convertible at the option of the shareholder at any
time into one share of Class A Common Stock for each share of the Preferred
Stock. In the event of any stock dividend, stock split, recapitalization or like
occurrence not affecting the Common and Preferred Stock in a like manner, the
conversion ratio shall be adjusted ratably.
In January 1997, Medscape issued 123,974 shares of Series B Preferred Stock
at $12.10 per share for $1,500,000. In October 1997, Medscape issued 1,152,272
shares of Series C Preferred Stock at $4.60 per share for $5,300,447. As part of
this offering, Medscape converted all of the Series B Preferred Stock
outstanding for 326,087 shares of Series C Preferred stock at $4.60 per share.
The total capital raised in 1997 from these offerings was $6,800,447, of which
$800,000 was used to pay the principal and interest on the loan payable to SCP
Communications, Inc. ("SCP"), a related party, with the remainder used to fund
Medscape's ongoing operations.
During 1997, SCP contributed to capital $642,364 which Medscape owed to it
under an administrative services agreement (note 12).
In March 1998, Medscape issued 932,401 shares of Series C Preferred Stock
at $4.29 per share for $3,999,999. In October 1998, Medscape issued 1,825,435
shares of Class B Common Stock in connection with the acquisition of Healthcare
Communications Group. Medscape also received a note for $627,950 from the
majority shareholder in lieu of payment for an additional 1,825,435 shares of
Class B Common Stock. The note is presented in the Equity section as a contra to
shareholders equity.
9. STOCK OPTION PLAN
During 1996, the Board of Directors adopted the Medscape, Inc. 1996 Stock
Option Plan (the "Plan"). Pursuant to the Plan, the Board of Directors granted
incentive stock options to certain key employees and non-qualified stock options
to certain key non-employees all at fair value. Under the Plan approved by the
Board of Directors, the total number of shares of Class B Common Stock that may
be granted is 5,500,000.
The incentive stock options granted permit the key employees the right and
option to purchase shares of Class B Common Stock. Except for a change of
control, as defined, an option may not be exercised within one year from the
date of the grant and no option will be exercisable after 10 years from the date
granted. Stock options vest over a three or four-year period, with one-third or
one-quarter of the options becoming exercisable one year from date of grant. In
the opinion of Medscape's management, all options granted were at fair market
value at the date of grant.
The non-qualified stock options also permit certain non-employees the right
and option to purchase shares of Class B Common Stock. Except for a change of
control, as defined, an option may not be exercised within one year from the
date of the grant and no option will be exercisable after 10 years from the date
granted. Stock options vest over a three-year period, with one-third of the
options becoming exercisable one year from date of grant. In the opinion of
Medscape's management, all options granted were at fair market value at the date
of grant.
In addition, the non-qualified stock options granted permit other
non-employees the option to purchase shares of Class B Common Stock. One-third
of the options are exercisable one year from date of grant. In the opinion of
Medscape's management, all options granted were at fair market value at the date
of grant.
F-12
<PAGE> 86
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions involving the incentive stock options granted to key employees
are summarized as follows:
<TABLE>
<CAPTION>
EXERCISE
OPTION PRICE
SHARES PER SHARE
<S> <C> <C>
Options outstanding April 1, 1996........................... -- $ --
Granted................................................... 312,110 .011
Exercised................................................. -- --
Canceled.................................................. (27,433) --
--------- ------------
Options outstanding December 31, 1996....................... 284,677 .011
Granted................................................... 557,500 .144 & .172
Exercised................................................. (7,978) .011
Canceled.................................................. (109,977) --
--------- ------------
Options outstanding December 31, 1997....................... 724,222 .011 - .172
Granted................................................... 1,650,118 .172 & .344
Exercised................................................. (7,797) .011 & .144
Canceled.................................................. (48,125) .144 & .0172
--------- ------------
Options outstanding December 31, 1998....................... 2,318,418 .011-.344
========= ============
</TABLE>
Employee Options exercisable at December 31, 1997 and 1998 were 63,325 and
344,873, respectively. No options were exercisable at December 31, 1996.
Transactions involving non-qualified stock options granted to non-employees
are summarized as follows:
<TABLE>
<CAPTION>
EXERCISE
OPTION PRICE
SHARES PER SHARE
<S> <C> <C>
Options outstanding April 1, 1996.......................... -- --
Granted.................................................. 1,974,918 $ .011
Exercised................................................ (22,500) .011
Canceled................................................. -- --
--------- ------------
Options outstanding December 31, 1996...................... 1,952,418 .011
Granted.................................................. 175,000 .144
Exercised................................................ (91,668) .011
Canceled................................................. (6,018) .011
--------- ------------
Options outstanding December 31, 1997...................... 2,029,732 .011 & .144
Granted.................................................. 340,000 .172 & .344
Exercised................................................ (407,005) .011 & .144
Canceled................................................. (89,678) .011 & .172
--------- ------------
Options outstanding December 31, 1998...................... 1,873,049 $.011 - .344
========= ============
</TABLE>
Non-employee options exercisable at December 31, 1997 and 1998 were
625,742.5 and 998,330, respectively. No options were exercisable at December 31,
1996.
SFAS No. 123 provides for a fair value based method of accounting for
employee options and options granted to non-employees and measures compensation
expense using an option valuation model that takes into account, as of the grant
date, the exercise price and expected life of the option, the current price of
the underlying stock and its expected volatility, expected dividends on the
stock, and the risk-free interest rate for the expected term of the options. For
the years ended December 31, 1996 and 1997 the fair value of options granted to
non-employees were nominal as determined using the Black Scholes option pricing
model. For
F-13
<PAGE> 87
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
options granted to non-employees in 1998, an amount equal to the fair value of
the services provided aggregating $65,000 is included as a charge to general and
administrative expenses in the 1998 statement of operations.
Medscape has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related interpretations
in accounting for its employee stock options. Medscape has issued its options at
fair value at the date of grant. Under APB 25, because the exercise price of
Medscape's employee stock options equals the fair value of the underlying stock
on the date of grant, no compensation expense is recognized.
Pro forma disclosures as if Medscape adopted the cost recognition
requirement under SFAS 123 is presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1997 1998
<S> <C> <C> <C>
Net loss as reported............................. $1,344,490 $3,463,914 $3,643,510
Net loss pro forma............................... 1,344,970 3,482,361 3,718,546
</TABLE>
The fair value of options granted under the Plan for the years ended
December 31, 1997 and 1998, in complying with SFAS 123 was estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used: no dividend yield, no expected volatility,
risk free interest rate of 5.66% as of December 31, 1997 and 4.60% as of
December 31, 1998, and expected lives of 3.25 years. Pro forma compensation cost
of options granted under the Plan is measured based on the discount from fair
value.
10. EMPLOYMENT AGREEMENTS
Medscape has employment agreements with four employees ranging from one to
five years, with commitments aggregating in each of the years, ending December
31; $571,000 in 1999, $470,000 in 2000, $211,000 in 2001, $195,000 in 2002 and
$163,000 in 2003.
11. MAJOR CUSTOMERS
Sales to two major customers for the nine months ended December 31, 1996
represent 73% and 22%. For the year ended December 31, 1997, sales to three
major customers represented 15%, 14% and 13%. For the year ended December 31,
1998, sales to two major customers represent 27% and 14%.
12. ADMINISTRATIVE SERVICES AGREEMENT
On April 1, 1996, Medscape and SCP, a company controlled by the same
stockholders, entered into a administrative services agreement under which SCP
provided Medscape with administrative, support services, and sufficient space
for Medscape to conduct its business. This agreement had been extended through
April 30, 1999.
At December 31, 1998, Medscape owed SCP an aggregate of $50,862 under this
agreement as compared to $465,916 at December 31, 1997. SCP provided services
aggregating, $740,739, $1,074,307 and $749,415 for the years ended December 31,
1998, December 31, 1997 and the period ended December 31, 1996, respectively. In
management's opinion, all of these services were provided and paid for at a fair
market value.
Medscape and SCP have entered into a ten-year "Publishers' Circle
Agreement" whereby SCP grants Medscape the right to distribute its content on
the Web and to provide the content for worldwide on-line search and retrieval.
Additionally, SCP agrees to promote Medscape in its publications, and run
advertising in
F-14
<PAGE> 88
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
every issue of its journals. In return, SCP can sell all Medscape products
including banner advertising for which SCP will receive a commission.
13. SUBSEQUENT EVENTS
On May 17, 1999, Medscape effected a 2.5-for-one stock split for each
outstanding share of each class of common shares. In connection with the stock
split, the number of authorized shares of Class A Common Stock was increased to
an aggregate of 1,079,000, the number of authorized shares of Class B Common
Stock to an aggregate of 6,701,363 shares and the preferred stock became
convertible into 2.5 times as many shares of the Class A Common Stock and each
outstanding warrant and option became exercisable for 2.5 times as many shares
of the Class B Common Stock. The 2.5-for-one stock split described above has
been applied retrospectively for all periods presented.
14. SUBSEQUENT EVENTS (UNAUDITED)
SHAREHOLDERS EQUITY
In March 1999, Medscape issued 1,757,683 shares of Series D Preferred Stock
at $11.72 per share for gross proceeds of $20,600,019.
In March 1999, 932,401 shares of Series C Preferred Stock were redesignated
as Series C-1 Preferred Stock.
In March 1999, the Board of Directors increased the authorized shares of
Class A Common Stock that can be issued to 27,500,000 and lowered the authorized
shares of Preferred Stock to 4,956,560.
The Board of Directors of Medscape has approved an increase in the total
number of Class B Common Stock that may be granted under the Medscape, Inc.,
1996 Stock Option Plan, to 8,250,000.
TRANSACTIONS WITH SOFTWATCH LTD.
On June 15, 1999, Medscape purchased 1,040,170 Series A Preferred Shares of
Softwatch Ltd. (Softwatch), an Israeli company, for $2,999,954. At the same
time, Medscape and Softwatch entered into a License and Web Site Development
Agreement pursuant to which Medscape licensed software from Softwatch to support
its consumer site and for Softwatch to provide ongoing support services for the
consumer site. On the date of the Agreement, Medscape paid $500,000 in cash of a
total of $1,500,000 licensing fee. $500,000 of the remaining balance will be
paid upon delivery of the software and $500,000 upon acceptance by Medscape.
Medscape will also pay royalties under the Agreement.
TRANSACTIONS WITH CBS CORPORATION
On July 7, 1999, Medscape entered into a Common Stock Purchase agreement,
and agreed to enter into an Advertising and Promotional Agreement, and a
Trademark and Content Agreement with CBS Corporation (CBS). Under the Stock
Purchase Agreement, Medscape will sell 7,397,208 shares of Class A Common Stock
and 6,541,160 shares of Class B Common Stock to CBS for an aggregate purchase
price of $157,000,000, $139,383.68, to be paid in cash, and $149,860,616.32, to
be paid through the advertising services to be provided by CBS in accordance
with the Advertising and Promotion Agreement and $7,000,000 to be paid through
the grant of rights under the Trademark and Content Agreement. Over the seven
year term of the Advertising and Promotion Agreement, CBS will arrange for the
placement of approximately $150 million worth of advertising and promotion in
the United States for Medscape's consumer and professional Web sites and their
other products and services.
F-15
<PAGE> 89
MEDSCAPE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Under the Trademark and Content Agreement, CBS will grant Medscape a
license to the "CBS" trademark and "Eye" design and health-related news content
for a seven year period. Under the agreement CBS will retain significant control
over the use and presentation of the CBS health content and CBS trademarks.
TRANSACTIONS WITH NDC HEALTH INFORMATION SERVICES
On July 7, 1999 Medscape entered into an agreement with National Data
Corporation under which NDC will make a $10,000,000 cash investment in Medscape
in exchange for 400,000 shares of Series E Preferred Stock. An additional
1,000,000 shares of Class A Common Stock will be issued to NDC in exchange for
$10,000,000 value attributed to licensing and promotional value, product
purchase amounts and credits against future commission due by Medscape to NDC.
F-16
<PAGE> 90
MEDSCAPE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND MARCH 31, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ---------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents................................. $ 1,595 $20,633
Accounts receivable....................................... 1,350 2,093
Prepaid expenses and other assets......................... 93 259
------- -------
Total current assets.............................. 3,038 22,985
Property and equipment -- net............................... 380 404
Intangible assets -- net.................................... 46 95
Goodwill -- net............................................. 1,950 1,919
------- -------
Total assets...................................... $ 5,414 $25,403
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable.......................................... $ 330 $ 40
Accrued expenses.......................................... 489 1,741
Due to related party...................................... 51 104
Deferred revenue.......................................... 800 1,798
------- -------
Total current liabilities......................... 1,670 3,683
------- -------
Shareholders' equity:
Common stock, Class A -- par value $.01; 15,000,000 and
27,500,000 at December 31, 1998 and March 31, 1999
shares authorized, 1,079,000 issued and outstanding.... 11 11
Common stock, Class B -- par value $.01; 15,000,000 shares
authorized, 5,792,318 issued and outstanding........... 58 58
Preferred stock, Series A -- par value $.01; 1,000,000 and
788,200 shares authorized at December 31, 1998 and
March 31, 1999, 788,200 shares issued and
outstanding............................................ 8 8
Preferred stock, Series C -- par value $.01; 4,000,000 and
1,478,359 shares authorized at December 31, 1998 and
March 31, 1999, 2,410,760 and 1,478,359 issued and
outstanding............................................ 24 15
Preferred stock, Series C-1 -- par value $.01; 932,401
shares at March 31, 1999, 932,401 issued and
outstanding and authorized............................. -- 9
Preferred stock, Series D -- par value $.01; 1,757,683
shares at March 31, 1999, 1,757,683 issued and
outstanding and authorized............................. -- 18
Warrants.................................................. -- 85
Additional paid-in-capital................................ 12,725 32,037
Treasury stock............................................ (3) (3)
Notes receivable.......................................... (628) (628)
Accumulated deficit....................................... (8,451) (9,890)
------- -------
Total shareholders' equity........................ 3,744 21,720
------- -------
Total liabilities and shareholders' equity........ $ 5,414 $25,403
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
F-17
<PAGE> 91
MEDSCAPE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
<S> <C> <C>
Revenues.................................................... $ 550 $ 1,644
--------- ---------
Operating expenses:
Editorial, production, content and technology............. 396 1,231
Sales and marketing....................................... 299 1,081
General and administration................................ 360 765
Depreciation and amortization............................. 47 88
--------- ---------
Total operating expenses.......................... 1,102 3,165
--------- ---------
Loss from operations........................................ (552) (1,521)
Interest income -- net.................................... (49) (82)
--------- ---------
Net loss.................................................... $ (503) $ (1,439)
========= =========
Basic net loss per shares................................... $ (.18) $ (.21)
Weighted average number of shares of common stock
outstanding............................................... 2,820,402 6,871,318
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE> 92
MEDSCAPE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (503) $(1,439)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 47 88
Changes in assets and liabilities:
Decrease (increase) in accounts receivable............. 375 (743)
Increase in prepaid expenses........................... (10) (166)
Increase (decrease) in accounts payable and accruals... 7 (223)
(Decrease) increase in due to related party............ (268) 53
(Decrease) increase in deferred revenue................ (147) 998
------ -------
Net cash in operating activities.................. (499) (1,432)
------ -------
INVESTING ACTIVITIES
Purchase of property and equipment........................ (22) (80)
Intangible assets......................................... -- (50)
------ -------
Net cash used in investing activities............. (22) (130)
------ -------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock................. 4,000 20,600*
------ -------
Cash provided by financing activities............. 4,000 20,600
------ -------
Increase in cash and cash equivalents....................... 3,479 19,038
Cash and cash equivalents, beginning of period.............. 3,628 1,595
------ -------
Cash and cash equivalents, end of period.................... $7,107 $20,633
====== =======
</TABLE>
- -------------------------
* Reflects gross proceeds before certain liabilities for expenses of the
offering.
See notes to condensed consolidated financial statements.
F-19
<PAGE> 93
MEDSCAPE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
1. BASIS OF PRESENTATION
Medscape, Inc. ("Medscape") has prepared the condensed financial statements
of which these notes are part, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to these rules and regulations; however, in the opinion of
Medscape's management, the Condensed Financial statements include all
adjustments, consisting only of normal recurring accruals, necessary to present
fairly the financial information for the three months ended March 31, 1999.
These Condensed Financial Statements should be read in conjunction with the
Financial Statements of Medscape for the year ended December 31, 1998.
2. PRIVATE PLACEMENT OF PREFERRED STOCK
On March 5, 1999, Medscape completed a private placement of its Series D
Preferred Stock (1,757,683 shares) for which it received $19,414,547 (gross
proceeds $20,600,019 less expenses of the private placement of $1,185,472). In
connection with this private placement, Medscape issued 14,887 warrants of Class
B Common Stock to its investment bank. Each warrant entitles the warrantholder
to purchase 1 share of common stock for $0.01 with a warrant. The value of the
warrants was determined using the Black Scholes pricing model and was recorded
in the balance sheet at March 31, 1999 at a value of $85,000.
3. PREFERRED STOCK SERIES C AND C-1
On March 5, 1999, 932,401 shares of Series C Preferred Stock that had been
issued on February 19 and March 9, 1998 were redesignated as Series C-1
Preferred Stock.
4. INCOME TAXES
No provision for income taxes has been made because Medscape has sustained
cumulative losses since the commencement of its operations.
At March 31, 1999, Medscape had net operating loss carryforwards ("NOLs")
of approximately $10,093,000 which will be available to reduce future taxable
income. The NOLs are scheduled to expire in the following years:
<TABLE>
<S> <C>
2011..................................................... $1,344,000
2012..................................................... 3,306,000
2018..................................................... 3,969,000
2019..................................................... 1,474,000
</TABLE>
In accordance with SFAS No. 109, Medscape has computed the components of
deferred income taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
<S> <C> <C>
Deferred tax assets........................................ $ 3,447,510 $ 4,133,000
Less valuation allowance................................... (3,447,510) (4,133,000)
----------- -----------
Net deferred tax assets.................................... $ -- $ --
=========== ===========
</TABLE>
F-20
<PAGE> 94
MEDSCAPE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Medscape's net operating losses primarily generated the deferred tax
assets. At December 31, 1998 and March 31, 1999, a valuation allowance is
provided as the realization of the deferred tax benefits is not likely.
5. SUBSEQUENT EVENTS
The Board of Directors of Medscape has approved an increase in the total
number of Class B Common Stock that may be granted under the Medscape, Inc. 1996
Stock Option Plan, to 8,250,000.
Medscape is in the process of filing an initial public offering with the
Commission. On consummation of the offering, all Preferred Shares will convert
to Common Shares.
SHAREHOLDERS EQUITY
On May 17, 1999, Medscape effected a 2.5-for-one stock split for each
outstanding share of each class of common shares. In connection with the stock
split, the number of authorized shares of Class A Common Stock was increased to
an aggregate of 1,079,000 shares, the number of authorized shares of Class B
common Stock was increased to an aggregate of 6,701,363 shares and the preferred
stock became convertible into 2.5 times as many shares of the Class A Common
Stock and each outstanding warrant and option became exercisable for 2.5 times
as many shares of the Class B Common Stock. The 2.5-for-one stock split
described above has been applied retrospectively for all periods presented.
In March 1999, Medscape issued 1,757,683 shares of Series D Preferred Stock
at $11.72 per share for gross proceeds of $20,600,019.
In March 1999, 932,401 shares of Series C Preferred Stock were redesignated
as Series C-1 Preferred Stock.
In March 1999, the Board of Directors increased the authorized shares of
Class A Common Stock that can be issued to 27,500,000 and lowered the authorized
shares of Preferred Stock to 4,956,560.
The Board of Directors of Medscape has approved an increase in the total
number of Class B Common Stock that may be granted under the Medscape, Inc.,
1996 Stock Option Plan, to 8,250,000.
TRANSACTIONS WITH SOFTWATCH LTD
On June 15, 1999, Medscape purchased 1,040,170 Series A Preferred Shares of
Softwatch Ltd. (Softwatch), an Israeli company, for $2,999,954. At the same
time, Medscape and Softwatch entered into a License and Web Site Development
Agreement pursuant to which Medscape licensed software from Softwatch to support
its consumer site and for Softwatch to provide ongoing support services for the
consumer site. On the date of the Agreement, Medscape paid $500,000 in cash of a
total of $1,500,000 licensing fee. The remaining $1,000,000 will be paid
$500,000 upon delivery of the software and $500,000 upon acceptance by Medscape.
Medscape will also pay royalties under the Agreement.
TRANSACTIONS WITH CBS CORPORATION
On July 7, 1999, Medscape entered into a Common Stock Purchase agreement,
and agreed to enter into an Advertising and Promotional Agreement, and a
Trademark and Content Agreement with CBS Corporation (CBS). Under the Stock
Purchase Agreement, Medscape will sell 7,397,208 shares of Class A Common Stock
and 6,541,160 shares of Class B Common Stock to CBS for an aggregate purchase
price of $157,000,000, $139,383.68, to be paid in cash, and $149,860,616.32, to
be paid through the advertising services to be provided by CBS in accordance
with the Advertising and Promotion Agreement and $7,000,000 to be paid through
the grant of rights under the Trademark and Content Agreement. Over the seven
year term of the Advertising and Promotion Agreement, CBS will arrange for the
placement of
F-21
<PAGE> 95
MEDSCAPE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
approximately $150 million worth of advertising and promotion in the United
States for Medscape's consumer and professional Web sites and their other
products and services.
Under the Trademark and Content Agreement, CBS will grant Medscape a
license to the "CBS" trademark and "Eye" design and health related news content
for a seven year period. Under the agreement CBS will retain significant control
over the use and presentation of the CBS health content and CBS trademarks.
TRANSACTIONS WITH NDC HEALTH INFORMATION SERVICES
On July 7, 1999 Medscape entered into an agreement with National Data
Corporation under which NDC will make a $10,000,000 cash investment in Medscape
in exchange for 400,000 shares of Medscape's Series E Preferred Stock. An
additional 1,000,000 shares of Class A Common Stock will be issued to NDC in
exchange for $10,000,000 value attributed to licensing and promotional value,
product purchase amounts and credits against future commission due by Medscape
to NDC.
F-22
<PAGE> 96
INDEPENDENT AUDITORS' REPORT
Healthcare Communications Group, LLC
Potomac, Maryland
We have audited the accompanying balance sheets of Healthcare
Communications Group, LLC ("HCG") as of December 31, 1997 and October 27, 1998,
and the related statements of operations, members' capital, and cash flows for
the year ended December 31, 1997 and the ten months ended October 27, 1998.
These financial statements are the responsibility of HCG's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of HCG at December 31, 1997 and October 27,
1998, and the results of its operations and its cash flows for the year ended
December 31, 1997 and the ten months ended October 27, 1998 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
April 9, 1999
F-23
<PAGE> 97
HEALTHCARE COMMUNICATIONS GROUP, LLC
BALANCE SHEETS
DECEMBER 31, 1997 AND OCTOBER 27, 1998
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 27,
1997 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 2)........................ $ 54,286 $ 14,081
Accounts receivable....................................... 520,388 1,190,359
Prepaid expenses and other assets......................... 116,063 54,730
-------- ----------
Total current assets.............................. 690,737 1,259,170
Property and equipment -- net (Note 3)...................... 29,875 76,777
Intangible assets -- net.................................... 6,800 5,383
-------- ----------
Total assets...................................... $727,412 $1,341,330
======== ==========
LIABILITIES AND MEMBERS' CAPITAL (DEFICIENCY IN CAPITAL)
Liabilities:
Accounts payable.......................................... $121,306 $ 23,012
Accrued expenses.......................................... 47,243 56,946
Demand note due to Medscape, Inc. (Note 4)................ -- 275,000
Deferred revenue (Note 2)................................. 190,000 1,121,193
-------- ----------
Total liabilities................................. 358,549 1,476,151
Commitments (Note 4)
Members' capital (deficiency in capital).................... 368,863 (134,821)
-------- ----------
Total liabilities and members' capital............ $727,412 $1,341,330
======== ==========
</TABLE>
See notes to financial statements.
F-24
<PAGE> 98
HEALTHCARE COMMUNICATIONS GROUP, LLC
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
TEN MONTHS ENDED OCTOBER 27, 1998
<TABLE>
<CAPTION>
TEN
YEAR MONTHS
ENDED ENDED
DECEMBER 31, OCTOBER 27,
1997 1998
<S> <C> <C>
Revenues.................................................... $3,155,504 $2,584,615
---------- ----------
Operating expenses:
Editorial, production, content and technology............. 1,853,118 1,736,351
General and administration................................ 923,547 867,970
Depreciation and amortization............................. 4,231 9,419
---------- ----------
Total operating expenses.......................... 2,780,896 2,613,740
---------- ----------
Income (loss) from operations............................... 374,608 (29,125)
Interest income........................................... (2,965) (1,542)
---------- ----------
Net income (loss)........................................... $ 377,573 $ (27,583)
========== ==========
</TABLE>
See notes to financial statements.
F-25
<PAGE> 99
HEALTHCARE COMMUNICATIONS GROUP, LLC
STATEMENTS OF MEMBERS' CAPITAL (DEFICIENCY IN CAPITAL)
FOR THE TEN MONTHS ENDED OCTOBER 27, 1998 AND
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Members' capital, January 1, 1997........................... $ 148,636
Net income for the year ended December 31, 1997........... 377,573
Distribution to members during 1997....................... (157,346)
---------
Members' capital, December 31, 1997......................... 368,863
Net loss for the ten months ended October 27, 1998........ (27,583)
Distribution to members during 1998....................... (476,101)
---------
Members' deficiency in capital, October 27, 1998............ $(134,821)
=========
</TABLE>
See notes to financial statements.
F-26
<PAGE> 100
HEALTHCARE COMMUNICATIONS GROUP, LLC
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 AND TEN MONTHS ENDED OCTOBER 27, 1998
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 27,
1997 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $ 377,573 $ (27,583)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization.......................... 4,231 9,419
Changes in assets and liabilities:
Decrease (increase) in accounts receivable............. 1,148,237 (669,971)
Decrease in prepaid expenses........................... 2,873 61,333
Increase (decrease) in accounts payable and accruals... 120,613 (88,591)
(Decrease) increase in deferred revenue................ (1,474,979) 931,193
----------- ---------
Net cash provided by operating activities......... 178,548 215,800
----------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment........................ (27,412) (54,904)
----------- ---------
Net cash used in investing activities............. (27,412) (54,904)
----------- ---------
FINANCING ACTIVITIES
Distributions to members.................................. (157,346) (476,101)
Demand note due to Medscape, Inc.......................... -- 275,000
----------- ---------
Net cash used in financing activities............. (157,346) (201,101)
----------- ---------
Decrease in cash and cash equivalents....................... (6,210) (40,205)
Cash and cash equivalents, beginning of period.............. 60,496 54,286
----------- ---------
Cash and cash equivalents, end of period.................... $ 54,286 $ 14,081
=========== =========
</TABLE>
See notes to financial statements.
F-27
<PAGE> 101
HEALTHCARE COMMUNICATIONS GROUP, LLC
NOTES TO FINANCIAL STATEMENTS
TEN MONTHS ENDED OCTOBER 27, 1998 AND YEAR ENDED DECEMBER 31, 1997
1. ORGANIZATION AND NATURE OF BUSINESS
Healthcare Communications Group, ("HCG") is a Maryland limited liability
company, founded on November 17, 1995. HCG is a medical communications/education
company that develops, produces and distributes unique live, print, digital and
Internet-based programs for healthcare professionals that are funded by
pharmaceutical companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, HCG considers all highly
liquid short-term cash investments purchased with maturities of three months or
less as cash and cash equivalents.
CONCENTRATION OF CREDIT RISK
HCG's financial instruments that are exposed to concentration of credit
risks consist primarily of cash and cash equivalents and trade accounts
receivable. HCG maintains its cash and cash equivalents in bank accounts which,
at times, exceeds federally insured limits. HCG has not experienced any losses
in these accounts. HCG believes it is not exposed to any significant credit risk
on cash and cash equivalents. Concentrations of credit risks with respect to
accounts receivable are limited because of HCG's expanding customer base and
credit worthiness of its three major customers (see Note 5), making up the
majority of the accounts receivable balance.
DEPRECIATION AND AMORTIZATION
HCG provides for depreciation of property and equipment based on the
estimated useful lives of the applicable assets and the life of leases, using
the straight-line method.
Expenditures for renewals and improvements which extend the useful lives of
assets are capitalized, while maintenance and repairs are charged to operations
as incurred.
Intangible assets consists of trademarks which are being amortized using
the straight-line method over their estimated useful life.
REVENUE RECOGNITION
Revenue from custom programs, such as on-line conference summaries and
custom modules produced by HCG, are recognized on a percentage of completion
basis. Revenues from conferences and other events produced by HCG are recognized
upon completion of the conference or event. At December 31, 1997 and October 27,
1998, there were no uncompleted projects.
F-28
<PAGE> 102
HEALTHCARE COMMUNICATIONS GROUP, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DEFERRED REVENUE
Deferred revenue represents amounts billed in excess of revenues
recognized. Included in accounts receivable are amounts due (under contract)
relating to deferred revenue.
IMPAIRMENT OF ASSETS
HCG's long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the net
carrying amount may not be recoverable. When these events occur, HCG measures
impairment by comparing the carrying value of the long-lived asset to the
estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. If the sum of the expected undiscounted
future cash flows is less than the carrying amount of the assets, HCG would
recognize an impairment loss. HCG determined that, as of December 31, 1997 and
October 27, 1998, there had been no impairment in the carrying value of the
long-lived assets.
INCOME TAXES
Under present income tax regulations, HCG pays no federal, state or local
income taxes. For tax purposes, any income or loss is included in the income tax
returns of the members.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information. SFAS No. 130 establishes new rules for the
reporting and display of comprehensive income and its components. HCG has no
elements of comprehensive income. HCG operates in one segment in the United
States.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities for HCG's year ended
December 31, 2000. Generally, it requires that an entity recognize all
derivatives as either an asset or liability and measure those instruments at
fair value, as well as identify the conditions for which a derivative may be
specifically designed as a hedge. Management is currently evaluating the effect
of this statement on HCG's financial statements.
During 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP No. 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use. This
statement is applicable to HCG's 1999 financial statements and will require HCG
to capitalize various payroll and payroll related costs and other costs that are
directly related to the development of some of the systems of HCG. HCG will
amortize these costs over the anticipated life of the systems. Management is
currently evaluating the effect of this statement on HCG's financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 27, USEFUL LIFE
DESCRIPTION 1997 1998 (IN YEARS)
<S> <C> <C> <C>
Computers and equipment............................ $26,441 $ 79,507 5
Furnitures and fixtures............................ 6,959 8,797 7
------- --------
33,400 88,304
Less accumulated depreciation...................... (3,525) (11,527)
------- --------
Property and equipment -- net...................... $29,875 $ 76,777
======= ========
</TABLE>
F-29
<PAGE> 103
HEALTHCARE COMMUNICATIONS GROUP, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEMAND NOTE
As of October 27, 1998, the demand note consists of $215,000 and $60,000,
borrowed on October 26 and October 23, 1998, respectively, from Medscape, Inc.
at an annual interest rate of 8% (Note 6). Under the terms of the demand note,
HCG was required to use the proceeds to pay amounts owed to vendors prior to the
acquisition by Medscape, Inc.
5. MAJOR CUSTOMERS
Sales to three major customers for the year ended December 31, 1997 and the
ten months ended October 27, 1998 represented 53% and 50% of total sales,
respectively. At December 31, 1997 and October 27, 1998, these three customers
represented 34% and 76% accounts receivable, respectively.
6. SUBSEQUENT EVENT
Effective October 27, 1998, the membership interests of HCG were purchased
by Medscape, Inc., a New York corporation.
F-30
<PAGE> 104
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[MEDSCAPE, INC. LOGO]
SHARES OF COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
DONALDSON, LUFKIN & JENRETTE
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
WIT CAPITAL CORPORATION
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in the prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted. The information contained in this prospectus is correct
only as of the date of this prospectus, regardless of the time of the delivery
of this prospectus or any sale of these securities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until [ , 1999], (25 days after the date of this prospectus), all
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 105
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the expenses payable by Medscape in
connection with this offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
<S> <C>
SEC Registration Fee...................................... $ 15,985
NASD Filing Fee........................................... 6,250
Nasdaq National Market Listing Fee........................ *
Accounting Fees and Expenses.............................. *
Legal Fees and Expenses................................... *
Printing Expenses......................................... *
Blue Sky Qualification Fees and Expenses.................. $ 2,500
Transfer Agent's Fee...................................... *
Miscellaneous............................................. *
----------
Total............................................. $ *
==========
</TABLE>
- ---------------
(1) The amounts set forth above, except for the SEC and NASD fees, are in each
case estimated.
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the Delaware General Corporation Law,
Article V of our certificate of incorporation provides that no director of
Medscape shall be personally liable to Medscape or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (1) for
any breach of the director's duty of loyalty to Medscape or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) in respect of certain unlawful
dividend payments or stock redemptions or repurchases, or (4) for any
transaction from which the director derived an improper personal benefit. In
addition, our certificate of incorporation provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Article VII of our bylaws provides that we shall, to the full extent
permitted by the laws of the State of Delaware, as amended from time to time,
indemnify all directors and officers.
Medscape maintains directors and officers liability insurance that covers
its officers and directors against certain losses that may arise out of their
positions with Medscape and covers Medscape for liabilities it may incur to
indemnify its officers and directors.
Under Section Seven of the underwriting agreement filed as Exhibit 1.1 to
this registration statement, the underwriters have agreed to indemnify, under
certain conditions, Medscape, its directors, certain officers and persons who
control Medscape within the meaning of the Securities Act against certain
liabilities.
II-1
<PAGE> 106
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a description of the sale of unregistered common stock for
the last three years:
(1) On January 17, 1997, we sold 123,974 shares of Series B Preferred
Stock to CSK Venture Capital Co., Ltd. at a purchase price of $12.099
per share, which was paid in cash.
(2) On October 31, 1997, we sold 1,152,523 shares of Series C Preferred
Stock to 18 sophisticated, accredited investors at a purchase price of
$4.60 per share, which was paid in cash. In addition, we also issued
349,650 shares of Series C Preferred Stock to CSK Venture Capital Co.,
Ltd. in exchange for its 123,974 shares of Series B Preferred Stock.
(3) On February 19 and March 9, 1998, we sold 932,401 additional shares of
Series C Preferred Stock to three sophisticated, accredited investors
at a purchase price of $4.29 per share, which was paid in cash. This
purchase caused an adjustment of the purchase price of the previously
purchased Series C Preferred Stock in section (2) above from $4.60 to
$4.29. On March 5, 1999, the 932,401 shares of Series C Preferred
Stock from the February 19 and March 9, 1998 closing were redesignated
as Series C-1 Preferred Stock.
(4) On October 27, 1999, we issued 1,825,435 shares of Class B Common
Stock in exchange for the outstanding membership interests held by the
then four members of Healthcare Communications Group, LLC.
(5) On October 27, 1998, as part of an Employment and Restricted Stock
Purchase Agreement, we sold 1,825,435 restricted shares of non-voting
Class B Common Stock to Jeffrey L. Drezner, M.D., Ph.D. at a purchase
price of $.344 per share, which was paid with a promissory note
secured by a pledge of the shares.
(6) On March 5, 1999, we sold 1,757,683 shares of Series D Preferred Stock
to 15 accredited investors at a purchase price of $11.72 per share,
which was paid in cash.
(7) On March 5, 1999 we issued warrants to purchase a total of 14,667.5
shares of Class B Common Stock to Credit Suisse First Boston
Corporation with an exercise price of $.004 as part of their placement
fee in connection with the Series D financing.
(8) Since April 1996 we have granted options to purchase 6,770,702.5
shares of Class B Common Stock to a total of 134 employees,
consultants and non-employee directors at exercise prices ranging from
$.008 to $3.40 per share.
(9) Since July 1996 we have sold 943,872.5 shares of Class B Common Stock,
pursuant to the exercise of some of the options described in section
(8) above, to a total of 36 employees, consultants and non-employee
directors exercise prices ranging from $.008 to $.344 per share.
(10) On July 7, 1999 we agreed to sell 7,397,208 shares of Class A Common
Stock and 6,541,160 shares of Class B Common Stock to CBS Corporation,
a large institutional accredited investor, for an aggregate purchase
price of $157,000,000, $139,383.68 to be paid in cash, $149,860,616.32
to be paid through the provision by CBS of advertising and promotion
services and $7,000,000 attributed to the license by CBS to us of the
"CBS" trademark and "Eye" design and selected health-related news
content.
(11) On July , 1999 we agreed to sell 400,000 shares of Series E
Preferred Stock at a purchase price of $25 per share and 1,000,000
shares of Class A Common Stock at a purchase price of $10 per share to
National Data Corporation, a large institutional accredited investor,
which included a $10,000,000 cash investment and an additional
$10,000,000 attributed to licensing and promotion to be provided by
NDC and credits against future commission amounts due by us to NDC.
The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated under Section 4(2) of the Securities
Act, or, with respect to issuances to employees, Rule 701 promulgated under
Section 3(b) of the Securities Act as transactions by an issuer not involving a
public offering or transactions pursuant to
II-2
<PAGE> 107
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution of the Securities and
appropriate legends were affixed to the instruments representing the securities
issued in these transactions. All recipients had adequate access, through their
relationships with the Company, to information about Medscape, Inc.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
1.1 Form of Underwriting Agreement.
2.1** Asset Purchase Agreement between Medscape, Inc. and SCP
Communications, Inc., dated April 1, 1996.
2.2** Administrative Services Agreement between Medscape, Inc. and
SCP Communications, Inc., dated April 1, 1996.
2.3** Financing Agreement between Medscape, Inc. and SCP
Communications, Inc., dated April 1, 1996.
2.4** Purchase Agreement between Medscape, Inc. and the holders of
all of the membership interests of Healthcare Communications
Group, L.L.C. dated October 27, 1998.
2.5** Letter Agreement between Medscape, Inc. and Ira Kirshenbaum,
M.D., dated February 2, 1999 regarding the sale of assets of
bonehome.com.
2.6** Bill of Sale between Medscape, Inc. and CompuRx and, dated
March 25, 1999.
3.1** Amended and Restated Certificate of Incorporation.
3.1.1 Amendment to the Amended and Restated Certificate of
Incorporation filed May 17, 1999.
3.1.2* Form of Amendment to the Amended and Restated Certificate of
Incorporation to be filed in connection with the NDC and CBS
transactions.
3.2* Form of Amended and Restated Certificate of Incorporation,
to be filed prior to the closing of the offering made under
this Registration Statement.
3.3** Bylaws.
4.1* Form of Specimen Common Stock Certificate.
4.2* Form of Warrant, dated as of March 5, 1999, entitling Credit
Suisse First Boston Corporation to purchase up to 14,667.5
shares of Medscape's Common Stock.
5.1* Opinion of Patterson, Belknap, Webb & Tyler LLP as to the
validity of the securities being offered.
10.1** Agreement of Lease between Medscape, Inc. and R.A.A. Realty
Company LP dated February 1999.
10.2 Lease Assignment made by SCP Communications, Inc. made in
favor of Medscape, Inc.
10.3 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated October 7, 1996.
10.4 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated August 29, 1995.
10.5 Agreement of Lease between Surgical Care Publishing, Inc.,
and Satyanman, Inc., dated March 17, 1994.
10.6 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated August 18, 1993.
10.7** Employment Agreement between Medscape, Inc. and Paul T.
Sheils, dated January 26, 1998.
10.8** Employment Agreement between Medscape, Inc. and Steven
Kalin, dated September 30, 1998.
</TABLE>
II-3
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.9** Employment and Restricted Stock Purchase Agreement between
Medscape, Inc. and Jeffrey L. Drezner, M.D., Ph.D., dated
October 27, 1998.
10.10** Promissory Note dated October 27, 1998, in the principal
amount of $627,949.64 made by Jeffrey L. Drezner, M.D.,
Ph.D. in favor of Medscape, Inc.
10.11** Employment Agreement between Medscape, Inc. and Peter M.
Frishauf, dated February 16, 1998.
10.12** Employment Agreement between Medscape, Inc. and George D.
Lundberg, M.D., dated February 15, 1999.
10.13** Employment Agreement between Medscape, Inc. and David
Yakimischak, dated March 15, 1999.
10.14** Employment Agreement between Medscape, Inc. and Meg Walsh,
dated March 4, 1999.
10.15** 1996 Stock Option Plan.
10.16** Form of Incentive Stock Option Agreement.
10.17** Form of Non-Qualified Stock Option Agreement.
10.18** Nonemployee Director Stock Option Plan.
10.19** Stock Purchase Agreement between Medscape, Inc. and
investors, dated October 31, 1997 in respect of the Series C
Preferred Stock.
10.20** First Amendment to Stock Purchase Agreement between
Medscape, Inc. and investors, dated February 19, 1998.
10.21** Supplemental Agreement to Amendment to Stock Purchase
Agreement and First Amendment to, and Waiver of Certain
Terms of, Stockholders' Agreement between Medscape, Inc. and
investors, dated March 9, 1998 in respect of the Series C
Preferred Stock.
10.22** Series D Preferred Stock Purchase Agreement between
Medscape, Inc. and investors, dated March 5, 1999.
10.23** Amended and Restated Stockholders' Agreement, dated March 5,
1999.
10.23.1 Amendment dated May 24, 1999, to the Amended and Restated
Stockholders' Agreement.
10.24** Form of Copyright Assignment.
10.25** Form of Letter to Authors.
10.26 Content Distribution Agreement between Medscape, Inc. and
Dow Jones & Company, Inc., dated January 22, 1999.
10.27 Interactive Publications Library Internet Gateway Agreement
between Medscape, Inc. and Dow Jones & Company, Inc., dated
July 14, 1998.
10.28 Preferred Share Purchase Agreement among Softwatch Ltd.,
Medscape, Inc. (as a purchaser) and certain other
purchasers, dated June 15, 1999.
10.29 License and Web Site Development Agreement between Medscape,
Inc. and Softwatch, Inc., dated June 15, 1999.
10.30 Employment Agreement between Medscape, Inc. and Mark
Boulding, dated June 28, 1999.
10.31 Common Stock Purchase Agreement between Medscape, Inc. and
CBS Corporation, dated July 4, 1999.
10.32 Form of Stockholders Agreement between Medscape, Inc. and
CBS Corporation, dated July , 1999.
10.33 Form of Joinder Agreement among certain Medscape, Inc.
shareholders, dated July , 1999, in connection with the
Stockholder Agreement dated July , 1999.
</TABLE>
II-4
<PAGE> 109
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.34 Form of Advertising and Promotion Agreement between
Medscape, Inc. and CBS Corporation, dated July , 1999.
10.35 Form of Trademark and Content Agreement between Medscape,
Inc. and CBS Corporation, dated July , 1999.
10.36 Form of Registration Rights Agreement between Medscape, Inc.
and CBS Corporation, dated July , 1999.
10.37* Stock Purchase Agreement between Medscape, Inc. and National
Data Corporation, dated July , 1999.
10.38* License and Product Development Agreement between Medscape,
Inc. and National Data Corporation, dated July , 1999.
10.39 Agreement of Lease between Medscape, Inc. and 224 W 30 LLC,
dated May 26, 1999.
21.1** Subsidiaries of Medscape, Inc.
23.1* Consent of Patterson, Belknap, Webb & Tyler LLP (included in
Exhibit 5.1 hereto).
23.2 Consent of Deloitte & Touche LLP.
24.1** Powers of Attorney.
</TABLE>
- ---------------
* To be filed by further Amendment to this Registration Statement.
** Previously filed.
+ Confidential Treatment requested.
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Medscape, Inc. pursuant to the foregoing provisions, or otherwise, Medscape,
Inc. has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Medscape, Inc. of expenses incurred or
paid by a director, officer, or a controlling person of Medscape, Inc. in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Medscape, Inc. will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
3. The undersigned registrant hereby undertakes that:
a. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by Medscape, Inc. pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
b. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Medscape, Inc.
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on July 8, 1999.
MEDSCAPE, INC.
By: /s/ PAUL T. SHEILS
---------------------------------------
Name: Paul T. Sheils
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
* President, Chief Executive Officer and July 8, 1999
- --------------------------------------------- Director (Principal Executive Officer)
Paul T. Sheils
* Chief Operating Officer and Chief July 8, 1999
- --------------------------------------------- Financial Officer (Principal Financial
Steven R. Kalin Accounting Officer)
* Chairman of the Board of Directors July 8, 1999
- ---------------------------------------------
Alan J. Patricof
* Executive Vice President and Director July 8, 1999
- ---------------------------------------------
Jeffrey L. Drezner,
M.D., Ph.D.
* Chairman-Executive Committee and Director July 8, 1999
- ---------------------------------------------
Peter M. Frishauf
* Director July 8, 1999
- ---------------------------------------------
Marc Butlein
* Director July 8, 1999
- ---------------------------------------------
Esther Dyson
* Director July 8, 1999
- ---------------------------------------------
Carlo A. von Schroeter
* Director July 8, 1999
- ---------------------------------------------
Oakleigh Thorne
*By: /s/ PAUL T. SHEILS
---------------------------------------
Paul T. Sheils
Attorney-in-fact
</TABLE>
II-6
<PAGE> 111
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<S> <C> <C>
1.1 Form of Underwriting Agreement.
2.1** Asset Purchase Agreement between Medscape, Inc. and SCP
Communications, Inc., dated April 1, 1996.
2.2** Administrative Services Agreement between Medscape, Inc. and
SCP Communications, Inc., dated April 1, 1996.
2.3** Financing Agreement between Medscape, Inc. and SCP
Communications, Inc., dated April 1, 1996.
2.4** Purchase Agreement between Medscape, Inc. and the holders of
all of the membership interests of Healthcare Communications
Group, L.L.C. dated October 27, 1998.
2.5** Letter Agreement between Medscape, Inc. and Ira Kirshenbaum,
M.D., dated February 2, 1999 regarding the sale of assets of
bonehome.com.
2.6** Bill of Sale between Medscape, Inc. and CompuRx, dated March
25, 1999.
3.1** Amended and Restated Certificate of Incorporation.
3.1.1 Amendment to the Amended and Restated Certificate of
Incorporation filed May 17, 1999.
3.1.2* Form of Amendment to the Amended and Restated Certificate of
Incorporation to be filed in connection with the NDC and CBS
transactions.
3.2* Form of Amended and Restated Certificate of Incorporation,
to be filed prior to the closing of the offering made under
this Registration Statement.
3.3** Bylaws.
4.1* Form of Specimen Common Stock Certificate.
4.2* Form of Warrant, dated as of March 5, 1999, entitling Credit
Suisse First Boston Corporation to purchase up to 14,667.5
shares of Medscape's Common Stock.
5.1* Opinion of Patterson, Belknap, Webb & Tyler LLP as to the
validity of the securities being offered.
10.1** Agreement of Lease between Medscape, Inc. and R.A.A. Realty
Company LP dated February 1999.
10.2 Lease Assignment made by SCP Communications, Inc. made in
favor of Medscape, Inc.
10.3 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated October 7, 1996.
10.4 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated August 29, 1995.
10.5 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated March 17, 1994.
10.6 Agreement of Lease between Surgical Care Publishing, Inc.
and Satyanman, Inc., dated August 18, 1993.
10.7** Employment Agreement between Medscape, Inc. and Paul T.
Sheils, dated January 26, 1998.
10.8** Employment Agreement between Medscape, Inc. and Steven
Kalin, dated September 30, 1998.
10.9** Employment and Restricted Stock Purchase Agreement between
Medscape, Inc. and Jeffrey L. Drezner, M.D., Ph.D., dated
October 27, 1998.
10.10** Promissory Note dated October 27, 1998, in the principal
amount of $627,949.64 made by Jeffrey L. Drezner, M.D.,
Ph.D. in favor of Medscape, Inc.
10.11** Employment Agreement between Medscape, Inc. and Peter M.
Frishauf, dated February 16, 1998.
10.12** Employment Agreement between Medscape, Inc. and George D.
Lundberg, M.D., dated February 15, 1999.
10.13** Employment Agreement between Medscape, Inc. and David
Yakimischak, dated March 15, 1999.
10.14** Employment Agreement between Medscape, Inc. and Meg Walsh,
dated March 4, 1999.
10.15** 1996 Stock Option Plan.
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<S> <C> <C>
10.16** Form of Incentive Stock Option Agreement.
10.17** Form of Non-Qualified Stock Option Agreement.
10.18** Nonemployee Director Stock Option Plan.
10.19** Stock Purchase Agreement, between Medscape, Inc. and
investors dated October 31, 1997 in respect of the Series C
Preferred Stock.
10.20** First Amendment to Stock Purchase Agreement between
Medscape, Inc. and investors, dated February 19, 1998.
10.21** Supplemental Agreement to Amendment to Stock Purchase
Agreement and First Amendment to, and Waiver of Certain
Terms of, Stockholders' Agreement between Medscape, Inc. and
investors, dated March 9, 1998 in respect of the Series C
Preferred Stock.
10.22** Series D Preferred Stock Purchase Agreement between
Medscape, Inc. and investors, dated March 5, 1999.
10.23** Amended and Restated Stockholders' Agreement, dated March 5,
1999.
10.23.1 Amendment, dated May 24, 1999, to the Amended and Restated
Stockholders' Agreement.
10.24** Form of Copyright Assignment.
10.25** Form of Letter to Authors.
10.26 Content Distribution Agreement between Medscape, Inc. and
Dow Jones & Company, Inc., dated January 22, 1999.
10.27 Interactive Publications Library Internet Gateway Agreement
between Medscape, Inc. and Dow Jones & Company, Inc., dated
July 14, 1998.
10.28 Preferred Share Purchase Agreement among Softwatch Ltd.,
Medscape, Inc. (as a purchaser) and certain other
purchasers, dated June 15, 1999.
10.29 License and Web Site Development Agreement between Medscape,
Inc. and Softwatch, Inc., dated June 15, 1999.
10.30 Employment Agreement between Medscape, Inc. and Mark
Boulding, dated June 28, 1999.
10.31 Common Stock Purchase Agreement between Medscape, Inc. and
CBS Corporation, dated July 4, 1999.
10.32 Form of Stockholders Agreement between Medscape, Inc. and
CBS Corporation, dated July , 1999.
10.33 Form of Joinder Agreement among certain Medscape, Inc.
shareholders, dated July , 1999, in connection with the
Stockholder Agreement dated July , 1999.
10.34 Form of Advertising and Promotion Agreement between
Medscape, Inc. and CBS Corporation, dated July , 1999.
10.35 Form of Trademark and Content Agreement between Medscape,
Inc. and CBS Corporation, dated July , 1999.
10.36 Form of Registration Rights Agreement between Medscape, Inc.
and CBS Corporation, dated July , 1999.
10.37* Stock Purchase Agreement between Medscape, Inc. and National
Data Corporation, dated July , 1999.
10.38* License and Product Development Agreement between Medscape,
Inc. and National Data Corporation, dated July , 1999.
10.39 Agreement of Lease between Medscape, Inc. and 224 W 30 LLC,
dated May 26, 1999.
21.1** Subsidiaries of Medscape, Inc.
23.1* Consent of Patterson, Belknap, Webb & Tyler LLP (included in
Exhibit 5.1 hereto).
23.2 Consent of Deloitte & Touche LLP.
24.1** Powers of Attorney.
</TABLE>
- ---------------
* To be filed by further Amendment to this Registration Statement.
** Previously filed.
+ Confidential Treatment requested.
<PAGE> 1
Exhibit 1.1
[ ] Shares
MEDSCAPE, INC.
Common Stock
UNDERWRITING AGREEMENT
July __, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO., INC.
WIT CAPITAL CORPORATION
DLJDIRECT INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Medscape, Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell ____________ shares of its common stock, par value of $.01 (the
"FIRM SHARES") to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional _______ shares of its common stock (the
"ADDITIONAL SHARES") if requested by the Underwriters as provided in Section 2
hereof. The Firm Shares and the Additional Shares are hereinafter referred to
collectively as the "SHARES". The shares of common stock of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK."
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules
<PAGE> 2
and regulations of the Commission thereunder (collectively, the "ACT"), a
registration statement on Form S-1, including a prospectus, relating to the
Shares. The registration statement, as amended at the time it became effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the Act, is
hereinafter referred to as the "REGISTRATION Statement"; and the prospectus in
the form first used to confirm sales of Shares is hereinafter referred to as the
"PROSPECTUS." If the Company has filed or is required pursuant to the terms
hereof to file a registration statement pursuant to Rule 462(b) under the Act
registering additional shares of Common Stock (a "RULE 462(B) REGISTRATION
STATEMENT"), then, unless otherwise specified, any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______ (the "PURCHASE PRICE") the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to _______ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
The Company hereby agrees not to (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
2
<PAGE> 3
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock 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 Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise), except to the
Underwriters pursuant to this Agreement, for a period of 180 days after the date
of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. Notwithstanding the foregoing, during such
period (i) the Company may grant stock options pursuant to the Company's
existing stock option plan and (ii) the Company may issue shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof. The Company also agrees not to file any
registration statement (other than a registration statement on Form S-8 or any
successor form) with respect to any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock for a period of
180 days after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. The Company shall, prior to
or concurrently with the execution of this Agreement, deliver an agreement
executed by (i) each of the directors and officers of the Company and (ii) each
stockholder listed on Annex I hereto to the effect that such person will not,
during the period commencing on the date such person signs such agreement and
ending 180 days after the date of the Prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Corporation, (A) engage in any of the
transactions described in the first sentence of this paragraph or (B) make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid by
the Company, to Donaldson, Lufkin & Jenrette Securities Corporation through the
facilities of The Depository Trust Company ("DTC"), for the respective accounts
of the several Underwriters, against payment to the Company of the Purchase
Price therefor by wire transfer of Federal or other funds immediately available
in New York City. The certificates representing the Shares shall be made
available for inspection not later than 12:00 P.M., New York City time, on the
business day prior to the Closing Date or the applicable Option Closing Date, as
the case may be,
3
<PAGE> 4
at the office of DTC or its designated custodian (the "DESIGNATED OFFICE"). The
time and date of delivery and payment for the Firm Shares shall be 9:00 A.M.,
New York City time, on ____________ __, 1999 or such other time on the same or
such other date as Donaldson, Lufkin & Jenrette Securities Corporation and the
Company shall agree in writing. The time and date of delivery for the Firm
Shares are hereinafter referred to as the "CLOSING DATE." The time and date of
delivery and payment for any Additional Shares to be purchased by the
Underwriters shall be 9:00 A.M., New York City time, on the date specified in
the applicable exercise notice given by you pursuant to Section 2 or such other
time on the same or such other date as Donaldson, Lufkin & Jenrette Securities
Corporation and the Company shall agree in writing. The time and date of
delivery for any Additional Shares are hereinafter referred to as an "OPTION
CLOSING DATE."
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Hogan & Hartson L.L.P., 885 Third Avenue,
26th Floor, New York, NY 10022 and the Shares shall be delivered at the
Designated Office, all on the Closing Date or such Option Closing Date, as the
case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish to you four signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
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(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 1:00 P.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering
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or sale of the Shares, in any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending [June
30], 2000 that shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiary as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriters and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
for the Underwriters in connection with the review and clearance of the offering
of the Shares by the National Association of Securities Dealers, Inc., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to the listing of the Shares on the Nasdaq National
Market, (vii) the cost of printing certificates representing the Shares, (viii)
the costs and charges of any transfer agent, registrar and/or depository, and
(ix) all other costs and expenses incident to the performance of the obligations
of the Company hereunder for which provision is not otherwise made in this
Section.
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(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement filed
after the effectiveness of this Agreement will become effective no later than
10:00 P.M., New York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or, to the knowledge of the
Company, threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the Act and (iv)
the Prospectus does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
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<PAGE> 8
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(d) The Company has been duly incorporated and is validly existing as a
corporation and the Company's only subsidiary, Healthcare Communications Group,
LLC, has been duly organized and is validly existing as a limited liability
company and both are, in good standing under the laws of their respective
jurisdictions of incorporation or organization, as the case may be, and each has
the power and authority to carry on its business as described in the Prospectus
and to own, lease and operate its properties, and each is duly qualified and is
in good standing as a foreign corporation or limited liability company, as the
case may be, authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not be
reasonably likely to have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its subsidiary,
taken as a whole (a "Material Adverse Effect").
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or its subsidiary relating to or entitling any person to purchase or
otherwise to acquire any shares of the capital stock of the Company or its
subsidiary, except as otherwise disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable and,
other than as disclosed in the Registration Statement, not subject to any
preemptive or similar rights; and the Shares have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject
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to any preemptive or similar rights.
(g) All of the outstanding membership interests of Healthcare
Communications Group, LLC have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, free and clear of
any security interest, claim, lien, encumbrance or adverse interest of any
nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor its subsidiary is in violation of its
respective charter, articles of organization, by-laws or operating agreement, as
the case may be, or in default in the performance of any obligation, agreement,
covenant or condition contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which the Company or its subsidiary is
a party or by which the Company or its subsidiary or their respective property
is bound, which default is reasonably likely to have a Material Adverse Effect.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
Act, the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
the regulations promulgated thereunder, the securities or Blue Sky laws of the
various states), (ii) violate any of the terms or provisions of the charter,
articles of organization, by-laws or operating agreement, as the case may be, of
the Company or its subsidiary or conflict with or constitute a breach of, or a
default under, any indenture, loan agreement, mortgage, lease or other agreement
or instrument to which the Company or its subsidiary is a party or by which the
Company or its subsidiary or their respective property is bound, which conflict,
breach or default is reasonably likely to have a Material Adverse Effect, (iii)
violate or conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over the Company, its subsidiary or their respective property or
(iv) result in the suspension, termination or revocation of any Authorization
(as defined below) of the Company or its subsidiary or any other impairment of
the rights of the holder of any such Authorization.
(k) There are no legal or governmental proceedings pending or to the
Company's knowledge threatened to which the Company or its subsidiary is or is
reasonably likely to be a party or to which any of their respective property is
or is reasonably likely to be subject that are required to be described in the
Registration Statement or the Prospectus and are not so described; nor are there
any statutes, regulations, contracts or other documents that are required to be
described in the
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Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required.
(l) Neither the Company nor its subsidiary has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the Federal
Food, Drug, and Cosmetic Act or Public Health Service Act, or any regulations
promulgated thereof including those related to the marketing and promotion of
pharmaceutical products or medical device products ("FOOD AND DRUG LAWS"), any
provisions of the Employee Retirement Income Security Act of 1974, as amended,
or any provisions of the Foreign Corrupt Practices Act, or the rules and
regulations promulgated thereunder, except for such violations which, singly or
in the aggregate, would not have a Material Adverse Effect.
(m) Each of the Company and its subsidiary has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, under any applicable Food and Drug Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiary, taken as a whole. Each such
Authorization is valid and in full force and effect and both the Company and its
subsidiary are in compliance with all the terms and conditions thereof and with
the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are unduly burdensome to the Company or its subsidiary; except
where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(n) There are no costs or liabilities associated with any applicable
Food and Drug Laws or Environmental Laws (including, without limitation, any
capital or operating expenditures required for clean-up, closure of properties
or compliance with Environmental Laws or any Authorization, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
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(o) This Agreement has been duly authorized, executed and delivered by
the Company.
(p) Deloitte & Touche LLP are independent public accountants with
respect to the Company and its subsidiary as required by the Act.
(q) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), together
with related schedules and notes, present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiary on the basis stated therein at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the supporting schedules, if any, included in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(s) Other than as set forth in the Registration Statement, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares registered
pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company and its
subsidiary, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or its subsidiary and
(iii) neither the Company nor its subsidiary has incurred any material liability
or obligation, direct or contingent.
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(u) Each certificate signed by any officer of the Company and delivered
to the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
SECTION 7. Indemnification. (a) The Company and its subsidiary, jointly
and severally, agree to indemnify and hold harmless each Underwriter, its
directors, its officers and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter who failed to deliver a Prospectus, as then
amended or supplemented, (so long as the Prospectus and any amendments or
supplements thereto was provided by the Company to the several Underwriters in
the requisite quantity and on a timely basis to permit proper delivery on or
prior to the Closing Date) to the person asserting any losses, claims, damages,
liabilities or judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in such preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the Prospectus, as so amended or supplemented, and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to such Underwriter but
only with reference to information relating to such Underwriter furnished in
writing to the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
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(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case
of parties indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement,
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compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (after deducting
underwriting discounts and commissions, but before deducting expenses) received
by the Company, and the total underwriting discounts and commissions received by
the Underwriters, bear to the total price to the public of the Shares, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds
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the amount of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7(d) are several in
proportion to the respective number of Shares purchased by each of the
Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Paul T. Sheils, in his capacity as President and Chief
Executive Officer of the Company, and Steven R. Kalin, in his capacity as Chief
Financial Officer of the Company, confirming the matters set forth in Sections
6(t), 8(a) and 8(b) and that the Company has complied with all of the agreements
and satisfied all of the conditions herein contained and required to be complied
with or satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiary, taken as a
whole, (ii) there shall not have been any change or any development involving a
prospective change in the capital stock or in the long-term debt of the Company
or its subsidiary and (iii) neither the Company nor its subsidiary shall
15
<PAGE> 16
have incurred any liability or obligation, direct or contingent, the effect of
which, in any such case described in clause 8(d)(i), 8(d)(ii) or 8(d)(iii), in
your judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Patterson, Belknap, Webb & Tyler LLP, counsel for the Company, to the effect
that:
(i) Each of the Company and its subsidiary has been duly
incorporated or organized, as the case may be, is validly existing as a
corporation or limited liability company in good standing under the
laws of its jurisdiction of incorporation or organization and has the
corporate power and authority or limited liability company power and
authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties;
(ii) Both the Company and its subsidiary are duly qualified
and are in good standing as a foreign corporation or limited liability
company, as the case may be, authorized to do business in each
jurisdiction listed on Schedule II hereto that the Company has advised
counsel are the only jurisdictions in with the Company or its
subsidiary conducts substantial business;
(iii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive
or similar rights;
(v) all of the outstanding membership interests of the
Company's subsidiary have been duly authorized and validly issued and
are fully paid and non-assessable, and are owned by the Company,
directly, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(viii) the Registration Statement has become effective under
the Act, no
16
<PAGE> 17
stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the best of such counsel's
knowledge after due inquiry, pending before or contemplated by the
Commission;
(ix) the statements under the captions "Business - Government
Regulation of the Internet and Healthcare industries," "Shares Eligible
for Future Sale," "Management," "Transactions with Related Parties,"
"Description of Capital Stock" and "Underwriting" in the Prospectus and
Items 14 and 15 of Part II of the Registration Statement, insofar as
such statements constitute a summary of the legal matters or documents
referred to therein, fairly present the information called for with
respect to such legal matters or documents;
(x) neither the Company nor its subsidiary is in violation of
its respective charter, articles of organization, by-laws or operating
agreement, as the case may be; to the best of such counsel's knowledge
after due inquiry, neither the Company nor its subsidiary is in default
in the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its
subsidiary, taken as a whole, to which the Company or its subsidiary is
a party or by which the Company or its subsidiary or their respective
property is bound;
17
<PAGE> 18
(xi) the execution, delivery and performance of this Agreement
by the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby
will not (A) require any consent, approval, authorization or order of,
or qualification with, any court or governmental body or agency (except
such as may be required under the Act, the Exchange Act, the rules and
regulations promulgated thereunder, or the securities or Blue Sky laws
of the various states), (B) violate any of the terms or provisions of
the charter, articles of organization, by-laws or operating agreement,
as the case may be, of the Company or its subsidiary or conflict with
or constitute a breach of, or a default under, any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which
the Company or its subsidiary is a party or by which the Company or its
subsidiary or their respective property is bound, which conflict,
breach or default is reasonably likely to have a Material Adverse
Effect (C) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, its subsidiary or
their respective property or (D) result in the suspension, termination
or revocation of any Authorization of the Company or its subsidiary or
any other impairment of the rights of the holder of any such
Authorization;
(xii) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or its subsidiary is or is reasonably likely to be a party or
to which any of their respective property is or is reasonably likely to
be subject that are required to be described in the Registration
Statement or the Prospectus and are not so described, or of any
statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not so
described or filed as required;
(xiii) neither the Company nor its subsidiary has violated any
Environmental Law, any provisions of the Employee Retirement Income
Security Act of 1974, as amended, or any provisions of the Foreign
Corrupt Practices Act, or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the
aggregate, would not have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company
and its subsidiary, taken as a whole;
(xiv) Both the Company and its subsidiary have such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary
to own, lease, license and operate its respective properties and to
conduct its business, except where the failure to have any such
Authorization or to make any such filing or notice would not, singly or
in the aggregate, have a
<PAGE> 19
material adverse effect on the business, prospects, financial condition
or results of operations of the Company and its subsidiary, taken as a
whole; each such Authorization is valid and in full force and effect
and both the Company and its subsidiary is in compliance with all the
terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect
thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which
allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to
the Company or its subsidiary; except where such failure to be valid
and in full force and effect or to be in compliance, the occurrence of
any such event or the presence of any such restriction would not,
singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of
the Company and its subsidiary, taken as a whole;
(xv) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended;
(xvi) other than as disclosed in the Registration Statement,
to the best of such counsel's knowledge after due inquiry, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with
the Shares registered pursuant to the Registration Statement; and
(xvii) (A) the Registration Statement and the Prospectus and
any supplement or amendment thereto (except for the financial
statements and other financial data included therein as to which no
opinion need be expressed) comply as to form with the Act, (B) such
counsel has no reason to believe that at the time the Registration
Statement became effective or on the date of this Agreement, the
Registration Statement and the prospectus included therein (except for
the financial statements and other financial data as to which such
counsel need not express any belief) contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (C) such counsel has no reason to believe that the
Prospectus, as amended or supplemented, if applicable (except for the
financial statements and other financial data, as aforesaid) contains
any untrue statement of a material fact or omits to state a material
fact necessary in order to
<PAGE> 20
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering such opinions, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and its subsidiary and certificates or other written
statements of public officials.
The opinion of Patterson, Belknap, Webb & Tyler LLP described in
Section 8(e) above shall be rendered to you at the request of the Company and
shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Hogan & Hartson L.L.P., counsel for the Underwriters, as to the
matters referred to in Sections 8(e)(iv), 8(e)(vi), 8(e)(ix) (but only with
respect to the statements under the caption "Description of Capital Stock" and
"Underwriting") and 8(e)(xvii).
In giving such opinions with respect to the matters covered by Section
8(e)(xvii) Patterson, Belknap, Webb & Tyler LLP and Hogan & Hartson L.L.P. may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification except as specified.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from Deloitte & Touche LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market subject to official notice of issuance.
(j) The Company shall not have failed on or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
<PAGE> 21
SECTION 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiary, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than
<PAGE> 22
one-tenth of the aggregate number of Firm Shares to be purchased by all
Underwriters and arrangements satisfactory to you and the Company for purchase
of such Firm Shares are not made within 48 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter and the Company. In any such case which does not result in
termination of this Agreement, either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. If, on an
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase such Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase on such date in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
SECTION 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to
Medscape, Inc., 134 West 29th Street, New York, New York 10001, Attention: Paul
T. Sheils, with copies to Patterson, Belknap, Webb & Tyler LLP, 1133 Avenue of
the Americas, New York, New York 10036, Attention: John P. Schmitt, and (ii) if
to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, with copies to Hogan & Hartson L.L.P., 555 13th Street N.W.,
Washington, DC 20004, Attention: Steven A. Museles, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable
<PAGE> 23
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The
Company also agrees to reimburse the several Underwriters, their directors and
officers and any persons controlling any of the Underwriters for any and all
fees and expenses (including, without limitation, the fees disbursements of
counsel) incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' directors and officers, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
MEDSCAPE, INC.
By: _____________________________________
Name: Paul T. Sheils
Title: President and Chief Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO., INC.
WIT CAPITAL CORPORATION
DLJDIRECT INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By ____________________________
<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF FIRM SHARES
------------ TO BE PURCHASED
---------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation
Credit Suisse First Boston Corporation
Bear, Stearns & Co., Inc.
Wit Capital Corporation
DLJdirect Inc.
Total
</TABLE>
<PAGE> 25
SCHEDULE II
JURISDICTION
<PAGE> 26
Annex I
- - CSK Venture Capital Co. Ltd. as investment manager for CSK-1(B)
Investment Fund
- - CSK Venture Capital Co. Ltd. as investment manager for CSK-2
Investment Fund
- - CSK Venture Capital Co. Ltd. as investment manager for CSK-1(A)
Investment Fund
- - Media Technology Ventures, Inc.
- - Media Technology Ventures Entrepreneurs Fund, LP.
- - Robert A. Bernhard, William L. Bernhard, Frank A. Weil, and
Lawrence B. Buttenweiser, Trustees U/A dated 9/3/64 F/B/O
Robert A. Bernhard Family
- - Robert A. Bernhard, William L. Bernhard, Frank A. Weil, and
Lawrence B. Buttenweiser, Trustees U/W/D Dorothy L. Bernhard F/B/O
Robert A. Bernhard Article 9th
- - RHL Ventures LLC
- - Toledot Investments, L.P.
- - Richard Linhart
- - Victor Scaravilli
- - Wormser Freres
- - Mark Braunstein, M.D.
- - BE Partners
- - CIBC Oppenheimer Corp.
- - Roger Mulvihill
- - Mary Mulvihill
- - TBG Information Investors, L.L.C
- - Hearst Communications, Inc.
- - Weston Presidio Capital II, L.P.
- - WPC Entrepreneur Fund, L.P.
- - Weston Presidio Capital III, L.P.
- - APA Excelsior IV, L.P.
- - APA Excelsior IV/Offshore, L.P.
- - Patricof Private Investment Club, L.P.
- - APA Excelsior Fund I
- - Highland Capital Partners IV Limited Partnership
- - Highland Entrepreneurs Fund IV, Limited Partnership
- - Esther Dyson
- - Peter Frishauf
- - Jeffrey L. Drezner, M.D., Ph.D.
- - Alan Patricof (continued)
<PAGE> 27
Annex I (continued)
- - Steven Kalin
- - Paul T. Sheils
- - Stephen E. Smith
- - Meg Walsh
- - Ira Kirschenbaum
- - Tom Luciani
2
<PAGE> 1
Exhibit 3.1.1
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MEDSCAPE, INC.
Paul T. Sheils hereby certifies that:
1. The name of the corporation is Medscape, Inc. (the "Corporation").
2. He is the duly elected President of the Corporation.
3. The Amended and Restated Certificate of Incorporation of the Corporation is
hereby amended by striking out paragraph (A) of Article Fourth thereof and by
substituting in lieu of said paragraph (A) the following new paragraph:
(A) The total number of shares of all classes of stock which
the Corporation is authorized to issue is forty-seven million four
hundred fifty-six thousand six hundred forty-three (47,456,643), of
which twenty-seven million five hundred thousand (27,500,000) shares
shall be Class A Common Stock with a par value of one cent ($.01) per
share, fifteen million (15,000,000) shall be Class B (Non-Voting)
Common Stock with a par value of one cent ($.01) per share, and four
million nine hundred fifty-six thousand six hundred forty-three
(4,956,643) shares shall be Preferred Stock with a par value of one
cent ($.01) per share. Each one share of authorized Class A Common
Stock issued and outstanding or standing in the name of the Corporation
at the close of business on the date of filing and recording (the
"Effective Time") of this Amendment to the Amended and Restated
Certificate of Incorporation with the Secretary of State of the State
of Delaware shall, upon the filing and recording of this Amendment to
the Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware, thereupon automatically be
reclassified and changed into two and
<PAGE> 2
one-half validly issued, fully paid and nonassessable shares of Class A
Common Stock and each one share of authorized Class B (Non-Voting)
Common Stock issued and outstanding or standing in the name of the
Corporation at the Effective Time shall, upon the filing and recording
of this Amendment to the Certificate of Incorporation with the
Secretary of State of the State of Delaware, thereupon automatically be
reclassified and changed into two and one-half validly issued, fully
paid and nonassessable shares of Class B (Non-Voting) Common Stock (the
"Stock Split"). Each holder of record of shares of Class A Common Stock
or Class B (Non-Voting) Common Stock to be so reclassified and changed
shall at the Effective Time become the record owner of the number of
shares of Class A Common Stock or Class B (Non-Voting) Common Stock,
respectively, as shall result from such reclassification and change.
Each such record holder shall be entitled to receive, upon the
surrender of the certificate or certificates representing the shares of
Class A Common Stock or Class B (Non-Voting) Common Stock to be so
reclassified and changed at the office of the Corporation in such form
and accompanied by such documents, if any, as may be prescribed by the
officers of the Corporation, a new certificate or certificates
representing the number of shares of Class A Common Stock or Class B
(Non-Voting) Common Stock, as applicable, of which he or she is the
record owner after giving effect to the provisions of this Article
Fourth.
4. The foregoing Amendment to the Amended and Restated Certificate of
Incorporation of the Corporation has been duly adopted by the Corporations's
Board of Directors and stockholders in accordance with the provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Amendment of the Amended and Restated Certificate of
Incorporation this 17th day of May, 1999.
/s/ Paul T. Sheils
--------------------------
Paul T. Sheils
President
3
<PAGE> 1
Exhibit 10.2
ASSIGNMENT AND ASSUMPTION OF LEASE
KNOW THAT SURGICAL CARE PUBLISHING, INC., having an address at
134 West 29th Street, New York, New York ("Assignor"), for good and valuable
consideration paid by MEDSCAPE, INC., having an address at 134 West 29th Street,
New York, New York ("Assignee"), the receipt and sufficiency of which are hereby
acknowledged, hereby assigns, transfers and conveys to Assignee, effective as of
March 1, 1999 (the "Effective Date"), all of Assignor's right, title and
interest (i) in, to and under the leases (the "Leases") specified on Schedule A
attached hereto and made part hereof, and (ii) in and to the security deposited
by Assignor as tenant under the Leases (the "Security"), which Leases and
Security relate to certain spaces in the building known as and by the address
134 West 29th Street, New York, New York.
TO HAVE AND TO HOLD unto Assignee, its successors and assigns
from and after the Effective Date for and during the remainder of the term of
the Leases, subject to the terms, covenants, conditions, obligations and
provisions therein contained.
AND KNOW THAT Assignee hereby accepts the assignment of
Assignor's right, title and interest in, to and under the Leases and the
Security, and assumes the performance of and compliance with all of Assignor's
obligations set forth in or arising under the Leases from and after the
Effective Date.
Assignor represents and warrants to Assignee that, as of the
date hereof:
1. The Leases heretofore delivered to Assignee by Assignor are
true, correct and complete copies of such Leases;
2. The Leases have not been amended or modified, except as set
forth on Schedule A;
3. The Leases have been duly executed by Satyanam, Inc. and
Assignor, are in full force and effect and are valid, binding and enforceable
against each of said parties in accordance with their terms;
4. Assignor has not encumbered its interest in or to the
Leases or Security;
5. Assignor has not received any notice of default from
landlord under the Leases with respect to the Leases and, to the best of
Assignor's knowledge, Assignor is not in default under the Leases.
<PAGE> 2
IN WITNESS WHEREOF Assignor and Assignee have duly executed
this instrument as of the ___ day of __________________, 1999.
ASSIGNOR:
SURGICAL CARE PUBLISHING, INC.
By: /s/ Diana M. Bourke
--------------------------------
Name: Diana M. Bourke
Title: President/ COO
ASSIGNEE:
MEDSCAPE, INC.
By: /s/ Tony Plesner
--------------------------------
Name: Tony Plesner
Title: Vice President, Finance
ACCEPTED AND AGREED TO:
LANDLORD:
SATYANAM, INC.
By:
--------------------------
Name:
Title:
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SCHEDULE A
LEASE
1. Lease dated October 7th, 1996 by and between Satyanam, Inc.
("Landlord") and Surgical Care Publishing, Inc. ("Tenant"), relating to
Unit 303 in the building known as 134 West 29th Street, New York, New
York 10001 (the "Building").
2. Lease dated August 29, 1995 by and between Landlord and Tenant,
relating to Unit 304 in the Building.
3. Lease dated August 18, 1993 by and between Landlord and Tenant,
relating to Unit 305 in the Building.
4. Lease dated March 17, 1994 by and between Landlord and Tenant, relating
to Units 306-310 in the Building.
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Exhibit 10.3
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 7th day of October 1996, between
SATYANAM INC., 146 West 29th Street, New York, N.Y. 10001, party of the first
part, hereinafter referred to as OWNER, and SURGICAL CARE PUBLISHING, INC.,
party of the second part, hereinafter referred to as TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner Unit #303 in the building known as 134 West 29th Street, New York, N.Y.
10001 in the Borough of Manhattan, City of New York, for the term of Two (2)
Years Eight (8) Months (or until such term shall sooner cease and expire as
hereinafter provided) to commence on the 1st day of November, nineteen hundred
and Ninety-Six, and to end on the 30th day of June, Nineteen Hundred And
Ninety-Nine and both dates inclusive, at an annual rental rate of As per Article
41 of Rider annexed hereto, which Tenant agrees to pay in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance on the first day of each month during said term, at the office of Owner
or such other place as Owner may designate, without any set off or deduction
whatsoever, except that Tenant shall pay the first _____ monthly installment(s)
on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent: 1. Tenant shall pay the rent as above and as
hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises
for General and Executive Offices.
provided such use is in accordance with the certificate of occupancy for the
building, if any, and for no other purpose.
Alterations: 3. Tenant shall make no changes in or to the
demised premises of any nature without
Owner's prior written consent. Subject to the prior written consent of Owner,
and to the provisions of this article, Tenant, at Tenant's expense, may make
alterations, installations, additions or improvements which are nonstructural
and which do
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not affect utility services or plumbing and electrical lines, in or to the
interior of the demised premises using contractors or mechanics first approved
in each instance by Owner. Not to be unreasonably withheld. Tenant shall, at its
expense, before making any alterations, additions, installations or improvements
obtain all permits, approval and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner. Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within One Hundred Twenty (120) days thereafter,
at Tenant's expense, by payment or filing the bond required by law or otherwise.
All fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the demised premises by
Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in
this Article shall be construed to give Owner title to or to prevent Tenant's
removal of trade fixtures, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Owner, Tenant shall immediately and at its expense, repair
and restore the premises to the condition existing prior to installation and
repair any damage to the demised premises or the building due to such removal.
All property permitted or required to be removed by Tenant at the end of the
term remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Owner, either be retained as Owner's property or
removed from the premises by Owner, at Tenant's expense.
Owner hereby agrees to cause such repairs, replacements and
improvements to be made with reasonable promptness, and to take reasonable steps
to minimize any inconvenience to Tenant arising therefrom, provided however that
this shall not obligate Owner to incur any additional overtime costs or entitle
Tenant to deduct or abate the rent or any other payments.
Repairs: 4. Owner shall maintain and repair the exterior
of and the public portions of the building.
Tenant shall, throughout the term of this lease, take good care of the demised
premises including the bathrooms and lavatory facilities (if the demised
premises encompass the entire floor of the building) and the windows and window
frames and, the fixtures and appurtenances therein and at Tenant's sole cost and
expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
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servants, employees, or licensees, arising from such Tenant conduct or omission,
when required by other provisions of this lease, including Article 6. Tenant
shall also repair all damage to the building and the demised premises caused by
the moving of Tenant's fixtures, furniture or equipment. All the aforesaid
repairs shall be of quality or class equal to the original work or construction.
If Tenant fails, after ten days notice, to proceed with due diligence to make
repairs required to be made by Tenant, the same may be made by the Owner at the
expense of Tenant, and the expenses thereof incurred by Owner shall be
collectible, as additional rent, after rendition of a bill or statement
therefor. If the demised premises be or become infested with vermin, Tenant
shall, at its expense, cause the same to be exterminated. Tenant shall give
Owner prompt notice of any defective condition in any plumbing, heating system
or electrical lines located in the demised premises and following such notice,
Owner shall remedy the condition with due diligence, but at the expense of
Tenant, if repairs are necessitated by damage or injury attributable to Tenant,
Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except
as specifically provided in Article 9 or elsewhere in this lease, there shall be
no allowance to the Tenant for a diminution of rental value and no liability on
the part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner, Tenant or others making or failing to make any repairs,
alterations, additions or improvements in or to any portion of the building or
the demised premises or in and to the fixtures, appurtenances or equipment
thereof. It is specifically agreed that Tenant shall not be entitled to any set
off or reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of any action for
damages for breach of contract. The provisions of this Article 4 with respect to
the making of repairs shall not apply in the case of fire or other casualty with
regard to which Article 9 hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit,
suffer or allow any window in the demised
premises to be cleaned from the outside in violation of Section 202 of the New
York State Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of 6. Prior to the commencement of the lease term,
Law, Fire Insurance: if Tenant is then in possession, and at all
times thereafter Tenant shall, at Tenant's
sole cost and expense, promptly comply with all present and future laws, orders
and regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board of
Fire Underwriters, or the Insurance Services Office, or any similar body which
shall impose any violation, order or duty upon Owner or Tenant with respect to
the demised premises, arising out of Tenant's use or manner of use thereof, or,
with respect to the building, if arising out of Tenant's use or manner of use of
the demised premises of the building (including the use permitted under the
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations
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unless Tenant has, by its manner of use of the demised premises or method of
operation therein, violated any such laws, ordinances, orders, rules,
regulations or requirements with respect thereto. Tenant shall not do or permit
any act or thing to be done in or to the demised premises which is contrary to
law, or which will invalidate or be in conflict with public liability, fire or
other policies of insurance at any time carried by or for the benefit of Owner.
Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire
Insurance Rating Organization and other authority having jurisdiction, and then
only in such manner and such quantity so as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy. If
by reason of failure to comply with the foregoing the fire insurance rate shall,
at the beginning of this lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" or rate for the building or demised premises issued by a body making
fire insurance rates applicable to said premises shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rates then applicable to said premises. Tenant shall not place a load
upon any floor of the demised premises exceeding the floor load per square foot
area which it was designed to carry and which is allowed by law. Owner reserves
the right to prescribe the weight and position of all safes, business machines
and mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to
absorb and prevent vibration, noise and annoyance. Limitation on load/sq. ft. is
120 lbs. (One Hundred Twenty Pounds).
Subordination: 7. This lease is subject and subordinate to all
ground or underlying leases and to all
mortgages which may now or hereafter affect such leases or the real property of
which demised premises are a part and to all renewals, modifications,
consolidations, replacements and extensions of any such underlying leases and
mortgages. This clause shall be self-operative and no further instrument or
subordination shall be required by any ground or underlying lessor or by any
mortgagee, affecting any lease or the real property of which the demised
premises are a part. In confirmation of such subordination, Tenant shall from
time to time execute promptly any certificate that Owner may request.
Tenant's Liability 8. Owner or its agents shall not be liable for
Insurance Property any damage to property of Tenant or of
Loss, Damage, others entrusted to employees of the
Indemnity: building, nor for loss of or damage to any
property of Tenant by theft or otherwise,
nor for any injury or damage to persons or property resulting from any cause of
whatsoever nature, unless caused by or due to the negligence of Owner, its
agents, servants or employees; Owner or its agents shall not be liable for any
damage caused by other tenants or persons in, upon or about said building or
caused by operations in connection of any private, public or quasi public work.
If at any time any
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windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorney's fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, contractors, employees, invitees, or licensees, of any covenant
or condition of this lease, or the carelessness, negligence or improper conduct
of the Tenant, Tenant's agents, contractors, employees, or licensees. Tenant's
liability under this lease extends to the acts and omissions of its sub-tenant,
and any agent, contractor, employee, or licensee of any sub-tenant. In case any
action or proceeding is brought against Owner by reason of any such claim,
Tenant, upon timely written notice from Owner, will, at Tenant's expense, resist
or defend such action or proceeding by counsel approved by Owner in writing,
such approval not to be unreasonably withheld.
Destruction, Fire 9. (a) If the demised premises or any part
and Other Casualty: thereof shall be damaged by fire or other
casualty, Tenant shall give immediate notice
thereof to Owner and this lease shall continue in full force and effect except
as hereinafter set forth. (b) If the demised premises are partially damaged or
rendered partially unusable by fire or other casualty, the damages thereto shall
be repaired by and at the expense of Owner and the rent and other items of
additional rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within forty-five (45)
days after such fire or casualty, or 30 days after adjustment of the insurance
claim for such fire or casualty, whichever is sooner, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Owner's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant.
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Unless Owner shall serve a termination notice as provided for herein, Owner
shall make the repairs and restorations under the conditions of (b) and (c)
hereof, with all reasonable expedition, subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
including Owner's obligation to restore under subparagraph (b) above, each party
shall look first to any insurance in its favor before making any claim against
the other party for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and collectible and
to the extent permitted by law, Owner and Tenant each hereby releases and waives
all right of recovery with respect to subparagraphs (b), (d) and (e) above,
against the other or any one claiming through or under each of them by way of
subrogation or otherwise. The release and waiver herein referred to shall be
deemed to include any loss or damage to the demised premises and/or to any
personal property, equipment, trade fixtures, goods and merchandise located
therein. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefitting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
Eminent Domain: 10. If the whole or any part of the demised
premises shall be acquired or condemned by
Eminent Domain for any public or quasi public use or purpose, then and in that
event, the term of this lease shall cease and terminate from the date of title
vesting in such proceeding and Tenant shall have no claim for the value of any
unexpired term of said lease. Tenant shall have the right to make an independent
claim to the condemning authority for the value of Tenant's moving expenses and
personal property, trade fixtures and equipment, provided Tenant is entitled
pursuant to the terms of the lease to remove such property, trade fixtures and
equipment at the end of the term and provided further such claim does not reduce
Owner's award.
Assignment, 11. Tenant, for itself, its heirs, distributees,
Mortgage, Etc.: executors, administrators, legal
representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor
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underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each
instance--which shall not be unreasonably withheld. Transfer of the majority of
the stock of a corporate Tenant or the majority partnership interest of a
partnership Tenant shall be deemed an assignment. If this lease be assigned, or
if the demised premises or any part thereof be underlet or occupied by anybody
other than Tenant, Owner may, after default by Tenant, collect rent from the
assignee, under-tenant or occupant, and apply the net amount collected to the
rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current: 12. Rates and conditions in respect to
submetering or rent inclusion, as the case
may be, to be added in RIDER attached hereto. Tenant covenants and agrees that
at all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Owner's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character of
electric service shall in no wise make Owner liable or responsible to Tenant,
for any loss, damages or expenses which Tenant may sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the
demised premises in any emergency at any time, and, at other reasonable times,
to examine the same and to make such repairs, replacements and improvements as
Owner may deem necessary and reasonably desirable to any portion of the building
or which Owner may elect to perform in the premises after Tenant's failure to
make repairs or perform any work which Tenant is obligated to perform under this
lease, or for the purpose of complying with laws, regulations and other
directions of governmental authorities. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the demised premises and
to erect new pipes and conduits therein provided, wherever possible, they are
within walls or otherwise concealed. Owner may, during the progress of any work
in the demised premises, take all necessary materials and equipment into said
premises without the same constituting an eviction nor shall the Tenant be
entitled to any abatement of rent while such work is in progress nor to any
damages by reason of loss or interruption of business or otherwise. Throughout
the term hereof Owner shall have the right to enter the demised premises at
reasonable hours for the purpose of showing the same to prospective purchasers
or mortgagees of the building, and during the last six months of the term for
the purpose of showing the same to prospective tenants and may, during said six
months period, place upon the demised premises the usual notices "To Let" and
"For Sale" which notices Tenant shall permit to remain thereon without
molestation. If Tenant is not present to open and permit an entry into the
demised premises, Owner or Owner's agents may enter the same whenever such entry
may be necessary or
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permissible by master key or forcibly and provided reasonable care is exercised
to safeguard Tenant's property, such entry shall not render Owner or its agents
liable therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom. Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligation hereunder.
Vault, Vault Space, 14. No Vaults, vault space or area, whether or
Area: not enclosed or covered, not within the
property line of the building is leased
hereunder anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant, if used by
Tenant, whether or not specifically leased hereunder.
Occupancy: 15. Tenant will not at any time use or occupy
the demised premises in violation of the
certificate of occupancy issued for the building of which the demised premises
are a part. Tenant has inspected the premises and accepts them as is, subject to
the riders annexed hereto with respect to Owner's work, if any. In any event,
Owner makes no representation as to the condition of the premises and Tenant
agrees to accept the same subject to violations, whether or not of record. If
any governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business, Tenant shall be responsible for and shall procure
and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the
contrary notwithstanding, this lease may be
cancelled by Owner by sending of a written notice to Tenant within a reasonable
time after the happening of any one or more of the following events: (1) the
commencement of a case in bankruptcy or under the laws of any state naming
Tenant as the debtor; or (2) the making by Tenant of an assignment or any other
arrangement for the benefit of creditors under any state statute. Neither Tenant
nor any person claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the premises
demised but shall forthwith quit and surrender the premises. If this lease shall
be assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.
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(b) It is stipulated and agreed that in the
event of the termination of this lease pursuant to (a) hereof, Owner shall
forthwith, notwithstanding any other provisions of this lease to the contrary,
be entitled to recover from Tenant as and for liquidated damages an amount equal
to the difference between the rental reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental value of the
demised premises for the same period. In the computation of such damages the
difference between any installment of rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the demised premises
for the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the amount
of the difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of
the covenants of this lease other than the
covenants for the payment of rent or additional rent; or if the demised premises
becomes "or if this lease be rejected under Section 235 of Title 11 of the U.S.
Code (bankruptcy code);" or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised premises shall
be taken or occupied by someone other than Tenant; or if Tenant shall make
default with respect to any other lease between Owner and Tenant; or if Tenant
shall have failed, after Ten (10) days written notice, to redeposit with Owner
any portion of the security deposited hereunder which Owner has applied to the
payment of any rent and additional rent due and payable hereunder or failed to
move into or take possession of the premises within Fifteen (15) days after the
commencement of the term of this lease, of which fact Owner shall be the sole
judge; then in any one or more of such events, upon Owner serving a written
fifteen (15) days notice upon Tenant specifying the nature of said default and
upon the expiration of said Ten (10) days, if Tenant shall have failed to comply
with or remedy such default, or if the said default or omission complained of
shall be of a nature that the same cannot be completely cured or remedied within
said Ten (10) day period, and if Tenant shall not have diligently commenced
during such default within such fifteen (15) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed to remedy or
cure such default, then Owner may serve a written five (5) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said five (5)
days this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such five (5) day period were the day herein
definitely fixed for the end and expiration of this lease and the term thereof
and Tenant shall then quit and surrender the demised premises to Owner but
Tenant shall remain liable as hereinafter provided. Owner shall use best efforts
to relet the premise, and shall be obligated to mitigate the damages to
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the extent of rent collected upon reletting if and when such rent is collected
after deducting all actual expenses incurred in such reletting.
(2) If the notice provided for in (1)
hereof shall have been given, and the term shall expire as aforesaid; or if
Tenant shall make default in the payment of the rent reserved herein or any item
of additional rent herein mentioned or any part of either or in making any other
payment herein required; then and in any of such events Owner may without
notice, re-enter the demised premises either by force or otherwise, and
dispossess Tenant by summary proceedings or otherwise, and the legal
representative of Tenant or other occupant of demised premises and remove their
effects and hold the premises as if this lease had not been made, and Tenant
hereby waives the service of notice of intention to re-enter or to institute
legal proceedings to that end. If Tenant shall make default hereunder prior to
the date fixed as the commencement of any renewal or extension of this lease,
Owner may cancel and terminate such renewal or extension agreement by written
notice.
Remedies of Owner 18. In case of any such default, re-entry,
and Waiver of expiration and/or dispossess by summary
Redemption: proceedings or other wise, (a) the rent, and
additional rent, shall become due thereupon
and be paid up to the time of such re-entry, dispossess and/or expiration, (b)
Owner may re-let the premises or any part or parts thereof, either in the name
of Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and or covenanted to be paid and the net
amount, if any, of the rents collected on account of the subsequent lease or
leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term of this lease. The failure of
Owner to re-let the premises or any part or parts thereof shall not release or
affect Tenant's liability for damages. In computing such liquidated damages
there shall be added to the said deficiency such expenses as Owner may incur in
connection with re-letting, such as legal expenses, reasonable attorneys' fees,
brokerage, advertising and for keeping the demised premises in good order or for
preparing the same for re-letting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in this lease and any
suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgment, considers advisable and necessary
for the purpose of re-letting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such re-letting, and in no
<PAGE> 11
11
event shall Tenant be entitled to receive any excess, if any, of such net rents
collected over the sums payable by Tenant to Owner hereunder. In the event of a
breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Owner shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not herein provided for. Mention in this lease of any particular
remedy, shall not preclude Owner from any other remedy, in law or in equity.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance or
performance of any material term or covenant
on Tenant's part to be observed or performed under or by virtue of any of the
terms or provisions in any article of this lease, after notice if required and
upon expiration of any applicable grace period if any, (except in an emergency),
then, unless otherwise provided elsewhere in this lease, Owner may immediately
or at any time thereafter and after ten (10) days notice perform the obligation
of Tenant thereunder. If Owner, in connection with the foregoing or in
connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceedings, and prevails in any such
action or proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within ten (10) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages. If Tenant obtains judgement
against the Owner due to default of the Owner, then Owner shall reimburse the
Tenant for reasonable costs incurred by the Tenant in bringing the action.
Building 20. Owner shall have the right at any time
Alterations and without the same constituting an eviction
Management: and without incurring liability to Tenant
therefor to change the arrangement and or
location of public entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets or other public parts of the building and to change
the name, number or designation by which the building may be known. There shall
be no allowance to Tenant for diminution of rental value and no liability on the
part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner or other Tenant making any repairs in the building or any
such alterations, additions and improvements. Furthermore, Tenant shall not have
any claim against Owner by reason of Owner's imposition of any controls of the
manner of access to the building by Tenant's social or business visitors as the
Owner may deem necessary for the security of the building and its occupants.
No Representations 21. Neither Owner nor Owner's agents have made
by Owner: any representations or promises with respect
to the physical condition of the building,
<PAGE> 12
12
the land upon which it is erected or the
demised premises, the rents, leases, expenses of operation or any other matter
or thing affecting or related to the demised premises or the building except as
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" on the date possession is tendered and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a part
were in good and satisfactory condition at the time such possession was so
taken, except as to latent defects. All understandings and agreements heretofore
made between the parties hereto are merged in this contract, which alone fully
and completely expresses the agreement between Owner and Tenant and any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part, unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
End of Term: 22. Upon the expiration or other termination of
the term of this lease, Tenant shall quit
and surrender to Owner the demised premises, broom clean, in good order and
condition, ordinary wear and damages which Tenant is not required to repair as
provided elsewhere in this lease excepted, and Tenant shall remove all its
property from the demised premises. Tenant's obligation to observe or perform
this covenant shall survive the expiration or other termination of this lease.
If the last day of the term of this Lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it be a
legal holiday in which case it shall expire at noon on the preceding business
day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that
upon Tenant paying the rent and additional
rent and observing and performing all the terms, covenants and conditions, on
Tenant's part to be observed and performed, Tenant may peaceably and quietly
enjoy the premises hereby demised, subject, nevertheless, to the terms and
conditions of this lease including, but not limited to, Article 34 hereof and to
the ground leases, underlying leases and mortgages hereinbefore mentioned.
Failure to Give 24. If Owner is unable to give possession of the
Possession: demised premises on the date of the
commencement of the term hereof, because of
the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or if Owner has not completed any work required
to be performed by Owner, or for any other reason, Owner shall not be subject to
any liability for failure to give possession on said date and the validity of
the lease shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the
<PAGE> 13
13
term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible for Owner's inability to obtain possession or complete
any work required) until after Owner shall have given Tenant notice that Owner
is able to deliver possession in the condition required by this lease. If
permission is given to Tenant to enter into the possession of the demised
premises or to occupy premises other than the demised premises prior to the date
specified as the commencement of the term of this lease, Tenant covenants and
agrees that such possession and/or occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except the obligation
to pay the fixed annual rent set forth in page one of this lease. The provisions
of this article are intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for
violation of, or to insist upon the strict
performance of any covenant or condition of this lease or of any of the Rules or
Regulations, set forth or hereafter adopted by Owner, shall not prevent a
subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach and no provision of this lease shall be deemed to have
been waived by Owner unless such waiver be in writing signed by Owner. No
payment by Tenant or receipt by Owner of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy in
this lease provided. All checks tendered to Owner as and for the rent of the
demised premises shall be deemed payments for the account of Tenant. Acceptance
by Owner of rent from anyone other than Tenant shall not be deemed to operate as
an attornment to Owner by the payor of such rent or as a consent by Owner to an
assignment or subletting by Tenant of the demised premises to such payor, or as
a modification of the provisions of this lease. No act or thing done by Owner or
Owner's agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial 26. It is mutually agreed by and between Owner
by Jury: and Tenant that the respective parties
hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any
<PAGE> 14
14
proceeding or action for possession including a summary proceeding for
possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4 except for statutory mandatory counterclaims.
Inability to Perform: 27. This Lease and the obligation of Tenant to
pay rent hereunder and perform all of the
other covenants and agreements hereunder on part of Tenant to be performed shall
in no wise be affected, impaired or excused because Owner is unable to fulfill
any of its obligations under this lease or to supply or is delayed in supplying
any service expressly or impliedly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations or decorations or is unable
to supply or is delayed in supplying any equipment, fixtures or other materials
if Owner is prevented or delayed from doing so by reason of strike or labor
troubles or any cause whatsoever beyond Owner's sole control including, but not
limited to, government preemption or restrictions or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions which have been or are affected, either
directly or indirectly, by war or other emergency.
Bills and Notices: 28. Except as otherwise in this lease provided,
a bill statement, notice or communication
which Owner may desire or be required to give to Tenant, shall be deemed
sufficiently given or rendered if, in writing, delivered to Tenant personally or
sent by registered or certified mail addressed to Tenant at the building of
which the demised premises form a part or at the last known residence address or
business address of Tenant or left at any of the aforesaid premises addressed to
Tenant, and the time of the rendition of such bill or statement and of the
giving of such notice or communication shall be deemed to be the time when the
same is delivered to Tenant, mailed, or left at the premises as herein provided.
Any notice by Tenant to Owner must be served by registered or certified mail
addressed to Owner at the address first hereinabove given or at such other
address as Owner shall designate by written notice.
Water Charges: 29. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary
lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge)
Owner may install a water meter and thereby measure Tenant's water consumption
for all purposes. Tenant shall pay Owner for the cost of the meter and the cost
of the installation, thereof and throughout the duration of Tenant's occupancy
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense in default of which Owner may cause
such meter and equipment to be replaced or repaired and collect the cost thereof
from Tenant, as additional rent. Tenant agrees to pay for water consumed, as
shown on said meter as and when bills are rendered, and on default in making
such payment Owner may pay such charges and collect the same from Tenant, as
additional rent. Tenant covenants and agrees to pay, as additional rent, the
sewer rent, charge or any other tax, rent, levy or charge which now or hereafter
is assessed, imposed or a lien upon the demised
<PAGE> 15
15
premises or the realty of which they are part pursuant to law, order or
regulation made or issued in connection with the use, consumption, maintenance
or supply of water, water system or sewage or sewage connection or system. If
the building or the demised premises or any part thereof is supplied with water
through a meter through which water is also supplied to other premises Tenant
shall pay to Owner, as additional rent, on the first day of each month, ____%
($10/--) of the total meter charges as Tenant's portion. Independently of and in
addition to any of the remedies reserved to Owner hereinabove or elsewhere in
this lease, Owner may sue for and collect any monies to be paid by Tenant or
paid by Owner for any of the reasons or purposes hereinabove set forth.
Sprinklers: 30. Anything elsewhere in this lease to the
contrary notwithstanding, if the New York
Board of Fire Underwriters or the New York Fire Insurance Exchange or any
bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the fire insurance
rate set by any said Exchange or by any fire insurance company, Tenant shall, at
Tenant's expenses, promptly make such sprinkler system installations, changes,
modifications, alterations, and supply additional sprinkler heads or other
equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $10/--, on the first day of each month during the term of this lease, as
Tenant's portion of the contract price for sprinkler supervisory service.
Elevators, Heat, 31. As long as Tenant is not in default under
Cleaning: any the covenants of this lease beyond the
applicable grace period provided in this
lease for the curing of such defaults, Owner shall: (a) provide necessary
passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on
Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided,
same shall be provided only on regular business days Monday through Friday
inclusive, and on those days only between the hours of 9 a.m. and 12 noon and
between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied
by Owner to the demised premises, when and as required by law, on business days
from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the
public halls and public portions of the building which are used in common by all
tenants. Tenant shall, at Tenant's expense, keep the demised premises, including
the windows, clean and in order, to the reasonable satisfaction of Owner, and
for that purpose shall employ the person or persons, or corporation approved by
Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse
and rubbish from the building. Bills for the same shall be rendered by Owner to
Tenant at such time as Owner may elect and shall be due and payable hereunder,
and the amount of such bills shall be deemed to be, and be paid as, additional
rent. Tenant shall, however, have the option of
<PAGE> 16
16
independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building. Owner reserves the right to
stop service of the heating, elevator, plumbing and electric systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Owner desirable or necessary to
be made, until said repairs, alterations, replacements or improvements shall
have been completed. If the building of which the demised premises are a part
supplies manually operated elevator service, Owner may proceed diligently with
alterations necessary to substitute automatic control elevator service without
in any way affecting the obligations of Tenant hereunder.
Security: 32. Tenant has deposited with Owner the sum of
$2,200.-- as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this lease; it is agreed that in the event Tenant defaults in respect of any of
the terms, provisions and conditions of this lease, including, but not limited
to, the payment of rent and additional rent, Owner may use, apply or retain the
whole or any part of the security so deposited to the extent required for the
payment of any rent and additional rent or any other sum as to which Tenant is
in default or for any sum which Owner may expend or may be required to expend by
reason of Tenant's default in respect of any of the terms, covenants and
conditions of this lease, including but not limited to, any damages or
deficiency in the reletting of the premises, whether such damages or deficiency
accrued before or after summary proceedings or other re-entry by Owner. In the
event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this lease, the security shall be
returned to Tenant after the date fixed as the end of the Lease and after
delivery of entire possession of the demised premises to Owner. In the event of
a sale of the land and building or leasing of the building, of which the demised
premises form a part, Owner shall have the right to transfer the security to the
vendee or lessee and Owner shall thereupon be released by Tenant from all
liability for the return of such security; and Tenant agrees to look to the new
Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Captions: 33. The Captions are inserted only as a matter
of convenience and for reference and in no
way define, limit or describe the scope of this lease nor the intent of any
provision thereof.
Definitions: 34. The term "Owner" as used in this lease means
only the owner of the fee or of the
leasehold of the building, or the mortgagee in possession, for the time being of
the land and building (or the owner of a lease of the building or
<PAGE> 17
17
of the land and building) of which the demised premises form a part, so that in
the event of any sale or sales of said land and building or of said lease, or in
the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums which
shall be due to Owner from Tenant under this lease, in addition to the annual
rental rate. The term "business days" as used in this lease, shall exclude
Saturdays, Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service. Wherever it is expressly
provided in this lease that consent shall not be unreasonably withheld, such
consent shall not be unreasonably delayed.
Adjacent 35. If an excavation shall be made upon land
Excavation- adjacent to the demised premises, or shall
Shoring: be authorized to be made, Tenant shall
afford to the person causing or authorized
to cause such excavation, license to enter upon the demised premises for the
purpose of doing such work as said person shall deem necessary to preserve the
wall or the building of which demised premises form a part from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Owner, or diminution or abatement of rent.
Rules and 36. Tenant and Tenant's servants, employees,
Regulations: agents, visitors, and licensees shall
observe faith fully, and comply strictly
with, the Rules and Regulations annexed hereto and such other and further
reasonable Rules and Regulations as Owner or Owner's agents may from time to
time adopt. Notice of any additional rules or regulations shall be given in such
manner as Owner may elect. In case Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within fifteen
(15) days after the giving of notice thereof. Nothing in this lease contained
shall be construed to impose upon Owner any duty or obligation to enforce the
Rules and Regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for violation
of the same by any other tenant, its servants, employees, agents, visitors or
licensees.
<PAGE> 18
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Glass: 37. Owner shall replace, at the expense of the
Tenant, any and all plate and other glass
damaged or broken from any cause whatsoever in and about the demised premises.
Owner may insure, and keep insured, at Tenant's expense, all plate and other
glass in the demised premises for and in the name of Owner. Bills for the
premiums therefor shall be rendered by Owner to Tenant at such times as Owner
may elect, and shall be due from, and payable by, Tenant when rendered, and the
amount thereof shall be deemed to be, and be paid, as additional rent.
Estoppel 38. Tenant, at any time, and from time to time,
Certificate: upon at least 10 days' prior notice by
Owner, shall execute, acknowledge and
deliver to Owner, and/or to any other person, firm or corporation specified by
Owner, a statement certifying that this Lease is unmodified in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), stating the dates to which
the rent and additional rent have been paid, and stating whether or not there
exists any default by Owner under this Lease, and, if so, specifying each such
default.
Directory Board 39. If, at the request of and as accommodation
Listing: to Tenant, Owner shall place upon the
directory board in the lobby of the
building, one or more names of persons other than Tenant, such directory board
listing shall not be construed as the consent by Owner to an assignment or
subletting by Tenant to such person or persons.
Successors and 40. The covenants, conditions and agreements
Assigns: contained in this lease shall bind and inure
to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns. Tenant shall look
only to Owner's estate and interest in the land and building for the
satisfaction of Tenant's remedies for the collection of a judgement (or other
judicial process) against Owner in the event of any default by Owner hereunder,
and no other property or assets of such Owner (or any partner, member, officer
or director thereof, disclosed or undisclosed), shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this lease, the relationship of Owner and
Tenant hereunder, or Tenant's use and occupancy of the demised premises.
Para 32 continued - Such Security Deposit shall not bear any Interest.
<PAGE> 19
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IN WITNESS WHEREOF, Owner and Tenant have respectively signed
and sealed this lease as of the day and year first above written.
Witness for Owner: SATYANAM, INC CORP.
-----------------------------------SEAL
/s/ Nari Pohani [L.S.]
- ------------------------------ -----------------------------------
Witness for Tenant SURGICAL CARE PUBLISHING, INC. CORP.
---------------------------------- SEAL
/s/ Faustino Galan [L.S.]
-----------------------------------
<PAGE> 20
20
ACKNOWLEDGEMENTS
CORPORATE TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came _______________________________ to me known, who being by me duly sworn,
did depose and say that he resides in ___________________________________ that
he is the _____________________ of _______________ the corporation described in
and which executed the foregoing instrument, as TENANT; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it as so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
___________________________
INDIVIDUAL TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came ___________________________________ to me known and known to me to be the
individual described in and who, as TENANT, executed the foregoing instrument
and acknowledged to me that ___________ he executed the same.
___________________________
<PAGE> 21
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IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A
PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any or the
corridors of halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any bicycles, vehicles, animals, fish, or
birds be kept in or about the building Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any
<PAGE> 22
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Tenant, Owner may remove same without any liability and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice,
drinking water, towel and other similar services, or accept barbering or
bootblacking services in the demised premises, except from persons authorized by
Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting
and peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons. Notwithstanding the foregoing,
Owner shall not be required to allow Tenant or any person to enter or remain in
the building, except on business days from 8:00 a.m. to 6:00 p.m. and on
Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against
Owner by reason of Owner excluding from the building any person who does not
present such pass.
<PAGE> 23
23
11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a loft building, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive, or hazardous
fluid, material, chemical or substance, or cause or permit any odors of cooking
or other processes, or any unusual or other objectionable odors to permeate in
or emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which
disturbs or interferes with other Tenants in the beneficial use of their
premises.
<PAGE> 24
Address
Premises
========================================================
TO
========================================================
STANDARD FORM OF
LOFT LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1994. All rights Reserved.
Reproduction in whole or in part prohibited.
========================================================
Dated ____________________________, 19__
Rent Per Year
Rent Per Month
Term
From
To
Drawn by_____________________________________________
Checked by___________________________________________
Entered by___________________________________________
Approved by__________________________________________
<PAGE> 25
Rider Agreement Dated October 7, 1996,
Between SATYANAM, INC. As Owner,
and SURGICAL CARE PUBLISHING, INC., as Tenant
41. BASE RENT
A. Tenant shall pay to the Owner base rent for the demised
premises in accordance with the provisions of the printed form of this Lease at
an annual rate of:
$12,672.-- for the period Nov 1st, 1996 to June 30th,
1997, payable in equal monthly installments of $1,056.00
$13,176.--for the period July 1st, 1997 to June 30th,
1998, payable in equal monthly installments of $1,098.00
$13,704.-- for the period July 1st, 1998 to June
30th, 1999, payable in equal monthly installments of $1,142.00
42. OPTION TO RENEW:
A. Provided Tenant is not in default in any of the material
terms, covenants or condition of this Lease, including but not limited to the
obligation to pay rent or additional rent, and provided further that Owner has
not during the initial term of the Lease commenced any summary proceeding for
possession or rent that has resulted in a judgement in favor of Owner, whether
by stipulation or after trial, Tenant shall have the right to renew this Lease
for an additional Five (5) year term commencing July 1st, 1999 and expiring June
30th, 2004.
The base rental for the renewal term shall be as
follows:
$14,244.-- for the period July 1st, 1999 to June
30th, 2000, payable in equal monthly installments of $1,187.00
$14,820.-- for the period July 1st, 2000 to June
30th, 2001, payable in equal monthly installments of $1,235.00
$15,420.-- for the period July 1st, 2001 to June
30th, 2002, payable in equal monthly installments of $1,285.00
$16,032.-- for the period July 1st, 2002 to June
30th, 2003, payable in equal monthly installments of $1,336.00
$16,680.-- for the period July 1st, 2003 to June
30th, 2004, payable in equal monthly installments of $1,390.00
<PAGE> 26
2
B. If the Tenant exercises the option to renew the lease;
tenant shall notify Landlord in writing on or before December 31, 1998 that it
intends to renew the Lease. The failure by Tenant to notify Landlord timely of
its intention to renew shall constitute an affirmative election by Tenant not to
renew the lease upon which Landlord may reasonably rely, if it so desires to
rerent the demised premises to a third party.
43. SUBLEASE
Owner represents and Tenant understands and agrees
that Owner is the proprietary lessee of the demised premises pursuant to a
Proprietary Lease between Owner, as lessee and 134 West 29th Street Owners Corp,
as lessor ("Owners Corporation"). All rights of Tenant are subject to the
Proprietary Lease. Tenant shall observe each and every covenant of the
Proprietary Lease on the part to be performed by Owner as lessee under the
Proprietary Lease. Observance of the terms, covenants and conditions of the
Proprietary Lease by the Tenant except the financial obligation shall be deemed
a substantial obligation of this tenancy. This lease is conditioned upon Owner's
obtaining the written consent from the Owner Corporation to this lease by
6/30/94.
44. PAYMENT OF RENT AND ADDITIONAL RENT
A. The payment of all rent and additional rent under
this lease shall constitute a substantial obligation of this tenancy entitling
the Owner to exercise all its rights and remedies under Article 17 of this
lease.
B. It shall not constitute a bar, preclusion or
election of remedies against the enforcement of a landlord's rights and remedies
under Article 17 of this lease for nonpayment of rent or additional rent if the
Owner has already commenced a proceeding or action to recover the rent or
additional rent.
C. Tenant covenants and agrees that the monthly
installments of annual rental shall be paid by Tenant to Owner on or before the
first day of each month without notice or demand by Owner. In the event that
such installments of annual rental shall not be paid by the Fifth (5) day of the
month or any item of additional rent shall not be paid within the applicable
time period following written demand therefor, the Owner shall give a written
notice to the Tenant. If the Tenant does not pay the amount due within three (3)
days of receipt of such written notice then the Tenant shall pay to the Owner as
additional rent, a late charge equal to two (2%) percent of such monthly
installment or item of additional rent.
D. If Owner receives from Tenant any payment less
than the sum of the annual rent, additional rent and other amount due under this
Lease, ("Partial Payment"), or Tenant is in arrears in payment of any amount due
under this Lease, in its sole discretion, may
<PAGE> 27
3
allocate such Partial Payment or payment in whole or in part to any other
charges or to any combination thereof.
E. If the Tenant's checks are returned by his bank
for any reason whatsoever three times during the term of the lease, then, the
Owner, at Owner's option, shall have the right, to demand payment of future
installments of rent or additional rent by certified, bank or teller's check or
by postal money order.
45. CONDITION OF PREMISES
Tenant acknowledges that it has inspected demised
premises and is familiar with the physical condition of same and Tenant agrees
to accept the demised premises in their "AS IS" physical condition,
Owner represents that substantially all the friable
Asbestos Containing Material has been either removed or contained throughout the
building and in the demised premises.
Owner will defend, indemnify and hold harmless
Tenant, its affiliates, its employees, agents and insurers, from and against all
losses, claims, damages, fines and expenses (including without limitation
reasonable legal fees) resulting from any environmental remediation required by
applicable laws, regulations or directives of properly constituted governmental
authorities as a result of the release of any toxic or hazardous substance or
waste on or about the Demised Premises by anyone other than Tenant, its
affiliates, its employees, agents or contractors.
46. USE
A. Tenant shall use and occupy the demised premises
solely for the use specified in Article 2 of the printed form of this lease and
for no other purposes. Tenant specifically covenants and agrees that Tenant
shall not use the demised premises or any part thereof, nor permit the demised
premises or any part thereof to be used for sleeping or residential purposes or
for overnight accommodations. Tenant shall continuously and uninterruptedly
during the term of this lease conduct its customary business activities as
permitted by Article 2 above.
B. In addition, Tenant shall not suffer nor permit
the demised premises or any part thereof to be used in any manner, or anything
to be done therein, or suffer or permit anything to be brought into or kept
therein, which would in any way (i) violate any of the provisions of any grant,
lease or mortgage or requirements of public authorities (ii) make void or
voidable any fire or liability insurance policy then in force with respect to
the building, (iii) make unattainable or more difficult to obtain from reputable
insurance companies authorized to do business in New York State fire insurance
with extended coverage, or liability, elevator, boiler or any other insurance
maintained by Landlord, (iv) cause physical damage to the building or any part
thereof, (v) constitute a public or private nuisance, (vi) impair, the
appearance, character or
<PAGE> 28
4
reputation of the building, (vii) impair or interfere with any of the building
services or the proper and heating, cleaning, or other servicing of the building
or the demised premises or impair or interfere with or tend to impair or
interfere with the use of the other areas of the building by, or occasion
discomfort, annoyance or inconvenience to, Owner or any of the other tenants or
occupants of the building, (viii) violate any of the terms, covenants or
conditions contained in this Lease, or (ix) be illegal, unlawful, or result in
the creation of a public or private nuisance.
C. Owner makes no representations, guarantees, or
acknowledgements that the use designated in the Lease by the Tenant is permitted
under any statute, ordinance, rule, regulation, or other present or future law
promulgated by any state, federal, municipal, or local government or agency or
authority thereof. In the event that said use is illegal or determined by any
notice of violation or order issued by the aforesaid appropriate governmental
authority, then upon six (6) days prior written notice given in accordance with
this Lease, this Lease and the term thereof shall expire on the last day of said
notice as if said day were the last day of the term of this Lease.
D. If any governmental licence or permit shall be
required for the proper and lawful conduct of Tenant's business, Tenant, at
Tenant's sole cost and expense, shall duly procure and thereafter maintain such
licence or permit and submit the same to inspection by Owner Tenant, at Tenant's
sole cost and expense, shall at all times comply with the terms and conditions
of each such licence or permit.
47. BROKERAGE
The parties warrant and represent to each other that
they had no dealings with any broker or agent in connection with this Lease. The
Tenant shall have no obligation with respect to any commission payable to said
broker. The parties covenant and agree to hold each other harmless and indemnify
each other from and against any and all costs, expenses or liability for any
compensation, commissions, fees and charges claimed by any broker with respect
to this Lease or the negotiation thereof. The obligation of Tenant contained in
the Article shall survive the expiration or earlier termination of this Lease.
48. RUBBISH REMOVAL AND CLEANING
A. Tenant covenants and agrees to maintain the
demised premises and adjacent public and/or common areas in a condition of
proper cleanliness, orderliness and state of attractive appearance at all times.
Tenant shall also be responsible and shall contract for the removal of all
rubbish from the demised premises at its sole cost and expense, in accordance
with any and all applicable municipal codes and regulations. If Tenant fails or
refuses to remove any rubbish from, in or around the demised premises, the Owner
may contract to have same removed and the Tenant shall pay for actual costs of
said removal as additional rent.
<PAGE> 29
5
49. INSURANCE
A. Tenant shall obtain or procure its own fire,
rental, liability, or other casualty insurance as may be required under the
terms of this Lease. Supplementary Article 9 of this Lease, each party shall
look first to any insurance in its favor before making any claim against the
other party for recovery of loss or damage resulting from fire or any other
casualty.
B. (1) Tenant shall, at its sole cost and expense,
procure and maintain throughout the term of this Lease a comprehensive general
liability policy of insurance insuring Tenant, Owner and Owners Corporation
against any and all risks and/or liability for property damage and bodily injury
to or death of a person or persons in, on or about the demised premises,
occasioned by or arising out of or in connection with the use or occupancy of
the demised premises, and a fire insurance policy (including extended coverage,
vandalism and malicious mischief) covering the demised premises and Tenant's
property. Such policies must be obtained from an insurance company rated "A" or
better by A.M. Best Company, Inc. in an amount not less than $1,000,000.00 with
respect to the bodily injuries or to death of any one person, in an amount not
less than $1,000,000.00 per occurrence, and in an amount of not less than
$250,000.00 for property damage, and shall name Owner and Owners Corporation as
an additional insureds. Tenant will deliver the original policy and all original
renewals of said policy to Owner on demand.
(2) Tenant shall at all times during this Lease is in
effect maintain for its own benefit, fire and casualty insurance for all the
contents, fixtures, personal, property, inventory and other moveable or
nonmoveable property of Tenant.
C. Tenant agrees to pay all premiums and charges for
the insurance required to be maintained by Tenant pursuant to the terms of this
Lease. If Tenant fails to make any such payments when due, or in the event of
its failure to deliver and/or pay the premium thereon, then Owner after giving
10 days written notice to the Tenant and opportunity to cure, may pay said
premium or charge (but in no event shall be obligated to do so), and upon
written demand to Tenant, Owner may collect said payment as additional rent, or
deem Tenant to be in default of substantial obligation of its tenancy. The
failure to maintain and/or renew the above policies of insurance shall
constitute a breach of a substantial obligation of this tenancy.
50. ADDITIONAL RENT
A. All payments, other than the base rental as
adjusted from time to time, to be made by Tenant pursuant to this Lease shall be
deemed additional rent, whether or not specifically so called, and, in the event
of any non-payment thereof, Owner shall have all rights and remedies provided
for herein or by law for non-payment of rent.
<PAGE> 30
6
B. Should Tenant default in the timely performance of
any covenant, term or condition herein contained on Tenant's part to be
performed, Owner, at its option and without thereby waiving such a default, may
perform or cause the Managing Agent of the Building to perform the same for and
on account of, and at the expense of the Tenant after five (5) days written
notice (except in the event of an emergency, i.e., threat of personal injury
and/or damage or destruction of property, when no notice shall be required.
Tenant shall pay as an item of additional rent all costs and expenses which
Owner may incur any of Tenant's defaults within five (5) days following delivery
of a written demand therefor which costs and expenses shall include, but not be
limited to, materials, fees paid to architects, engineers, attorneys,
contractors, subcontractors, fines and penalties.
C. Owner's failure during the term of this Lease to
prepare and deliver any statements of bills required to be delivered to Tenant
pursuant to the provisions of this lease, or Owner's failure to make a demand
for the payment of any item of additional rent, shall not in any way be deemed
to be a waiver of, or cause Owner to forfeit or surrender its rights to collect
such additional rent during the terms of this lease. Tenant's liability for the
payment of any item of additional rent shall survive the expiration or sooner
termination of this Lease.
51. NO WAIVER BY OWNER
A. The receipt of any rent, or any portion thereof,
whether specifically reserved or payable under any of the covenants herein
contained, after a default on the part of the Tenant (whether such rent is due
before or after such default) shall not be deemed to operate as a waiver of any
default or of any current default or of the right of Owner to enforce the
payment of any rent herein reserved or to declare a forfeiture to this Lease and
to recover the possession of the demised premises provided in this Lease. Nor
shall
B. Owner's acceptance of rent during any time in
which Tenant is in default of any provision hereunder shall not constitute a
waiver of such default, and Tenant specifically agrees and consents that rent
must be paid by Tenant during any default and Tenant specifically agrees that
such acceptance shall be made without prejudice to Owner's right to terminate
this Lease and shall not be deemed a consent to any default of the Lease.
52. BILLS AND NOTICES
Supplementing Article 28 of this lease, any notice,
bill, statement, or communication required to be given under the terms of this
Lease by the Owner shall be sufficiently given by the Owner's agent or
attorney-at-law or in-fact, whether or not any authorization is annexed. Any
notice, bill, statement, or communication required to be given shall be
sufficiently given when mailed.
53. ELECTRICITY SERVICE
<PAGE> 31
7
A. (1) Landlord shall redistribute or furnish
electrical energy to or for the use of Tenant in the Premises for the operation
of the lighting fixtures and the electrical receptacles installed in the
Premises. Tenant's electrical consumption shall be measured by the meter
currently installed in the Premises. The cost of electricity utilized by Tenant
shall be paid for by Tenant to Landlord as additional rent and shall be
calculated at the then applicable rate prescribed by the public utility company
serving the Premises for submetered electrical energy, plus (i) Landlord's
charge for overhead and supervision in the amount of ten percent (10%) of the
total electric bill and (ii) any taxes or other charges in connection therewith.
If any tax shall be imposed upon Landlord's receipts from the sale or resale of
electrical energy to Tenant, the prorata share applicable to the electrical
energy service received by Tenant shall be passed on to, included in the bill
of, and paid by Tenant if and to the extent permitted by law. Landlord shall
bill Tenant, monthly, for the cost of its consumption of electricity in the
Premises and Tenant shall pay the amount thereof at the time of payment of each
installment of Rent. If either the quantity or character of electrical services
is changed by the public utility or other company supplying electrical service
to the Building or is no longer available or suitable for Tenant's requirements,
no such change, unavailability or unsuitability shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord, or its agents, by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's
business, or otherwise.
(2) Any additional feeders or risers which are
required to supply any additional electrical requirements which Tenant may have,
and all other equipment proper and necessary in connection with such feeders or
risers, shall be installed by Landlord upon Tenant's request, at the sole cost
and expense of Tenant, provided that, in Landlord's reasonable judgment, such
additional feeders or riders are necessary and are permissible under applicable
laws and insurance regulations and the installation of such feeders or risers
will not cause permanent damage or injury to the Building or the Premises or
cause or create a dangerous or hazardous condition or entail excessive or
unreasonable alterations or interface with or disturb other tenants or occupants
of the Building. At no time shall the use of electrical energy in the Premises
exceed the capacity of the existing feeders or wiring installations then serving
the Premises. Tenant shall not make or perform, or permit the making or
performance of, any alterations to wiring installations or other electrical
facilities in or serving the Premises without the prior consent of Landlord in
each instance. Any such Alterations, additions or consent by Landlord shall be
subject to the provisions of this Lease including, but not limited to, the
provisions of Article 3 hereof.
(3) Landlord reserves the right to discontinue
furnishing electricity to Tenant in the Premises on not less than sixty (60)
days written notice to Tenant. If Landlord exercises such right to discontinue,
or is compelled to discontinue furnishing electricity to Tenant, this Lease
shall continue in full force, and effect and shall be unaffected thereby, except
only that from and after the effective date of such discontinuance, Landlord
shall not be obliged to furnish
<PAGE> 32
8
electricity to Tenant. If Landlord so discontinues furnishing electricity to
Tenant, Tenant shall arrange to obtain electricity directly from the public
utility or other company servicing the Building. Such electricity may be
furnished to Tenant by means of the then existing electrical. facilities serving
the Premises to the extent that the same are available, suitable and safe for
such purposes. All meters and all additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to obtain
electricity, of substantially the same quantity, quality and character, shall be
installed by Landlord at Tenant's sole cost and expense. Landlord shall not
voluntarily discontinue furnishing electricity to Tenant until Tenant is able to
receive electricity directly from the public utility or other company servicing
the Building.
(4) Landlord shall not be liable to tenant in any way
for any interruption, curtailment or failure or defect in the supply or
character of electricity furnished to the premises by reason of any requirement,
act or omission or Landlord or of any public utility or other company servicing
the Building with electricity or for any other reason except Landlord's
negligence or willful conduct.
B. Tenant shall not be released or excused from the
performance of any of its obligations under this Lease for any change in the
quantity or quality of service, failure or interruption or curtailment or
cessation of Utilities service for any reason whatsoever, and no such change,
failure, interruption or curtailment or cessation shall constitute a
constructive or partial eviction or entitle Tenant to an abatement of, offset
against, or deduction from rent or additional rent or impose any liability upon
Owner.
C. Owner shall not be obligated to provide hot water,
air conditioning, and ventilation service to the demised premises.
54. ESTOPPEL CERTIFICATE
A. Upon Owner's written request, Tenant shall confirm
the existence of this Lease and any modifications hereto as evidenced by a
written agreement, and/or specific terms hereof (said form shall hereinafter be
referred to as an "Estoppel Certificate"). Tenant shall within five (5) days
from receipt of an Estoppel Certificate, execute the same in the presence of a
notary public who shall thereafter complete the acknowledgement and Tenant shall
return said Estoppel Certificate to Owner and/or Owner's designee by the means
specified. All parties to whom said Estoppel Certificate is addressed shall be
absolutely entitled to rely upon the reservations of Tenant therein contained
and Tenant shall be forever barred from refuting any statements therein set
forth as of the date to which said Estoppel Certificate speaks.
B. If, in connection with obtaining financing, a
bank, insurance company, or other lending institution shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent
<PAGE> 33
9
thereto, provided that such modifications do not increase the obligations of
Tenant hereunder or materially adversely affect the leasehold interest hereby
created.
55. NO LIABILITY ON LANDLORD
A. Tenant shall indemnify and save Owner harmless
against (i) any and all claims against Owner of whatever nature arising from any
act, omission or negligence of Tenant, its contractors, licensees, agents,
servants, employees, invitees and/or visitors. (ii) any and all claims against
the Owner arising from any accident, injury or damage occurring outside of the
demised premises but within or about the land and building where accident,
injury or damage result or is claimed to have resulted from any act, omissions
or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees and/or visitors. (iii) any breach, violation or
nonperformance of any of the terms, covenants, and conditions contained in this
lease on the part of the Tenant to be fulfilled, kept, observed and performed.
This indemnity and hold harmless covenant
shall include indemnity from and against any and all liability, fines, suits,
demands, costs and expenses (including attorneys' fees and disbursements) of any
kind or nature incurred in connection with any such claim or proceeding brought
thereon, and the defense thereof by the Owner. The indemnity and hold harmless
covenant shall survive the expiration or the earlier termination of the term of
this Lease and for any period of time prior to the commencement of the term of
this Lease during which Tenant was given access to the demised premises.
B. Tenant shall reimburse Owner as an item of
additional rent within ten (10) days following written demand therefor, for all
expenditures incurred by or damages or fines sustained or incurred by Owner due
to Tenant's default of the provisions of this Article.
C. Notwithstanding anything provided in this Lease or
provided at law or in equity to the contrary, in the event that Tenant shall
obtain a monetary judgement against Owner in any action or proceeding, Tenant
shall seek satisfaction of such a judgement only from Owner's estate and
interest in the demised premises comprising of Cooperative Unit # 306, 307, 308,
309/310 in 134 West 29th Street Owners Corporation, and not other property or
other assets belonging to Owner or its directors, officers, partners, principals
(disclosed or undisclosed) or employees shall be subject to lien, levy,
execution or other enforcement procedure for the satisfaction of any such
judgement arising from the relationship of landlord and tenant hereunder,
Tenant's use and occupancy of the demised premises or this Lease. If Tenant
shall acquire a lien on such other property or assets by judgement or otherwise,
Tenant shall promptly release such lien by executing and delivering to Owner an
instrument to the effect prepared by Owner, Tenant's covenants as contained in
the Article shall survive the expiration or the earlier termination of the term
of this Lease.
<PAGE> 34
10
56. MECHANICS' LIEN
In no event shall any material or equipment be
incorporated into the demised premises in connection with any alterations,
installations, additions, improvements, repairs or replacements made by Tenant
including, but not limited to, Tenant's changes, which is subject to any lien,
encumbrance, chattel mortgage, security interest or charge of any kind
whatsoever, or is subject to any conditional sale or other similar or dissimilar
title retention agreement with this express written consent of Owner. Tenant
specifically covenants that any personal property which Tenant shall bring to or
install in the demised premises which requires special handling shall not be
subject to any security interest held by a third party. Any mechanic's or
materialman's lien filed against the lands and/or the building or Owner's
interest therein, for work claimed to have been done, or for materials claimed
to have been furnished to Tenant, shall be discharged by Tenant within one
hundred twenty (120) days thereafter, at Tenant's sole cost and expense, by
filing a bond as provided by law or otherwise. If Tenant shall fail to have
discharged any lien or encumbrance described in this Article, Owner, shall have
the right but not the obligation, to cause such lien or encumbrance to be
discharged by bonding or otherwise, and Tenant shall reimburse Owner as an item
of additional rent, for all actual costs and expenses which Owner incurs,
including reasonable attorneys' fees and disbursements, within ten (10) days
following written demand.
57. GOVERNMENTAL REGULATIONS
A. In the event the Tenant makes any alterations,
decorations, installations, etc., including but not limited to, Tenant's
changes, if any, that do not comply with applicable building regulations,
administrative agency, governmental or quasi-governmental agency regulations, or
that may result in the imposition of any fines, penalties (civil or criminal) or
any monetary awards, costs or fees against Landlord, Tenant shall be liable for
any and all costs associated therewith including, but not limited to, attorney's
fees, architects' fees, engineering fees, penalties, fines, renovation costs,
construction costs, consultation and any and all other costs, which shall be
deemed additional rent and due upon receipt of Owner's statement therefor.
B. Supplementing the provisions of Article 6 hereof,
Tenant shall promptly comply with and give prompt notice to Owner of any notice
it receives of the violation of any present or future law, order, ordinance, or
regulation of any governmental entity, department, commission, or any direction
of any public officer pursuant to law or of the New York Board of Fire
Underwriters or the use or occupation thereof, and Tenant shall effect such
compliance at its sole cost and expense.
58. LIMITATION ON RENT
A. If, at the commencement of, or at any time during
the term of this lease, the rent reserved in this Lease is not fully collectible
by reason of any federal, state, county
<PAGE> 35
11
or city law, proclamation, order or regulation, or direction of a public officer
or body pursuant to law, Tenant agrees to take such steps as Owner may request
to permit Owner to collect the maximum rents which may be legally permissible
from time to time during the continuance of such legal rent restriction (but not
in excess of the amounts reserved therefor under this Lease). Upon the
termination of such legal rent restriction, Tenant shall pay to Owner to the
extent permitted by law, an amount equal to (a) the rents which would have been
paid pursuant to this lease to such legal rent restriction less (b) the rents
paid by Tenant to Owner during the period such legal rent restriction was in
effect.
B. To the maximum extent permitted by law, Tenant
hereby waives any right to continued occupancy of the demised premises after the
expiration of the Lease imposed by any statute, rule or ordinance. If Tenant by
regulatory statute, rule or ordinance is entitled to continued occupancy, and so
long as such statute is in effect or applies to Tenant, then Tenant shall be
obligated to pay rent on a month-to-month basis at a new base rent equal to 125%
of the highest monthly rent set forth in this Lease plus any and all additional
rents denominated herein, and the terms herein shall apply to such statutory
tenancy to the extent they do not conflict with statute, rule or ordinance.
59. ENTIRE AGREEMENT
This Lease contains the entire understanding arrived
at between the parties and all prior discussions and negotiations are merged
herein and may not be extended, renewed, terminated, or otherwise modified
except by an instrument in writing signed by the party against whom enforcement
of any such modification is sought.
60. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED
It is specifically understood and agreed that this
Lease is offered to Tenant for signature subject to Owner's acceptance and
approval and that Tenant has hereunto affixed its signature with the
understanding that this Lease shall not in any way bind owner until such time as
the same has been approved and executed by Landlord and delivered to Tenant.
61. SEVERABILITY
This lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease or any part thereof to be drafted. If any provision of this Lease shall be
determined to be void or unenforceable by any court of competent jurisdiction,
then such determination shall not affect any other provisions of this Lease, all
of which other provisions shall remain in full force and effect; and it is the
intention of the parties hereto that if any provision of this Lease is capable
of two constructions, one which would render the provision valid, then the
provision shall have the meaning which renders it valid.
<PAGE> 36
12
62. NO COUNTERCLAIMS
Tenant shall and hereby does waive its right and
agrees not to interpose any counterclaim or set off, of whatever nature or
description, in any proceeding or action that may be instituted by Owner against
Tenant to recover rent, additional rent, other charges, possession, or for
damages, or in connection with any matters or claims whatsoever arising out of
or in any way connected with this lease, or any renewal, extension, holdover, or
modification thereof, or the relationship of Owner and Tenant, or Tenant's use
or occupancy of said premises. This clause, as well as the "waiver of jury
trial" provision of this lease, shall survive the expiration, early termination,
or cancellation of this lease or the term thereof. Nothing herein contained,
however, shall be construed as a waiver of Tenant's right to commence a separate
action on a bona fide claim against Owner.
63. OWNER'S CONSENT
If Tenant shall request Owner's approval or consent
and Owner shall fail or refuse to give such approval or consent, Tenant shall
not be entitled to any damages for any withholding or delay of such approval or
consent by Owner it being intended that Tenant's sole remedy shall be an action
for injunction or specific performance (the rights to money damages or other
remedies being hereby specifically waived), and that such remedy shall be
available only in those cases where Owner shall have expressly agreed in writing
not to unreasonably withhold its consent or approval or where, as a matter of
law, Owner may not unreasonably withhold its consent or approval.
64. SUBORDINATION AND ATTORNMENT
A. This Lease and all rights of Tenant hereunder are
and shall be subject and subordinate in all respects to all underlying leases
and to all mortgages and building loan agreements, including without limitation
leasehold mortgages, which may now or hereafter affect the land and/or the
building and/or any of such leases, whether or not such mortgages shall also
cover other lands and/or buildings, to each and every advance made or hereafter
to be made under such mortgages and/or building loan agreements, and to all
renewals, modifications, replacements, assignments, and extensions of such
leases, building loan agreements, mortgages and spreaders and consolidations of
such mortgages.
This Article shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly, at its sole cost and expense, execute and
deliver any instrument in recordable form that Owner, the lessor of any such
lease of the holder of any such mortgage or any of their respective assigns or
successors-in-interest may reasonably request to evidence such subordination.
The leases to which this Lease is, at the time referred to, subject and
subordinate pursuant to this Article are hereinafter sometimes called "superior
leases" and the mortgages to which this Lease is, at the
<PAGE> 37
13
time referred to, subject and subordinate pursuant to this Article are
hereinafter sometimes called "superior mortgages" and the lessor of a superior
lease or its successor-in-interest, at the time referred to, is sometimes
hereinafter called a "lessor" and the holder of a superior mortgage or its
successor-in-interest at the time referred to is sometimes hereinafter called a
"holder".
B. In the event of any act or omission of Owner which
would give tenant the right, immediately or after lapse of a period of time, to
cancel or terminate this lease, or to claim a partial or total eviction, Tenant
shall not exercise such right (i) until it has given written notice of such act
or omission to the lease, and (ii) unless such act or omission shall be one
which is not capable of being remedied by Owner or such holder or lessor within
a reasonable period of time, until a reasonable period of time, for remedying
such act or omission shall have elapsed following the giving of such notice and
following the time when such holder or lessor shall have become entitled under
such superior mortgage or superior lease, as the case may be, to remedy the same
(to which reasonable period shall in no event be less that the period to which
Owner would be entitled under this Lease otherwise, after similar notice, to
effect such remedy,) provided such holder or lessor shall with due diligence
give Tenant written notice of its intention to and commence and continue to,
remedy such act or omission.
C. If the fee owner of the lands and/or building of
which the demised premises form a part, the lessor of a superior lease of the
holder of a superior mortgage shall succeed to the rights of Owner under this
lease, whether through possession or foreclosure action or through termination
for any reason of the leasehold estate covering the lands and/or building or by
delivery succeeding to Owner's rights (herein sometimes called "successor
Landlord") and upon such successor Owner's written agreement to accept Tenant's
attornment, Tenant shall attorn to and recognize such successor landlord as
Tenant's landlord under this Lease. The foregoing provisions shall inure to the
benefit of any such successor landlord, and shall be self-operative upon any
demand, without requiring any further instrument to give effect to said
provisions. Tenant, however, upon demand of any such successor landlord, agrees
to execute, from time to time, an instrument in confirmation of such attornment
which is satisfactory to such successor landlord. Upon such attornment this
lease shall continue in full force and effect for the remainder of the term
originally demised under this lease as, or as if it were, a direct lease between
successor landlord and Tenant upon all of the terms, covenants, conditions,
agreements and provisions as are set forth in this lease except that the
successor landlord shall not:
(i) be liable for any previous act or
omission of Owner under this Lease;
(ii) be subject to any offset, not
expressly provided for in this lease, which shall have theretofore accrued to
Tenant against Owner or
(iii) be bound by any previous
modification of this lease, not expressly provided for in this lease, or by any
previous prepayment of more than one month's
<PAGE> 38
14
installments of fixed annual rent, unless such modification or prepayment shall
have been expressly approved in writing by the successor landlord through or by
reason of which the successor landlord shall have succeeded to the rights of
Owner under this lease.
D. Landlord hereby agrees to request from any lessor
under a Superior Lease, or trustee or mortgagee of a Mortgage superior to the
interest of Tenant hereunder, an agreement in the standard form customarily
employed by such lessor, trustee or mortgagee pursuant to which such lessor,
trustee, or mortgagee shall agree that the leasehold estate granted to Tenant
and the rights of Tenant pursuant to this Lease to quiet and peaceful possession
under this Lease shall not be terminated, modified, affected or disturbed by an
action which any such trustee or mortgagee may take to foreclose any such
mortgage, or which any such lessor may take to terminate such Superior Lease.
Such agreement shall remain in effect so long as Tenant shall pay the Rent,
escalations, additional rents, and other amounts to be paid by Tenant under the
Lease, within any applicable grace periods provided for hereunder, without
offsets or defenses thereto, and as long as Tenant shall fully perform and
comply with all the other terms, covenants, conditions and provisions of this
Lease on the part of the Tenant to be performed or complied with.
65. OCCUPANCY TAX
Tenant shall pay any occupancy tax or rent tax now in
effect or hereafter enacted directly to the taxing authority responsible for the
collection of the same. In the event such occupancy tax or rent tax is payable
by Owner in the first instance or hereafter required to be paid by Owner, such
tax shall be paid to Owner additional rent within ten (10) days following
Owner's written demand therefor. Nothing contained herein shall be deemed to
require Tenant to pay municipal, state, federal income, inheritance, estate,
succession, transferor gift or any corporate franchise tax imposed upon Owner.
66. REPAIRS AND MAINTENANCE
A. Tenant shall, at its sole cost and expense, take
good care of and make all interior repairs and replacements to the demised
premises and the fixtures and appurtenances therein, nonstructural, foreseen
and/or unforeseen, and ordinary and/or extraordinary during the Term of this
lease, which shall include, without limitation, all repairs and replacements of
the demised premises, electrical, ventilating systems, floors, walls, ceiling,
doors, pipes, conduits appurtenant to the demised premises as and when needed so
as to preserve, maintain and/or keep the demised premises in good working order,
conditions and/or repair and in tenantable condition, reasonable wear and tear,
obsolescence and damage from the elements, fire and other casualty.
B. The quality of workmanship and materials used with
respect to the repairs, replacements, maintenance and other work required to be
done under the Article and/or
<PAGE> 39
15
Article 4 hereof shall be at least equal in quality and class to the original
materials and workmanship.
67. CONFLICTS
If there is any conflict between the terms contained
in the printed form lease and the terms contained in this Rider, the provisions
of this Rider shall govern.
68. HOLDING OVER
Should Tenant hold over in possession after the
expiration or sooner termination of the term of the Lease, such holding-over
shall not be deemed to extend or renew this Lease, but such holding-over shall
be on the terms and conditions of this Lease except that the charge for use and
occupancy for each calender month shall be 125% of the highest monthly rent set
forth in this Lease plus of all items of additional rent set forth herein.
69. ASSIGNMENT AND SUBLETTING
Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assignees,
expressly covenants that it shall not assign, mortgage, pledge, encumber, or
otherwise transfer this Lease, nor underlet, nor suffer, nor permit the Premises
or any part thereof to be used or occupied by others (whether for desk space,
mailing privileges or otherwise), without the prior written consent of Landlord
in each instance which shall not be unreasonably withheld or delayed. If this
Lease be assigned, or if the Premises or any part thereof be underlet or
occupied by anybody other than Tenant, Landlord may, after default by Tenant,
collect rent from the assignee, undertenant or occupant, and apply the net
amount collected to the Rent herein reserved, but no assignment, underletting,
occupancy or collection shall be deemed a waiver of the provisions hereof, the
acceptance of the assignee, undertenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of covenants on the part of Tenant
herein contained. The consent by Landlord to an assignment or underletting shall
not in any way be construed to relieve Tenant from obtaining the express consent
in writing of Landlord to any further assignment or underletting. In no event
shall any permitted sublessee assign or encumber its sublease or further sublet
all or any portion of its sublet space, or otherwise suffer or permit the sublet
space or any part thereof to be used or occupied by others, without Landlord's
prior written consent in each instance. Any assignment, sublease, mortgage,
pledge, encumbrance or transfer in contravention of the provisions of this
Article shall be void.
Owner hereby agrees that Tenant may allow part of the
premises to be occupied by its affiliates or sublet part of the premises to its
affiliates provided, that such occupancy or sublettings are subject to all of
the covenants, agreements, terms, provisions and conditions contained in this
Lease. Owner shall cause to list Tenant and its affiliates to be posted on the
building directory in the lobby.
<PAGE> 40
16
70. Notwithstanding anything to the contrary contained herein,
Owner shall remain responsible for maintaining and repairing the heating &
plumbing systems (except Air-conditioning) provided such repair results from
problems not caused by Tenant, its affiliates, its agents, its employees or its
contractors.
71. Tenant has requested and Owner has agreed to allow
non-powered bicycles to be brought in the Demised Premises, provided however
that, the freight elevators which are open on weekdays (Monday through Friday
between 10:00 am to 6:00 pm) are used only to transport them from street level
floor to the 3rd and 4th floor).
Tenant shall assume all liability including but not
limited to theft, damage to property and any third party claim, with respect to
the bicycles being brought into the building.
72. Notwithstanding anything to the contrary contained herein,
Tenant shall have access to building 24 hours a day, 7 days a week by private
key. However, Owner shall not provide heat and freight elevator services on
holidays and after office hours.
73. Tenant is aware that currently the premises are occupied.
Owner shall try to deliver vacant premises by October 31st, 1996. In the event
of delay in getting premises vacant, rent shall start from the day, premises are
delivered.]
SATYANAM, INC.
-------------------------------------------
OWNER
BY: /s/ Nari Pohani
---------------------------------------
SURGICAL CARE PUBLISHING, INC.
-------------------------------------------
TENANT
BY: /s/ Faustino Galan
----------------------------------------
<PAGE> 1
Exhibit 10.4
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 29th day of August 1995, between
SATYANAM, INC., 146 West 29th Street, New York, N.Y. 10001, party of the first
part, hereinafter referred to as OWNER, and SURGICAL CARE PUBLISHING, INC.,
party of the second part, hereinafter referred to as TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner UNIT N 304 in the building known as 134 West 29th Street, New York, N.Y.
10001 in the Borough of Manhattan, City of New York, for the term of Three (3)
years, Ten (10) months (or until such term shall sooner cease and expire as
hereinafter provided) to commence on the 1st day of September, nineteen hundred
and ninety-five, and to end on the 30th day of June nineteen hundred and
ninety-nine and both dates inclusive, at an annual rental rate of as per Article
41 of Rider annexed hereto which Tenant agrees to pay in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance on the first day of each month during said term, at the office of Owner
or such other place as Owner may designate, without any set off or deduction
whatsoever, except that Tenant shall pay the first _____ monthly installment(s)
on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent: 1. Tenant shall pay the rent as above and as
hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises
for general and executive offices.
provided such use is in accordance with the certificate of occupancy for the
building, if any, and for no other purpose.
Alterations: 3. Tenant shall make no changes in or to the
demised premises of any nature without
Owner's prior written consent. Subject to the prior written consent of Owner,
and to the provisions of this article, Tenant, at Tenant's expense, may make
alterations, installations, additions or improvements which are nonstructural
and which do
<PAGE> 2
2
not affect utility services or plumbing and electrical lines, in or to the
interior of the demised premises using contractors or mechanics first approved
in each instance by Owner. Not to be unreasonably withheld. Tenant shall, at its
expense, before making any alterations, additions, installations or improvements
obtain all permits, approval and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner. Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within One Hundred Twenty (120) days thereafter,
at Tenant's expense, by payment or filing the bond required by law or otherwise.
All fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the demised premises by
Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in
this Article shall be construed to give Owner title to or to prevent Tenant's
removal of trade fixtures, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Owner, Tenant shall immediately and at its expense, repair
and restore the premises to the condition existing prior to installation and
repair any damage to the demised premises or the building due to such removal.
All property permitted or required to be removed by Tenant at the end of the
term remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Owner, either be retained as Owner's property or
removed from the premises by Owner, at Tenant's expense.
*3. Owner hereby agrees to cause such repairs,
replacements and improvements to be made with reasonable promptness, and to take
reasonable steps to minimize any inconvenience to Tenant arising therefrom,
provided however, that this shall not obligate Owner to incur any additional
overtime costs or entitle Tenant to deduct or abate the rent or any other
payments.
Repairs: 4. Owner shall maintain and repair the exterior
of and the public portions of the building.
Tenant shall, throughout the term of this lease, take good care of the demised
premises including the bathrooms and lavatory facilities (if the demised
premises encompass the entire floor of the building) and the windows and window
frames and, the fixtures and appurtenances therein and at Tenant's sole cost and
expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
<PAGE> 3
3
servants, employees, or licensees, arising from such Tenant conduct or omission,
when required by other provisions of this lease, including Article 6. Tenant
shall also repair all damage to the building and the demised premises caused by
the moving of Tenant's fixtures, furniture or equipment. All the aforesaid
repairs shall be of quality or class equal to the original work or construction.
If Tenant fails, after ten days notice, to proceed with due diligence to make
repairs required to be made by Tenant, the same may be made by the Owner at the
expense of Tenant, and the expenses thereof incurred by Owner shall be
collectible, as additional rent, after rendition of a bill or statement
therefor. If the demised premises be or become infested with vermin, Tenant
shall, at its expense, cause the same to be exterminated. Tenant shall give
Owner prompt notice of any defective condition in any plumbing, heating system
or electrical lines located in the demised premises and following such notice,
Owner shall remedy the condition with due diligence, but at the expense of
Tenant, if repairs are necessitated by damage or injury attributable to Tenant,
Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except
as specifically provided in Article 9 or elsewhere in this lease, there shall be
no allowance to the Tenant for a diminution of rental value and no liability on
the part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner, Tenant or others making or failing to make any repairs,
alterations, additions or improvements in or to any portion of the building or
the demised premises or in and to the fixtures, appurtenances or equipment
thereof. It is specifically agreed that Tenant shall not be entitled to any set
off or reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of any action for
damages for breach of contract. The provisions of this Article 4 with respect to
the making of repairs shall not apply in the case of fire or other casualty with
regard to which Article 9 hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit,
suffer or allow any window in the demised
premises to be cleaned from the outside in violation of Section 202 of the New
York State Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of 6. Prior to the commencement of the lease term,
Law, Fire Insurance: if Tenant is then in possession, and at all
times thereafter Tenant shall, at Tenant's
sole cost and expense, promptly comply with all present and future laws, orders
and regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board of
Fire Underwriters, or the Insurance Services Office, or any similar body which
shall impose any violation, order or duty upon Owner or Tenant with respect to
the demised premises, arising out of Tenant's use or manner of use thereof, or,
with respect to the building, if arising out of Tenant's use or manner of use of
the demised premises of the building (including the use permitted under the
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations
<PAGE> 4
4
unless Tenant has, by its manner of use of the demised premises or method of
operation therein, violated any such laws, ordinances, orders, rules,
regulations or requirements with respect thereto. Tenant shall not do or permit
any act or thing to be done in or to the demised premises which is contrary to
law, or which will invalidate or be in conflict with public liability, fire or
other policies of insurance at any time carried by or for the benefit of Owner.
Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire
Insurance Rating Organization and other authority having jurisdiction, and then
only in such manner and such quantity so as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy. If
by reason of failure to comply with the foregoing the fire insurance rate shall,
at the beginning of this lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" or rate for the building or demised premises issued by a body making
fire insurance rates applicable to said premises shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rates then applicable to said premises. Tenant shall not place a load
upon any floor of the demised premises exceeding the floor load per square foot
area which it was designed to carry and which is allowed by law. Owner reserves
the right to prescribe the weight and position of all safes, business machines
and mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to
absorb and prevent vibration, noise and annoyance. Limitation on load/sq. ft. is
120 lbs.--(One Hundred Twenty Pounds.)
Subordination: 7. This lease is subject and subordinate to all
ground or underlying leases and to all
mortgages which may now or hereafter affect such leases or the real property of
which demised premises are a part and to all renewals, modifications,
consolidations, replacements and extensions of any such underlying leases and
mortgages. This clause shall be self-operative and no further instrument or
subordination shall be required by any ground or underlying lessor or by any
mortgagee, affecting any lease or the real property of which the demised
premises are a part. In confirmation of such subordination, Tenant shall from
time to time execute promptly any certificate that Owner may request.
Tenant's Liability 8. Owner or its agents shall not be liable for
Insurance Property any damage to property of Tenant or of
Loss, Damage, others entrusted to employees of the
Indemnity: building, nor for loss of or damage to any
property of Tenant by theft or otherwise,
nor for any injury or damage to persons or property resulting from any cause of
whatsoever nature, unless caused by or due to the negligence of Owner, its
agents, servants or employees; Owner or its agents shall not be liable for any
damage caused by other tenants or persons in, upon or about said building or
caused by operations in connection of any private, public or quasi public work.
If at any time any
<PAGE> 5
5
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorney's fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, contractors, employees, invitees, or licensees, of any covenant
or condition of this lease, or the carelessness, negligence or improper conduct
of the Tenant, Tenant's agents, contractors, employees, or licensees. Tenant's
liability under this lease extends to the acts and omissions of its sub-tenant,
and any agent, contractor, employee, or licensee of any sub-tenant. In case any
action or proceeding is brought against Owner by reason of any such claim,
Tenant, upon timely written notice from Owner, will, at Tenant's expense, resist
or defend such action or proceeding by counsel approved by Owner in writing,
such approval not to be unreasonably withheld.
Destruction, Fire 9. (a) If the demised premises or any part
and Other Casualty: thereof shall be damaged by fire or other
casualty, Tenant shall give immediate notice
thereof to Owner and this lease shall continue in full force and effect except
as hereinafter set forth. (b) If the demised premises are partially damages or
rendered partially unusable by fire or other casualty, the damages thereto shall
be repaired by and at the expense of Owner and the rent and other items of
additional rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within forty-five (45)
days after such fire or casualty, or 30 days after adjustment of the insurance
claim for such fire or casualty, whichever is sooner, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Owner's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant.
<PAGE> 6
6
Unless Owner shall serve a termination notice as provided for herein, Owner
shall make the repairs and restorations under the conditions of (b) and (c)
hereof, with all reasonable expedition, subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
including Owner's obligation to restore under subparagraph (b) above, each party
shall look first to any insurance in its favor before making any claim against
the other party for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and collectible and
to the extent permitted by law, Owner and Tenant each hereby releases and waives
all right of recovery with respect to subparagraphs (b), (d) and (e) above,
against the other or any one claiming through or under each of them by way of
subrogation or otherwise. The release and waiver herein referred to shall be
deemed to include any loss or damage to the demised premises and/or to any
personal property, equipment, trade fixtures, goods and merchandise located
therein. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefitting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
Eminent Domain: 10. If the whole or any part of the demised
premises shall be acquired or condemned by
Eminent Domain for any public or quasi public use or purpose, then and in that
event, the term of this lease shall cease and terminate from the date of title
vesting in such proceeding and Tenant shall have no claim for the value of any
unexpired term of said lease. Tenant shall have the right to make an independent
claim to the condemning authority for the value of Tenant's moving expenses and
personal property, trade fixtures and equipment, provided Tenant is entitled
pursuant to the terms of the lease to remove such property, trade fixtures and
equipment at the end of the term and provided further such claim does not reduce
Owner's award.
Assignment, 11. Tenant, for itself, its heirs, distributees,
Mortgage, Etc.: executors, administrators, legal
representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor
<PAGE> 7
7
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each
instance--which shall not be unreasonably withheld. Transfer of the majority of
the stock of a corporate Tenant or the majority partnership interest of a
partnership Tenant shall be deemed an assignment. If this lease be assigned, or
if the demised premises or any part thereof be underlet or occupied by anybody
other than Tenant, Owner may, after default by Tenant, collect rent from the
assignee, under-tenant or occupant, and apply the net amount collected to the
rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current: 12. Rates and conditions in respect to
submetering or rent inclusion, as the case
may be, to be added in RIDER attached hereto. Tenant covenants and agrees that
at all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Owner's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character of
electric service shall in no wise make Owner liable or responsible to Tenant,
for any loss, damages or expenses which Tenant may sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the
demised premises in any emergency at any time, and, at other reasonable times,
to examine the same and to make such repairs, replacements and improvements as
Owner may deem necessary and reasonably desirable to any portion of the building
or which Owner may elect to perform in the premises after Tenant's failure to
make repairs or perform any work which Tenant is obligated to perform under this
lease, or for the purpose of complying with laws, regulations and other
directions of governmental authorities. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the demised premises and
to erect new pipes and conduits therein provided, wherever possible, they are
within walls or otherwise concealed. Owner may, during the progress of any work
in the demised premises, take all necessary materials and equipment into said
premises without the same constituting an eviction nor shall the Tenant be
entitled to any abatement of rent while such work is in progress nor to any
damages by reason of loss or interruption of business or otherwise. Throughout
the term hereof Owner shall have the right to enter the demised premises at
reasonable hours for the purpose of showing the same to prospective purchasers
or mortgagees of the building, and during the last six months of the term for
the purpose of showing the same to prospective tenants and may, during said six
months period, place upon the demised premises the usual notices "To Let" and
"For Sale" which notices Tenant shall permit to remain thereon without
molestation. If Tenant is not present to open and permit an entry into the
demised premises, Owner or Owner's agents may enter the same whenever such entry
may be necessary or
<PAGE> 8
8
permissible by master key or forcibly and provided reasonable care is exercised
to safeguard Tenant's property, such entry shall not render Owner or its agents
liable therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom. Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligation hereunder.
Vault, Vault Space, 14. No Vaults, vault space or area, whether or
Area: not enclosed or covered, not within the
property line of the building is leased
hereunder anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant, if used by
Tenant, whether or not specifically leased hereunder.
Occupancy: 15. Tenant will not at any time use or occupy
the demised premises in violation of the
certificate of occupancy issued for the building of which the demised premises
are a part. Tenant has inspected the premises and accepts them as is, subject to
the riders annexed hereto with respect to Owner's work, if any. In any event,
Owner makes no representation as to the condition of the premises and Tenant
agrees to accept the same subject to violations, whether or not of record. If
any governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business, Tenant shall be responsible for and shall procure
and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the
contrary notwithstanding, this lease may be
cancelled by Owner by sending of a written notice to Tenant within a reasonable
time after the happening of any one or more of the following events: (1) the
commencement of a case in bankruptcy or under the laws of any state naming
Tenant as the debtor; or (2) the making by Tenant of an assignment or any other
arrangement for the benefit of creditors under any state statute. Neither Tenant
nor any person claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the premises
demised but shall forthwith quit and surrender the premises. If this lease shall
be assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.
<PAGE> 9
9
(b) It is stipulated and agreed that in
the event of the termination of this lease pursuant to (a) hereof, Owner shall
forthwith, notwithstanding any other provisions of this lease to the contrary,
be entitled to recover from Tenant as and for liquidated damages an amount equal
to the difference between the rental reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental value of the
demised premises for the same period. In the computation of such damages the
difference between any installment of rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the demised premises
for the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the amount
of the difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of
the covenants of this lease other than the
covenants for the payment of rent or additional rent; or if the demised premises
becomes "or if this lease be rejected under Section 235 of Title 11 of the U.S.
Code (bankruptcy code);" or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised premises shall
be taken or occupied by someone other than Tenant; or if Tenant shall make
material default with respect to any other lease between Owner and Tenant; or if
Tenant shall have failed, after Ten (10) days written notice, to redeposit with
Owner any portion of the security deposited hereunder which Owner has applied to
the payment of any rent and additional rent due and payable hereunder or failed
to move into or take possession of the premises within fifteen (15) days after
the commencement of the term of this lease, of which fact Owner shall be the
sole judge; then in any one or more of such events, upon Owner serving a written
fifteen (15) days notice upon Tenant specifying the nature of said default and
upon the expiration of said Ten (10) days, if Tenant shall have failed to comply
with or remedy such default, or if the said default or omission complained of
shall be of a nature that the same cannot be completely cured or remedied within
said Ten (10) day period, and if Tenant shall not have diligently commenced
during such default within such fifteen (15) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed to remedy or
cure such default, then Owner may serve a written five (5) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said five (5)
days this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such five (5) day period were the day herein
definitely fixed for the end and expiration of this lease and the term thereof
and Tenant shall then quit and surrender the demised premises to Owner but
Tenant shall remain liable as hereinafter provided. Owner shall use best efforts
to relet the premise, and shall be obligated to
<PAGE> 10
10
mitigate the damages to the extent of rent collected upon reletting if and when
such rent is collected after deducting all actual expenses incurred in such
reletting.
(2) If the notice provided for in (1) hereof
shall have been given, and the term shall expire as aforesaid; or if Tenant
shall make default in the payment of the rent reserved herein or any item of
additional rent herein mentioned or any part of either or in making any other
payment herein required; then and in any of such events Owner may without
notice, re-enter the demised premises either by force or otherwise, and
dispossess Tenant by summary proceedings or otherwise, and the legal
representative of Tenant or other occupant of demised premises and remove their
effects and hold the premises as if this lease had not been made, and Tenant
hereby waives the service of notice of intention to re-enter or to institute
legal proceedings to that end. If Tenant shall make default hereunder prior to
the date fixed as the commencement of any renewal or extension of this lease,
Owner may cancel and terminate such renewal or extension agreement by written
notice.
Remedies of Owner 18. In case of any such default, re-entry,
and Waiver of expiration and/or dispossess by summary
Redemption: proceedings or other wise, (a) the rent, and
additional rent, shall become due thereupon
and be paid up to the time of such re-entry, dispossess and/or expiration, (b)
Owner may re-let the premises or any part or parts thereof, either in the name
of Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and or covenanted to be paid and the net
amount, if any, of the rents collected on account of the subsequent lease or
leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term of this lease. The failure of
Owner to re-let the premises or any part or parts thereof shall not release or
affect Tenant's liability for damages. In computing such liquidated damages
there shall be added to the said deficiency such expenses as Owner may incur in
connection with re-letting, such as legal expenses, reasonable attorneys' fees,
brokerage, advertising and for keeping the demised premises in good order or for
preparing the same for re-letting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in this lease and any
suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgment, considers advisable and necessary
for the purpose of re-letting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such re-letting, and in no
<PAGE> 11
11
event shall Tenant be entitled to receive any excess, if any, of such net rents
collected over the sums payable by Tenant to Owner hereunder. In the event of a
breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Owner shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not herein provided for. Mention in this lease of any particular
remedy, shall not preclude Owner from any other remedy, in law or in equity.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance or
performance of any material term or covenant
on Tenant's part to be observed or performed under or by virtue of any of the
terms or provisions in any article of this lease, after notice if required and
upon expiration of any applicable grace period if any, (except in an emergency),
then, unless otherwise provided elsewhere in this lease, Owner may immediately
or at any time thereafter and after ten (10) days notice perform the obligation
of Tenant thereunder. If Owner, in connection with the foregoing or in
connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceedings, and prevails in any such
action or proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within ten (10) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages. If tenant obtains judgement
against the owner due to default of the Owner, then Owner shall reimburse the
Tenant for reasonable costs incurred by the Tenant in bringing the action.
Building 20. Owner shall have the right at any time
Alterations and without the same constituting an eviction
Management: and without incurring liability to Tenant
therefor to change the arrangement and or
location of public entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets or other public parts of the building and to change
the name, number or designation by which the building may be known. There shall
be no allowance to Tenant for diminution of rental value and no liability on the
part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner or other Tenant making any repairs in the building or any
such alterations, additions and improvements. Furthermore, Tenant shall not have
any claim against Owner by reason of Owner's imposition of any controls of the
manner of access to the building by Tenant's social or business visitors as the
Owner may deem necessary for the security of the building and its occupants.
No Representations 21. Neither Owner nor Owner's agents have made
by Owner: any representations or promises with respect
to the physical condition of the building,
<PAGE> 12
12
the land upon which it is erected or the demised premises, the rents, leases,
expenses of operation or any other matter or thing affecting or related to the
demised premises or the building except as herein expressly set forth and no
rights, easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth in the provisions of this lease. Tenant has
inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same "as is" on the date possession
is tendered and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
End of Term: 22. Upon the expiration or other termination of
the term of this lease, Tenant shall quit
and surrender to Owner the demised premises, broom clean, in good order and
condition, ordinary wear and damages which Tenant is not required to repair as
provided elsewhere in this lease excepted, and Tenant shall remove all its
property from the demised premises. Tenant's obligation to observe or perform
this covenant shall survive the expiration or other termination of this lease.
If the last day of the term of this Lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it be a
legal holiday in which case it shall expire at noon on the preceding business
day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that
upon Tenant paying the rent and additional
rent and observing and performing all the terms, covenants and conditions, on
Tenant's part to be observed and performed, Tenant may peaceably and quietly
enjoy the premises hereby demised, subject, nevertheless, to the terms and
conditions of this lease including, but not limited to, Article 34 hereof and to
the ground leases, underlying leases and mortgages hereinbefore mentioned.
Failure to Give 24. If Owner is unable to give possession of the
Possession: demised premises on the date of the
commencement of the term hereof, because of
the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or if Owner has not completed any work required
to be performed by Owner, or for any other reason, Owner shall not be subject to
any liability for failure to give possession on said date and the validity of
the lease shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the
<PAGE> 13
13
term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible for Owner's inability to obtain possession or complete
any work required) until after Owner shall have given Tenant notice that Owner
is able to deliver possession in the condition required by this lease. If
permission is given to Tenant to enter into the possession of the demised
premises or to occupy premises other than the demised premises prior to the date
specified as the commencement of the term of this lease, Tenant covenants and
agrees that such possession and/or occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except the obligation
to pay the fixed annual rent set forth in page one of this lease. The provisions
of this article are intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for
violation of, or to insist upon the strict
performance of any covenant or condition of this lease or of any of the Rules or
Regulations, set forth or hereafter adopted by Owner, shall not prevent a
subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach and no provision of this lease shall be deemed to have
been waived by Owner unless such waiver be in writing signed by Owner. No
payment by Tenant or receipt by Owner of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy in
this lease provided. All checks tendered to Owner as and for the rent of the
demised premises shall be deemed payments for the account of Tenant. Acceptance
by Owner of rent from anyone other than Tenant shall not be deemed to operate as
an attornment to Owner by the payor of such rent or as a consent by Owner to an
assignment or subletting by Tenant of the demised premises to such payor, or as
a modification of the provisions of this lease. No act or thing done by Owner or
Owner's agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial 26. It is mutually agreed by and between Owner
by Jury: and Tenant that the respective parties
hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any
<PAGE> 14
14
proceeding or action for possession including a summary proceeding for
possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4 except for statutory mandatory counterclaims.
Inability to Perform: 27. This Lease and the obligation of Tenant to
pay rent hereunder and perform all of the
other covenants and agreements hereunder on part of Tenant to be performed shall
in no wise be affected, impaired or excused because Owner is unable to fulfill
any of its obligations under this lease or to supply or is delayed in supplying
any service expressly or impliedly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations or decorations or is unable
to supply or is delayed in supplying any equipment, fixtures or other materials
if Owner is prevented or delayed from doing so by reason of strike or labor
troubles or any cause whatsoever beyond Owner's sole control including, but not
limited to, government preemption or restrictions or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions which have been or are affected, either
directly or indirectly, by war or other emergency.
Bills and Notices: 28. Except as otherwise in this lease provided,
a bill statement, notice or communication
which Owner may desire or be required to give to Tenant, shall be deemed
sufficiently given or rendered if, in writing, delivered to Tenant personally or
sent by registered or certified mail addressed to Tenant at the building of
which the demised premises form a part or at the last known residence address or
business address of Tenant or left at any of the aforesaid premises addressed to
Tenant, and the time of the rendition of such bill or statement and of the
giving of such notice or communication shall be deemed to be the time when the
same is delivered to Tenant, mailed, or left at the premises as herein provided.
Any notice by Tenant to Owner must be served by registered or certified mail
addressed to Owner at the address first hereinabove given or at such other
address as Owner shall designate by written notice.
Water Charges: 29. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary
lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge)
Owner may install a water meter and thereby measure Tenant's water consumption
for all purposes. Tenant shall pay Owner for the cost of the meter and the cost
of the installation, thereof and throughout the duration of Tenant's occupancy
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense in default of which Owner may cause
such meter and equipment to be replaced or repaired and collect the cost thereof
from Tenant, as additional rent. Tenant agrees to pay for water consumed, as
shown on said meter as and when bills are rendered, and on default in making
such payment Owner may pay such charges and collect the same from Tenant, as
additional rent. Tenant covenants and agrees to pay, as additional rent, the
sewer rent, charge or any other tax, rent, levy or charge which now or hereafter
is assessed, imposed or a lien upon the demised
<PAGE> 15
15
premises or the realty of which they are part pursuant to law, order or
regulation made or issued in connection with the use, consumption, maintenance
or supply of water, water system or sewage or sewage connection or system. If
the building or the demised premises or any part thereof is supplied with water
through a meter through which water is also supplied to other premises Tenant
shall pay to Owner, as additional rent, on the first day of each month, ____%
($10.--) of the total meter charges as Tenant's portion. Independently of and in
addition to any of the remedies reserved to Owner hereinabove or elsewhere in
this lease, Owner may sue for and collect any monies to be paid by Tenant or
paid by Owner for any of the reasons or purposes hereinabove set forth.
Sprinklers: 30. Anything elsewhere in this lease to the
contrary notwithstanding, if the New York
Board of Fire Underwriters or the New York Fire Insurance Exchange or any
bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the fire insurance
rate set by any said Exchange or by any fire insurance company, Tenant shall, at
Tenant's expenses, promptly make such sprinkler system installations, changes,
modifications, alterations, and supply additional sprinkler heads or other
equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $10.--, on the first day of each month during the term of this lease, as
Tenant's portion of the contract price for sprinkler supervisory service.
Elevators, Heat, 31. As long as Tenant is not in default under
Cleaning: any the covenants of this lease beyond the
applicable grace period provided in this
lease for the curing of such defaults, Owner shall: (a) provide necessary
passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on
Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided,
same shall be provided only on regular business days Monday through Friday
inclusive, and on those days only between the hours of 9 a.m. and 12 noon and
between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied
by Owner to the demised premises, when and as required by law, on business days
from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the
public halls and public portions of the building which are used in common by all
tenants. Tenant shall, at Tenant's expense, keep the demised premises, including
the windows, clean and in order, to the reasonable satisfaction of Owner, and
for that purpose shall employ the person or persons, or corporation approved by
Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse
and rubbish from the building. Bills for the same shall be rendered by Owner to
Tenant at such time as Owner may elect and shall be due and payable hereunder,
and the amount of such bills shall be deemed to be, and be paid as, additional
rent. Tenant shall, however, have the option of
<PAGE> 16
16
independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building. Owner reserves the right to
stop service of the heating, elevator, plumbing and electric systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Owner desirable or necessary to
be made, until said repairs, alterations, replacements or improvements shall
have been completed. If the building of which the demised premises are a part
supplies manually operated elevator service, Owner may proceed diligently with
alterations necessary to substitute automatic control elevator service without
in any way affecting the obligations of Tenant hereunder.
Security: 32. Tenant has deposited with Owner the sum of
$2,500.-- as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this lease; it is agreed that in the event Tenant defaults in respect of any of
the terms, provisions and conditions of this lease, including, but not limited
to, the payment of rent and additional rent, Owner may use, apply or retain the
whole or any part of the security so deposited to the extent required for the
payment of any rent and additional rent or any other sum as to which Tenant is
in default or for any sum which Owner may expend or may be required to expend by
reason of Tenant's default in respect of any of the terms, covenants and
conditions of this lease, including but not limited to, any damages or
deficiency in the reletting of the premises, whether such damages or deficiency
accrued before or after summary proceedings or other re-entry by Owner. In the
event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this lease, the security shall be
returned to Tenant after the date fixed as the end of the Lease and after
delivery of entire possession of the demised premises to Owner. In the event of
a sale of the land and building or leasing of the building, of which the demised
premises form a part, Owner shall have the right to transfer the security to the
vendee or lessee and Owner shall thereupon be released by Tenant from all
liability for the return of such security; and Tenant agrees to look to the new
Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Captions: 33. The Captions are inserted only as a matter
of convenience and for reference and in no
way define, limit or describe the scope of this lease nor the intent of any
provision thereof.
Definitions: 34. The term "Owner" as used in this lease means
only the owner of the fee or of the
leasehold of the building, or the mortgagee in possession, for the time being of
the land and building (or the owner of a lease of the building or
<PAGE> 17
17
of the land and building) of which the demised premises form a part, so that in
the event of any sale or sales of said land and building or of said lease, or in
the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums which
shall be due to Owner from Tenant under this lease, in addition to the annual
rental rate. The term "business days" as used in this lease, shall exclude
Saturdays, Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service. Wherever it is expressly
provided in this lease that consent shall not be unreasonably withheld, such
consent shall not be unreasonably delayed.
Adjacent 35. If an excavation shall be made upon land
Excavation- adjacent to the demised premises, or shall
Shoring: be authorized to be made, Tenant shall
afford to the person causing or authorized
to cause such excavation, license to enter upon the demised premises for the
purpose of doing such work as said person shall deem necessary to preserve the
wall or the building of which demised premises form a part from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Owner, or diminution or abatement of rent.
Rules and 36. Tenant and Tenant's servants, employees,
Regulations: agents, visitors, and licensees shall
observe faith fully, and comply strictly
with, the Rules and Regulations annexed hereto and such other and further
reasonable Rules and Regulations as Owner or Owner's agents may from time to
time adopt. Notice of any additional rules or regulations shall be given in such
manner as Owner may elect. In case Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within fifteen
(15) days after the giving of notice thereof. Nothing in this lease contained
shall be construed to impose upon Owner any duty or obligation to enforce the
Rules and Regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for violation
of the same by any other tenant, its servants, employees, agents, visitors or
licensees.
<PAGE> 18
18
Glass: 37. Owner shall replace, at the expense of the
Tenant, any and all plate and other glass
damaged or broken from any cause whatsoever in and about the demised premises.
Owner may insure, and keep insured, at Tenant's expense, all plate and other
glass in the demised premises for and in the name of Owner. Bills for the
premiums therefor shall be rendered by Owner to Tenant at such times as Owner
may elect, and shall be due from, and payable by, Tenant when rendered, and the
amount thereof shall be deemed to be, and be paid, as additional rent.
Estoppel 38. Tenant, at any time, and from time to time,
Certificate: upon at least 10 days' prior notice by
Owner, shall execute, acknowledge and
deliver to Owner, and/or to any other person, firm or corporation specified by
Owner, a statement certifying that this Lease is unmodified in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), stating the dates to which
the rent and additional rent have been paid, and stating whether or not there
exists any default by Owner under this Lease, and, if so, specifying each such
default.
Directory Board 39. If, at the request of and as accommodation
Listing: to Tenant, Owner shall place upon the
directory board in the lobby of the
building, one or more names of persons other than Tenant, such directory board
listing shall not be construed as the consent by Owner to an assignment or
subletting by Tenant to such person or persons.
Successors and 40. The covenants, conditions and agreements
Assigns: contained in this lease shall bind and inure
to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns. Tenant shall look
only to Owner's estate and interest in the land and building for the
satisfaction of Tenant's remedies for the collection of a judgement (or other
judicial process) against Owner in the event of any default by Owner hereunder,
and no other property or assets of such Owner (or any partner, member, officer
or director thereof, disclosed or undisclosed), shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this lease, the relationship of Owner and
Tenant hereunder, or Tenant's use and occupancy of the demised premises.
Para 32 continued - Such security deposit shall not bear any interest.
<PAGE> 19
19
IN WITNESS WHEREOF, Owner and Tenant have respectively signed
and sealed this lease as of the day and year first above written.
Witness for Owner: SATYANAM, INC CORP.
-----------------------------------SEAL
/s/ Nari Pohani [L.S.]
- ------------------------------ -----------------------------------
Witness for Tenant SURGICAL CARE PUBLISHING CORP.
---------------------------------- SEAL
/s/ Peter Frishauf [L.S.]
-----------------------------------
<PAGE> 20
20
ACKNOWLEDGEMENTS
CORPORATE TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came _______________________________ to me known, who being by me duly sworn,
did depose and say that he resides in ___________________________________ that
he is the _____________________ of _______________ the corporation described in
and which executed the foregoing instrument, as TENANT; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it as so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
______________________________
INDIVIDUAL TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came ___________________________________ to me known and known to me to be the
individual described in and who, as TENANT, executed the foregoing instrument
and acknowledged to me that ___________ he executed the same.
______________________________
<PAGE> 21
21
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A
PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any or the
corridors of halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any bicycles, vehicles, animals, fish, or
birds be kept in or about the building Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any
<PAGE> 22
22
Tenant, Owner may remove same without any liability and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice,
drinking water, towel and other similar services, or accept barbering or
bootblacking services in the demised premises, except from persons authorized by
Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting
and peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons. Notwithstanding the foregoing,
Owner shall not be required to allow Tenant or any person to enter or remain in
the building, except on business days from 8:00 a.m. to 6:00 p.m. and on
Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against
Owner by reason of Owner excluding from the building any person who does not
present such pass.
<PAGE> 23
23
11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a loft building, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive, or hazardous
fluid, material, chemical or substance, or cause or permit any odors of cooking
or other processes, or any unusual or other objectionable odors to permeate in
or emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which
disturbs or interferes with other Tenants in the beneficial use of their
premises.
<PAGE> 24
24
Address
Premises
========================================================
TO
========================================================
STANDARD FORM OF
LOFT LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1994. All rights Reserved.
Reproduction in whole or in part prohibited.
========================================================
Dated ____________________________, 19__
Rent Per Year
Rent Per Month
Term
From
To
Drawn by_____________________________________________
Checked by___________________________________________
Entered by___________________________________________
Approved by__________________________________________
<PAGE> 25
Rider Agreement Dated August 29th, 1995,
Between SATYANAM, INC. As Owner,
and SURGICAL CARE PUBLISHING, INC., as Tenant
41. BASE RENT
A. Tenant shall pay to the Owner base rent for the demised
premises in accordance with the provisions of the printed form of this Lease at
an annual rate of:
$11,280.00 for the period September 1st, 1995 to June
30th, 1996, payable in equal monthly installments of $1,128.00.
$14,160.00 for the period July 1st, 1996 to June
30th, 1997, payable in equal monthly installments of $1,180.00
$14,796.00 for the period July 1st, 1997 to June
30th, 1998, payable in equal monthly installments of $1,233.00
$15,432.00 for the period July 1st, 1998 to June
30th, 1999, payable in equal monthly installments of $1,286.00
42. OPTION TO RENEW:
A. Provided Tenant is not in default in any of the material
terms, covenants or condition of this Lease, including but not limited to the
obligation to pay rent or additional rent, and provided further that Owner has
not during the initial term of the Lease commenced any summary proceeding for
possession or rent that has resulted in a judgement in favor of Owner, whether
by stipulation or after trial, Tenant shall have the right to renew this Lease
for an additional Five (5) year term commencing July 1st, 1999 and expiring June
30th, 2004.
The base rental for the renewal term shall be as
follows:
$15,996.00 for the period July 1st, 1999 to June
30th, 2000, payable in equal monthly installments of $1,333.00
$16,632.00 for the period July 1st, 2000 to June
30th, 2001, payable in equal monthly installments of $1,386.00
$17,256.00 for the period July 1st, 2001 to June
30th, 2002, payable in equal monthly installments of $1,438.00
$17,892.00 for the period July 1st, 2002 to June
30th, 2003, payable in equal monthly installments of $1,491.00
<PAGE> 26
2
$18,528.00 for the period July 1st, 2003 to June
30th, 2004, payable in equal monthly installments of $1,544.00
B. If the Tenant exercises the option to renew the lease;
tenant shall notify Landlord in writing on or before December 31, 1998 that it
intends to renew the Lease. The failure by Tenant to notify Landlord timely of
its intention to renew shall constitute an affirmative election by Tenant not to
renew the lease upon which Landlord may reasonably rely, if it so desires to
rerent the demised premises to a third party.
43. SUBLEASE
Owner represents and Tenant understands and agrees
that Owner is the proprietary lessee of the demised premises pursuant to a
Proprietary Lease between Owner, as lessee and 134 West 29th Street Owners Corp,
as lessor ("Owners Corporation"). All rights of Tenant are subject to the
Proprietary Lease. Tenant shall observe each and every covenant of the
Proprietary Lease on the part to be performed by Owner as lessee under the
Proprietary Lease. Observance of the terms, covenants and conditions of the
Proprietary Lease by the Tenant except the financial obligation shall be deemed
a substantial obligation of this tenancy. This lease is conditioned upon Owner's
obtaining the written consent from the Owner Corporation to this lease by
6/30/94.
44. PAYMENT OF RENT AND ADDITIONAL RENT
A. The payment of all rent and additional rent under
this lease shall constitute a substantial obligation of this tenancy entitling
the Owner to exercise all its rights and remedies under Article 17 of this
lease.
B. It shall not constitute a bar, preclusion or
election of remedies against the enforcement of a landlord's rights and remedies
under Article 17 of this lease for nonpayment of rent or additional rent if the
Owner has already commenced a proceeding or action to recover the rent or
additional rent.
C. Tenant covenants and agrees that the monthly
installments of annual rental shall be paid by Tenant to Owner on or before the
first day of each month without notice or demand by Owner. In the event that
such installments of annual rental shall not be paid by the Fifth (5) day of the
month or any item of additional rent shall not be paid within the applicable
time period following written demand therefor, the Owner shall give a written
notice to the Tenant. If the Tenant does not pay the amount due within three (3)
days of receipt of such written notice then the Tenant shall pay to the Owner as
additional rent, a late charge equal to two (2%) percent of such monthly
installment or item of additional rent.
<PAGE> 27
3
D. If Owner receives from Tenant any payment less
than the sum of the annual rent, additional rent and other amount due under this
Lease, ("Partial Payment"), or Tenant is in arrears in payment of any amount due
under this Lease, in its sole discretion, may allocate such Partial Payment or
payment in whole or in part to any other charges or to any combination thereof.
E. If the Tenant's checks are returned by his bank
for any reason whatsoever three times during the term of the lease, then, the
Owner, at Owner's option, shall have the right, to demand payment of future
installments of rent or additional rent by certified, bank or teller's check or
by postal money order.
45. CONDITION OF PREMISES
Tenant acknowledges that it has inspected demised
premises and is familiar with the physical condition of same and Tenant agrees
to accept the demised premises in their "AS IS" physical condition,
Owner represents that substantially all the friable
Asbestos Containing Material has been either removed or contained throughout the
building and in the demised premises. Owner will defend, indemnify and hold
harmless Tenant, its affiliates, its employees, agents and insurers, from and
against all losses, claims, damages, fines and expenses (including without
limitation reasonable legal fees) resulting from any environmental remediation
required by applicable laws, regulations or directives of properly constituted
governmental authorities as a result of the release of any toxic or hazardous
substance or waste on or about the Demised Premises by anyone other than Tenant,
its affiliates, its employees, agents or contractors.
46. USE
A. Tenant shall use and occupy the demised premises
solely for the use specified in Article 2 of the printed form of this lease and
for no other purposes. Tenant specifically covenants and agrees that Tenant
shall not use the demised premises or any part thereof, nor permit the demised
premises or any part thereof to be used for sleeping or residential purposes or
for overnight accommodations. Tenant shall continuously and uninterruptedly
during the term of this lease conduct its customary business activities as
permitted by Article 2 above.
B. In addition, Tenant shall not suffer nor permit
the demised premises or any part thereof to be used in any manner, or anything
to be done therein, or suffer or permit anything to be brought into or kept
therein, which would in any way (i) violate any of the provisions of any grant,
lease or mortgage or requirements of public authorities (ii) make void or
voidable any fire or liability insurance policy then in force with respect to
the building, (iii) make unattainable or more difficult to obtain from reputable
insurance companies authorized to do
<PAGE> 28
4
business in New York State fire insurance with extended coverage, or liability,
elevator, boiler or any other insurance maintained by Landlord, (iv) cause
physical damage to the building or any part thereof, (v) constitute a public or
private nuisance, (vi) impair, the appearance, character or reputation of the
building, (vii) impair or interfere with any of the building services or the
proper and heating, cleaning, or other servicing of the building or the demised
premises or impair or interfere with or tend to impair or interfere with the use
of the other areas of the building by, or occasion discomfort, annoyance or
inconvenience to, Owner or any of the other tenants or occupants of the
building, (viii) violate any of the terms, covenants or conditions contained in
this Lease, or (ix) be illegal, unlawful, or result in the creation of a public
or private nuisance.
C. Owner makes no representations, guarantees, or
acknowledgements that the use designated in the Lease by the Tenant is permitted
under any statute, ordinance, rule, regulation, or other present or future law
promulgated by any state, federal, municipal, or local government or agency or
authority thereof. In the event that said use is illegal or determined by any
notice of violation or order issued by the aforesaid appropriate governmental
authority, then upon six (6) days prior written notice given in accordance with
this Lease, this Lease and the term thereof shall expire on the last day of said
notice as if said day were the last day of the term of this Lease.
D. If any governmental licence or permit shall be
required for the proper and lawful conduct of Tenant's business, Tenant, at
Tenant's sole cost and expense, shall duly procure and thereafter maintain such
licence or permit and submit the same to inspection by Owner Tenant, at Tenant's
sole cost and expense, shall at all times comply with the terms and conditions
of each such licence or permit.
47. BROKERAGE
The parties warrant and represent to each other that
they had no dealings with any broker or agent in connection with this Lease. The
Tenant shall have no obligation with respect to any commission payable to said
broker. The parties covenant and agree to hold each other harmless and indemnify
each other from and against any and all costs, expenses or liability for any
compensation, commissions, fees and charges claimed by any broker with respect
to this Lease or the negotiation thereof. The obligation of Tenant contained in
the Article shall survive the expiration or earlier termination of this Lease.
48. RUBBISH REMOVAL AND CLEANING
A. Tenant covenants and agrees to maintain the
demised premises and adjacent public and/or common areas in a condition of
proper cleanliness, orderliness and state of attractive appearance at all times.
Tenant shall also be responsible and shall contract for the removal of all
rubbish from the demised premises at its sole cost and expense, in accordance
with any and all applicable municipal codes and regulations. If Tenant fails or
refuses to remove any
<PAGE> 29
5
rubbish from, in or around the demised premises, the Owner may contract to have
same removed and the Tenant shall pay for actual costs of said removal as
additional rent.
49. INSURANCE
A. Tenant shall obtain or procure its own fire,
rental, liability, or other casualty insurance as may be required under the
terms of this Lease. Supplementary Article 9 of this Lease, each party shall
look first to any insurance in its favor before making any claim against the
other party for recovery of loss or damage resulting from fire or any other
casualty.
B. (1) Tenant shall, at its sole cost and expense,
procure and maintain throughout the term of this Lease a comprehensive general
liability policy of insurance insuring Tenant, Owner and Owners Corporation
against any and all risks and/or liability for property damage and bodily injury
to or death of a person or persons in, on or about the demised premises,
occasioned by or arising out of or in connection with the use or occupancy of
the demised premises, and a fire insurance policy (including extended coverage,
vandalism and malicious mischief) covering the demised premises and Tenant's
property. Such policies must be obtained from an insurance company rated "A" or
better by A.M. Best Company, Inc. in an amount not less than $1,000,000.00 with
respect to the bodily injuries or to death of any one person, in an amount not
less than $1,000,000.00 per occurrence, and in an amount of not less than
$250,000.00 for property damage, and shall name Owner and Owners Corporation as
an additional insureds. Tenant will deliver the original policy and all original
renewals of said policy to Owner on demand.
(2) Tenant shall at all times during this
Lease is in effect maintain for its own benefit, fire and casualty insurance for
all the contents, fixtures, personal, property, inventory and other moveable or
nonmoveable property of Tenant.
C. Tenant agrees to pay all premiums and charges for
the insurance required to be maintained by Tenant pursuant to the terms of this
Lease. If Tenant fails to make any such payments when due, or in the event of
its failure to deliver and/or pay the premium thereon, then Owner after giving
10 days written notice to the Tenant and opportunity to cure, may pay said
premium or charge (but in no event shall be obligated to do so), and upon
written demand to Tenant, Owner may collect said payment as additional rent, or
deem Tenant to be in default of substantial obligation of its tenancy. The
failure to maintain and/or renew the above policies of insurance shall
constitute a breach of a substantial obligation of this tenancy.
<PAGE> 30
6
50. ADDITIONAL RENT
A. All payments, other than the base rental as
adjusted from time to time, to be made by Tenant pursuant to this Lease shall be
deemed additional rent, whether or not specifically so called, and, in the event
of any non-payment thereof, Owner shall have all rights and remedies provided
for herein or by law for non-payment of rent.
B. Should Tenant default in the timely performance of
any covenant, term or condition herein contained on Tenant's part to be
performed, Owner, at its option and without thereby waiving such a default, may
perform or cause the Managing Agent of the Building to perform the same for and
on account of, and at the expense of the Tenant after five (5) days written
notice (except in the event of an emergency, i.e., threat of personal injury
and/or damage or destruction of property, when no notice shall be required.
Tenant shall pay as an item of additional rent all costs and expenses which
Owner may incur any of Tenant's defaults within five (5) days following delivery
of a written demand therefor which costs and expenses shall include, but not be
limited to, materials, fees paid to architects, engineers, attorneys,
contractors, subcontractors, fines and penalties.
C. Owner's failure during the term of this Lease to
prepare and deliver any statements of bills required to be delivered to Tenant
pursuant to the provisions of this lease, or Owner's failure to make a demand
for the payment of any item of additional rent, shall not in any way be deemed
to be a waiver of, or cause Owner to forfeit or surrender its rights to collect
such additional rent during the terms of this lease. Tenant's liability for the
payment of any item of additional rent shall survive the expiration or sooner
termination of this Lease.
51. NO WAIVER BY OWNER
A. The receipt of any rent, or any portion thereof,
whether specifically reserved or payable under any of the covenants herein
contained, after a default on the part of the Tenant (whether such rent is due
before or after such default) shall not be deemed to operate as a waiver of any
default or of any current default or of the right of Owner to enforce the
payment of any rent herein reserved or to declare a forfeiture to this Lease and
to recover the possession of the demised premises provided in this Lease. Nor
shall
B. Owner's acceptance of rent during any time in
which Tenant is in default of any provision hereunder shall not constitute a
waiver of such default, and Tenant specifically agrees and consents that rent
must be paid by Tenant during any default and Tenant specifically agrees that
such acceptance shall be made without prejudice to Owner's right to terminate
this Lease and shall not be deemed a consent to any default of the Lease.
<PAGE> 31
7
52. BILLS AND NOTICES
Supplementing Article 28 of this lease, any notice,
bill, statement, or communication required to be given under the terms of this
Lease by the Owner shall be sufficiently given by the Owner's agent or
attorney-at-law or in-fact, whether or not any authorization is annexed. Any
notice, bill, statement, or communication required to be given shall be
sufficiently given when mailed.
53. ELECTRICITY SERVICE
A. (1) Landlord shall redistribute or furnish
electrical energy to or for the use of Tenant in the Premises for the operation
of the lighting fixtures and the electrical receptacles installed in the
Premises. Tenant's electrical consumption shall be measured by the meter
currently installed in the Premises. The cost of electricity utilized by Tenant
shall be paid for by Tenant to Landlord as additional rent and shall be
calculated at the then applicable rate prescribed by the public utility company
serving the Premises for submetered electrical energy, plus (i) Landlord's
charge for overhead and supervision in the amount of ten percent (10%) of the
total electric bill and (ii) any taxes or other charges in connection therewith.
If any tax shall be imposed upon Landlord's receipts from the sale or resale of
electrical energy to Tenant, the prorata share applicable to the electrical
energy service received by Tenant shall be passed on to, included in the bill
of, and paid by Tenant if and to the extent permitted by law. Landlord shall
bill Tenant, monthly, for the cost of its consumption of electricity in the
Premises and Tenant shall pay the amount thereof at the time of payment of each
installment of Rent. If either the quantity or character of electrical services
is changed by the public utility or other company supplying electrical service
to the Building or is no longer available or suitable for Tenant's requirements,
no such change, unavailability or unsuitability shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord, or its agents, by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's
business, or otherwise.
(2) Any additional feeders or risers which
are required to supply any additional electrical requirements which Tenant may
have, and all other equipment proper and necessary in connection with such
feeders or risers, shall be installed by Landlord upon Tenant's request, at the
sole cost and expense of Tenant, provided that, in Landlord's reasonable
judgment, such additional feeders or riders are necessary and are permissible
under applicable laws and insurance regulations and the installation of such
feeders or risers will not cause permanent damage or injury to the Building or
the Premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations or interface with or disturb other tenants
or occupants of the Building. At no time shall the use of electrical energy in
the Premises exceed the capacity of the existing feeders or wiring installations
then serving the Premises. Tenant shall not make or perform, or permit the
making or performance of, any alterations to wiring
<PAGE> 32
8
installations or other electrical facilities in or serving the Premises without
the prior consent of Landlord in each instance. Any such Alterations, additions
or consent by Landlord shall be subject to the provisions of this Lease
including, but not limited to, the provisions of Article 3 hereof.
(3) Landlord reserves the right to
discontinue furnishing electricity to Tenant in the Premises on not less than
sixty (60) days written notice to Tenant. If Landlord exercises such right to
discontinue, or is compelled to discontinue furnishing electricity to Tenant,
this Lease shall continue in full force, and effect and shall be unaffected
thereby, except only that from and after the effective date of such
discontinuance, Landlord shall not be obliged to furnish electricity to Tenant.
If Landlord so discontinues furnishing electricity to Tenant, Tenant shall
arrange to obtain electricity directly from the public utility or other company
servicing the Building. Such electricity may be furnished to Tenant by means of
the then existing electrical. facilities serving the Premises to the extent that
the same are available, suitable and safe for such purposes. All meters and all
additional panel boards, feeders, risers, wiring and other conductors and
equipment which may be required to obtain electricity, of substantially the same
quantity, quality and character, shall be installed by Landlord at Tenant's sole
cost and expense. Landlord shall not voluntarily discontinue furnishing
electricity to Tenant until Tenant is able to receive electricity directly from
the public utility or other company servicing the Building.
(4) Landlord shall not be liable to tenant
in any way for any interruption, curtailment or failure or defect in the supply
or character of electricity furnished to the premises by reason of any
requirement, act or omission or Landlord or of any public utility or other
company servicing the Building with electricity or for any other reason except
Landlord's negligence or willful conduct.
B. Tenant shall not be released or excused from the
performance of any of its obligations under this Lease for any change in the
quantity or quality of service, failure or interruption or curtailment or
cessation of Utilities service for any reason whatsoever, and no such change,
failure, interruption or curtailment or cessation shall constitute a
constructive or partial eviction or entitle Tenant to an abatement of, offset
against, or deduction from rent or additional rent or impose any liability upon
Owner.
C. Owner shall not be obligated to provide hot water,
air conditioning, and ventilation service to the demised premises.
54. ESTOPPEL CERTIFICATE
A. Upon Owner's written request, Tenant shall confirm
the existence of this Lease and any modifications hereto as evidenced by a
written agreement, and/or specific terms hereof (said form shall hereinafter be
referred to as an "Estoppel Certificate"). Tenant shall within five (5) days
from receipt of an Estoppel Certificate, execute the same in the presence of a
<PAGE> 33
9
notary public who shall thereafter complete the acknowledgement and Tenant shall
return said Estoppel Certificate to Owner and/or Owner's designee by the means
specified. All parties to whom said Estoppel Certificate is addressed shall be
absolutely entitled to rely upon the reservations of Tenant therein contained
and Tenant shall be forever barred from refuting any statements therein set
forth as of the date to which said Estoppel Certificate speaks.
B. If, in connection with obtaining financing, a
bank, insurance company, or other lending institution shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.
55. NO LIABILITY ON LANDLORD
A. Tenant shall indemnify and save Owner harmless
against (i) any and all claims against Owner of whatever nature arising from any
act, omission or negligence of Tenant, its contractors, licensees, agents,
servants, employees, invitees and/or visitors, (ii) any and all claims against
the Owner arising from any accident, injury or damage occurring outside of the
demised premises but within or about the land and building where accident,
injury or damage result or is claimed to have resulted from any act, omissions
or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees and/or visitors, (iii) any breach, violation or
nonperformance of any of the terms, covenants, and conditions contained in this
lease on the part of the Tenant to be fulfilled, kept, observed and performed.
This indemnity and hold harmless covenant
shall include indemnity from and against any and all liability, fines, suits,
demands, costs and expenses (including attorneys' fees and disbursements) of any
kind or nature incurred in connection with any such claim or proceeding brought
thereon, and the defense thereof by the Owner. The indemnity and hold harmless
covenant shall survive the expiration or the earlier termination of the term of
this Lease and for any period of time prior to the commencement of the term of
this Lease during which Tenant was given access to the demised premises. The
indemnity and hold harmless provided for herein is conditioned upon Owner giving
Tenant timely notice of any liability, claim, suit or demand, cooperating with
the Tenant in the defense of such liability, claim, suit or demand, cooperating
with the Tenant in the defense of such liability, claim, suit or demand and
allowing Tenant to retain attorneys of its own choosing to defend against any
such liability, claim, suit or demand.
B. Tenant shall reimburse Owner as an item of
additional rent within ten (10) days following written demand therefor, for all
expenditures incurred by or damages or fines sustained or incurred by Owner due
to Tenant's default of the provisions of this Article.
<PAGE> 34
10
C. Notwithstanding anything provided in this Lease or
provided at law or in equity to the contrary, in the event that Tenant shall
obtain a monetary judgement against Owner in any action or proceeding, Tenant
shall seek satisfaction of such a judgement only from Owner's estate and
interest in the demised premises comprising of Cooperative Unit # 305 in 134
West 29th Street Owners Corporation, and not other property or other assets
belonging to Owner or its directors, officers, partners, principals (disclosed
or undisclosed) or employees shall be subject to lien, levy, execution or other
enforcement procedure for the satisfaction of any such judgement arising from
the relationship of landlord and tenant hereunder, Tenant's use and occupancy of
the demised premises or this Lease. If Tenant shall acquire a lien on such other
property or assets by judgement or otherwise, Tenant shall promptly release such
lien by executing and delivering to Owner an instrument to the effect prepared
by Owner, Tenant's covenants as contained in the Article shall survive the
expiration or the earlier termination of the term of this Lease.
56. MECHANICS' LIEN
In no event shall any material or equipment be
incorporated into the demised premises in connection with any alterations,
installations, additions, improvements, repairs or replacements made by Tenant
including, but not limited to, Tenant's changes, which is subject to any lien,
encumbrance, chattel mortgage, security interest or charge of any kind
whatsoever, or is subject to any conditional sale or other similar or dissimilar
title retention agreement with this express written consent of Owner. Tenant
specifically covenants that any personal property which Tenant shall bring to or
install in the demised premises which requires special handling shall not be
subject to any security interest held by a third party. Any mechanic's or
materialman's lien filed against the lands and/or the building or Owner's
interest therein, for work claimed to have been done, or for materials claimed
to have been furnished to Tenant, shall be discharged by Tenant within one
hundred twenty (120) days thereafter, at Tenant's sole cost and expense, by
filing a bond as provided by law or otherwise. If Tenant shall fail to have
discharged any lien or encumbrance described in this Article, Owner, shall have
the right but not the obligation, to cause such lien or encumbrance to be
discharged by bonding or otherwise, and Tenant shall reimburse Owner as an item
of additional rent, for all actual costs and expenses which Owner incurs,
including reasonable attorneys' fees and disbursements, within ten (10) days
following written demand.
57. GOVERNMENTAL REGULATIONS
A. In the event the Tenant makes any alterations,
decorations, installations, etc., including but not limited to, Tenant's
changes, if any, that do not comply with applicable building regulations,
administrative agency, governmental or quasi-governmental agency regulations, or
that may result in the imposition of any fines, penalties (civil or criminal) or
any monetary awards, costs or fees against Landlord, Tenant shall be liable for
any and all costs associated therewith including, but not limited to, attorney's
fees, architects' fees, engineering fees,
<PAGE> 35
11
penalties, fines, renovation costs, construction costs, consultation and any and
all other costs, which shall be deemed additional rent and due upon receipt of
Owner's statement therefor.
B. Supplementing the provisions of Article 6 hereof,
Tenant shall promptly comply with and give prompt notice to Owner of any notice
it receives of the violation of any present or future law, order, ordinance, or
regulation of any governmental entity, department, commission, or any direction
of any public officer pursuant to law or of the New York Board of Fire
Underwriters or the use or occupation thereof, and Tenant shall effect such
compliance at its sole cost and expense.
58. LIMITATION ON RENT
A. If, at the commencement of, or at any time during
the term of this lease, the rent reserved in this Lease is not fully collectible
by reason of any federal, state, county or city law, proclamation, order or
regulation, or direction of a public officer or body pursuant to law, Tenant
agrees to take such steps as Owner may request to permit Owner to collect the
maximum rents which may be legally permissible from time to time during the
continuance of such legal rent restriction (but not in excess of the amounts
reserved therefor under this Lease). Upon the termination of such legal rent
restriction, Tenant shall pay to Owner to the extent permitted by law, an amount
equal to (a) the rents which would have been paid pursuant to this lease to such
legal rent restriction less (b) the rents paid by Tenant to Owner during the
period such legal rent restriction was in effect.
B. To the maximum extent permitted by law, Tenant
hereby waives any right to continued occupancy of the demised premises after the
expiration of the Lease imposed by any statute, rule or ordinance. If Tenant by
regulatory statute, rule or ordinance is entitled to continued occupancy, and so
long as such statute is in effect or applies to Tenant, then Tenant shall be
obligated to pay rent on a month-to-month basis at a new base rent equal to 125%
of the highest monthly rent set forth in this Lease plus any and all additional
rents denominated herein, and the terms herein shall apply to such statutory
tenancy to the extent they do not conflict with statute, rule or ordinance.
59. ENTIRE AGREEMENT
This Lease contains the entire understanding arrived
at between the parties and all prior discussions and negotiations are merged
herein and may not be extended, renewed, terminated, or otherwise modified
except by an instrument in writing signed by the party against whom enforcement
of any such modification is sought.
<PAGE> 36
12
60. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED
It is specifically understood and agreed that this
Lease is offered to Tenant for signature subject to Owner's acceptance and
approval and that Tenant has hereunto affixed its signature with the
understanding that this Lease shall not in any way bind owner until such time as
the same has been approved and executed by Landlord and delivered to Tenant.
61. SEVERABILITY
This lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease or any part thereof to be drafted. If any provision of this Lease shall be
determined to be void or unenforceable by any court of competent jurisdiction,
then such determination shall not affect any other provisions of this Lease, all
of which other provisions shall remain in full force and effect; and it is the
intention of the parties hereto that if any provision of this Lease is capable
of two constructions, one which would render the provision valid, then the
provision shall have the meaning which renders it valid.
62. NO COUNTERCLAIMS
Tenant shall and hereby does waive its right and
agrees not to interpose any counterclaim or set off, of whatever nature or
description, in any proceeding or action that may be instituted by Owner against
Tenant to recover rent, additional rent, other charges, possession, or for
damages, or in connection with any matters or claims whatsoever arising out of
or in any way connected with this lease, or any renewal, extension, holdover, or
modification thereof, or the relationship of Owner and Tenant, or Tenant's use
or occupancy of said premises. This clause, as well as the "waiver of jury
trial" provision of this lease, shall survive the expiration, early termination,
or cancellation of this lease or the term thereof. Nothing herein contained,
however, shall be construed as a waiver of Tenant's right to commence a separate
action on a bona fide claim against Owner.
63. OWNER'S CONSENT
If Tenant shall request Owner's approval or consent
and Owner shall fail or refuse to give such approval or consent, Tenant shall
not be entitled to any damages for any withholding or delay of such approval or
consent by Owner it being intended that Tenant's sole remedy shall be an action
for injunction or specific performance (the rights to money damages or other
remedies being hereby specifically waived), and that such remedy shall be
available only in those cases where Owner shall have expressly agreed in writing
not to unreasonably withhold its consent or approval or where, as a matter of
law, Owner may not unreasonably withhold its consent or approval.
<PAGE> 37
13
64. SUBORDINATION AND ATTORNMENT
A. This Lease and all rights of Tenant hereunder are
and shall be subject and subordinate in all respects to all underlying leases
and to all mortgages and building loan agreements, including without limitation
leasehold mortgages, which may now or hereafter affect the land and/or the
building and/or any of such leases, whether or not such mortgages shall also
cover other lands and/or buildings, to each and every advance made or hereafter
to be made under such mortgages and/or building loan agreements, and to all
renewals, modifications, replacements, assignments, and extensions of such
leases, building loan agreements, mortgages and spreaders and consolidations of
such mortgages.
This Article shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly, at its sole cost and expense, execute and
deliver any instrument in recordable form that Owner, the lessor of any such
lease of the holder of any such mortgage or any of their respective assigns or
successors-in-interest may reasonably request to evidence such subordination.
The leases to which this Lease is, at the time referred to, subject and
subordinate pursuant to this Article are hereinafter sometimes called "superior
leases" and the mortgages to which this Lease is, at the time referred to,
subject and subordinate pursuant to this Article are hereinafter sometimes
called "superior mortgages" and the lessor of a superior lease or its
successor-in-interest, at the time referred to, is sometimes hereinafter called
a "lessor" and the holder of a superior mortgage or its successor-in-interest at
the time referred to is sometimes hereinafter called a "holder".
B. In the event of any act or omission of Owner which
would give tenant the right, immediately or after lapse of a period of time, to
cancel or terminate this lease, or to claim a partial or total eviction, Tenant
shall not exercise such right (i) until it has given written notice of such act
or omission to the lease, and (ii) unless such act or omission shall be one
which is not capable of being remedied by Owner or such holder or lessor within
a reasonable period of time, until a reasonable period of time, for remedying
such act or omission shall have elapsed following the giving of such notice and
following the time when such holder or lessor shall have become entitled under
such superior mortgage or superior lease, as the case may be, to remedy the same
(to which reasonable period shall in no event be less that the period to which
Owner would be entitled under this Lease otherwise, after similar notice, to
effect such remedy,) provided such holder or lessor shall with due diligence
give Tenant written notice of its intention to and commence and continue to,
remedy such act or omission.
C. If the fee owner of the lands and/or building of
which the demised premises form a part, the lessor of a superior lease of the
holder of a superior mortgage shall succeed to the rights of Owner under this
lease, whether through possession or foreclosure action or through termination
for any reason of the leasehold estate covering the lands and/or building or by
delivery succeeding to Owner's rights (herein sometimes called "successor
Landlord") and upon such successor Owner's written agreement to accept Tenant's
attornment, Tenant shall
<PAGE> 38
14
attorn to and recognize such successor landlord as Tenant's landlord under this
Lease. The foregoing provisions shall inure to the benefit of any such successor
landlord, and shall be self-operative upon any demand, without requiring any
further instrument to give effect to said provisions. Tenant, however, upon
demand of any such successor landlord, agrees to execute, from time to time, an
instrument in confirmation of such attornment which is satisfactory to such
successor landlord. Upon such attornment this lease shall continue in full force
and effect for the remainder of the term originally demised under this lease as,
or as if it were, a direct lease between successor landlord and Tenant upon all
of the terms, covenants, conditions, agreements and provisions as are set forth
in this lease except that the successor landlord shall not:
(i) be liable for any previous act or
omission of Owner under this Lease;
(ii) be subject to any offset, not expressly
provided for in this lease, which shall have theretofore accrued to Tenant
against Owner or
(iii) be bound by any previous modification
of this lease, not expressly provided for in this lease, or by any previous
prepayment of more than one month's installments of fixed annual rent, unless
such modification or prepayment shall have been expressly approved in writing by
the successor landlord through or by reason of which the successor landlord
shall have succeeded to the rights of Owner under this lease.
D. Landlord hereby agrees to request from any lessor
under a Superior Lease, or trustee or mortgagee of a Mortgage superior to the
interest of Tenant hereunder, an agreement in the standard form customarily
employed by such lessor, trustee or mortgagee pursuant to which such lessor,
trustee, or mortgagee shall agree that the leasehold estate granted to Tenant
and the rights of Tenant pursuant to this Lease to quiet and peaceful possession
under this Lease shall not be terminated, modified, affected or disturbed by an
action which any such trustee or mortgagee may take to foreclose any such
mortgage, or which any such lessor may take to terminate such Superior Lease.
Such agreement shall remain in effect so long as Tenant shall pay the Rent,
escalations, additional rents, and other amounts to be paid by Tenant under the
Lease, within any applicable grace periods provided for hereunder, without
offsets or defenses thereto, and as long as Tenant shall fully perform and
comply with all the other terms, covenants, conditions and provisions of this
Lease on the part of the Tenant to be performed or complied with.
65. OCCUPANCY TAX
Tenant shall pay any occupancy tax or rent tax now in
effect or hereafter enacted directly to the taxing authority responsible for the
collection of the same. In the event such occupancy tax or rent tax is payable
by Owner in the first instance or hereafter required to be paid by Owner, such
tax shall be paid to Owner additional rent within ten (10) days following
<PAGE> 39
15
Owner's written demand therefor. Nothing contained herein shall be deemed to
require Tenant to pay municipal, state, federal income, inheritance, estate,
succession, transferor gift or any corporate franchise tax imposed upon Owner.
66. REPAIRS AND MAINTENANCE
A. Tenant shall, at its sole cost and expense, take
good care of and make all interior repairs and replacements to the demised
premises and the fixtures and appurtenances therein, nonstructural, foreseen
and/or unforeseen, and ordinary and/or extraordinary during the Term of this
lease, which shall include, without limitation, all repairs and replacements of
the demised premises, electrical, ventilating systems, floors, walls, ceiling,
doors, pipes, conduits appurtenant to the demised premises as and when needed so
as to preserve, maintain and/or keep the demised premises in good working order,
conditions and/or repair and in tenantable condition, reasonable wear and tear,
obsolescence and damage from the elements, fire and other casualty.
B. The quality of workmanship and materials used with
respect to the repairs, replacements, maintenance and other work required to be
done under the Article and/or Article 4 hereof shall be at least equal in
quality and class to the original materials and workmanship.
67. CONFLICTS
If there is any conflict between the terms contained
in the printed form lease and the terms contained in this Rider, the provisions
of this Rider shall govern.
68. HOLDING OVER
Should Tenant hold over in possession after the
expiration or sooner termination of the term of the Lease, such holding-over
shall not be deemed to extend or renew this Lease, but such holding-over shall
be on the terms and conditions of this Lease except that the charge for use and
occupancy for each calender month shall be 125% of the highest monthly rent set
forth in this Lease plus of all items of additional rent set forth herein.
69. ASSIGNMENT AND SUBLETTING
Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assignees,
expressly covenants that it shall not assign, mortgage, pledge, encumber, or
otherwise transfer this Lease, nor underlet, nor suffer, nor permit the Premises
or any part thereof to be used or occupied by others (whether for desk space,
mailing privileges or otherwise), without the prior written consent of Landlord
in each instance which shall not be unreasonably withheld or delayed. If this
Lease be assigned, or if the Premises or any
<PAGE> 40
16
part thereof be underlet or occupied by anybody other than Tenant, Landlord may,
after default by Tenant, collect rent from the assignee, undertenant or
occupant, and apply the net amount collected to the Rent herein reserved, but no
assignment, underletting, occupancy or collection shall be deemed a waiver of
the provisions hereof, the acceptance of the assignee, undertenant or occupant
as tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Landlord to an
assignment or underletting shall not in any way be construed to relieve Tenant
from obtaining the express consent in writing of Landlord to any further
assignment or underletting. In no event shall any permitted sublessee assign or
encumber its sublease or further sublet all or any portion of its sublet space,
or otherwise suffer or permit the sublet space or any part thereof to be used or
occupied by others, without Landlord's prior written consent in each instance.
Any assignment, sublease, mortgage, pledge, encumbrance or transfer in
contravention of the provisions of this Article shall be void.
Owner hereby agrees that Tenant may allow part of the
premises to be occupied by its affiliates or sublet part of the premises to its
affiliates provided, that such occupancy or sublettings are subject to all of
the covenants, agreements, terms, provisions and conditions contained in this
Lease. Owner shall cause to list Tenant and its affiliates to be posted on the
building directory in the lobby.
70. Notwithstanding anything to the contrary contained herein,
Owner shall remain responsible for maintaining and repairing the heating &
plumbing systems (except Air-conditioning) provided such repair results from
problems not caused by Tenant, its affiliates, its agents, its employees or its
contractors.
71. Tenant has requested and Owner has agreed to allow
non-powered bicycles to be brought in the Demised Premises, provided however
that, the freight elevators which are open on weekdays (Monday through Friday
between 10:00 am to 6:00 pm) are used only to transport them from street level
floor to the 3rd floor).
Tenant shall assume all liability including but not
limited to theft, damage to property and any third party claim, with respect to
the bicycles being brought into the building.
<PAGE> 41
17
72. Notwithstanding anything to the contrary contained herein,
Tenant shall have access to building 24 hours a day, 7 days a week by private
key. However, Owner shall not provide heat and freight elevator services on
holidays and after office hours.
SATYANAM, INC.
-------------------------------------------
OWNER
BY: /s/ Nari Pohani
---------------------------------------
SURGICAL CARE PUBLISHING, INC.
-------------------------------------------
TENANT
BY: /s/ Peter Frishauf
----------------------------------------
<PAGE> 42
TERESHARAN LAND CO. OF MANHATTAN, INC.
146 West 29th Street, New York, N.Y. 10001
TELEPHONE: (212) 279-8800 TELEFAX: (212) 629-3767
August 30, 1995
Ref: Unit # 304 at 134 West 29th Street.
In consideration of Teresharan Land Co. of Manhattan Inc. among other things,
providing consulting and advisory services to Surgical Care Publishing Inc,
Surgical Care Publishing Inc shall pay to Teresharan Land Co. of Manhattan Inc.,
the sum of $8,816.-- over a period of forty six (46) months in equal monthly
installments of $191.65 starting September 1st, 1995.
If Surgical Care Publishing Inc, exercises its Option-to-Renew its Lease on the
above mentioned unit for a period of 5 years, then Surgical Care Publishing Inc.
shall pay to Teresharan Land Co. of Manhattan Inc. a further sum of $15,000.--
over a period of five (5) years in equal monthly installments of $250.--
starting July 1st, 1999 and ending June 30th, 2004.
The above amounts are payable in addition to the amounts to be paid as per MOU
dated March 17, 1994.
/s/ Nari Pohani /s/ Peter Frishauf
____________________________________ ________________________________
TERESHARAN LAND CO. OF SURGICAL CARE PUBLISHING INC.
MANHATTAN INC.
<PAGE> 1
Exhibit 10.5
STANDARD FORM OF LOFT LEASE The Real
Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 17th day of March 1994, between
Satyanam, Inc., 146 West 29th St., New York, N.Y. 10001 party of the first part,
hereinafter referred to as Owner, and Surgical Care Publishing, Inc., party of
the second part, hereinafter referred to as Tenant,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner unit numbers 306 to 310 as per Exhibit A annexed hereto in the building
known as 134 West 29th Street, New York, NY 10001 in the Borough of Manhattan,
City of New York, for the term of Five (5) years (or until such term shall
sooner cease and expire as hereinafter provided) to commence on the 1st day of
May nineteen hundred and ninety-four, and to end on the 30th day of June
nineteen hundred and ninety-nine both dates inclusive, at an annual rental rate
of as per Article 41 of Rider annexed hereto which Tenant agrees to pay in
lawful money of the United States which shall be legal tender in payment of all
debts and dues, public and private, at the time of payment, in equal monthly
installments in advance on the first day of each month during said term, at the
office of Owner or such other place as Owner may designate, without any set off
or deduction whatsoever, except that Tenant shall pay the first _____ monthly
installment(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Occupancy: 1. Tenant shall pay the rent as above and as
hereinafter provided.
Use: 2. Tenant shall use and occupy demised premises
for general and executive offices
provided such use is in accordance with the Certificate of Occupancy for the
building, if any, and for no other purpose.
Alterations: 3. Tenant shall make no changes in or to the
demised premises of any nature without
Owner's prior written consent. Subject to
the prior written consent of Owner, and to
the provisions of this article, Tenant, at
Tenant's expense, may
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make alterations, installations, additions or improvements which are
nonstructural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or mechanics first approved by Owner, such approval not to be
unreasonably withheld. Tenant shall, at its expense, before making any
alterations, additions, installations or improvements obtain all permits,
approval and certificates required by any governmental or quasi-governmental
bodies and (upon completion) certificates of final approval thereof and shall
deliver promptly duplicates of all such permits, approvals and certificates to
Owner. Tenant agrees to carry and will cause Tenant's contractors and
sub-contractors to carry such workman's compensation, general liability,
personal and property damage insurance as Owner may reasonably require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within one hundred twenty (120) days thereafter,
at Tenant's expense, by filing the bond required by law or otherwise. All
fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the demised premises by
Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in
this Article shall be construed to give Owner title to or to prevent Tenant's
removal of trade fixtures, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Owner, Tenant shall immediately and at its expense, repair
and restore the premises to the condition existing prior to installation and
repair any damage to the demised premises or the building due to such removal.
All property permitted or required to be removed by Tenant at the end of the
term remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Owner, either be retained as Owner's property or
removed from the premises by Owner, at Tenant's expense.
Repairs: 4. Owner shall maintain and repair the exterior
of and the public portions of the building.
Tenant shall, throughout the term of this lease, take good care of the demised
premises including the bathrooms and lavatory facilities (if the demised
premises encompass the entire floor of the building) and the windows and window
frames and, the fixtures and appurtenances therein and at Tenant's sole cost and
expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees or licensees, arising from such Tenant conduct or omission,
when required by other provisions of this lease, including Article 6. Tenant
shall also repair all damage to the building and the demised premises caused by
the moving of Tenant's fixtures, furniture or equipment. All the aforesaid
repairs shall be of quality or class equal to the original work or construction.
If Tenant fails, after ten days notice, to proceed with due diligence to make
repairs
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required to be made by Tenant, the same may be made by the Owner at the expense
of Tenant, and the expenses thereof incurred by Owner shall be collectible, as
additional rent, after rendition of a bill or statement therefor. If the demised
premises be or become infested with vermin, Tenant shall, at its expense, cause
the same to be exterminated. Tenant shall give Owner prompt notice of any
defective condition in any plumbing, heating system or electrical lines located
in the demised premises and following such notice, Owner shall remedy the
condition with due diligence, but at the expense of Tenant, if repairs are
necessitated by damage or injury attributable to Tenant, Tenant's servants,
agents, employees, invitees or licensees as aforesaid. Except as specifically
provided in Article 9 or elsewhere in this lease, there shall be no allowance to
the Tenant for a diminution of rental value and no liability on the part of
Owner by reason of inconvenience, annoyance or injury to business arising from
Owner, Tenant or others making or failing to make any repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. The
provisions of this Article 4 with respect to the making of repairs shall not
apply in the case of fire or other casualty with regard to which Article 9
hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit,
suffer or allow any window in the demised
premises to be cleaned from the outside in violation of Section 202 of the New
York State Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of 6. Prior to the commencement of the lease term,
Law, Fire Insurance, if Tenant is then in possession, and at all
Floor Loads: times thereafter Tenant shall, at Tenant's
sole cost and expense, promptly comply with all present and future laws, orders
and regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board of
Fire Underwriters, or the Insurance Services Office, or any similar body which
shall impose any violation, order or duty upon Owner or Tenant with respect to
the demised premises, arising out of Tenant's use or manner of use thereof, or,
with respect to the building, if arising out of Tenant's use or manner of use of
the demised premises of the building (including the use permitted under the
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has, by its
manner of use of the demised premises or method of operation therein, violated
any such laws, ordinances, orders, rules, regulations or requirements with
respect thereto. Tenant shall not do or permit any act or thing to be done in or
to the demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire or other policies of insurance at any
time carried by or for the benefit of Owner. Tenant shall not keep anything in
the demised premises except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization and
other authority having jurisdiction, and then only in such manner and such
quantity so as not to increase the rate for fire insurance
<PAGE> 4
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applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. If by reason of failure
to comply with the foregoing the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" or rate for the building
or demised premises issued by a body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's judgement, to absorb and prevent
vibration, noise and annoyance. Limitation on load/sq. ft. is 120 lbs (one
hundred twenty pounds).
Subordination: 7. This lease is subject and subordinate to all
ground or underlying leases and to all
mortgages which may now or hereafter affect such leases or the real property of
which demised premises are a part and to all renewals, modifications,
consolidations, replacements and extensions of any such underlying leases and
mortgages. This clause shall be self-operative and no further instrument or
subordination shall be required by any ground or underlying lessor or by any
mortgagee, affecting any lease or the real property of which the demised
premises are a part. In confirmation of such subordination, Tenant shall execute
promptly any certificate that Owner may request.
Property-Loss 8. Owner or its agents shall not be liable for
Loss, Damage, any damage to property of Tenant or of
Reimbursement, others entrusted to employees of the
Indemnity: building, nor for loss of or damage to any
property of Tenant by theft or otherwise, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence of Owner, its agents, servants or employees; Owner
or its agents shall not be liable for any damage caused by other tenants or
persons in, upon or about said building or caused by operations in connection of
any private, public or quasi public work. If at any time any windows of the
demised premises are temporarily closed, darkened or bricked up (or permanently
closed, darkened or bricked up, if required by law) for any reason whatsoever
including, but not limited to Owner's own acts, Owner shall not be liable for
any damage Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor nor abatement or diminution of rent nor shall the same
release Tenant from its obligations hereunder nor constitute an eviction. Tenant
shall indemnify and save harmless Owner against and from all liabilities,
obligations, damages, penalties, claims, costs and expenses for which Owner
shall not be reimbursed by insurance, including reasonable attorney's fees,
paid, suffered or incurred as a result of any breach
<PAGE> 5
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by Tenant, Tenant's agents, contractors, employees or licensees, of any covenant
or condition of this lease, or the carelessness, negligence or improper conduct
of the Tenant, Tenant's agents, contractors, employees or licensees. Tenant's
liability under this lease extends to the acts and omissions of its sub-tenant,
and any agent, contractor, employee or licensee of its sub-tenant. In case any
action or proceeding is brought against Owner by reason of any such claim,
Tenant, upon timely written notice from Owner, will, at Tenant's expense, resist
or defend such action or proceeding by counsel approved by Owner in writing,
such approval not to be unreasonably withheld.
Destruction, Fire 9. (a) If the demised premises or any part thereof
and Other Casualty: shall be damaged by fire or other casualty,
Tenant shall give immediate notice thereof to Owner and this lease shall
continue in full force and effect except as hereinafter set forth. (b) If the
demised premises are partially damages or rendered partially unusable by fire or
other casualty, the damages thereto shall be repaired by and at the expense of
Owner and the rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within 45 [forty-five]
days after such fire or casualty, specifying a date for the expiration of the
lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Owner's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for
<PAGE> 6
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recovery for loss or damage resulting from fire or other casualty, and to the
extent that such insurance is in force and collectible and to the extent
permitted by law, Owner and Tenant each hereby releases and waives all right of
recovery against the other or any one claiming through or under each of them by
way of subrogation or otherwise. The foregoing release and waiver shall be in
force only if both releasors' insurance policies contain a clause providing that
such a release or waiver shall not invalidate the insurance. If, and to the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefitting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to waiver of subrogation. Tenant acknowledges
that Owner will not carry insurance on Tenant's furniture and or furnishings or
any fixtures or equipment, improvements, or appurtenances removable by Tenant
and agrees that Owner will not be obligated to repair any damage thereto or
replace the same. (f) Tenant hereby waives the provisions of Section 227 of the
Real Property Law and agrees that the provisions of this article shall govern
and control in lieu thereof.
Eminent Domain: 10. If the whole or any part of the demised
premises shall be acquired or condemned by
Eminent Domain for any public or quasi public use or purpose, then and in that
event, the term of this lease shall cease and terminate from the date of title
vesting in such proceeding and Tenant shall have no claim for the value of any
unexpired term of said lease.
Assignment, 11. Tenant, for itself, its heirs, distributees,
Mortgage, Etc.: executors, administrators, legal
representatives, successors and assigns, expressly covenants that it shall not
assign, mortgage or encumber this agreement, nor underlet, or suffer or permit
the demised premises or any part thereof to be used by others, without the prior
written consent of Owner in each instance, which shall not be unreasonably
withheld Transfer of the majority of the stock of a corporate Tenant shall be
deemed an assignment. If this lease be assigned, or if the demised premises or
any part thereof be underlet or occupied by anybody other than Tenant, Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collection shall be deemed a waiver
of this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric Current: 12. Rates and conditions in respect to
submetering or rent inclusion, as the case
may be, to be added in RIDER attached hereto. Tenant covenants and agrees that
at all times its use of electric current shall not exceed the capacity of
existing leeders to the building or the risers or wiring installation and Tenant
may not use any
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electrical equipment which, in Owner's opinion, reasonably exercised, will
overload such installations or interfere with the use thereof by other tenants
of the building. The change at any time of the character of electric service
shall in no wise make Owner liable or responsible to Tenant, for any losses,
damages or expenses which Tenant may sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the
demised premises in any emergency at any time, and, at other reasonable times,
to examine the same and to make such repairs, replacements and improvements as
Owner may deem necessary and reasonably desirable to any portion of the building
or which Owner may elect to perform in the premises after Tenant's failure to
make repairs or perform any work which Tenant is obligated to perform under this
lease, or for the purpose of complying with laws, regulations and other
directions of governmental authorities. Owner hereby agrees to cause such
repairs, replacements and improvements to be made with reasonable promptness,
and to take reasonable steps to minimize any inconvenience to Tenant arising
therefrom, provided however, that this shall not obligate Owner to incur any
additional overtime costs or entitle Tenant to deduct or abate the rent or any
other payments. Tenant shall permit Owner to use and maintain and replace pipes
and conduits in and through the demised premises and to erect new pipes and
conduits therein provided, wherever possible, they are within walls or otherwise
concealed. Owner may, during the progress of any work in the demised premises,
take all necessary materials and equipment into said premises without the same
constituting an eviction nor shall the Tenant be entitled to any abatement of
rent while such work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Throughout the term hereof Owner shall
have the right to enter the demised premises at reasonable hours for the purpose
of showing the same to prospective purchasers or mortgagees of the building, and
during the last six months of the term for the purpose of showing the same to
prospective tenants and may, during said six months period, place upon the
premises the usual notices "To Let" and "For Sale" which notices Tenant shall
permit to remain thereon without molestation. If Tenant is not present to open
and permit an entry into the premises, Owner or Owner's agents may enter the
same whenever such entry may be necessary or permissible by master key or
forcibly and provided reasonable care is exercised to safeguard Tenant's
property, such entry shall not render Owner or its agents liable therefor, nor
in any event shall the obligations of Tenant hereunder be affected. If during
the last month of the term Tenant shall have removed all or substantially all of
Tenant's property therefrom. Owner may immediately enter, alter, renovate or
redecorate the demised premises without limitation or abatement of rent, or
incurring liability to Tenant for any compensation and such act shall have no
effect on this lease or Tenant's obligation hereunder.
Vault, Vault Space, 14. No Vaults, vault space or area, whether or
Area: not enclosed or covered, not within the
property line of the building is leased hereunder anything contained in or
indicated on any sketch, blue print or plan, or anything contained elsewhere in
this lease to the contrary notwithstanding. Owner makes no representation as to
the location of the property line of the building. All vaults and vault space
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and all such areas not within the property line of the building, which Tenant
may be permitted to use and/or occupy, is to be used and/or occupied under a
revocable license, and if any such license be revoked, or if the amount of such
space or area be diminished or required by any federal, state or municipal
authority or public utility, Owner shall not be subject to any liability nor
shall Tenant be entitled to any compensation or diminution or abatement of rent,
nor shall such revocation, diminution or requisition be deemed constructive or
actual eviction. Any tax, fee or charge of municipal authorities for such vault
or area shall be paid by Tenant, if used by Tenant, whether or not specifically
leased hereunder.
Occupancy: 15. Tenant will not at any time use or occupy
the demised premises in violation of the
certificate of occupancy issued for the building of which the demised premises
are a part. Tenant has inspected the premises and accepts them as is, subject to
the riders annexed hereto with respect to Owner's work, if any. In any event,
Owner makes no representation as to the condition of the premises and Tenant
agrees to accept the same subject to violations, whether or not of record. If
any governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business, Tenant shall be responsible for and shall procure
and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the
contrary notwithstanding, this lease may be
cancelled by Owner by sending of a written notice to Tenant within a reasonable
time after the happening of any one or more of the following events: (1) the
commencement of a case in bankruptcy or under the laws of any state naming
Tenant as the debtor; or (2) the making by Tenant of an assignment or any other
arrangement for the benefit of creditors under any state statute. Neither Tenant
nor any person claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the premises
demised but shall forthwith quit and surrender the premises. If this lease shall
be assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.
(b) It is stipulated and agreed that in the
event of the termination of this lease pursuant to (a) hereof, Owner shall
forthwith, notwithstanding any other provisions of this lease to the contrary,
be entitled to recover from Tenant as and for liquidated damages an amount equal
to the difference between the rental reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental value of the
demised premises for the same period. In the computation of such damages the
difference between any installment of rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the demised premises
for the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as
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liquidated damages by reason of such termination, an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when, and governing
the proceedings in which, such damages are to be proved, whether or not such
amount be greater, equal to, or less than the amount of the difference referred
to above.
Default: 17. (1) If Tenant defaults in fulfilling any of
the covenants of this lease other than the
covenants for the payment of rent or additional rent; or if the demised premises
becomes "or if this lease be rejected under Section235 of Title 11 of the U.S.
Code (bankruptcy code)"; or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised premises shall
be taken or occupied by someone other than Tenant; or if Tenant shall make
material default with respect to any other lease between Owner and Tenant; or if
Tenant shall have failed, after 10 (ten) days written notice, to redeposit with
Owner any portion of the security deposited hereunder which Owner has applied to
the payment of any rent and additional rent due and payable hereunder or failed
to move into or take possession of the premises within fifteen (15) days after
the commencement of the term of this lease, of which fact Owner shall be the
sole judge; then in any one or more of such events, upon Owner serving a written
five (5) days notice upon Tenant specifying the nature of said default and upon
the expiration of said ten (10) days, if Tenant shall have failed to comply with
or remedy such default, or if the said default or omission complained of shall
be of a nature that the same cannot be completely cured or remedied within said
ten (10) day period, and if Tenant shall not have diligently commenced during
such default within such ten (10) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days this lease and
the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided. Owner shall use best efforts to relet the premises and
shall be obligated to mitigate the damages to the extent of rent collected upon
reletting if when such rent is collected, and after deducting all relative
expenses incurred in such reletting.
(2) If the notice provided for in (1) hereof
shall have been given, and the term shall expire as aforesaid; or if Tenant
shall make default in the payment of the rent reserved herein or any item of
additional rent herein mentioned or any part of either or in making any other
payment herein required; then and in any of such events Owner may without
notice, re-enter the demised premises either by force or otherwise, and
dispossess Tenant by summary proceedings or otherwise, and the legal
representative of Tenant or other occupant of demised premises and remove their
effects and hold the premises as if this lease had not been made, and Tenant
hereby waives the service of notice of intention to re-enter or to institute
legal proceedings to that end. If Tenant shall make default hereunder prior to
the date fixed as the commencement of any renewal or extension of this lease,
Owner may cancel and terminate such renewal or extension agreement by written
notice.
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Remedies of Owner 18. In case of any such default, re-entry,
and Waiver of expiration and/or dispossess by summary
Redemption: proceedings or otherwise, (a) the rent, and
additional rent, shall become due thereupon
and be paid up to the time of such re-entry, dispossess and/or expiration, (b)
Owner may relet the premises or any part or parts thereof, either in the name of
Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and or covenanted to be paid and the net
amount, if any, of the rents collected on account of the subsequent lease or
leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term of this lease. The failure of
Owner to relet the premises or any part or parts thereof shall not release or
affect Tenant's liability for damages. In computing such liquidated damages
there shall be added to the said deficiency such expenses as Owner may incur in
connection with reletting, such as legal expenses, reasonable attorneys' fees,
brokerage, advertising and for keeping the demised premises in good order or for
preparing the same for reletting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in this lease and any
suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgment, considers advisable and necessary
for the purpose of reletting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to relet the demised
premises, or in the event that the demised premises are relet, for failure to
collect the rent thereof under such reletting, and in no event shall Tenant be
entitled to receive any excess, if any, of such net rents collected over the
sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance
or performance of any material term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, Owner may immediately or at any time
thereafter and after ten (10) days' notice perform the obligation of Tenant
thereunder. If Owner, in connection with the foregoing or in connection with any
default by Tenant in the covenant to
<PAGE> 11
11
pay rent hereunder, makes any expenditures or incurs any obligations for the
payment of money, including but not limited to attorney's fees, in instituting,
prosecuting or defending any action or proceedings, then Tenant will reimburse
Owner for such reasonable sums so paid or obligations incurred with interest and
costs. The foregoing expenses incurred by reason of Tenant's default shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Owner
within five (5) days of rendition of any bill or statement to Tenant therefor.
If Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner as damages. If tenant obtains judgement against the Owner due to default
of the Owner, then Owner shall reimburse the Tenant for reasonable costs
incurred by the Tenant in bringing the action.
Building 20. Owner shall have the right at any time
Alterations and without the same constituting an eviction
Management: and without incurring liability to Tenant
therefor to change the arrangement and or
location of public entrances, passageways,
doors, doorways, corridors, elevators, stairs, toilets or other public parts of
the building and to change the name, number or designation by which the building
may be known. There shall be no allowance to Tenant for diminution of rental
value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or other Tenant making any
repairs in the building or any such alterations, additions and improvements.
Furthermore, Tenant shall not have any claim against Owner by reason of Owner's
imposition of any controls of the manner of access to the building by Tenant's
social or business visitors as the Owner may deem necessary for the security of
the building and its occupants.
No Representations 21. Neither Owner nor Owner's agents have made
by Owner: any representations or promises with respect
to the physical condition of the building,
the land upon which it is erected or the
demised premises, the rents, leases, expenses of operation or any other matter
or thing affecting or related to the demised premises or the building except as
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" on the date possession is tendered and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a part
were in good and satisfactory condition at the time such possession was so
taken, except as to latent defects. All understandings and agreements heretofore
made between the parties hereto are merged in this contract, which alone fully
and completely expresses the agreement between Owner and Tenant and any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part, unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
<PAGE> 12
12
End of Term: 22. Upon the expiration or other termination of
the term of this lease, Tenant shall quit
and surrender to Owner the demised premises, broom clean, in good order and
condition, ordinary wear and damages which Tenant is not required to repair as
provided elsewhere in this lease excepted, and Tenant shall remove all its
property from the demised premises. Tenant's obligation to observe or perform
this covenant shall survive the expiration or other termination of this lease.
If the last day of the term of this Lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it be a
legal holiday in which case it shall expire at noon on the preceding business
day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that
upon Tenant paying the rent and additional
rent and observing and performing all the terms, covenants and conditions, on
Tenant's part to be observed and performed, Tenant may peaceably and quietly
enjoy the premises hereby demised, subject, nevertheless, to the terms and
conditions of this lease including, but not limited to, Article 34 hereof and to
the ground leases, underlying leases and mortgages hereinbefore mentioned.
Failure to Give 24. If Owner is unable to give possession of the
Possession: demised premises on the date of the
commencement of the term hereof, because of
the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or if Owner has not completed any work required
to be performed by Owner, or for any other reason, Owner shall not be subject to
any liability for failure to give possession on said date and the validity of
the lease shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the term of this lease, but the rent payable
hereunder shall be abated (provided Tenant is not responsible for Owner's
inability to obtain possession or complete any work required) until after Owner
shall have given Tenant notice that the premises are substantially ready for
Tenant's occupancy. If permission is given to Tenant to enter into the
possession of the demised premises or to occupy premises other than the demised
premises prior to the date specified as the commencement of the term of this
lease. Tenant covenants and agrees that such occupancy shall be deemed to be
under all the terms, covenants, conditions and provisions of this lease, except
as to the covenant to pay rent. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for
violation of, or to insist upon the strict
performance of any covenant or condition of this lease or of any of the Rules or
Regulations, set forth or hereafter adopted by Owner, shall not prevent a
subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
with knowledge of the
<PAGE> 13
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breach of any covenant of this lease shall not be deemed a waiver of such breach
and no provision of this lease shall be deemed to have been waived by Owner
unless such waiver be in writing signed by Owner. No payment by Tenant or
receipt by Owner of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent, nor
shall any endorsement or statement of any check or any letter accompanying any
check or payment as rent be deemed an accord and satisfaction, and Owner may
accept such check or payment without prejudice to Owner's right to recover the
balance of such rent or pursue any other remedy in this lease provided. All
checks tendered to Owner as and for the rent of the demised premises shall be
deemed payments for the account of Tenant. Acceptance by Owner of rent from
anyone other than Tenant shall not be deemed to operate as an attornment to
Owner by the payor of such rent or as a consent by Owner to an assignment or
subletting by Tenant of the demised premises to such payor, or as a modification
of the provisions of this lease. No act or thing done by Owner or Owner's agents
during the term hereby demised shall be deemed an acceptance of a surrender of
said premises and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
Waiver of Trial 26. It is mutually agreed by and between Owner
by Jury: and Tenant that the respective parties
hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any summary proceeding
for possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding.
Inability to Perform: 27. This Lease and the obligation of Tenant to
pay rent hereunder and perform all of the
other covenants and agreements hereunder on part of Tenant to be performed shall
in no wise be affected, impaired or excused because Owner is unable to fulfill
any of its obligations under this lease or to supply or is delayed in supplying
any service expressly or impliedly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations or decorations or is unable
to supply or is delayed in supplying any equipment or fixtures if Owner is
prevented or delayed from so doing by reason of strike or labor troubles or
government preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
<PAGE> 14
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Bills and Notices: 28. Except as otherwise in this lease provided,
a bill statement, notice or communication which Owner may desire or be required
to give to Tenant, shall be deemed sufficiently given or rendered if, in
writing, delivered to Tenant personally or sent by registered or certified mail
addressed to Tenant at the building of which the demised premises form a part or
at the last known residence address or business address of Tenant or left at any
of the aforesaid premises addressed to Tenant, and the time of the rendition of
such bill or statement and of the giving of such notice or communication shall
be deemed to be the time when the same is delivered to Tenant, mailed, or left
at the premises as herein provided. Any notice by Tenant to Owner must be served
by registered or certified mail addressed to Owner at the address first
hereinabove given or at such other address as Owner shall designate by written
notice.
Water Charges: 29. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary
lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge)
Owner may install a water meter and thereby measure Tenant's water consumption
for all purposes. Tenant shall pay Owner for the cost of the meter and the cost
of the installation, thereof and throughout the duration of Tenant's occupancy
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense in default of which Owner may cause
such meter and equipment to be replaced or repaired and collect the cost thereof
from Tenant, as additional rent. Tenant agrees to pay for water consumed, as
shown on said meter as and when bills are rendered, and on default in making
such payment Owner may pay such charges and collect the same from Tenant, as
additional rent. Tenant covenants and agrees to pay, as additional rent, the
sewer rent, charge or any other tax, rent, levy or charge which now or hereafter
is assessed, imposed or a lien upon the demised premises or the realty of which
they are part pursuant to law, order or regulation made or issued in connection
with the use, consumption, maintenance or supply of water, water system or
sewage or sewage connection or system. If the building or the demised premises
or any part thereof is supplied with water through a meter through which water
is also supplied to other premises Tenant shall pay to Owner, as additional
rent, on the first day of each month, ____% ($25.00) of the total meter charges
as Tenant's portion. Independently of and in addition to any of the remedies
reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and
collect any monies to be paid by Tenant or paid by Owner for any of the reasons
or purposes hereinabove set forth.
Sprinklers: 30. Anything elsewhere in this lease to the
contrary notwithstanding, if the New York
Board of Fire Underwriters or the New York Fire Insurance Exchange or any
bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment,
<PAGE> 15
15
become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate set by any said
Exchange or by any fire insurance company, Tenant shall, at Tenant's expenses,
promptly make such sprinkler system installations, changes, modifications,
alterations, and supply additional sprinkler heads or other equipment as
required whether the work involved shall be structural or non-structural in
nature. Tenant shall pay to Owner as additional rent the sum of $25.00, on the
first day of each month during the term of this lease, as Tenant's portion of
the contract price for sprinkler supervisory service.
Elevators, Heat, 31. As long as Tenant is not in default under
Cleaning: any the covenants of this lease Owner shall:
(a) provide necessary passenger elevator
facilities on business days from 8 a.m. to
6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service
is provided, same shall be provided only on regular business days Monday through
Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon
and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services
supplied by Owner to the demised premises, when and as required by law, on
business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d)
clean the public halls and public portions of the building which are used in
common by all tenants. Tenant shall, at Tenant's expense, keep the demised
premises, including the windows, clean and in order, to the satisfaction of
Owner, and for that purpose shall employ the person or persons, or corporation
approved by Owner. Tenant shall pay to Owner the cost of removal of any of
Tenant's refuse and rubbish from the building. Bills for the same shall be
rendered by Owner to Tenant at such time as Owner may elect and shall be due and
payable hereunder, and the amount of such bills shall be deemed to be, and be
paid as, additional rent. Tenant shall, however, have the option of
independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building. Owner reserves the right to
stop service of the heating, elevator, plumbing and electric systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Owner desirable or necessary to
be made, until said repairs, alterations, replacements or improvements shall
have been completed. If the building of which the demised premises are a part
supplies manually operated elevator service, Owner may proceed with alterations
necessary to substitute automatic control elevator service upon ten (10) days
written notice to Tenant without in any way affecting the obligations of Tenant
hereunder, provided that the same shall be done with the minimum amount of
inconvenience to Tenant, and Owner pursues with due diligence the completion of
the alterations.
Security: 32. Tenant has deposited with Owner the sum of
$7,500 as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this lease; it is agreed that in the event Tenant defaults in respect of any of
the terms, provisions and conditions of this lease, including, but not limited
to, the payment of rent and additional rent, Owner may use, apply or retain the
whole or any part of the security
<PAGE> 16
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so deposited to the extent required for the payment of any rent and additional
rent or any other sum as to which Tenant is in default or for any sum which
Owner may expend or may be required to expend by reason of Tenant's default in
respect of any of the terms, covenants and conditions of this lease, including
but not limited to, any damages or deficiency in the reletting of the premises,
whether such damages or deficiency accrued before or after summary proceedings
or other re-entry by Owner. In the event that Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
lease, the security shall be returned to Tenant after the date fixed as the end
of the Lease and after delivery of entire possession of the demised premises to
Owner. In the event of a sale of the land and building or leasing of the
building, of which the demised premises form a part, Owner shall have the right
to transfer the security to the vendee or lessee and Owner shall thereupon be
released by Tenant from all liability for the return of such security; and
Tenant agrees to look to the new Owner solely for the return of said security,
and it is agreed that the provisions hereof shall apply to every transfer or
assignment made of the security to a new Owner. Tenant further covenants that it
will not assign or encumber or attempt to assign or encumber the monies
deposited herein as security and that neither Owner nor its successors or
assigns shall be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance. Such security deposit shall not bear any interest.
Captions: 33. The Captions are inserted only as a matter
of convenience and for reference and in no
way define, limit or describe the scope of this lease nor the intent of any
provision thereof.
Definitions: 34. The term "Owner" as used in this lease means
only the owner of the fee or of the
leasehold of the building, or the mortgagee in possession, for the time being of
the land and building (or the owner of a lease of the building or of the land
and building) of which the demised premises form a part, so that in the event of
any sale or sales of said land and building or of said lease, or in the event of
a lease of said building, or of the land and building, the said Owner shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Owner hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties and
the purchaser, at any such sale, or the said lessee of the building, or of the
land and building, that the purchaser or the lessee of the building has assumed
and agreed to carry out any and all covenants and obligations of Owner
hereunder. The words "re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning. The term "rent" includes the annual
rental rate whether so expressed or expressed in monthly installments, and
"additional rent." "Additional rent" means all sums which shall be due to Owner
from Tenant under this lease, in addition to the annual rental rate. The term
"business days" as used in this lease, shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 31 hereof), Sundays
and all days observed by the State or Federal Government as legal holidays and
those designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with respect
to HVAC service.
<PAGE> 17
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Adjacent 35. If an excavation shall be made upon land
Excavation- adjacent to the demised premises, or shall
Shoring: be authorized to be made, Tenant shall
afford to the person causing or authorized
to cause such excavation, license to enter upon the demised premises for the
purpose of doing such work as said person shall deem necessary to preserve the
wall or the building of which demised premises form apart from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Owner, or diminution or abatement of rent.
Rules and 36. Tenant and Tenant's servants, employees,
Regulations: agents, visitors, and licensees shall
observe faithfully, and comply strictly
with, the Rules and Regulations annexed hereto and such other and further
reasonable Rules and Regulations as Owner or Owner's agents may from time to
time adopt. Notice of any additional rules or regulations shall be given in such
manner as Owner may elect. In case Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within ten (10)
days after the giving of notice thereof. Nothing in this lease contained shall
be construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as against
any other tenant and Owner shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees.
Glass: 37. Owner shall replace, at the expense of the
Tenant, any and all plate and other glass
damaged or broken from any cause whatsoever in and about the demised premises.
Owner may insure, and keep insured, at Tenant's expense, all plate and other
glass in the demised premises for and in the name of Owner. Bills for the
premiums therefor shall be rendered by Owner to Tenant at such times as Owner
may elect, and shall be due from, and payable by, Tenant when rendered, and the
amount thereof shall be deemed to be, and be paid, as additional rent.
Estoppel 38. Tenant, at any time, and from time to time,
Certificate: upon at least 10 days' prior notice by
Owner, shall execute, acknowledge and
deliver to Owner, and/or to any other person, firm or corporation specified by
Owner, a statement certifying that this Lease is unmodified in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), stating the dates to which
the rent and additional rent have been paid, and stating whether or not there
exists any default by Owner under this Lease, and, if so, specifying each such
default.
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Directory Board 39. If, at the request of and as accommodation
Listing: to Tenant, Owner shall place upon the
directory board in the lobby of the
building, one or more names of persons other than Tenant, such directory board
listing shall not be construed as the consent by Owner to an assignment or
subletting by Tenant to such person or persons.
Successors and 40. The covenants, conditions and agreements
Assigns: contained in this lease shall bind and inure
to the benefit of Owner and Tenant and their
respective heirs, distributees, executors,
administrators, successors, and except as otherwise provided in this lease,
their assigns.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed
and sealed this lease as of the day and year first above written.
Witness for Owner: SATYANAM, INC. CORP.
SEAL
/s/ Nari Pohani [L.S.]
_____________________________ ________________________________
Witness for Tenant: SURGICAL CARE PUBLISHING, INC. CORP.
SEAL
/s/ Faustino Galan [L.S.]
_____________________________ ________________________________
<PAGE> 19
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ACKNOWLEDGMENTS
CORPORATE TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came _______________________________ to me known, who being by me duly sworn,
did depose and say that he resides in ___________________________________ that
he is the _____________________ of _______________ the corporation described in
and which executed the foregoing instrument, as TENANT: that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
________________________________________
INDIVIDUAL TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came ___________________________________ to me known and known to me to be the
individual described in and who, as TENANT, executed the foregoing instrument
and acknowledged to me that ___________ he executed the same.
________________________________________
<PAGE> 20
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IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A
PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any or the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any
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Tenant, Owner may remove same without any liability and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice,
drinking water, towel and other similar services, or accept barbering or
bootblacking services in the demised premises, except from persons authorized by
Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting
and peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m. on business days, after 1 p.m. on Saturdays, and at
all hours on Sundays and legal holidays all persons who do not present a pass to
the building signed by Owner. Owner will furnish passes to persons for whom any
Tenant requests same in writing. Each Tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Owner for all acts
of such persons. Notwithstanding the foregoing, Owner shall not be required to
allow Tenant or any person to enter or remain in the building, except on
business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to
1:00 p.m.
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11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a loft building, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. Tenant shall not use the demised premises in a manner which
disturbs or interferes with other Tenants in the beneficial use of their
premises.
<PAGE> 23
23
Address
Premises
TO
STANDARD FORM OF
LOFT LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1982. All rights Reserved.
Reproduction in whole or in part prohibited.
Dated ____________________________, 19__
Rent Per Year
Rent Per Month
Term
From
To
Drawn by__________________________
Checked by________________________
Entered by________________________
Approved by_______________________
<PAGE> 24
Rider Agreement Dated March 17th, 1994,
Between SATYANAM, INC. As Owner,
and SURGICAL CARE PUBLISHING, INC., as Tenant
41. BASE RENT
A. Tenant shall pay to the Owner base rent for the
demised premises in accordance with the provisions of the printed form of this
Lease at an annual rate of:
$42,200.00 for the period May 1st, 1994 to June 30th,
1995, payable in equal monthly installments of $3,516.67.
$44,200.00 for the period July 1st, 1995 to June
30th, 1996, payable in equal monthly installments of $3,683.33.
$46,200.00 for the period July 1st, 1996 to June
30th, 1997, payable in equal monthly installments of $3,850.00.
$48,200.00 for the period July 1st, 1997 to June
30th, 1998 payable in equal monthly installments of $4,016.67.
$50,200.00 for the period July 1st, 1998 to June
30th, 1999, payable in equal monthly installments of $4,183.33
Rent abated thru June 30th, 1994.
42. OPTION TO RENEW:
A. Provided Tenant is not in default in any of the material
terms, covenants or condition of this Lease, including but not limited to the
obligation to pay rent or additional rent, and provided further that Owner has
not during the initial term of the Lease commenced any summary proceeding for
possession or rent that has resulted in a judgement in favor of Owner., whether
by stipulation or after trial, Tenant shall have the right to renew this Lease
for an additional Five (5) year term commencing July 1st, 1999 and expiring June
30th, 2004.
The base rental for the renewal term shall be as
follows:
$52,200.00 for the period July 1st, 1999 to June
30th, 2004, payable in equal monthly installments of $4,350.00
$54,200.00 for the period July 1st, 2000 to June 30th
2001, payable in equal monthly installments of $4,516.67.
<PAGE> 25
2
$56,200.00 for the period July 1st, 2001 to June
30th, 2002, payable in equal monthly installments of $4,683.33.
$58,200.00 for the period July 1st, 2002 to June
30th, 2003, payable in equal monthly installments of $4,850.00.
$60,200.00 for the period July 1st, 2003 to June
30th, 2004, payable in equal monthly installments of $5,016.67.
B. If the Tenant exercises the option to renew the lease;
tenant shall notify Landlord in writing on or before December 31, 1998 that it
intends to renew the Lease. The failure by Tenant to notify Landlord timely of
its intention to renew shall constitute an affirmative election by Tenant not to
renew the lease upon which Landlord may reasonably rely, if it so desires to
rerent the demised premises to a third party.
43. SUBLEASE
Owner represents and Tenant understands and agrees
that Owner is the proprietary lessee of the demised premises pursuant to a
Proprietary Lease between Owner, as lessee and 134 West 29th Street Owners Corp,
as lessor ("Owners Corporation"). All rights of Tenant are subject to the
Proprietary Lease. Tenant shall observe each and every covenant of the
Proprietary Lease on the part to be performed by Owner as lessee under the
Proprietary Lease. Observance of the terms, covenants and conditions of the
Proprietary Lease by the Tenant except the financial obligation shall be deemed
a substantial obligation of this tenancy. This lease is conditioned upon Owner's
obtaining the written consent from the Owner Corporation to this lease by
6/30/94.
44. PAYMENT OF RENT AND ADDITIONAL RENT
A. The payment of all rent and additional rent under
this lease shall constitute a substantial obligation of this tenancy entitling
the Owner to exercise all its rights and remedies under Article 17 of this
lease.
B. It shall not constitute a bar, preclusion or
election of remedies against the enforcement of a landlord's rights and remedies
under Article 17 of this lease for nonpayment of rent or additional rent if the
Owner has already commenced a proceeding or action to recover the rent or
additional rent.
C. Tenant covenants and agrees that the monthly
installments of annual rental shall be paid by Tenant to Owner on or before the
first day of each month without notice or demand by Owner. In the event that
such installments of annual rental shall not be paid by the Fifth (5) day of the
month or any item of additional rent shall not be paid within the
<PAGE> 26
3
applicable time period following written demand therefor, the Owner shall give a
written notice to the Tenant. If the Tenant does not pay the amount due within
three (3) days of receipt of such written notice then the Tenant shall pay to
the Owner as additional rent, a late charge equal to two (2%) percent of such
monthly installment or item of additional rent.
D. If Owner receives from Tenant any payment less
than the sum of the annual rent, additional rent and other amount due under this
Lease, ("Partial Payment"), or Tenant is in arrears in payment of any amount due
under this Lease, in its sole discretion, may allocate such Partial Payment or
payment in whole or in part to any other charges or to any combination thereof.
E. If the Tenant's checks are returned by his bank
for any reason whatsoever three times during the term of the lease, then, the
Owner, at Owner's option, shall have the right, to demand payment of future
installments of rent or additional rent by certified, bank or teller's check or
by postal money order.
45. CONDITION OF PREMISES
Tenant acknowledges that it has inspected demised
premises and is familiar with the physical condition of same and Tenant agrees
to accept the demised premises in their "AS IS" physical condition,
Owner represents that substantially all the friable
Asbestos Containing Material has been either removed or contained throughout the
building and in the demised premises.
Owner will defend, indemnify and hold harmless
Tenant, its affiliates, its employees, agents and insurers, from and against all
losses, claims, damages, fines and expenses (including without limitation
reasonable legal fees) resulting from any environmental remediation required by
applicable laws, regulations or directives of properly constituted governmental
authorities as a result of the release of any toxic or hazardous substance or
waste on or about the Demised Premises by anyone other than Tenant, its
affiliates, its employees, agents or contractors.
46. USE
A. Tenant shall use and occupy the demised premises
solely for the use specified in Article 2 of the printed form of this lease and
for no other purposes. Tenant specifically covenants and agrees that Tenant
shall not use the demised premises or any part thereof, nor permit the demised
premises or any part thereof to be used for sleeping or residential purposes or
for overnight accommodations. Tenant shall continuously and uninterruptedly
during the term of this lease conduct its customary business activities as
permitted by Article 2 above.
<PAGE> 27
4
B. In addition, Tenant shall not suffer nor permit
the demised premises or any part thereof to be used in any manner, or anything
to be done therein, or suffer or permit anything to be brought into or kept
therein, which would in any way (i) violate any of the provisions of any grant,
lease or mortgage or requirements of public authorities (ii) make void or
voidable any fire or liability insurance policy then in force with respect to
the building, (iii) make unattainable or more difficult to obtain from reputable
insurance companies authorized to do business in New York State fire insurance
with extended coverage, or liability, elevator, boiler or any other insurance
maintained by Landlord, (iv) cause physical damage to the building or any part
thereof, (v) constitute a public or private nuisance, (vi) impair, the
appearance, character or reputation of the building, (vii) impair or interfere
with any of the building services or the proper and heating, cleaning, or other
servicing of the building or the demised premises or impair or interfere with or
tend to impair or interfere with the use of the other areas of the building by,
or occasion discomfort, annoyance or inconvenience to, Owner or any of the other
tenants or occupants of the building, (viii) violate any of the terms, covenants
or conditions contained in this Lease, or (ix) be illegal, unlawful, or result
in the creation of a public or private nuisance.
C. Owner makes no representations, guarantees, or
acknowledgments that the use designated in the Lease by the Tenant is permitted
under any statute, ordinance, rule, regulation, or other present or future law
promulgated by any state, federal, municipal, or local government or agency or
authority thereof. In the event that said use is illegal or determined by any
notice of violation or order issued by the aforesaid appropriate governmental
authority, then upon six (6) days prior written notice given in accordance with
this Lease, this Lease and the term thereof shall expire on the last day of said
notice as if said day were the last day of the term of this Lease.
D. If any governmental licence or permit shall be
required for the proper and lawful conduct of Tenant's business, Tenant, at
Tenant's sole cost and expense, shall duly procure and thereafter maintain such
licence or permit and submit the same to inspection by Owner Tenant, at Tenant's
sole cost and expense, shall at all times comply with the terms and conditions
of each such licence or permit.
47. BROKERAGE
The parties warrant and represent to each other that
they had no dealings with any broker or agent in connection with this Lease. The
Tenant shall have no obligation with respect to any commission payable to said
broker. The parties covenant and agree to hold each other harmless and indemnify
each other from and against any and all costs, expenses or liability for any
compensation, commissions, fees and charges claimed by any broker with respect
to this Lease or the negotiation thereof. The obligation of Tenant contained in
the Article shall survive the expiration or earlier termination of this Lease.
<PAGE> 28
5
48. RUBBISH REMOVAL AND CLEANING
A. Tenant covenants and agrees to maintain the
demised premises and adjacent public and/or common areas in a condition of
proper cleanliness, orderliness and state of attractive appearance at all times.
Tenant shall also be responsible and shall contract for the removal of all
rubbish from the demised premises at its sole cost and expense, in accordance
with any and all applicable municipal codes and regulations. If Tenant fails or
refuses to remove any rubbish from, in or around the demised premises, the Owner
may contract to have same removed and the Tenant shall pay for actual costs of
said removal as additional rent.
49. INSURANCE
A. Tenant shall obtain or procure its own fire,
rental, liability, or other casualty insurance as may be required under the
terms of this Lease. Supplementary Article 9 of this Lease, each party shall
look first to any insurance in its favor before making any claim against the
other party for recovery of loss or damage resulting from fire or any other
casualty.
B. (1) Tenant shall, at its sole cost and expense,
procure and maintain throughout the term of this Lease a comprehensive general
liability policy of insurance insuring Tenant, Owner and Owners Corporation
against any and all risks and/or liability for property damage and bodily injury
to or death of a person or persons in, on or about the demised premises,
occasioned by or arising out of or in connection with the use or occupancy of
the demised premises, and a fire insurance policy (including extended coverage,
vandalism and malicious mischief) covering the demised premises and Tenant's
property. Such policies must be obtained from an insurance company rated "A" or
better by A.M. Best Company, Inc. in an amount not less than $1,000,000.00 with
respect to the bodily injuries or to death of any one person, in an amount not
less than $1,000,000.00 per occurrence, and in an amount of not less than
$250,000.00 for property damage, and shall name Owner and Owners Corporation as
an additional insureds. Tenant will deliver the original policy and all original
renewals of said policy to Owner on demand.
(2) Tenant shall at all times during this Lease is in
effect maintain for its own benefit, fire and casualty insurance for all the
contents, fixtures, personal, property, inventory and other moveable or
nonmoveable property of Tenant.
C. Tenant agrees to pay all premiums and charges for
the insurance required to be maintained by Tenant pursuant to the terms of this
Lease. If Tenant fails to make any such payments when due, or in the event of
its failure to deliver and/or pay the premium thereon, then Owner after giving
10 days written notice to the Tenant and opportunity to cure, may pay said
premium or charge (but in no event shall be obligated to do so), and upon
written demand to Tenant, Owner may collect said payment as additional rent, or
deem Tenant to be in
<PAGE> 29
6
default of substantial obligation of its tenancy. The failure to maintain and/or
renew the above policies of insurance shall constitute a breach of a substantial
obligation of this tenancy.
50. ADDITIONAL RENT
A. All payments, other than the base rental as
adjusted from time to time, to be made by Tenant pursuant to this Lease shall be
deemed additional rent, whether or not specifically so called, and, in the event
of any non-payment thereof, Owner shall have all rights and remedies provided
for herein or by law for non-payment of rent.
B. Should Tenant default in the timely performance of
any covenant, term or condition herein contained on Tenant's part to be
performed, Owner, at its option and without thereby waiving such a default, may
perform or cause the Managing Agent of the Building to perform the same for and
on account of, and at the expense of the Tenant after five (5) days written
notice (except in the event of an emergency, i.e., threat of personal injury
and/or damage or destruction of property, when no notice shall be required.
Tenant shall pay as an item of additional rent all costs and expenses which
Owner may incur any of Tenant's defaults within five (5) days following delivery
of a written demand therefor which costs and expenses shall include, but not be
limited to, materials, fees paid to architects, engineers, attorneys,
contractors, subcontractors, fines and penalties.
C. Owner's failure during the term of this Lease to
prepare and deliver any statements of bills required to be delivered to Tenant
pursuant to the provisions of this lease, or Owner's failure to make a demand
for the payment of any item of additional rent, shall not in any way be deemed
to be a waiver of, or cause Owner to forfeit or surrender its rights to collect
such additional rent during the terms of this lease. Tenant's liability for the
payment of any item of additional rent shall survive the expiration or sooner
termination of this Lease.
51. NO WAIVER BY OWNER
A. The receipt of any rent, or any portion thereof,
whether specifically reserved or payable under any of the covenants herein
contained, after a default on the part of the Tenant (whether such rent is due
before or after such default) shall not be deemed to operate as a waiver of any
default or of any current default or of the right of Owner to enforce the
payment of any rent herein reserved or to declare a forfeiture to this Lease and
to recover the possession of the demised premises provided in this Lease. Nor
shall
B. Owner's acceptance of rent during any time in
which Tenant is in default of any provision hereunder shall not constitute a
waiver of such default, and Tenant specifically agrees and consents that rent
must be paid by Tenant during any default and Tenant specifically agrees that
such acceptance shall be made without prejudice to Owner's right to terminate
this Lease and shall not be deemed a consent to any default of the Lease.
<PAGE> 30
7
52. BILLS AND NOTICES
Supplementing Article 28 of this lease, any notice,
bill, statement, or communication required to be given under the terms of this
Lease by the Owner shall be sufficiently given by the Owner's agent or
attorney-at-law or in-fact, whether or not any authorization is annexed. Any
notice, bill, statement, or communication required to be given shall be
sufficiently given when mailed.
53. ELECTRICITY SERVICE
A. (1) Landlord shall redistribute or furnish
electrical energy to or for the use of Tenant in the Premises for the operation
of the lighting fixtures and the electrical receptacles installed in the
Premises. Tenant's electrical consumption shall be measured by the meter
currently installed in the Premises. The cost of electricity utilized by Tenant
shall be paid for by Tenant to Landlord as additional rent and shall be
calculated at the then applicable rate prescribed by the public utility company
serving the Premises for submetered electrical energy, plus (i) Landlord's
charge for overhead and supervision in the amount of ten percent (10%) of the
total electric bill and (ii) any taxes or other charges in connection therewith.
If any tax shall be imposed upon Landlord's receipts from the sale or resale of
electrical energy to Tenant, the pro rata share applicable to the electrical
energy service received by Tenant shall be passed on to, included in the bill
of, and paid by Tenant if and to the extent permitted by law. Landlord shall
bill Tenant, monthly, for the cost of its consumption of electricity in the
Premises and Tenant shall pay the amount thereof at the time of payment of each
installment of Rent. If either the quantity or character of electrical services
is changed by the public utility or other company supplying electrical service
to the Building or is no longer available or suitable for Tenant's requirements,
no such change, unavailability or unsuitability shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord, or its agents, by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's
business, or otherwise.
(2) Any additional feeders or risers which are
required to supply any additional electrical requirements which Tenant may have,
and all other equipment proper and necessary in connection with such feeders or
risers, shall be installed by Landlord upon Tenant's request, at the sole cost
and expense of Tenant, provided that, in Landlord's reasonable judgment, such
additional feeders or riders are necessary and are permissible under applicable
laws and insurance regulations and the installation of such feeders or risers
will not cause permanent damage or injury to the Building or the Premises or
cause or create a dangerous or hazardous condition or entail excessive or
unreasonable alterations or interface with or disturb other tenants or occupants
of the Building. At no time shall the use of electrical energy in the Premises
exceed the capacity of the existing feeders or wiring installations then serving
the Premises. Tenant shall
<PAGE> 31
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not make or perform, or permit the making or performance of, any alterations to
wiring installations or other electrical facilities in or serving the Premises
without the prior consent of Landlord in each instance. Any such Alterations,
additions or consent by Landlord shall be subject to the provisions of this
Lease including, but not limited to, the provisions of Article 3 hereof.
(3) Landlord reserves the right to discontinue
furnishing electricity to Tenant in the Premises on not less than sixty (60)
days written notice to Tenant. If Landlord exercises such right to discontinue,
or is compelled to discontinue furnishing electricity to Tenant, this Lease
shall continue in full force and effect, and shall be unaffected thereby, except
only that from and after the effective date of such discontinuance, Landlord
shall not be obliged to furnish electricity to Tenant. If Landlord so
discontinues furnishing electricity to Tenant, Tenant shall arrange to obtain
electricity directly from the public utility or other company servicing the
Building. Such electricity may be furnished to Tenant by means of the then
existing electrical. facilities serving the Premises to the extent that the same
are available, suitable and safe for such purposes. All meters and all
additional panel boards, feeders, risers, wiring and other conductors and
equipment which may be required to obtain electricity, of substantially the same
quantity, quality and character, shall be installed by Landlord at Tenant's sole
cost and expense. Landlord shall not voluntarily discontinue furnishing
electricity to Tenant until Tenant is able to receive electricity directly from
the public utility or other company servicing the Building.
(4) Landlord shall not be liable to tenant in any way
for any interruption, curtailment or failure or defect in the supply or
character of electricity furnished to the premises by reason of any requirement,
act or omission or Landlord or of any public utility or other company servicing
the Building with electricity or for any other reason except Landlord's
negligence or willful conduct.
B. Tenant shall not be released or excused from the
performance of any of its obligations under this Lease for any change in the
quantity or quality of service, failure or interruption or curtailment or
cessation of Utilities service for any reason whatsoever, and no such change,
failure, interruption or curtailment or cessation shall constitute a
constructive or partial eviction or entitle Tenant to an abatement of, offset
against, or deduction from rent or additional rent or impose any liability upon
Owner.
C. Owner shall not be obligated to provide hot water,
air conditioning, and ventilation service to the demised premises.
54. ESTOPPEL CERTIFICATE
A. Upon Owner's written request, Tenant shall confirm
the existence of this Lease and any modifications hereto as evidenced by a
written agreement, and/or specific terms hereof (said form shall hereinafter be
referred to as an "Estoppel Certificate"). Tenant shall
<PAGE> 32
9
within five (5) days from receipt of an Estoppel Certificate, execute the same
in the presence of a notary public who shall thereafter complete the
acknowledgment and Tenant shall return said Estoppel Certificate to Owner and/or
Owner's designee by the means specified. All parties to whom said Estoppel
Certificate is addressed shall be absolutely entitled to rely upon the
reservations of Tenant therein contained and Tenant shall be forever barred from
refuting any statements therein set forth as of the date to which said Estoppel
Certificate speaks.
B. If, in connection with obtaining financing, a
bank, insurance company, or other lending institution shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.
55. NO LIABILITY ON LANDLORD
A. Tenant shall indemnify and save Owner harmless
against (i) any and all claims against Owner of whatever nature arising from any
act, omission or negligence of Tenant, its contractors, licensees, agents,
servants, employees, invitees and/or visitors. (ii) any and all claims against
the Owner arising from any accident, injury or damage occurring outside of the
demised premises but within or about the land and building where accident,
injury or damage result or is claimed to have resulted from any act, omissions
or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees and/or visitors. (iii) any breach, violation or
nonperformance of any of the terms, covenants, and conditions contained in this
lease on the part of the Tenant to be fulfilled, kept, observed and performed.
This indemnity and hold harmless covenant
shall include indemnity from and against any and all liability, fines, suits,
demands, costs and expenses (including attorneys' fees and disbursements) of any
kind or nature incurred in connection with any such claim or proceeding brought
thereon, and the defense thereof by the Owner. The indemnity and hold harmless
covenant shall survive the expiration or the earlier termination of the term of
this Lease and for any period of time prior to the commencement of the term of
this Lease during which Tenant was given access to the demised premises.
B. Tenant shall reimburse Owner as an item of
additional rent within ten (10) days following written demand therefor, for all
expenditures incurred by or damages or fines sustained or incurred by Owner due
to Tenant's default of the provisions of this Article.
C. Notwithstanding anything provided in this Lease or
provided at law or in equity to the contrary, in the event that Tenant shall
obtain a monetary judgement against Owner in any action or proceeding, Tenant
shall seek satisfaction of such a judgement only from Owner's estate and
interest in the demised premises comprising of Cooperative Unit # 306, 307, 308,
309/310 in 134 West 29th Street Owners Corporation, and not other property or
other
<PAGE> 33
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assets belonging to Owner or its directors, officers, partners, principals
(disclosed or undisclosed) or employees shall be subject to lien, levy,
execution or other enforcement procedure for the satisfaction of any such
judgement arising from the relationship of landlord and tenant hereunder,
Tenant's use and occupancy of the demised premises or this Lease. If Tenant
shall acquire a lien on such other property or assets by judgement or otherwise,
Tenant shall promptly release such lien by executing and delivering to Owner an
instrument to the effect prepared by Owner, Tenant's covenants as contained in
the Article shall survive the expiration or the earlier termination of the term
of this Lease.
56. MECHANICS' LIEN
In no event shall any material or equipment be
incorporated into the demised premises in connection with any alterations,
installations, additions, improvements, repairs or replacements made by Tenant
including, but not limited to, Tenant's changes, which is subject to any lien,
encumbrance, chattel mortgage, security interest or charge of any kind
whatsoever, or is subject to any conditional sale or other similar or dissimilar
title retention agreement with this express written consent of Owner. Tenant
specifically covenants that any personal property which Tenant shall bring to or
install in the demised premises which requires special handling shall not be
subject to any security interest held by a third party. Any mechanic's or
materialman's lien filed against the lands and/or the building or Owner's
interest therein, for work claimed to have been done, or for materials claimed
to have been furnished to Tenant, shall be discharged by Tenant within one
hundred twenty (120) days thereafter, at Tenant's sole cost and expense, by
filing a bond as provided by law or otherwise. If Tenant shall fail to have
discharged any lien or encumbrance described in this Article, Owner, shall have
the right but not the obligation, to cause such lien or encumbrance to be
discharged by bonding or otherwise, and Tenant shall reimburse Owner as an item
of additional rent, for all actual costs and expenses which Owner incurs,
including reasonable attorneys' fees and disbursements, within ten (10) days
following written demand.
57. GOVERNMENTAL REGULATIONS
A. In the event the Tenant makes any alterations,
decorations, installations, etc., including but not limited to, Tenant's
changes, if any, that do not comply with applicable building regulations,
administrative agency, governmental or quasi-governmental agency regulations, or
that may result in the imposition of any fines, penalties (civil or criminal) or
any monetary awards, costs or fees against Landlord, Tenant shall be liable for
any and all costs associated therewith including, but not limited to, attorney's
fees, architects' fees, engineering fees, penalties, fines, renovation costs,
construction costs, consultation and any and all other costs, which shall be
deemed additional rent and due upon receipt of Owner's statement therefor.
B. Supplementing the provisions of Article 6 hereof,
Tenant shall promptly comply with and give prompt notice to Owner of any notice
it receives of the violation
<PAGE> 34
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of any present or future law, order, ordinance, or regulation of any
governmental entity, department, commission, or any direction of any public
officer pursuant to law or of the New York Board of Fire Underwriters or the use
or occupation thereof, and Tenant shall effect such compliance at its sole cost
and expense.
58. LIMITATION ON RENT
A. If, at the commencement of, or at any time during
the term of this lease, the rent reserved in this Lease is not fully collectible
by reason of any federal, state, county or city law, proclamation, order or
regulation, or direction of a public officer or body pursuant to law, Tenant
agrees to take such steps as Owner may request to permit Owner to collect the
maximum rents which may be legally permissible from time to time during the
continuance of such legal rent restriction (but not in excess of the amounts
reserved therefor under this Lease). Upon the termination of such legal rent
restriction, Tenant shall pay to Owner to the extent permitted by law, an amount
equal to (a) the rents which would have been paid pursuant to this lease to such
legal rent restriction less (b) the rents paid by Tenant to Owner during the
period such legal rent restriction was in effect.
B. To the maximum extent permitted by law, Tenant
hereby waives any right to continued occupancy of the demised premises after the
expiration of the Lease imposed by any statute, rule or ordinance. If Tenant by
regulatory statute, rule or ordinance is entitled to continued occupancy, and so
long as such statute is in effect or applies to Tenant, then Tenant shall be
obligated to pay rent on a month-to-month basis at a new base rent equal to 125%
of the highest monthly rent set forth in this Lease plus any and all additional
rents denominated herein, and the terms herein shall apply to such statutory
tenancy to the extent they do not conflict with statute, rule or ordinance.
59. ENTIRE AGREEMENT
This Lease contains the entire understanding arrived
at between the parties and all prior discussions and negotiations are merged
herein and may not be extended, renewed, terminated, or otherwise modified
except by an instrument in writing signed by the party against whom enforcement
of any such modification is sought.
60. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED
It is specifically understood and agreed that this
Lease is offered to Tenant for signature subject to Owner's acceptance and
approval and that Tenant has hereunto affixed its signature with the
understanding that this Lease shall not in any way bind owner until such time as
the same has been approved and executed by Landlord and delivered to Tenant.
<PAGE> 35
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61. SEVERABILITY
This lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease or any part thereof to be drafted. If any provision of this Lease shall be
determined to be void or unenforceable by any court of competent jurisdiction,
then such determination shall not affect any other provisions of this Lease, all
of which other provisions shall remain in full force and effect; and it is the
intention of the parties hereto that if any provision of this Lease is capable
of two constructions, one which would render the provision valid, then the
provision shall have the meaning which renders it valid.
62. NO COUNTERCLAIMS
Tenant shall and hereby does waive its right and
agrees not to interpose any counterclaim or set off, of whatever nature or
description, in any proceeding or action that may be instituted by Owner against
Tenant to recover rent, additional rent, other charges, possession, or for
damages, or in connection with any matters or claims whatsoever arising out of
or in any way connected with this lease, or any renewal, extension, holdover, or
modification thereof, or the relationship of Owner and Tenant, or Tenant's use
or occupancy of said premises. This clause, as well as the "waiver of jury
trial" provision of this lease, shall survive the expiration, early termination,
or cancellation of this lease or the term thereof. Nothing herein contained,
however, shall be construed as a waiver of Tenant's right to commence a separate
action on a bona fide claim against Owner.
63. OWNER'S CONSENT
If Tenant shall request Owner's approval or consent
and Owner shall fail or refuse to give such approval or consent, Tenant shall
not be entitled to any damages for any withholding or delay of such approval or
consent by Owner, it being intended that Tenant's sole remedy shall be an action
for injunction or specific performance (the rights to money damages or other
remedies being hereby specifically waived), and that such remedy shall be
available only in those cases where Owner shall have expressly agreed in writing
not to unreasonably withhold its consent or approval or where, as a matter of
law, Owner may not unreasonably withhold its consent or approval.
64. SUBORDINATION AND ATTORNMENT
A. This Lease and all rights of Tenant hereunder are
and shall be subject and subordinate in all respects to all underlying leases
and to all mortgages and building loan agreements, including without limitation,
leasehold mortgages, which may now or hereafter affect the land and/or the
building and/or any of such leases, whether or not such mortgages shall also
cover other lands and/or buildings, to each and every advance made or hereafter
to be made under such mortgages and/or building loan agreements, and to all
renewals, modifications,
<PAGE> 36
13
replacements, assignments, and extensions of such leases, building loan
agreements, mortgages and spreaders and consolidations of such mortgages.
This Article shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly, at its sole cost and expense, execute and
deliver any instrument in recordable form that Owner, the lessor of any such
lease of the holder of any such mortgage or any of their respective assigns or
successors-in-interest may reasonably request to evidence such subordination.
The leases to which this Lease is, at the time referred to, subject and
subordinate pursuant to this Article are hereinafter sometimes called "superior
leases" and the mortgages to which this Lease is, at the time referred to,
subject and subordinate pursuant to this Article are hereinafter sometimes
called "superior mortgages", and the lessor of a superior lease or its
successor-in-interest, at the time referred to, is sometimes hereinafter called
a "lessor" and the holder of a superior mortgage or its successor-in-interest at
the time referred to is sometimes hereinafter called a "holder".
B. In the event of any act or omission of Owner which
would give tenant the right, immediately or after lapse of a period of time, to
cancel or terminate this lease, or to claim a partial or total eviction, Tenant
shall not exercise such right (i) until it has given written notice of such act
or omission to the lease, and (ii) unless such act or omission shall be one
which is not capable of being remedied by Owner or such holder or lessor within
a reasonable period of time, until a reasonable period of time, for remedying
such act or omission shall have elapsed following the giving of such notice and
following the time when such holder or lessor shall have become entitled under
such superior mortgage or superior lease, as the case may be, to remedy the same
(to which reasonable period shall in no event be less that the period to which
Owner would be entitled under this Lease otherwise, after similar notice, to
effect such remedy), provided such holder or lessor shall with due diligence
give Tenant written notice of its intention to and commence and continue to,
remedy such act or omission.
C. If the fee owner of the lands and/or building of
which the demised premises form a part, the lessor of a superior lease of the
holder of a superior mortgage shall succeed to the rights of Owner under this
lease, whether through possession or foreclosure action or through termination
for any reason of the leasehold estate covering the lands and/or building or by
delivery succeeding to Owner's rights (herein sometimes called "successor
Landlord") and upon such successor Owner's written agreement to accept Tenant's
attornment, Tenant shall attorn to and recognize such successor landlord as
Tenant's landlord under this Lease. The foregoing provisions shall inure to the
benefit of any such successor landlord, and shall be self-operative upon any
demand, without requiring any further instrument to give effect to said
provisions. Tenant, however, upon demand of any such successor landlord, agrees
to execute, from time to time, an instrument in confirmation of such attornment
which is satisfactory to such successor landlord. Upon such attornment this
lease shall continue in full force and effect for the remainder of the term
originally demised under this lease as, or as if it were, a direct lease
<PAGE> 37
14
between successor landlord and Tenant upon all of the terms, covenants,
conditions, agreements and provisions as are set forth in this lease except that
the successor landlord shall not:
(i) be liable for any previous act or
omission of Owner under this Lease;
(ii) be subject to any offset, not expressly
provided for in this lease, which shall have theretofore accrued to Tenant
against Owner or
(iii) be bound by any previous modification
of this lease, not expressly provided for in this lease, or by any previous
prepayment of more than one month's installments of fixed annual rent, unless
such modification or prepayment shall have been expressly approved in writing by
the successor landlord through or by reason of which the successor landlord
shall have succeeded to the rights of Owner under this lease.
D. Landlord hereby agrees to request from any lessor
under a Superior Lease, or trustee or mortgagee of a Mortgage superior to the
interest of Tenant hereunder, an agreement in the standard form customarily
employed by such lessor, trustee or mortgagee pursuant to which such lessor,
trustee, or mortgagee shall agree that the leasehold estate granted to Tenant
and the rights of Tenant pursuant to this Lease to quiet and peaceful possession
under this Lease shall not be terminated, modified, affected or disturbed by an
action which any such trustee or mortgagee may take to foreclose any such
mortgage, or which any such lessor may take to terminate such Superior Lease.
Such agreement shall remain in effect so long as Tenant shall pay the Rent,
escalations, additional rents, and other amounts to be paid by Tenant under the
Lease, within any applicable grace periods provided for hereunder, without
offsets or defenses thereto, and as long as Tenant shall fully perform and
comply with all the other terms, covenants, conditions and provisions of this
Lease on the part of the Tenant to be performed or complied with.
65. OCCUPANCY TAX
Tenant shall pay any occupancy tax or rent tax now in
effect or hereafter enacted directly to the taxing authority responsible for the
collection of the same. In the event such occupancy tax or rent tax is payable
by Owner in the first instance or hereafter required to be paid by Owner, such
tax shall be paid to Owner's additional rent within ten (10) days following
Owner's written demand therefor. Nothing contained herein shall be deemed to
require Tenant to pay municipal, state, federal income, inheritance, estate,
succession, transferor gift or any corporate franchise tax imposed upon Owner.
<PAGE> 38
15
66. REPAIRS AND MAINTENANCE
A. Tenant shall, at its sole cost and expense, take
good care of and make all interior repairs and replacements to the demised
premises and the fixtures and appurtenances therein, nonstructural, foreseen
and/or unforeseen, and ordinary and/or extraordinary during the Term of this
lease, which shall include, without limitation., all repairs and replacements of
the demised premises, electrical, ventilating systems, floors, walls, ceiling,
doors, pipes, conduits appurtenant to the demised premises as and when needed so
as to preserve, maintain and/or keep the demised premises in good working order,
conditions and/or repair and in tenantable condition, reasonable wear and tear,
obsolescence and damage from the elements, fire and other casualty.
B. The quality of workmanship and materials used with
respect to the repairs, replacements, maintenance and other work required to be
done under the Article and/or Article 4 hereof shall be at least equal in
quality and class to the original materials and workmanship.
67. CONFLICTS
If there is any conflict between the terms contained
in the printed form lease and the terms contained in this Rider, the provisions
of this Rider shall govern.
68. HOLDING OVER
Should Tenant hold over in possession after the
expiration or sooner termination of the term of the Lease, such holding-over
shall not be deemed to extend or renew this Lease, but such holding-over shall
be on the terms and conditions of this Lease except that the charge for use and
occupancy for each calender month shall be 125% of the highest monthly rent set
forth in this Lease plus of all items of additional rent set forth herein.
69. ASSIGNMENT AND SUBLETTING
Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assignees,
expressly covenants that it shall not assign, mortgage, pledge, encumber, or
otherwise transfer this Lease, nor underlet, nor suffer, nor permit the Premises
or any part thereof to be used or occupied by others (whether for desk space,
mailing privileges or otherwise), without the prior written consent of Landlord
in each instance which shall not be unreasonably withheld or delayed. If this
Lease be assigned, or if the Premises or any part thereof be underlet or
occupied by anybody other than Tenant, Landlord may, after default by Tenant,
collect rent from the assignee, undertenant or occupant, and apply the net
amount collected to the Rent herein reserved, but no assignment, underletting,
occupancy or collection shall be deemed a waiver of the provisions hereof, the
acceptance of the assignee, undertenant or
<PAGE> 39
16
occupant as tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. The consent by
Landlord to an assignment or underletting shall not in any way be construed to
relieve Tenant from obtaining the express consent in writing of Landlord to any
further assignment or underletting. In no event shall any permitted sublessee
assign or encumber its sublease or further sublet all or any portion of its
sublet space, or otherwise suffer or permit the sublet space or any part thereof
to be used or occupied by others, without Landlord's prior written consent in
each instance. Any assignment, sublease, mortgage, pledge, encumbrance or
transfer in contravention of the provisions of this Article shall be void.
Owner hereby agrees that Tenant may allow part of the
premises to be occupied by its affiliates or sublet part of the premises to its
affiliates provided, that such occupancy or sublettings are subject to all of
the covenants, agreements, terms, provisions and conditions contained in this
Lease. Owner shall cause to list Tenant and its affiliates to be posted on the
building directory in the lobby.
70. Notwithstanding anything to the contrary contained herein,
Owner shall remain responsible for maintaining and repairing the heating &
plumbing systems (except Air-conditioning) provided such repair results from
problems not caused by Tenant, its affiliates, its agents, its employees or its
contractors.
71. Tenant has requested and Owner has agreed to allow
non-powered bicycles to be brought in the Demised Premises, provided however
that, the freight elevators which are open on weekdays (Monday through Friday
between 10:00 am to 6:00 pm) are used only to transport them from street level
floor to the 3rd and 4th floor).
Tenant shall assume all liability including, but not
limited to theft, damage to property and any third party claim, with respect to
the bicycles being brought into the building.
<PAGE> 40
17
72. Notwithstanding anything to the contrary contained herein,
Tenant shall have access to building 24 hours a day, 7 days a week by private
key. However, Owner shall not provide heat and freight elevator services on
holidays and after office hours.
SATYANAM, INC.
________________________________________
OWNER
BY: /s/ Nari Pohani
____________________________________
SURGICAL CARE PUBLISHING, INC.
________________________________________
TENANT
BY: /s/ Peter Frishauf
____________________________________
<PAGE> 1
Exhibit 10.6
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 18th day of August 1993, between
SATYANAM, INC., party of the first part, hereinafter referred to as OWNER, and
SURGICAL CARE PUBLISHING, INC., party of the second part, hereinafter referred
to as TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner Unit # 305 as per Exhibit "A" annexed hereto in the building known as 134
West 29th Street, New York, N.Y. 10001 in the Borough of Manhattan, City of New
York, for the term of September 1, 1993 thru and including June 30, 1999 (or
until such term shall sooner cease and expire as hereinafter provided) to
commence on the 1st day of September nineteen hundred and ninety-three, and to
end on the 30th day of June, nineteen hundred and ninety nine both dates
inclusive, at an annual rental rate of As per Article 41 of Rider annexed hereto
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first _____ monthly installment(s) on the execution hereof (unless this
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Occupancy: 1. Tenant shall pay the rent as above and as hereinafter provided.
Use: 2. Tenant shall use and occupy demised premises for general and
executive offices.
provided such use is in accordance with the Certificate of Occupancy for the
building, if any, and for no other purpose.
Alterations: 3. Tenant shall make no changes in or to the demised premises of
any nature without Owner's prior written consent. Subject to
the prior written consent of Owner, and to the provisions of this article,
Tenant, at Tenant's expense, may make alterations, installations, additions or
improvements which are nonstructural and which do not affect utility services or
plumbing and electrical lines, in or to the interior of the demised
<PAGE> 2
2
premises using contractors or mechanics first approved by Owner, such approval
not to be unreasonably withheld. Tenant shall, at its expense, before making any
alterations, additions, installations or improvements obtain all permits,
approval and certificates required by any governmental or quasi-governmental
bodies and (upon completion) certificates of final approval thereof and shall
deliver promptly duplicates of all such permits, approvals and certificates to
Owner. Tenant agrees to carry and will cause Tenant's contractors and
sub-contractors to carry such workman's compensation, general liability,
personal and property damage insurance as Owner may reasonably require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within one hundred twenty (120) days thereafter,
at Tenant's expense, by filing the bond required by law or otherwise. All
fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the demised premises by
Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in
this Article shall be construed to give Owner title to or to prevent Tenant's
removal of trade fixtures, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Owner, Tenant shall immediately and at its expense, repair
and restore the premises to the condition existing prior to installation and
repair any damage to the demised premises or the building due to such removal.
All property permitted or required to be removed by Tenant at the end of the
term remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Owner, either be retained as Owner's property or
removed from the premises by Owner, at Tenant's expense.
Repairs: 4. Owner shall maintain and repair the exterior of and the public
portions of the building. Tenant shall, throughout the term of this
lease, take good care of the demised premises including the bathrooms and
lavatory facilities (if the demised premises encompass the entire floor of the
building) and the windows and window frames and, the fixtures and appurtenances
therein and at Tenant's sole cost and expense promptly make all repairs thereto
and to the building, whether structural or non-structural in nature, caused by
or resulting from the carelessness, omission, neglect or improper conduct of
Tenant, Tenant's servants, employees or licensees, and whether or not arising
from such Tenant conduct or omission, when required by other provisions of this
lease, including Article 6. Tenant shall also repair all damage to the building
and the demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If Tenant fails, after ten days notice, to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by the Owner at the expense of Tenant, and the expenses thereof
incurred by Owner shall be collectible, as additional
<PAGE> 3
3
rent, after rendition of a bill or statement therefor. If the demised premises
be or become infested with vermin, Tenant shall, at its expense, cause the same
to be exterminated. Tenant shall give Owner prompt notice of any defective
condition in any plumbing, heating system or electrical lines located in the
demised premises and following such notice, Owner shall remedy the condition
with due diligence, but at the expense of Tenant, if repairs are necessitated by
damage or injury attributable to Tenant, Tenant's servants, agents, employees,
invitees or licensees as aforesaid. Except as specifically provided in Article 9
or elsewhere in this lease, there shall be no allowance to the Tenant for a
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. The provisions of this
Article 4 with respect to the making of repairs shall not apply in the case of
fire or other casualty with regard to which Article 9 hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit, suffer or
allow any window in the demised premises to be cleaned
from the outside in violation of Section 202 of the New York State Labor Law or
any other applicable law or of the Rules of the Board of Standards and Appeals,
or of any other Board or body having or asserting jurisdiction.
Requirements of 6. Prior to the commencement of the lease term, if Tenant
Law, Fire Insurance, is then in possession, and at all times thereafter
Floor Loads: Tenant shall, at Tenant's sole cost and expense,
promptly comply with all present and future laws,
orders and regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board of
Fire Underwriters, or the Insurance Services Office, or any similar body which
shall impose any violation, order or duty upon Owner or Tenant with respect to
the demised premises, whether or not arising out of Tenant's use or manner of
use thereof, or, with respect to the building, if arising out of Tenant's use or
manner of use of the demised premises of the building (including the use
permitted under the lease). Except as provided in Article 30 hereof, nothing
herein shall require Tenant to make structural repairs or alterations unless
Tenant has, by its manner of use of the demised premises or method of operation
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant shall not do or permit any act or
thing to be done in or to the demised premises which is contrary to law, or
which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner. Tenant
shall not keep anything in the demised premises except as now or hereafter
permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance
Rating Organization and other authority having jurisdiction, and then only in
such manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior
<PAGE> 4
4
to the commencement of Tenant's occupancy. If by reason of failure to comply
with the foregoing the fire insurance rate shall, at the beginning of this lease
or at any time thereafter, be higher than it otherwise would be, then Tenant
shall reimburse Owner, as additional rent hereunder, for that portion of all
fire insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant. In any action or proceeding wherein Owner and
Tenant are parties, a schedule or "make-up" or rate for the building or demised
premises issued by a body making fire insurance rates applicable to said
premises shall be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rates then applicable to said
premises. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient, in Owner's judgement, to absorb and prevent vibration,
noise and annoyance. Limitation on load/sq. ft. Is 120lbs (one hundred twenty
pounds)
Subordination: 7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or
hereafter affect such leases or the real property of which demised premises are
a part and to all renewals, modifications, consolidations, replacements and
extensions of any such underlying leases and mortgages. This clause shall be
self-operative and no further instrument or subordination shall be required by
any ground or underlying lessor or by any mortgagee, affecting any lease or the
real property of which the demised premises are a part. In confirmation of such
subordination, Tenant shall execute promptly any certificate that Owner may
request.
Property-Loss 8. Owner or its agents shall not be liable for any damage to
Loss, Damage, property of Tenant or of others entrusted to employees of the
Reimbursement, building, nor for loss of or damage to any property of Tenant
Indemnity: by theft or otherwise, nor for any injury or damage to persons
or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees; Owner or its agents shall not be liable for any damage caused by
other tenants or persons in, upon or about said building or caused by operations
in connection of any private, public or quasi public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorney's fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, contractors, employees or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenant, Tenant's agents,
<PAGE> 5
5
contractors, employees or licensees. Tenant's liability under this lease extends
to the acts and omissions of its sub-tenant, and any agent, contractor, employee
or licensee of its sub-tenant. In case any action or proceeding is brought
against Owner by reason of any such claim, Tenant, upon timely written notice
from Owner, will, at Tenant's expense, resist or defend such action or
proceeding by counsel approved by Owner in writing, such approval not to be
unreasonably withheld.
Destruction, Fire 9.(a) If the demised premises or any part thereof shall be
and Other Casualty: damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall
continue in full force and effect except as hereinafter set forth. (b) If the
demised premises are partially damages or rendered partially unusable by fire or
other casualty, the damages thereto shall be repaired by and at the expense of
Owner and the rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within forty five (45)
days after such fire or casualty, specifying a date for the expiration of the
lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Owner's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each
<PAGE> 6
6
hereby releases and waives all right of recovery against the other or any one
claiming through or under each of them by way of subrogation or otherwise. The
foregoing release and waiver shall be in force only if both releasors' insurance
policies contain a clause providing that such a release or waiver shall not
invalidate the insurance. If, and to the extent, that such waiver can be
obtained only by the payment of additional premiums, then the party benefitting
from the waiver shall pay such premium within ten days after written demand or
shall be deemed to have agreed that the party obtaining insurance coverage shall
be free of any further obligation under the provisions hereof with respect to
waiver of subrogation. Tenant acknowledges that Owner will not carry insurance
on Tenant's furniture and or furnishings or any fixtures or equipment,
improvements, or appurtenances removable by Tenant and agrees that Owner will
not be obligated to repair any damage thereto or replace the same. (f) Tenant
hereby waives the provisions of Section 227 of the Real Property Law and agrees
that the provisions of this article shall govern and control in lieu thereof.
Eminent Domain: 10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or
quasi public use or purpose, then and in that event, the term of this lease
shall cease and terminate from the date of title vesting in such proceeding and
Tenant shall have no claim for the value of any unexpired term of said lease.
Assignment, 11. Tenant, for itself, its heirs, distributees, executors,
Mortgage, Etc.: administrators, legal representatives, successors and
assigns, expressly covenants that it shall not assign,
mortgage or encumber this agreement, nor underlet, or suffer or permit the
demised premises or any part thereof to be used by others, without the prior
written consent of Owner in each instance. Transfer of the majority of the stock
of a corporate Tenant shall be deemed an assignment. If this lease be assigned,
or if the demised premises or any part thereof be underlet or occupied by
anybody other than Tenant, Owner may, after default by Tenant, collect rent from
the assignee, under-tenant or occupant, and apply the net amount collected to
the rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current: 12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER
attached hereto. Tenant covenants and agrees that at all times its use of
electric current shall not exceed the capacity of existing leeders to the
building or the risers or wiring installation and Tenant may not use any
electrical equipment which, in Owner's opinion, reasonably exercised, will
overload such installations or interfere with the use thereof by other tenants
of the building. The change at any
<PAGE> 7
7
time of the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any losses, damages or expenses which Tenant may
sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right (but shall
not be obligated) to enter the demised premises in any
emergency at any time, and, at other reasonable times, to examine the same and
to make such repairs, replacements and improvements as Owner may deem necessary
and reasonably desirable to any portion of the building or which Owner may elect
to perform in the premises after Tenant's failure to make repairs or perform any
work which Tenant is obligated to perform under this lease, or for the purpose
of complying with laws, regulations and other directions of governmental
authorities. Owner hereby agrees to cause such repairs, replacements and
improvements to be made with reasonable promptness and to take reasonable steps
to minimize any inconvenience to Tenant arising therefrom, provided however,
that this shall not obligate Owner to incur any additional overtime costs nor
entitle Tenant to deduct or abate the rent or any other payment. Tenant shall
permit Owner to use and maintain and replace pipes and conduits in and through
the demised premises and to erect new pipes and conduits therein provided,
wherever possible, they are within walls or otherwise concealed. Owner may,
during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants and may, during said six months period, place upon the premises the
usual notices "To Let" and "For Sale" which notices Tenant shall permit to
remain thereon without molestation. If Tenant is not present to open and permit
an entry into the premises, Owner or Owner's agents may enter the same whenever
such entry may be necessary or permissible by master key or forcibly and
provided reasonable care is exercised to safeguard Tenant's property, such entry
shall not render Owner or its agents liable therefor, nor in any event shall the
obligations of Tenant hereunder be affected. If during the last month of the
term Tenant shall have removed all or substantially all of Tenant's property
therefrom. Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring liability
to Tenant for any compensation and such act shall have no effect on this lease
or Tenant's obligation hereunder.
Vault, Vault Space, 14. No Vaults, vault space or area, whether or not enclosed
Area: or covered, not within the property line of the
building is leased hereunder anything contained in or
indicated on any sketch, blue print or plan, or anything contained elsewhere in
this lease to the contrary notwithstanding. Owner makes no representation as to
the location of the property line of the building. All vaults and vault space
and all such areas not within the property line of the building, which Tenant
may be permitted to use and/or occupy, is to be used and/or occupied under a
revocable license, and if any such license
<PAGE> 8
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be revoked, or if the amount of such space or area be diminished or required by
any federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant, if used by
Tenant, whether or not specifically leased hereunder.
Occupancy: 15. Tenant will not at any time use or occupy the demised premises
in violation of the certificate of occupancy issued for the
building of which the demised premises are a part. Tenant has inspected the
premises and accepts them as is, subject to the riders annexed hereto with
respect to Owner's work, if any. In any event, Owner makes no representation as
to the condition of the premises and Tenant agrees to accept the same subject to
violations, whether or not of record. If any governmental license or permit
shall be required for the proper and lawful conduct of Tenant's business, Tenant
shall be responsible for and shall procure and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by sending
of a written notice to Tenant within a reasonable time after the happening of
any one or more of the following events: (1) the commencement of a case in
bankruptcy or under the laws of any state naming Tenant as the debtor; or (2)
the making by Tenant of an assignment or any other arrangement for the benefit
of creditors under any state statute. Neither Tenant nor any person claiming
through or under Tenant, or by reason of any statute or order of court, shall
thereafter be entitled to possession of the premises demised but shall forthwith
quit and surrender the premises. If this lease shall be assigned in accordance
with its terms, the provisions of this Article 16 shall be applicable only to
the party then owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rental reserved hereunder for the unexpired portion of
the term demised and the fair and reasonable rental value of the demised
premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the demised premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such
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damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or
additional rent; or if the demised premises becomes "or if this lease be
rejected under Section 235 of Title 11 of the U.S. Code (bankruptcy code)"; or
if any execution or attachment shall be issued against Tenant or any of Tenant's
property whereupon the demised premises shall be taken or occupied by someone
other than Tenant; or if Tenant shall make material default with respect to any
other lease between Owner and Tenant; or if Tenant shall have failed, after ten
(10) days written notice, to redeposit with Owner any portion of the security
deposited hereunder which Owner has applied to the payment of any rent and
additional rent due and payable hereunder or failed to move into or take
possession of the premises within ten (10) days after the commencement of the
term of this lease, of which fact Owner shall be the sole judge; then in any one
or more of such events, upon Owner serving a written five (5) days notice upon
Tenant specifying the nature of said default and upon the expiration of said ten
(10) days, if Tenant shall have failed to comply with or remedy such default, or
if the said default or omission complained of shall be of a nature that the same
cannot be completely cured or remedied within said ten (10) day period, and if
Tenant shall not have diligently commenced during such default within such ten
(10) day period, and shall not thereafter with reasonable diligence and in good
faith, proceed to remedy or cure such default, then Owner may serve a written
three (3) days' notice of cancellation of this lease upon Tenant, and upon the
expiration of said three (3) days this lease and the term thereunder shall end
and expire as fully and completely as if the expiration of such three (3) day
period were the day herein definitely fixed for the end and expiration of this
lease and the term thereof and Tenant shall then quit and surrender the demised
premises to Owner but Tenant shall remain liable as hereinafter provided. Owner
shall use best efforts to relet the premises and shall be obligated to mitigate
the damages to the extent of rent collected upon reletting if when such rent is
collected, and after deducting all relative expenses incurred in such reletting.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
<PAGE> 10
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Remedies of Owner 18. In case of any such default, re-entry, expiration and/or
and Waiver of dispossess by summary proceedings or otherwise, (a) the
Redemption: rent, and additional rent, shall become due thereupon and
be paid up to the time of such re-entry, dispossess
and/or expiration, (b) Owner may relet the premises or any part or parts
thereof, either in the name of Owner or otherwise, for a term or terms, which
may at Owner's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this lease and may grant concessions
or free rent or charge a higher rental than that in this lease, (c) Tenant or
the legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
subsequent lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Owner to relet the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with reletting, such as legal expenses, reasonable
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for reletting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re-rental may, at
Owner's option, make such alterations, repairs, replacements, and/or decorations
in the demised premises as Owner, in Owner's sole judgment, considers advisable
and necessary for the purpose of reletting the demised premises, and the making
of such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid. Owner
shall in no event be liable in any way whatsoever for failure to relet the
demised premises, or in the event that the demised premises are relet, for
failure to collect the rent thereof under such reletting, and in no event shall
Tenant be entitled to receive any excess, if any, of such net rents collected
over the sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance or performance
of any material term or covenant on Tenant's part to be
observed or performed under or by virtue of any of the terms or provisions in
any article of this lease, then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and after ten (10) days'
notice perform the obligation of Tenant thereunder. If Owner, in connection with
the foregoing or in connection with any default by Tenant in the covenant to
<PAGE> 11
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pay rent hereunder, makes any expenditures or incurs any obligations for the
payment of money, including but not limited to attorney's fees, in instituting,
prosecuting or defending any action or proceedings, then Tenant will reimburse
Owner for such reasonable sums so paid or obligations incurred with interest and
costs. The foregoing expenses incurred by reason of Tenant's default shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Owner
within five (5) days of rendition of any bill or statement to Tenant therefor.
If Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner as damages.
Building 20. Owner shall have the right at any time without the same
Alterations and constituting an eviction and without incurring liability
Management: to Tenant therefor to change the arrangement and or
location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building may
be known. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or other Tenant making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
any controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representations 21. Neither Owner nor Owner's agents have made any
by Owner: representations or promises with respect to the physical
condition of the building, the land upon which it is
erected or the demised premises, the rents, leases, expenses of operation or any
other matter or thing affecting or related to the demised premises or the
building except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this lease. Tenant has inspected the building and
the demised premises and is thoroughly acquainted with their condition and
agrees to take the same "as is" on the date possession is tendered and
acknowledges that the taking of possession of the demised premises by Tenant
shall be conclusive evidence that the said premises and the building of which
the same form a part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All understandings and
agreements heretofore made between the parties hereto are merged in this
contract, which alone fully and completely expresses the agreement between Owner
and Tenant and any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
<PAGE> 12
12
End of Term: 22. Upon the expiration or other termination of the term of
this lease, Tenant shall quit and surrender to Owner the
demised premises, broom clean, in good order and condition, ordinary wear and
damages which Tenant is not required to repair as provided elsewhere in this
lease excepted, and Tenant shall remove all its property from the demised
premises. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of this lease. If the last day of the term
of this Lease or any renewal thereof, falls on Sunday, this lease shall expire
at noon on the preceding Saturday unless it be a legal holiday in which case it
shall expire at noon on the preceding business day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and
performing all the terms, covenants and conditions, on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the premises
hereby demised, subject, nevertheless, to the terms and conditions of this lease
including, but not limited to, Article 34 hereof and to the ground leases,
underlying leases and mortgages hereinbefore mentioned.
Failure to Give 24. If Owner is unable to give possession of the demised
Possession: premises on the date of the commencement of the term
hereof, because of the holding-over or retention of
possession of any tenant, undertenant or occupants or if the demised premises
are located in a building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy or because of
the fact that a certificate of occupancy has not been procured or if Owner has
not completed any work required to be performed by Owner, or for any other
reason, Owner shall not be subject to any liability for failure to give
possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to extend
the term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible for Owner's inability to obtain possession or complete
any work required) until after Owner shall have given Tenant notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease. Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. The provisions
of this article are intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for violation of, or
to insist upon the strict performance of any covenant or
condition of this lease or of any of the Rules or Regulations, set forth or
hereafter adopted by Owner, shall not prevent a subsequent act which would have
originally constituted a violation from having all the force and effect of an
original violation. The receipt by Owner of rent with knowledge of the
<PAGE> 13
13
breach of any covenant of this lease shall not be deemed a waiver of such breach
and no provision of this lease shall be deemed to have been waived by Owner
unless such waiver be in writing signed by Owner. No payment by Tenant or
receipt by Owner of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent, nor
shall any endorsement or statement of any check or any letter accompanying any
check or payment as rent be deemed an accord and satisfaction, and Owner may
accept such check or payment without prejudice to Owner's right to recover the
balance of such rent or pursue any other remedy in this lease provided. All
checks tendered to Owner as and for the rent of the demised premises shall be
deemed payments for the account of Tenant. Acceptance by Owner of rent from
anyone other than Tenant shall not be deemed to operate as an attornment to
Owner by the payor of such rent or as a consent by Owner to an assignment or
subletting by Tenant of the demised premises to such payor, or as a modification
of the provisions of this lease. No act or thing done by Owner or Owner's agents
during the term hereby demised shall be deemed an acceptance of a surrender of
said premises and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
Waiver of Trial 26. It is mutually agreed by and between Owner and Tenant
by Jury: that the respective parties hereto shall and they
hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other (except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding.
Inability to Perform: 27. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and
agreements hereunder on part of Tenant to be performed shall in no wise be
affected, impaired or excused because Owner is unable to fulfill any of its
obligations under this lease or to supply or is delayed in supplying any service
expressly or impliedly to be supplied or is unable to make, or is delayed in
making any repair, additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if Owner is prevented or
delayed from so doing by reason of strike or labor troubles or any cause
whatsoever beyond Owner's sole control including, but not limited to, government
preemption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
<PAGE> 14
14
Bills and Notices: 28. Except as otherwise in this lease provided, a bill
statement, notice or communication which Owner may desire
or be required to give to Tenant, shall be deemed sufficiently given or rendered
if, in writing, delivered to Tenant personally or sent by registered or
certified mail addressed to Tenant at the building of which the demised premises
form a part or at the last known residence address or business address of Tenant
or left at any of the aforesaid premises addressed to Tenant, and the time of
the rendition of such bill or statement and of the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant
to Owner must be served by registered or certified mail addressed to Owner at
the address first hereinabove given or at such other address as Owner shall
designate by written notice.
Water Charges: 29. If Tenant requires, uses or consumes water for any
purpose in addition to ordinary lavatory purposes (of
which fact Tenant constitutes Owner to be the sole judge) Owner may install a
water meter and thereby measure Tenant's water consumption for all purposes.
Tenant shall pay Owner for the cost of the meter and the cost of the
installation, thereof and throughout the duration of Tenant's occupancy Tenant
shall keep said meter and installation equipment in good working order and
repair at Tenant's own cost and expense in default of which Owner may cause such
meter and equipment to be replaced or repaired and collect the cost thereof from
Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on
said meter as and when bills are rendered, and on default in making such payment
Owner may pay such charges and collect the same from Tenant, as additional rent.
Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge
or any other tax, rent, levy or charge which now or hereafter is assessed,
imposed or a lien upon the demised premises or the realty of which they are part
pursuant to law, order or regulation made or issued in connection with the use,
consumption, maintenance or supply of water, water system or sewage or sewage
connection or system. If the building or the demised premises or any part
thereof is supplied with water through a meter through which water is also
supplied to other premises Tenant shall pay to Owner, as additional rent, on the
first day of each month, ____% ($5.00) of the total meter charges as Tenant's
portion. Independently of and in addition to any of the remedies reserved to
Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any
monies to be paid by Tenant or paid by Owner for any of the reasons or purposes
hereinabove set forth.
Sprinklers: 30. Anything elsewhere in this lease to the contrary
notwithstanding, if the New York Board of Fire
Underwriters or the New York Fire Insurance Exchange or any bureau, department
or official of the federal, state or city government recommend or require the
installation of a sprinkler system or that any changes, modifications,
alterations, or additional sprinkler heads or other equipment be made or
supplied in an existing sprinkler system by reason of Tenant's business, or the
location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment,
<PAGE> 15
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become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate set by any said
Exchange or by any fire insurance company, Tenant shall, at Tenant's expenses,
promptly make such sprinkler system installations, changes, modifications,
alterations, and supply additional sprinkler heads or other equipment as
required whether the work involved shall be structural or non-structural in
nature. Tenant shall pay to Owner as additional rent the sum of $5.00, on the
first day of each month during the term of this lease, as Tenant's portion of
the contract price for sprinkler supervisory service.
Elevators, Heat, 31. As long as Tenant is not in default under any the covenants
Cleaning: of this lease Owner shall: (a) provide necessary passenger
elevator facilities on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is
provided, same shall be provided only on regular business days Monday through
Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon
and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services
supplied by Owner to the demised premises, when and as required by law, on
business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d)
clean the public halls and public portions of the building which are used in
common by all tenants. Tenant shall, at Tenant's expense, keep the demised
premises, including the windows, clean and in order, to the satisfaction of
Owner, and for that purpose shall employ the person or persons, or corporation
approved by Owner. Tenant shall pay to Owner the cost of removal of any of
Tenant's refuse and rubbish from the building. Bills for the same shall be
rendered by Owner to Tenant at such time as Owner may elect and shall be due and
payable hereunder, and the amount of such bills shall be deemed to be, and be
paid as, additional rent. Tenant shall, however, have the option of
independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building. Owner reserves the right to
stop service of the heating, elevator, plumbing and electric systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Owner desirable or necessary to
be made, until said repairs, alterations, replacements or improvements shall
have been completed. If the building of which the demised premises are a part
supplies manually operated elevator service, Owner may proceed with alterations
necessary to substitute automatic control elevator service upon ten (10) days
written notice to Tenant without in any way affecting the obligations of Tenant
hereunder, provided that the same shall be done with the minimum amount of
inconvenience to Tenant, and Owner pursues with due diligence the completion of
the alterations.
Security: 32. Tenant has deposited with Owner the sum of $1,000.00 as
security for the faithful performance and observance by
Tenant of the terms, provisions and conditions of this lease; it is agreed that
in the event Tenant defaults in respect of any of the terms, provisions and
conditions of this lease, including, but not limited to, the payment of rent and
additional rent, Owner may use, apply or retain the whole or any part of the
security
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so deposited to the extent required for the payment of any rent and additional
rent or any other sum as to which Tenant is in default or for any sum which
Owner may expend or may be required to expend by reason of Tenant's default in
respect of any of the terms, covenants and conditions of this lease, including
but not limited to, any damages or deficiency in the reletting of the premises,
whether such damages or deficiency accrued before or after summary proceedings
or other re-entry by Owner. In the event that Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
lease, the security shall be returned to Tenant after the date fixed as the end
of the Lease and after delivery of entire possession of the demised premises to
Owner. In the event of a sale of the land and building or leasing of the
building, of which the demised premises form a part, Owner shall have the right
to transfer the security to the vendee or lessee and Owner shall thereupon be
released by Tenant from all liability for the return of such security; and
Tenant agrees to look to the new Owner solely for the return of said security,
and it is agreed that the provisions hereof shall apply to every transfer or
assignment made of the security to a new Owner. Tenant further covenants that it
will not assign or encumber or attempt to assign or encumber the monies
deposited herein as security and that neither Owner nor its successors or
assigns shall be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance. Such security deposit shall not bear any interest.
Captions: 33. The Captions are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope
of this lease nor the intent of any provision thereof.
Definitions: 34. The term "Owner" as used in this lease means only the owner of
the fee or of the leasehold of the building, or the mortgagee
in possession, for the time being of the land and building (or the owner of a
lease of the building or of the land and building) of which the demised premises
form a part, so that in the event of any sale or sales of said land and building
or of said lease, or in the event of a lease of said building, or of the land
and building, the said Owner shall be and hereby is entirely freed and relieved
of all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "rent" includes the annual rental rate whether so expressed or
expressed in monthly installments, and "additional rent." "Additional rent"
means all sums which shall be due to Owner from Tenant under this lease, in
addition to the annual rental rate. The term "business days" as used in this
lease, shall exclude Saturdays (except such portion thereof as is covered by
specific hours in Article 31 hereof), Sundays and all days observed by the State
or Federal Government as legal holidays and those designated as holidays by the
applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to HVAC service.
<PAGE> 17
17
Adjacent 35. If an excavation shall be made upon land adjacent to the
Excavation- demised premises, or shall be authorized to be made, Tenant
Shoring: shall afford to the person causing or authorized to cause such
excavation, license
to enter upon the demised premises for the purpose of doing such work as said
person shall deem necessary to preserve the wall or the building of which
demised premises form apart from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
Rules and 36. Tenant and Tenant's servants, employees, agents, visitors, and
Regulations: licensees shall observe faithfully, and comply strictly with,
the Rules and Regulations annexed hereto and such other and
further reasonable Rules and Regulations as Owner or Owner's agents may from
time to time adopt. Notice of any additional rules or regulations shall be given
in such manner as Owner may elect. In case Tenant disputes the reasonableness of
any additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within ten (10)
days after the giving of notice thereof. Nothing in this lease contained shall
be construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as against
any other tenant and Owner shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees.
Glass: 37. Owner shall replace, at the expense of the Tenant, any and all
plate and other glass damaged or broken from any cause
whatsoever in and about the demised premises. Owner may insure, and keep
insured, at Tenant's expense, all plate and other glass in the demised premises
for and in the name of Owner. Bills for the premiums therefor shall be rendered
by Owner to Tenant at such times as Owner may elect, and shall be due from, and
payable by, Tenant when rendered, and the amount thereof shall be deemed to be,
and be paid, as additional rent.
Estoppel 38. Tenant, at any time, and from time to time, upon at least 10
Certificate: days' prior notice by Owner, shall execute, acknowledge and
deliver to Owner, and/or to any other person, firm or
corporation specified by Owner, a statement certifying that this Lease is
unmodified in full force and effect (or, if there have been modifications, that
the same is in full force and effect as modified and stating the modifications),
stating the dates to which the rent and additional rent have been paid, and
stating whether or not there exists any default by Owner under this Lease, and,
if so, specifying each such default.
<PAGE> 18
18
Directory Board 39. If, at the request of and as accommodation to Tenant, Owner
Listing: shall place upon the directory board in the lobby of the
building, one or more names of persons other than Tenant,
such directory board listing shall not be construed as the consent by Owner to
an assignment or subletting by Tenant to such person or persons.
Successors and 40. The covenants, conditions and agreements contained in this
Assigns: lease shall bind and inure to the benefit of Owner and
Tenant and their respective heirs, distributees, executors,
administrators, successors, and except as otherwise provided in this lease,
their assigns.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
Witness for Owner: SATYANAM, INC CORP.
---------------------------SEAL
/s/ Nari Pohani [L.S.]
- ----------------------------- ---------------------------
Witness for Tenant: SURGICAL CARE PUBLISHING CORP.
---------------------------SEAL
/s/ Peter Frishauf [L.S.]
- ----------------------------- ---------------------------
<PAGE> 19
19
ACKNOWLEDGMENTS
CORPORATE TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came _______________________________ to me known, who being by me duly sworn,
did depose and say that he resides in ___________________________________ that
he is the _____________________ of _______________ the corporation described in
and which executed the foregoing instrument, as TENANT: that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
___________________________________
INDIVIDUAL TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came ___________________________________ to me known and known to me to be the
individual described in and who, as TENANT, executed the foregoing instrument
and acknowledged to me that ___________ he executed the same.
___________________________________
<PAGE> 20
20
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A
PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any or the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any
<PAGE> 21
21
Tenant, Owner may remove same without any liability and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice,
drinking water, towel and other similar services, or accept barbering or
bootblacking services in the demised premises, except from persons authorized by
Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting
and peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m. on business days, after 1 p.m. on Saturdays, and at
all hours on Sundays and legal holidays all persons who do not present a pass to
the building signed by Owner. Owner will furnish passes to persons for whom any
Tenant requests same in writing. Each Tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Owner for all acts
of such persons. Notwithstanding the foregoing, Owner shall not be required to
allow Tenant or any person to enter or remain in the building, except on
business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to
1:00 p.m.
<PAGE> 22
22
11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a loft building, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. Tenant shall not use the demised premises in a manner which
disturbs or interferes with other Tenants in the beneficial use of their
premises.
<PAGE> 23
23
Address
Premises
=====================================================
TO
=====================================================
STANDARD FORM OF
LOFT LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1982. All rights Reserved.
Reproduction in whole or in part prohibited.
=====================================================
Dated ____________________________, 19__
Rent Per Year
Rent Per Month
Term
From
To
Drawn by ____________________________________________
Checked by __________________________________________
Entered by __________________________________________
Approved by _________________________________________
<PAGE> 24
1
Rider Agreement Dated August 18, 1993
Between SATYANAM, INC. As Owner,
and SURGICAL CARE PUBLISHING, INC., as Tenant
41. BASE RENT
A. Tenant shall pay to the Landlord base rent for the demised
premises in accordance with the provisions of the printed form of this Lease at
an annual rate of:
$ 5,460.00 for the period September 1, 1993 to June
30, 1994, payable in equal monthly installments of $ 455.00.
$ 5,676.00 for the period July 1, 1994 to June 30,
1995, payable in equal monthly installments of $ 473.00.
$ 5,904.00 for the period July 1, 1995 to June 30,
1996, payable in equal monthly installments of $ 492.00.
$6,144.00 for the period July 1, 1996 to June 30,
1997, payable in equal monthly installments of $512.00
$6,384.00 for the period July 1, 1997 to June 30,
1998, payable in equal monthly installments of $532.00
$6,636.00 for the period July 1, 1998 to June 30,
1999, payable in equal monthly installments of $553.00
Rent abated thru October 31st, 1993.
42. OPTION TO RENEW:
A. Provided Tenant is not in default in any of the material
terms, covenants or condition of this Lease, including but not limited to the
obligation to pay rent or additional rent, and provided further that Owner has
not during the initial term of the Lease commenced any summary proceeding for
possession or rent that has resulted in a judgement in favor of Owner., whether
by stipulation or after trial, Tenant shall have the right to renew this Lease
for an additional Five (5) year term commencing July 1, 1999 and expiring June
30, 2004.
The base rental for the renewal term shall be as
follows:
$7,020.00 for the period July 1, 1999 to June 30,
2000, payable in equal monthly installments of $585.00.
<PAGE> 25
2
$ 7,308.00 for the period July 1, 2000 to June 30,
2001, payable in equal monthly installments of $ 609.00.
$ 7,596.00 for the period July 1, 2001 to June 30,
2002, payable in equal monthly installments of $ 633.00.
$ 7,896.00 for the period July 1, 2002 to June 30,
2003, payable in equal monthly installments of $ 658.00.
$ 8,220.00 for the period July 1, 2003 to June 30,
2004, payable in equal monthly installments of $ 685.00.
B. If the Tenant exercises the option to renew the lease;
tenant shall notify Landlord in writing on or before December 31, 1998 that it
intends to renew the Lease. The failure by Tenant to notify Landlord timely of
its intention to renew shall constitute an affirmative election by Tenant not to
renew the lease upon which Landlord may reasonably rely, if it so desires to
rerent the demised premises to a third party.
43. SUBLEASE
Owner represents and Tenant understands and agrees
that Owner is the proprietary lessee of the demised premises pursuant to a
Proprietary Lease between Owner, as lessee and 134 West 29th Street Owners Corp,
as lessor ("Owners Corporation"). All rights of Tenant are subject to the
Proprietary Lease. Tenant shall observe each and every covenant of the
Proprietary Lease on the part to be performed by Owner as lessee under the
Proprietary Lease. Observance of the terms, covenants and conditions of the
Proprietary Lease by the Tenant except the financial obligation shall be deemed
a substantial obligation of this tenancy. This lease is conditioned upon Owner's
obtaining the written consent from the Owner Corporation to this lease by August
30, 1993.
44. PAYMENT OF RENT AND ADDITIONAL RENT
A. The payment of all rent and additional rent under
this lease shall constitute a substantial obligation of this tenancy entitling
the Owner to exercise all its rights and remedies under Article 17 of this
lease.
B. It shall not constitute a bar, preclusion or
election of remedies against the enforcement of a landlord's rights and remedies
under Article 17 of this lease for nonpayment of rent or additional rent if the
Owner has already commenced a proceeding or action to recover the rent or
additional rent.
<PAGE> 26
3
C. Tenant covenants and agrees that the monthly
installments of annual rental shall be paid by Tenant to Owner on or before the
first day of each month without notice or demand by Owner. In the event that
such installments of annual rental shall not be paid by the Fifth (5) day of the
month or any item of additional rent shall not be paid within the applicable
time period following written demand therefor, the Owner shall give a written
notice to the Tenant. If the Tenant does not pay the amount due within three (3)
days of receipt of such written notice then the Tenant shall pay to the Owner as
additional rent, a late charge equal to two (2%) percent of such monthly
installment or item of additional rent.
D. If Owner receives from Tenant any payment less
than the sum of the annual rent, additional rent and other amount due under this
Lease, ("Partial Payment"), or Tenant is in arrears in payment of any amount due
under this Lease, in its sole discretion, may allocate such Partial Payment or
payment in whole or in part to any other charges or to any combination thereof.
E. If the Tenant's checks are returned by his bank
for any reason whatsoever three times during the term of the lease, then, the
Owner, at Owner's option, shall have the right, to demand payment of future
installments of rent or additional rent by certified, bank or teller's check or
by postal money order.
45. CONDITION OF PREMISES
Tenant acknowledges that it has inspected demised
premises and is familiar with the physical condition of same and Tenant agrees
to accept the demised premises in their "AS IS" physical condition,
Owner represents that substantially all the friable
Asbestos Containing Material has been either removed or contained throughout the
building and in the demised premises.
Owner will defend, indemnify and hold harmless
Tenant, its affiliates, its employees, agents and insurers, from and against all
losses, claims, damages, fines and expenses (including without limitation
reasonable legal fees) resulting from any environmental remediation required by
applicable laws, regulations or directives of properly constituted governmental
authorities as a result of the release of any toxic or hazardous substance or
waste on or about the Demised Premises by anyone other than Tenant, its
affiliates, its employees, agents or contractors.
46. USE
A. Tenant shall use and occupy the demised premises
solely for the use specified in Article 2 of the printed form of this lease and
for no other purposes. Tenant specifically covenants and agrees that Tenant
shall not use the demised premises or any part thereof, nor permit the demised
premises or any part thereof to be used for sleeping or residential
<PAGE> 27
4
purposes or for overnight accommodations. Tenant shall continuously and
uninterruptedly during the term of this lease conduct its customary business
activities as permitted by Article 2 above.
B. In addition, Tenant shall not suffer nor permit
the demised premises or any part thereof to be used in any manner, or anything
to be done therein, or suffer or permit anything to be brought into or kept
therein, which would in any way (i) violate any of the provisions of any grant,
lease or mortgage or requirements of public authorities (ii) make void or
voidable any fire or liability insurance policy then in force with respect to
the building, (iii) make unattainable or more difficult to obtain from reputable
insurance companies authorized to do business in New York State fire insurance
with extended coverage, or liability, elevator, boiler or any other insurance
maintained by Landlord, (iv) cause physical damage to the building or any part
thereof, (v) constitute a public or private nuisance, (vi) impair, the
appearance, character or reputation of the building, (vii) impair or interfere
with any of the building services or the proper and heating, cleaning, or other
servicing of the building or the demised premises or impair or interfere with or
tend to impair or interfere with the use of the other areas of the building by,
or occasion discomfort, annoyance or inconvenience to, Owner or any of the other
tenants or occupants of the building, (viii) violate any of the terms, covenants
or conditions contained in this Lease, or (ix) be illegal, unlawful, or result
in the creation of a public or private nuisance.
C. Owner makes no representations, guarantees, or
acknowledgments that the use designated in the Lease by the Tenant is permitted
under any statute, ordinance, rule, regulation, or other present or future law
promulgated by any state, federal, municipal, or local government or agency or
authority thereof. In the event that said use is illegal or determined by any
notice of violation or order issued by the aforesaid appropriate governmental
authority, then upon six (6) days prior written notice given in accordance with
this Lease, this Lease and the term thereof shall expire on the last day of said
notice as if said day were the last day of the term of this Lease.
D. If any governmental licence or permit shall be
required for the proper and lawful conduct of Tenant's business, Tenant, at
Tenant's sole cost and expense, shall duly procure and thereafter maintain such
licence or permit and submit the same to inspection by Owner Tenant, at Tenant's
sole cost and expense, shall at all times comply with the terms and conditions
of each such licence or permit.
47. BROKERAGE
The parties warrant and represent to each other that
they had no dealings with any broker or agent in connection with this Lease. The
Tenant shall have no obligation with respect to any commission payable to said
broker. The parties covenant and agree to hold each other harmless and indemnify
each other from and against any and all costs, expenses or liability for any
compensation, commissions, fees and charges claimed by any broker with respect
to this
<PAGE> 28
5
Lease or the negotiation thereof. The obligation of Tenant contained in the
Article shall survive the expiration or earlier termination of this Lease.
48. RUBBISH REMOVAL AND CLEANING
A. Tenant covenants and agrees to maintain the
demised premises and adjacent public and/or common areas in a condition of
proper cleanliness, orderliness and state of attractive appearance at all times.
Tenant shall also be responsible and shall contract for the removal of all
rubbish from the demised premises at its sole cost and expense, in accordance
with any and all applicable municipal codes and regulations. If Tenant fails or
refuses to remove any rubbish from, in or around the demised premises, the Owner
may contract to have same removed and the Tenant shall pay for actual costs of
said removal as additional rent.
49. INSURANCE
A. Tenant shall obtain or procure its own fire,
rental, liability, or other casualty insurance as may be required under the
terms of this Lease. Supplementary Article 9 of this Lease, each party shall
look first to any insurance in its favor before making any claim against the
other party for recovery of loss or damage resulting from fire or any other
casualty.
B. (1) Tenant shall, at its sole cost and expense,
procure and maintain throughout the term of this Lease a comprehensive general
liability policy of insurance insuring Tenant, Owner and Owners Corporation
against any and all risks and/or liability for property damage and bodily injury
to or death of a person or persons in, on or about the demised premises,
occasioned by or arising out of or in connection with the use or occupancy of
the demised premises, and a fire insurance policy (including extended coverage,
vandalism and malicious mischief) covering the demised premises and Tenant's
property. Such policies must be obtained from an insurance company rated "A" or
better by A.M. Best Company, Inc. in an amount not less than $1,000,000.00 with
respect to the bodily injuries or to death of any one person, in an amount not
less than $1,000,000.00 per occurrence, and in an amount of not less than
$250,000.00 for property damage, and shall name Owner and Owners Corporation as
an additional insureds. Tenant will deliver the original policy and all original
renewals of said policy to Owner on demand.
(2) Tenant shall at all times during this Lease is
in effect maintain for its own benefit, fire and casualty insurance for all the
contents, fixtures, personal, property, inventory and other moveable or
nonmoveable property of Tenant.
C. Tenant agrees to pay all premiums and charges for
the insurance required to be maintained by Tenant pursuant to the terms of this
Lease. If Tenant fails to make any such payments when due, or in the event of
its failure to deliver and/or pay the premium thereon, then Owner after giving
10 days written notice to the Tenant and opportunity to cure,
<PAGE> 29
6
may pay said premium or charge (but in no event shall be obligated to do so),
and upon written demand to Tenant, Owner may collect said payment as additional
rent, or deem Tenant to be in default of substantial obligation of its tenancy.
The failure to maintain and/or renew the above policies of insurance shall
constitute a breach of a substantial obligation of this tenancy.
50. ADDITIONAL RENT
A. All payments, other than the base rental as
adjusted from time to time, to be made by Tenant pursuant to this Lease shall be
deemed additional rent, whether or not specifically so called, and, in the event
of any non-payment thereof, Owner shall have all rights and remedies provided
for herein or by law for non-payment of rent.
B. Should Tenant default in the timely performance of
any covenant, term or condition herein contained on Tenant's part to be
performed, Owner, at its option and without thereby waiving such a default, may
perform or cause the Managing Agent of the Building to perform the same for and
on account of, and at the expense of the Tenant after five (5) days written
notice (except in the event of an emergency, i.e., threat of personal injury
and/or damage or destruction of property, when no notice shall be required.
Tenant shall pay as an item of additional rent all costs and expenses which
Owner may incur any of Tenant's defaults within five (5) days following delivery
of a written demand therefor which costs and expenses shall include, but not be
limited to, materials, fees paid to architects, engineers, attorneys,
contractors, subcontractors, fines and penalties.
C. Owner's failure during the term of this Lease to
prepare and deliver any statements of bills required to be delivered to Tenant
pursuant to the provisions of this lease, or Owner's failure to make a demand
for the payment of any item of additional rent, shall not in any way be deemed
to be a waiver of, or cause Owner to forfeit or surrender its rights to collect
such additional rent during the terms of this lease. Tenant's liability for the
payment of any item of additional rent shall survive the expiration or sooner
termination of this Lease.
51. NO WAIVER BY OWNER
A. The receipt of any rent, or any portion thereof,
whether specifically reserved or payable under any of the covenants herein
contained, after a default on the part of the Tenant (whether such rent is due
before or after such default) shall not be deemed to operate as a waiver of any
default or of any current default or of the right of Owner to enforce the
payment of any rent herein reserved or to declare a forfeiture to this Lease and
to recover the possession of the demised premises provided in this Lease. Nor
shall
B. Owner's acceptance of rent during any time in
which Tenant is in default of any provision hereunder shall not constitute a
waiver of such default, and Tenant specifically agrees and consents that rent
must be paid by Tenant during any default and Tenant
<PAGE> 30
7
specifically agrees that such acceptance shall be made without prejudice to
Owner's right to terminate this Lease and shall not be deemed a consent to any
default of the Lease.
52. BILLS AND NOTICES
Supplementing Article 28 of this lease, any notice,
bill, statement, or communication required to be given under the terms of this
Lease by the Owner shall be sufficiently given by the Owner's agent or
attorney-at-law or in-fact, whether or not any authorization is annexed. Any
notice, bill, statement, or communication required to be given shall be
sufficiently given when mailed.
53. ELECTRICITY SERVICE
A. (1) Landlord shall redistribute or furnish
electrical energy to or for the use of Tenant in the Premises for the operation
of the lighting fixtures and the electrical receptacles installed in the
Premises. Tenant's electrical consumption shall be measured by the meter
currently installed in the Premises. The cost of electricity utilized by Tenant
shall be paid for by Tenant to Landlord as additional rent and shall be
calculated at the then applicable rate prescribed by the public utility company
serving the Premises for submetered electrical energy, plus (i) Landlord's
charge for overhead and supervision in the amount of ten percent (10%) of the
total electric bill and (ii) any taxes or other charges in connection therewith.
If any tax shall be imposed upon Landlord's receipts from the sale or resale of
electrical energy to Tenant, the pro rata share applicable to the electrical
energy service received by Tenant shall be passed on to, included in the bill
of, and paid by Tenant if and to the extent permitted by law. Landlord shall
bill Tenant, monthly, for the cost of its consumption of electricity in the
Premises and Tenant shall pay the amount thereof at the time of payment of each
installment of Rent. If either the quantity or character of electrical services
is changed by the public utility or other company supplying electrical service
to the Building or is no longer available or suitable for Tenant's requirements,
no such change, unavailability or unsuitability shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord, or its agents, by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's
business, or otherwise.
(2) Any additional feeders or risers which are
required to supply any additional electrical requirements which Tenant may have,
and all other equipment proper and necessary in connection with such feeders or
risers, shall be installed by Landlord upon Tenant's request, at the sole cost
and expense of Tenant, provided that, in Landlord's reasonable judgment, such
additional feeders or riders are necessary and are permissible under applicable
laws and insurance regulations and the installation of such feeders or risers
will not cause permanent damage or injury to the Building or the Premises or
cause or create a dangerous or hazardous condition or entail excessive or
unreasonable alterations or interface with or disturb other tenants
<PAGE> 31
8
or occupants of the Building. At no time shall the use of electrical energy in
the Premises exceed the capacity of the existing feeders or wiring installations
then serving the Premises. Tenant shall not make or perform, or permit the
making or performance of, any alterations to wiring installations or other
electrical facilities in or serving the Premises without the prior consent of
Landlord in each instance. Any such Alterations, additions or consent by
Landlord shall be subject to the provisions of this Lease including, but not
limited to, the provisions of Article 3 hereof.
(3) Landlord reserves the right to discontinue
furnishing electricity to Tenant in the Premises on not less than sixty (60)
days notice to Tenant. If Landlord exercises such right to discontinue, or is
compelled to discontinue furnishing electricity to Tenant, this Lease shall
continue in full force and effect, and shall be unaffected thereby, except only
that from and after the effective date of such discontinuance, Landlord shall
not be obliged to furnish electricity to Tenant. If Landlord so discontinues
furnishing electricity to Tenant, Tenant shall arrange to obtain electricity
directly from the public utility or other company servicing the Building. Such
electricity may be furnished to Tenant by means of the then existing electrical.
facilities serving the Premises to the extent that the same are available,
suitable and safe for such purposes. All meters and all additional panel boards,
feeders, risers, wiring and other conductors and equipment which may be required
to obtain electricity, of substantially the same quantity, quality and
character, shall be installed by Landlord at Tenant's sole cost and expense.
Landlord shall not voluntarily discontinue furnishing electricity to Tenant
until Tenant is able to receive electricity directly from the public utility or
other company servicing the Building.
(4) Landlord shall not be liable to tenant in any
way for any interruption, curtailment or failure or defect in the supply or
character of electricity furnished to the premises by reason of any requirement,
act or omission or Landlord or of any public utility or other company servicing
the Building with electricity or for any other reason except Landlord's
negligence or willful conduct.
B. Tenant shall not be released or excused from the
performance of any of its obligations under this Lease for any change in the
quantity or quality of service, failure or interruption or curtailment or
cessation of Utilities service for any reason whatsoever, and no such change,
failure, interruption or curtailment or cessation shall constitute a
constructive or partial eviction or entitle Tenant to an abatement of, offset
against, or deduction from rent or additional rent or impose any liability upon
Owner.
C. Owner shall not be obligated to provide hot water,
air conditioning, and ventilation service to the demised premises.
<PAGE> 32
9
54. ESTOPPEL CERTIFICATE
A. Upon Owner's written request, Tenant shall confirm
the existence of this Lease and any modifications hereto as evidenced by a
written agreement, and/or specific terms hereof (said form shall hereinafter be
referred to as an "Estoppel Certificate"). Tenant shall within five (5) days
from receipt of an Estoppel Certificate, execute the same in the presence of a
notary public who shall thereafter complete the acknowledgment and Tenant shall
return said Estoppel Certificate to Owner and/or Owner's designee by the means
specified. All parties to whom said Estoppel Certificate is addressed shall be
absolutely entitled to rely upon the reservations of Tenant therein contained
and Tenant shall be forever barred from refuting any statements therein set
forth as of the date to which said Estoppel Certificate speaks.
B. If, in connection with obtaining financing, a
bank, insurance company, or other lending institution shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.
55. NO LIABILITY ON LANDLORD
A. Tenant shall indemnify and save Owner harmless
against (i) any and all claims against Owner of whatever nature arising from any
act, omission or negligence of Tenant, its contractors, licensees, agents,
servants, employees, invitees and/or visitors. (ii) any and all claims against
the Owner arising from any accident, injury or damage occurring outside of the
demised premises but within or about the land and building where accident,
injury or damage result or is claimed to have resulted from any act, omissions
or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees and/or visitors. (iii) any breach, violation or
nonperformance of any of the terms, covenants, and conditions contained in this
lease on the part of the Tenant to be fulfilled, kept, observed and performed.
This indemnity and hold harmless covenant shall
include indemnity from and against any and all liability, fines, suits, demands,
costs and expenses (including attorneys' fees and disbursements) of any kind or
nature incurred in connection with any such claim or proceeding brought thereon,
and the defense thereof by the Owner. The indemnity and hold harmless covenant
shall survive the expiration or the earlier termination of the term of this
Lease and for any period of time prior to the commencement of the term of this
Lease during which Tenant was given access to the demised premises.
B. Tenant shall reimburse Owner as an item of
additional rent within ten (10) days following written demand therefor, for all
expenditures incurred by or damages or fines sustained or incurred by Owner due
to Tenant's default of the provisions of this Article.
<PAGE> 33
10
C. Notwithstanding anything provided in this Lease or
provided at law or in equity to the contrary, in the event that Tenant shall
obtain a monetary judgement against Owner in any action or proceeding, Tenant
shall seek satisfaction of such a judgement only from Owner's estate and
interest in the demised premises comprising of Cooperative Unit # 306, 307, 308,
309/310 in 134 West 29th Street Owners Corporation, and not other property or
other assets belonging to Owner or its directors, officers, partners, principals
(disclosed or undisclosed) or employees shall be subject to lien, levy,
execution or other enforcement procedure for the satisfaction of any such
judgement arising from the relationship of landlord and tenant hereunder,
Tenant's use and occupancy of the demised premises or this Lease. If Tenant
shall acquire a lien on such other property or assets by judgement or otherwise,
Tenant shall promptly release such lien by executing and delivering to Owner an
instrument to the effect prepared by Owner, Tenant's covenants as contained in
the Article shall survive the expiration or the earlier termination of the term
of this Lease.
56. MECHANICS' LIEN
In no event shall any material or equipment be
incorporated into the demised premises in connection with any alterations,
installations, additions, improvements, repairs or replacements made by Tenant
including, but not limited to, Tenant's changes, which is subject to any lien,
encumbrance, chattel mortgage, security interest or charge of any kind
whatsoever, or is subject to any conditional sale or other similar or dissimilar
title retention agreement with this express written consent of Owner. Tenant
specifically covenants that any personal property which Tenant shall bring to or
install in the demised premises which requires special handling shall not be
subject to any security interest held by a third party. Any mechanic's or
materialman's lien filed against the lands and/or the building or Owner's
interest therein, for work claimed to have been done, or for materials claimed
to have been furnished to Tenant, shall be discharged by Tenant within one
hundred twenty (120) days thereafter, at Tenant's sole cost and expense, by
filing a bond as provided by law or otherwise. If Tenant shall fail to have
discharged any lien or encumbrance described in this Article, Owner, shall have
the right but not the obligation, to cause such lien or encumbrance to be
discharged by bonding or otherwise, and Tenant shall reimburse Owner as an item
of additional rent, for all actual costs and expenses which Owner incurs,
including reasonable attorneys' fees and disbursements, within ten (10) days
following written demand.
57. GOVERNMENTAL REGULATIONS
A. In the event the Tenant makes any alterations,
decorations, installations, etc., including but not limited to, Tenant's
changes, if any, that do not comply with applicable building regulations,
administrative agency, governmental or quasi-governmental agency regulations, or
that may result in the imposition of any fines, penalties (civil or criminal) or
any monetary awards, costs or fees against Landlord, Tenant shall be liable for
any and all costs associated therewith including, but not limited to, attorney's
fees, architects' fees, engineering fees,
<PAGE> 34
11
penalties, fines, renovation costs, construction costs, consultation and any and
all other costs, which shall be deemed additional rent and due upon receipt of
Owner's statement therefor.
B. Supplementing the provisions of Article 6 hereof,
Tenant shall promptly comply with and give prompt notice to Owner of any notice
it receives of the violation of any present or future law, order, ordinance, or
regulation of any governmental entity, department, commission, or any direction
of any public officer pursuant to law or of the New York Board of Fire
Underwriters or the use or occupation thereof, and Tenant shall effect such
compliance at its sole cost and expense.
58. LIMITATION ON RENT
A. If, at the commencement of, or at any time during
the term of this lease, the rent reserved in this Lease is not fully collectible
by reason of any federal, state, county or city law, proclamation, order or
regulation, or direction of a public officer or body pursuant to law, Tenant
agrees to take such steps as Owner may request to permit Owner to collect the
maximum rents which may be legally permissible from time to time during the
continuance of such legal rent restriction (but not in excess of the amounts
reserved therefor under this Lease). Upon the termination of such legal rent
restriction, Tenant shall pay to Owner to the extent permitted by law, an amount
equal to (a) the rents which would have been paid pursuant to this lease to such
legal rent restriction less (b) the rents paid by Tenant to Owner during the
period such legal rent restriction was in effect.
B. To the maximum extent permitted by law, Tenant
hereby waives any right to continued occupancy of the demised premises after the
expiration of the Lease imposed by any statute, rule or ordinance. If Tenant by
regulatory statute, rule or ordinance is entitled to continued occupancy, and so
long as such statute is in effect or applies to Tenant, then Tenant shall be
obligated to pay rent on a month-to-month basis at a new base rent equal to 125%
of the highest monthly rent set forth in this Lease plus any and all additional
rents denominated herein, and the terms herein shall apply to such statutory
tenancy to the extent they do not conflict with statute, rule or ordinance.
59. ENTIRE AGREEMENT
This Lease contains the entire understanding arrived
at between the parties and all prior discussions and negotiations are merged
herein and may not be extended, renewed, terminated, or otherwise modified
except by an instrument in writing signed by the party against whom enforcement
of any such modification is sought.
<PAGE> 35
12
60. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED
It is specifically understood and agreed that this
Lease is offered to Tenant for signature subject to Owner's acceptance and
approval and that Tenant has hereunto affixed its signature with the
understanding that this Lease shall not in any way bind owner until such time as
the same has been approved and executed by Landlord and delivered to Tenant.
61. SEVERABILITY
This lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease or any part thereof to be drafted. If any provision of this Lease shall be
determined to be void or unenforceable by any court of competent jurisdiction,
then such determination shall not affect any other provisions of this Lease, all
of which other provisions shall remain in full force and effect; and it is the
intention of the parties hereto that if any provision of this Lease is capable
of two constructions, one which would render the provision valid, then the
provision shall have the meaning which renders it valid.
62. NO COUNTERCLAIMS
Tenant shall and hereby does waive its right and
agrees not to interpose any counterclaim or set off, of whatever nature or
description, in any proceeding or action that may be instituted by Owner against
Tenant to recover rent, additional rent, other charges, possession, or for
damages, or in connection with any matters or claims whatsoever arising out of
or in any way connected with this lease, or any renewal, extension, holdover, or
modification thereof, or the relationship of Owner and Tenant, or Tenant's use
or occupancy of said premises. This clause, as well as the "waiver of jury
trial" provision of this lease, shall survive the expiration, early termination,
or cancellation of this lease or the term thereof. Nothing herein contained,
however, shall be construed as a waiver of Tenant's right to commence a separate
action on a bona fide claim against Owner.
63. OWNER'S CONSENT
If Tenant shall request Owner's approval or consent
and Owner shall fail or refuse to give such approval or consent, Tenant shall
not be entitled to any damages for any withholding or delay of such approval or
consent by Owner, it being intended that Tenant's sole remedy shall be an action
for injunction or specific performance (the rights to money damages or other
remedies being hereby specifically waived), and that such remedy shall be
available only in those cases where Owner shall have expressly agreed in writing
not to unreasonably withhold its consent or approval or where, as a matter of
law, Owner may not unreasonably withhold its consent or approval.
<PAGE> 36
13
64. SUBORDINATION AND ATTORNMENT
A. This Lease and all rights of Tenant hereunder are
and shall be subject and subordinate in all respects to all underlying leases
and to all mortgages and building loan agreements, including without limitation,
leasehold mortgages, which may now or hereafter affect the land and/or the
building and/or any of such leases, whether or not such mortgages shall also
cover other lands and/or buildings, to each and every advance made or hereafter
to be made under such mortgages and/or building loan agreements, and to all
renewals, modifications, replacements, assignments, and extensions of such
leases, building loan agreements, mortgages and spreaders and consolidations of
such mortgages.
This Article shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly, at its sole cost and expense, execute and
deliver any instrument in recordable form that Owner, the lessor of any such
lease of the holder of any such mortgage or any of their respective assigns or
successors-in-interest may reasonably request to evidence such subordination.
The leases to which this Lease is, at the time referred to, subject and
subordinate pursuant to this Article are hereinafter sometimes called "superior
leases" and the mortgages to which this Lease is, at the time referred to,
subject and subordinate pursuant to this Article are hereinafter sometimes
called "superior mortgages", and the lessor of a superior lease or its
successor-in-interest, at the time referred to, is sometimes hereinafter called
a "lessor" and the holder of a superior mortgage or its successor-in-interest at
the time referred to is sometimes hereinafter called a "holder".
B. In the event of any act or omission of Owner which
would give tenant the right, immediately or after lapse of a period of time, to
cancel or terminate this lease, or to claim a partial or total eviction, Tenant
shall not exercise such right (i) until it has given written notice of such act
or omission to the lease, and (ii) unless such act or omission shall be one
which is not capable of being remedied by Owner or such holder or lessor within
a reasonable period of time, until a reasonable period of time, for remedying
such act or omission shall have elapsed following the giving of such notice and
following the time when such holder or lessor shall have become entitled under
such superior mortgage or superior lease, as the case may be, to remedy the same
(to which reasonable period shall in no event be less that the period to which
Owner would be entitled under this Lease otherwise, after similar notice, to
effect such remedy), provided such holder or lessor shall with due diligence
give Tenant written notice of its intention to and commence and continue to,
remedy such act or omission.
C. If the fee owner of the lands and/or building of
which the demised premises form a part, the lessor of a superior lease of the
holder of a superior mortgage shall succeed to the rights of Owner under this
lease, whether through possession or foreclosure action or through termination
for any reason of the leasehold estate covering the lands and/or building or by
delivery succeeding to Owner's rights (herein sometimes called "successor
Landlord") and upon such successor Owner's written agreement to accept Tenant's
attornment, Tenant shall
<PAGE> 37
14
attorn to and recognize such successor landlord as Tenant's landlord under this
Lease. The foregoing provisions shall inure to the benefit of any such successor
landlord, and shall be self-operative upon any demand, without requiring any
further instrument to give effect to said provisions. Tenant, however, upon
demand of any such successor landlord, agrees to execute, from time to time, an
instrument in confirmation of such attornment which is satisfactory to such
successor landlord. Upon such attornment this lease shall continue in full force
and effect for the remainder of the term originally demised under this lease as,
or as if it were, a direct lease between successor landlord and Tenant upon all
of the terms, covenants, conditions, agreements and provisions as are set forth
in this lease except that the successor landlord shall not:
(i) be liable for any previous act or
omission of Owner under this Lease;
(ii) be subject to any offset, not expressly
provided for in this lease, which shall have theretofore accrued to Tenant
against Owner or
(iii) be bound by any previous modification
of this lease, not expressly provided for in this lease, or by any previous
prepayment of more than one month's installments of fixed annual rent, unless
such modification or prepayment shall have been expressly approved in writing by
the successor landlord through or by reason of which the successor landlord
shall have succeeded to the rights of Owner under this lease.
D. Landlord hereby agrees to request from any lessor
under a Superior Lease, or trustee or mortgagee of a Mortgage superior to the
interest of Tenant hereunder, an agreement in the standard form customarily
employed by such lessor, trustee or mortgagee pursuant to which such lessor,
trustee, or mortgagee shall agree that the leasehold estate granted to Tenant
and the rights of Tenant pursuant to this Lease to quiet and peaceful possession
under this Lease shall not be terminated, modified, affected or disturbed by an
action which any such trustee or mortgagee may take to foreclose any such
mortgage, or which any such lessor may take to terminate such Superior Lease.
Such agreement shall remain in effect so long as Tenant shall pay the Rent,
escalations, additional rents, and other amounts to be paid by Tenant under the
Lease, within any applicable grace periods provided for hereunder, without
offsets or defenses thereto, and as long as Tenant shall fully perform and
comply with all the other terms, covenants, conditions and provisions of this
Lease on the part of the Tenant to be performed or complied with.
65. OCCUPANCY TAX
Tenant shall pay any occupancy tax or rent tax now in
effect or hereafter enacted directly to the taxing authority responsible for the
collection of the same. In the event such occupancy tax or rent tax is payable
by Owner in the first instance or hereafter required to be paid by Owner, such
tax shall be paid to Owner's additional rent within ten (10) days following
<PAGE> 38
15
Owner's written demand therefor. Nothing contained herein shall be deemed to
require Tenant to pay municipal, state, federal income, inheritance, estate,
succession, transferor gift or any corporate franchise tax imposed upon Owner.
66. REPAIRS AND MAINTENANCE
A. Tenant shall, at its sole cost and expense, take
good care of and make all interior repairs and replacements to the demised
premises and the fixtures and appurtenances therein, nonstructural, foreseen
and/or unforeseen, and ordinary and/or extraordinary during the Term of this
lease, which shall include, without limitation., all repairs and replacements of
the demised premises, electrical, ventilating systems, floors, walls, ceiling,
doors, pipes, conduits appurtenant to the demised premises as and when needed so
as to preserve, maintain and/or keep the demised premises in good working order,
conditions and/or repair and in tenantable condition, reasonable wear and tear,
obsolescence and damage from the elements, fire and other casualty.
B. The quality of workmanship and materials used with
respect to the repairs, replacements, maintenance and other work required to be
done under the Article and/or Article 4 hereof shall be at least equal in
quality and class to the original materials and workmanship.
67. CONFLICTS
If there is any conflict between the terms contained
in the printed form lease and the terms contained in this Rider, the provisions
of this Rider shall govern.
68. HOLDING OVER
Should Tenant hold over in possession after the
expiration or sooner termination of the term of the Lease, such holding-over
shall not be deemed to extend or renew this Lease, but such holding-over shall
be on the terms and conditions of this Lease except that the charge for use and
occupancy for each calender month shall be 125% of the highest monthly rent set
forth in this Lease plus of all items of additional rent set forth herein.
69. ASSIGNMENT AND SUBLETTING
Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assignees,
expressly covenants that it shall not assign, mortgage, pledge, encumber, or
otherwise transfer this Lease, nor underlet, nor suffer, nor permit the Premises
or any part thereof to be used or occupied by others (whether for desk space,
mailing privileges or otherwise), without the prior written consent of Landlord
in each instance which shall not be unreasonably withheld or delayed. If this
Lease be assigned, or if the Premises or any
<PAGE> 39
16
part thereof be underlet or occupied by anybody other than Tenant, Landlord may,
after default by Tenant, collect rent from the assignee, undertenant or
occupant, and apply the net amount collected to the Rent herein reserved, but no
assignment, underletting, occupancy or collection shall be deemed a waiver of
the provisions hereof, the acceptance of the assignee, undertenant or occupant
as tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Landlord to an
assignment or underletting shall not in any way be construed to relieve Tenant
from obtaining the express consent in writing of Landlord to any further
assignment or underletting. In no event shall any permitted sublessee assign or
encumber its sublease or further sublet all or any portion of its sublet space,
or otherwise suffer or permit the sublet space or any part thereof to be used or
occupied by others, without Landlord's prior written consent in each instance.
Any assignment, sublease, mortgage, pledge, encumbrance or transfer in
contravention of the provisions of this Article shall be void.
Owner hereby agrees that Tenant may allow part of the
premises to be occupied by its affiliates or sublet part of the premises to its
affiliates provided, that such occupancy or sublettings are subject to all of
the covenants, agreements, terms, provisions and conditions contained in this
Lease. Owner shall cause to list Tenant and its affiliates to be posted on the
building directory in the lobby.
70. Notwithstanding anything to the contrary contained herein,
Owner shall remain responsible for maintaining and repairing the heating &
plumbing systems (except Air-conditioning) provided such repair results from
problems not caused by Tenant, its affiliates, its agents, its employees or its
contractors.
71. Tenant has requested and Owner has agreed to allow
non-powered bicycles to be brought in the Demised Premises, provided however
that, the freight elevators which are open on weekdays (Monday through Friday
between 10:00 am to 6:00 pm) are used only to transport them from street level
floor to the 3rd and 4th floor.
Tenant shall assume all liability including, but not
limited to theft, damage to property and any third party claim, with respect to
the bicycles being brought into the building.
<PAGE> 40
17
72. Notwithstanding anything to the contrary contained herein,
Tenant shall have access to building 24 hours a day, 7 days a week by private
key. However, Owner shall not provide heat and freight elevator services on
holidays and after office hours.
SATYANAM, INC.
-----------------------------------
OWNER
BY: /s/ Nari Pohani
-------------------------------
SURGICAL CARE PUBLISHING, INC.
-----------------------------------
TENANT
BY: /s/ Peter Frishauf
-------------------------------
<PAGE> 1
Exhibit 10.23.1
AMENDMENT TO
THE AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED MARCH 5, 1999
THIS AMENDMENT TO CERTAIN TERMS OF THE AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT (this "Amendment") dated as of May 24, 1999, by and
among Medscape, Inc., a Delaware corporation (the "Corporation"), and the
Stockholders who are parties to the Amended and Restated Stockholders'
Agreement, dated as of March 5, 1999 (as so amended, the "Stockholders'
Agreement").
WHEREAS, pursuant to Sections 12 and 13 of the Stockholders'
Agreement, the written consent of (i) the Corporation, (ii) the Stockholders
holding a majority of (x) the shares of Series C Stock and (y) the Vested Shares
held by Dr. Drezner, (iii) the Stockholders holding at least 66 2/3 of the
shares of Series D Preferred Stock, and (d) the Stockholders holding a majority
of the shares of Class A Common Stock is required for any amendment to, and
waiver of the provisions of, the Stockholders' Agreement; and
WHEREAS, the parties to the Stockholders' Agreement wish to
amend the Stockholders Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and of the
mutual consents and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not
defined herein, shall have the meaning given such terms in the Stockholders'
Agreement.
SECTION 2. Amendment to Section 2 - Election of Directors. A
new subsection 2.(j) shall be added to the Stockholders' Agreement, which shall
read in its entirety as follows:
"(j) The rights and obligations of the Corporation and the
Stockholders set forth in this Section 2 shall
terminate upon the consummation of a Designated
Offering."
SECTION 3. Captions. The captions in this Amendment are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 4. Stockholders' Agreement to Remain in Full Force and
Effect. Except as amended hereby, the Stockholders' Agreement shall remain in
full force
<PAGE> 2
and effect and is hereby ratified, adopted and confirmed in all respects. All
references in the Stockholders' Agreement to "herein," or words of like import,
and all references to the Stockholders' Agreement in any agreement or document
shall hereafter be deemed to refer to the Stockholders' Agreement, as amended
hereby.
SECTION 5. Governing Law. This Amendment shall be governed and
construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts taken together, shall constitute
but one and the same amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Waiver to be executed as of the date and year first written above.
MEDSCAPE, INC.
By: /s/ Paul T. Sheils
-------------------------------------
Paul T. Sheils
President and Chief Executive Officer
2
<PAGE> 3
(STOCKHOLDER WITH RIGHTS UNDER SECTION 13)
/s/Jeffrey L . Drezner
--------------------------------
Jeffrey L. Drezner, M.D., Ph.D.
3
<PAGE> 4
INVESTOR STOCKHOLDERS
(SERIES C STOCK)
<TABLE>
<S> <C>
/s/ Esther Dyson CSK VENTURE CAPITAL CO., LTD.,
- --------------------------------------
ESTHER DYSON as investment manager for CSK-1(B)
Investment Fund
APA EXCELSIOR IV, L.P.
By: /s/ Max Kuroishi
-------------------------------
Name: Max Kuroishi
By: /s/ Alan Patricof Title: Director
- --------------------------------------
Name: Alan Patricof
Title:
CSK VENTURE CAPITAL CO., LTD.,
as investment manager for CSK-2
COUTTS & CO. (CAYMAN) LTD., C/F Investment Fund
APA EXCELSIOR IV/OFFSHORE, L.P.
By: /s/ Alan Patricof By: /s/ Max Kuroishi
- -------------------------------------- -------------------------------
Name: Alan Patricof Name: Max Kuroishi
Title: Title: Director
THE PATRICOF PRIVATE MEDIA TECHNOLOGY VENTURES, L.P.
INVESTMENT CLUB
By: /s/ Alan Patricof By: /s/ Barry Weinman
- -------------------------------------- -------------------------------
Name: Alan Patricof Name: Barry M. Weinman
Title: Title: Managing Member of the General
Partner
CSK VENTURE CAPITAL CO., LTD.,
as investment manager for CSK-1(A) MEDIA TECHNOLOGY VENTURES
Investment Fund ENTREPRENEURS FUND, L.P.
By: /s/ Max Kuroishi By:/s/ Barry Weinman
- -------------------------------------- -------------------------------
Name: Max Kuroishi Name: Barry M. Weinman
Title: Director Title: Managing Member of the
General Partner
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
ROBERT A. BERNHARD, WILLIAM L. RHL VENTURES LLC
BERNHARD, FRANK A. WEIL, AND
LAWRENCE B. BUTTENWEISER,
TRUSTEES U/A DATED 9/3/64 F/B/O By: /s/ Robert H. Lessin
---------------------------------
ROBERT A. BERNHARD FAMILY Name: Robert H. Lessin
Title:
By: /s/ Robert Bernhard TOLEDOT INVESTMENTS, L.P.
---------------------------------
Name: Robert A. Bernhard
Title: Trustee
By:/s/ Richard Linhart
---------------------------------
RICHARD LINHART, GENERAL
PARTNER
ROBERT A. BERNHARD, WILLIAM L.
BERNHARD, JOHN L. LOEB, AND
BENJAMIN J. BUTTENWEISER, /s/ Richard Linhart
TRUSTEES U/W/D DOROTHY L. ---------------------------------
BERNHARD F/B/O ROBERT A. RICHARD LINHART
BERNHARD ARTICLE 9TH
/s/ Victor Scaravilli
---------------------------------
By: /s/ Robert Bernhard VICTOR SCARAVILLI
---------------------------------
Name: Robert A. Bernhard
Title: Trustee BE PARTNERS
WORMSER FRERES By:/s/ Timothy Sommerfield
---------------------------------
Name: Timothy Sommerfield
By: /s/ Marcel Wormser Title: Partner
---------------------------------
Name: Marcel Wormser
Title: Administrateur /s/ Mark Braunstein
Wormser Freres, Paris ---------------------------------
MARK BRAUNSTEIN, M.D.
OPPENHEIMER & CO., INC. TBG INFORMATION INVESTORS, L.L.C.
By: /s/ Nathan Gantcher By /s/ Oakleigh Thorne
--------------------------------- ---------------------------------
Name: Nathan Gantcher Name: Oakleigh Thorne
Title: Vice Chairman Title: Chairman & CEO
/s/ Roger Mulvihill
- ---------------------------------
ROGER MULVIHILL
/s/ Mary Mulvihill
- ---------------------------------
MARY MULVIHILL
</TABLE>
5
<PAGE> 6
INVESTING STOCKHOLDERS
(SERIES D CONVERTIBLE PREFERRED STOCK)
<TABLE>
<S> <C>
CSK VENTURE CAPITAL CO., LTD. CSK VENTURE CAPITAL CO., LTD. AS
AS INVESTMENT MANAGER FOR INVESTMENT MANAGER FOR
CSK-1(B) INVESTMENT FUND CSK-1(A) INVESTMENT FUND
By:/s/ Max Kuroishi By: /s/ Max Kuroishi
--------------------------------- ---------------------------------
Name: Max Kuroishi Name: Max Kuroishi
Title: Director Title: Director
Address: Kenchikukaikan, 7F Address: Kenchikukaikan, 7F
5-26-20 Shiba, Minato-ku 5-26-20 Shiba, Minato-ku
Tokyo 108-0014 Japan Tokyo 108-0014 Japan
CSK VENTURE CAPITAL CO., LTD. HEARST COMMUNICATIONS, INC.
AS INVESTMENT MANAGER FOR
CSK-2 INVESTMENT FUND
By: /s/ Kenneth Bronfin
---------------------------------
Name: Kenneth A. Bronfin
By: /s/ Max Kuroishi Title: Senior Vice President
--------------------------------- Address: 959 8th Avenue, Suite 331
Name: Max Kuroishi New York, NY 10019
Title: Director
Address: Kenchikukaikan, 7F MEDIA TECHNOLOGY VENTURES, L.P.
5-26-20 Shiba, Minato-ku
Tokyo 108-0014 Japan By: /s/ Barry Weinman
---------------------------------
Name: Barry M. Weinman
WORMSER FRERES Title: Managing Member of the
General Partner
By: /s/ Marcel Wormser
---------------------------------
Name: Marcel Wormser
Title: Administrateur, Wormser Freres,
Paris
Address: Banque D'Escompte
13 Blvd. Haussmann
75009 Paris France
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C>
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
MEDIA TECHNOLOGY VENTURES its General Partner
ENTREPRENEURS FUND, L.P.
By: /s/ Alan Patricof
---------------------------------
By: /s/ Barry Weinman Name: Alan J. Patricof
---------------------------------
Name: Barry M. Weinman Title: Chairman
Title: Managing Member of the
General Partner
APA EXCELSIOR IV/OFFSHORE, L.P. PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: PATRICOF & CO. VENTURES, INC., By: APA EXCELSIOR IV PARTNERS, L.P.,
its Investment Advisor its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ Alan Patricof By: /s/ Alan Patricof
--------------------------------- ---------------------------------
Name: Alan J. Patricof Name: Alan J. Patricof
Title: Chairman Title: Chairman
WESTON PRESIDIO CAPITAL II, L.P. WESTON PRESIDIO CAPITAL III, L.P.
By: Weston Presidio Capital By: Weston Presidio Capital Management III,
Management II, LP, LLC, its General Partner
its General Partner
By: /s/ Carlo von Schroeter By: /s/ Carlo von Schroeter
--------------------------------- ---------------------------------
Carlo von Schroeter, General Partner Carlo von Schroeter
WPC ENTREPRENEUR FUND, L.P. HIGHLAND CAPITAL PARTNERS IV
By: Weston Presidio Capital LIMITED PARTNERSHIP
Management III, LLC, By: Highland Management Partners IV LLC,
its General Partner its General Partner
By: /s/ Carlo von Schroeter By: /s/ Wycliffe Grousbeck
--------------------------------- ---------------------------------
Carlo von Schroeter Wycliffe Grousbeck, General Partner
</TABLE>
7
<PAGE> 8
HIGHLAND ENTREPRENEURS' FUNDS
IV, LIMITED PARTNERSHIP
By: Highland Entrepreneurs' Fund IV
LLC, its General Partner
By: /s/ Wycliffe Grousbeck
---------------------------------
Member
8
<PAGE> 9
EXISTING STOCKHOLDERS
<TABLE>
<S> <C>
(SERIES A PREFERRED STOCKHOLDER) (CLASS A COMMON STOCKHOLDER)
THE EXCELSIOR FUND I
By: /s/ Alan Patricof /s/ Peter M. Frishauf
-------------------------------- ---------------------------------
Name: Alan Patricof PETER M. FRISHAUF
Title:
</TABLE>
9
<PAGE> 1
Exhibit 10.26
CONTENT DISTRIBUTION AGREEMENT
THIS CONTENT DISTRIBUTION AGREEMENT is between DOW JONES & COMPANY, INC., a
Delaware corporation ("Dow Jones") and the undersigned corporation, partnership
or other legal entity ("Distributor").
Distributor owns and operates the electronic service defined in Exhibit A (the
"Distributor Service"). Distributor wants to obtain from Dow Jones the right to
receive the content defined in Exhibit B (the "Dow Jones Information") via the
delivery methods defined in Exhibit C (the "Delivery Methods") and make
available the Dow Jones Information to users who have access to a certain
restricted area in the Distributor Service, all on the terms and conditions set
forth below.
1. GRANT OF RIGHTS; RESTRICTIONS.
(a) ACCESS TO DOW JONES INFORMATION. Dow Jones hereby grants to
Distributor, subject to the terms and conditions contained in this Agreement, a
limited, non-exclusive, nontransferable right to: (i) receive via the Delivery
Methods the Dow Jones Information; (ii) store only the most recent transmission
of the Dow Jones Information on one host computer owned and operated by
Distributor located within the United States (the "Distributor Host Computer");
and (iii) distribute and display the Dow Jones Information solely to "Registered
Users" (as defined in Section l(b)(I)), solely by means of the Distributor
Service and solely by means of the distribution methods defined in Exhibit A
(the "Authorized Distribution Methods"). No provision of this Agreement shall be
deemed to restrict or limit Dow Jones' right to market, sell, distribute,
display or otherwise provide access to the Dow Jones Information directly or
indirectly anywhere in the world, or enter into contracts, grant licenses or
make arrangements with any other party to market, sell, distribute, display or
otherwise provide access to the Dow Jones Information anywhere in the world.
Distributor shall not sublicense or otherwise transfer or assign any right
granted in Section I (a) to any other person or entity.
(b) REGISTERED USERS.
(i) "Registered User" shall mean an individual who (A)
provides at least his or her first and last name and email address to
Distributor, (B) becomes legally bound by Distributor's online member agreement
and (C) has access via the Restricted Area of the Distributor Service to any
portion of the Dow Jones Information. Distributor shall not permit any
corporation, partnership or other type of legal entity, other than an
individual, to become a Registered User and receive access to any Dow Jones
Information, without Dow Jones' prior written consent.
(ii) Distributor shall cause each Registered User to be
legally bound by its online member agreement, a copy of which is attached to
this Agreement as Exhibit D (the "Member Agreement"). Distributor shall not
amend the Member Agreement in any way that is
<PAGE> 2
unfavorable to Dow Jones.
(iii) Distributor shall not post the Dow Jones Information in
any "public" or "free" area, or area accessible without a password, on the World
Wide Web.
(c) ADDITIONAL LICENSE RESTRICTIONS.
(i) Distributor shall not distribute the Dow Jones Information
to any third party other than a Registered User or distribute the Dow Jones
Information through any means other than through the Restricted Area of the
Distributor Service and the Authorized Distribution methods. Distributor shall
not make the Dow Jones information available through third parties by
incorporating or "bundling" the Distributor Service as one information source or
service of many available through third-party front-end software or a
third-party, electronic information service or Internet site. Distributor shall
not permit Registered Users to access the Dow Jones Information via any
interactive online or electronic information service other than the Distributor
Service. Distributor shall not actively engage in or authorize making any, of
the Dow Jones Information available: (a) as part of a "co-branded" or "private
label" web site, web service, or Internet access service, or as part of a
"channel" through a software or Internet service. or similar arrangements or
relationships that offer or provide access to Dow Jones Information from or
through other web sites, web services, or Internet access services; or (b) as
part of the Distributor Service when "framed" and displaced as part of another
web site or web service.
(ii) Distributor shall not allow the Dow Jones Information to
be indexed by Web search engines or any search engine that is not integrated
into the Distributor Service.
(iii) Distributor shall not grant any site or enterprise
licenses to receive access to Dow Jones Information, without Dow Jones' prior
written consent.
(iv) All rights not expressly granted to Distributor herein
shall be retained by Dow Jones.
2. DELIVERY OF DOW JONES INFORMATION.
(a) DELIVERY AND INSTALLATION. Distributor shall acquire, install,
operate and maintain at its expense all communications lines, equipment,
software, services and related technology necessary to receive the Dow Jones
Information via the Delivery Method. Distributor also shall be responsible for,
and shall pay for, any development work, software or hardware relating to the
setup and integration of the Dow Jones Information as part of the Distributor
Service.
(b) LIMITATIONS ON USE. Except as specifically provided herein,
Distributor shall not use, store, manipulate, distribute or otherwise make
available, and shall use reasonable commercial efforts to cause each third party
who obtains access to Dow Jones Information (including, without limitation, any
Registered User) not to use, store, manipulate, distribute or
2
<PAGE> 3
otherwise make available, any Dow Jones Information without the prior written
consent of Dow Jones. Distributor shall not, and shall use reasonable commercial
efforts not to permit any other party to, edit, alter or otherwise change in any
manner the content, format or presentation of the Dow Jones Information,
including, without limitation, all copyright and proprietary rights notices.
(c) SERVICE PRESENTATION. Distributor shall insure that all Dow Jones
Information available through the Distributor Service is identified as content
from Dow Jones, including, without limitation, prominently displaying on the
Distributor Service the Dow Jones-branded logos provided to Distributor by Dow
Jones. Dow Jones shall have the right to approve the final design and
presentation of the Dow Jones Information in the Distributor Service prior to
the date the Dow Jones Information is first made commercially available in the
Distributor Service (the "Commercial Availability Date"), and shall have the
right to require reasonable changes in the presentation of the Dow Jones
Information from time to time during the term of this Agreement.
(d) QUALITY OF TRANSMISSIONS. Distributor shall use its best efforts to
insure that each transmission of Dow Jones Information (i) is of high quality,
(ii) contains an accurate and complete copy of the Dow Jones Information which
Distributor has been licensed to distribute, (iii) is free from errors or
defects, and (iv) with the exception of isolated short-term technical
difficulties, is made available to Registered Users within one hour after
receipt from Dow Jones.
(e) SPECIFICATIONS. Distributor shall adhere to the Dow Jones Composite
Feed specifications, a copy of which has been provided to Distributor, and any
updates thereof delivered to Distributor. Distributor shall not store, and shall
dispose of, any codes and content it receives from Dow Jones hereunder other
than the Dow Jones Information licensed hereunder.
3. PROPRIETARY RIGHTS.
(a) OWNERSHIP; COPYRIGHT. Distributor acknowledges and agrees that all
ownership and proprietary rights (including, without limitation, the copyrights)
to the Dow Jones Information are and shall remain the sole and exclusive
property of Dow Jones or its licensors.
(b) TRADEMARKS. Distributor acknowledges and agrees that Dow Jones or
its licensors are the sole owners of the trademarks and service marks ("marks")
used in connection with the Dow Jones Information and that nothing contained in
this Agreement grants Distributor any right to use any Dow Jones Mark, logo or
trade name, except as expressly provided in this Agreement.
(c) INFRINGEMENT. Distributor shall promptly advise Dow Jones of any
possible infringement of which Distributor becomes aware of any of Dow Jones'
Marks, copyrights, trade secrets or other proprietary rights, or any use of the
Dow Jones Information in violation of this Agreement.
4. ADVERTISING AND PROMOTION.
3
<PAGE> 4
(a) ADVERTISING. Distributor shall cause all advertising or promotional
material that appears on the same screen display or web page as any Dow Jones
Information to comply with the then-current Dow Jones Online Advertising
Guidelines, as amended from time to time by Dow Jones in its sole discretion
(the "Ad Guidelines"). The current version of the Ad Guidelines are attached as
Exhibit F. Dow Jones will deliver at least 30 days' advance notice prior to
amending the Ad Guidelines.
(b) PROMOTIONAL MATERIALS. Distributor shall not make, publish or
distribute or cooperate with any third party in making, publishing or
distributing any public announcements, press releases, advertising, marketing
promotional or other materials (whether in print, electronically or otherwise)
("Materials") that use Dow Jones' name. logos, or Marks with regard to the
execution or performance of this Agreement, without the prior written approval
of Dow Jones. If Dow Jones has not notified Distributor of its disapproval
within 10 days after Distributor delivers samples of a particular item of
material, such Material shall be deemed approved.
5. PAYMENTS.
(a) CALCULATION OF PAYMENTS. Beginning on the earlier of (i) the
Commercial Availability Date or (ii) 60 days after the Effective Date,
Distributor shall pay to Dow Jones the payments ("Payments") defined in Exhibit
E at the times set forth in Exhibit E.
(b) PAYMENT. Within thirty (30) days after the end of each calendar
month, Distributor shall deliver to Dow Jones a check in an amount equal to the
Payment for such period, and a report setting forth sufficient information for
Dow Jones to determine how the Payment was calculated, a breakdown of the number
of Registered Users whose principal residence is outside the U.S. and Canada,
and any other information agreed upon by both parties.
(c) TAXES. Distributor shall pay any taxes, fees and similar
governmental charges related to the execution or performance of this Agreement,
other than applicable income taxes imposed on Dow Jones related to its receipt
of Payments.
(d) MAINTENANCE AND INSPECTION OF RECORDS. Distributor shall maintain
complete and accurate books and records, in accordance with generally accepted
accounting practices, of all matters related to its compliance with its
obligations hereunder ("Records"). Dow Jones shall have the right itself, or
through its authorized representatives, upon at least 30 days' prior written
notice to inspect the Records of Distributor during normal business hours no
more than twice per year; provided, however, if such inspection reveals an
underpayment to Dow Jones of more than 4%, the cost of such inspection shall be
paid by Distributor. Dow Jones will keep confidential all information obtained
from such inspection. and use it solely for the purpose of verifying compliance
with the terms hereof.
(e) CURRENCY. All amounts are stated in U.S. Dollars and shall be paid
in U.S.
4
<PAGE> 5
currency.
6. INDEMNIFICATION.
(a) BY DOW JONES. Dow Jones shall indemnify and hold harmless
Distributor against all liabilities, costs and expenses (including reasonable
attorneys' fees) incurred by Distributor that arise out of any claim asserted by
a third party that the Dow Jones Information infringes a U.S. copyright (except
for claims for which Dow Jones is entitled to indemnification under Section
6(b), in which case Dow Jones shall have no indemnification obligations with
respect to such claim), provided that Distributor, upon receipt of notice of a
claim that could result in Dow Jones indemnifying Distributor pursuant to this
subsection, gives prompt written notice to Dow Jones of the existence of such
claim and permits Dow Jones, if it so requests, either to conduct the defense of
such claim or to participate with Distributor in the defense thereof and in any
settlement negotiations relating thereto; provided, however, that Dow Jones
shall not be required to pay any settlement amount that it has not approved in
advance.
(b) BY DISTRIBUTOR. Distributor shall indemnify and hold harmless Dow
Jones against all liabilities, costs and expenses (including reasonable
attorneys' fees) incurred by Dow Jones that arise out of any claim asserted by a
third party that involves, relates to or concerns (i) the marketing, sale, or
promotion by Distributor of the Distributor Service, (ii) any use by Distributor
of any Dow Jones Information in violation of this Agreement; or (iii) any claim
alleging that the Distributor Service infringes any patent, trade secret,
copyright or other intellectual property rights of any third party; provided
that Dow Jones, upon receipt of notice of a claim that could result in
Distributor indemnifying Dow Jones pursuant to this subsection, gives prompt
written notice to Distributor of the existence of such claim and permits
Distributor, if it so requests, either to conduct the defense of such claim or
to participate with Dow Jones in the defense thereof and in any settlement
negotiations relating thereto; provided however, that Distributor shall not be
required to pay any settlement amount that it has not approved in advance.
(c) DISCLAIMER. DOW JONES PROVIDES THE DOW JONES INFORMATION "AS IS",
WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES. FOR EXAMPLE, DOW JONES DOES NOT
WARRANT THE ACCURACY, TIMELINESS, COMPLETENESS, ADEQUACY, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF THE DOW JONES INFORMATION, AND DOW JONES
SHALL NOT BE LIABLE TO DISTRIBUTOR OR TO ANY THIRD PARTY WITH RESPECT TO ANY
ACTUAL OR ALLEGED INACCURACY, UNTIMELINESS, INCOMPLETENESS, INADEQUACY,
UNMERCHANTABILITY OR UNFITNESS. DISTRIBUTOR SHALL NOT MAKE ANY STATEMENT
RESPECTING THE DOW JONES INFORMATION THAT IS CONTRADICTORY TO OR INCONSISTENT
WITH THE FOREGOING STATEMENTS.
7. TERM AND TERMINATION.
(a) TERM. The term of this Agreement shall commence on the Effective
Date (defined
5
<PAGE> 6
on last page of this Agreement) and shall terminate on the first anniversary of
the Effective Date. Unless either party delivers to the other written notice of
nonrenewal at least 60 days prior to the end of the then-current term or renewal
term, this Agreement shall automatically be extended for additional one year
terms.
(b) UNCURED BREACH. If either party shall breach any provision
contained in this Agreement (other than a breach of Section 8, which shall be
deemed incurable) and such breach is not cured within 30 days after receiving
written notice of such breach from the other party, the party giving such notice
may then deliver a second written notice to the breaching party, terminating,
this Agreement, in which event this Agreement, and the licenses granted
hereunder. shall terminate on the date specified in such second notice.
(c) CESSATION OF SERVICE. If Dow Jones discontinues publishing or
commercial distribution of the Dow Jones Information, then either party may
cancel this Agreement upon thirty (30) days' prior written notice to the other
party.
(d) INSOLVENCY. In the event that either party, shall be adjudged
insolvent or bankrupt, or upon the institution of any proceedings by it seeking
relief, reorganization or arrangement under any laws relating to insolvency, or
if an involuntary petition in bankruptcy is filed against such party and said
petition is not discharged within 60 days after such filing, or upon any
assignment for the benefit of its creditors, or upon the appointment of a
receiver, liquidator or trustee of any of its assets, or upon the liquidation,
dissolution or winding up of its business (an "Event of Bankruptcy"), then the
party affected by any such Event of Bankruptcy shall immediately Give notice
thereof to the other party, and the other party at its option may terminate this
Agreement, and the licenses granted hereunder, upon written notice.
(e) CHANGE IN CONTROL. If there is a direct or indirect change in the
effective voting control of Distributor, or if Distributor merges into or is
acquired by a third party, or if Distributor sells or transfers the Distributor
Service or all or substantially all of the assets of the business unit
containing the Distributor Service to a third party (a "Change in Control"),
then Distributor shall give prompt written notice thereof to Dow Jones, and Dow
Jones at its option may, within 30 days after receipt of such notice or
immediately, if no timely notice is given, terminate this Agreement immediately
by, delivering written notice. Distributor may notify, Dow Jones in writing of
any proposed Change in Control prior to its proposed effectiveness, and Dow
Jones shall, within 30 days after receipt of such notice, notify Distributor
whether Dow Jones would exercise its right to terminate this Agreement if such
proposed Change in Control were consummated.
(f) EFFECT OF TERMINATION. Upon the expiration or termination of this
Agreement for any reason, Distributor shall (i) immediately inhibit all access
to the Dow Jones Information through the Distributor Service, (ii) delete any
Dow Jones Information then stored on the Distributor Host Computer, (iii) cease
advertising and promoting the availability of the Dow Jones Information via the
Distributor Service and (iv) discontinue all uses of Dow Jones' trade
6
<PAGE> 7
names or Marks. In addition, upon expiration or termination of this Agreement,
each party, at its expense, shall promptly return to the other all copies of the
other party's Confidential Information.
8. CONFIDENTIAL INFORMATION.
Distributor and Dow Jones understand and agree that in the performance
of this Agreement each party may have access to private or confidential
information of the other party, including, but not limited to, trade secrets,
marketing and business plans and technical information, which is designated as
confidential by the disclosing party in writing, whether by letter or by the use
of a proprietary stamp or legend, prior to or at the time it is disclosed to the
other party ("Confidential Information"). Both parties agree that the terms of
this Agreement. including without limitation its financial terms such as the
Payments and the information contained in reports, shall be deemed Confidential
Information owned by the other party. Distributor acknowledges and agrees that
the technical and functional specifications and the code and design of the
Composite Feed and all tools and utilities supplied by Dow Jones to Distributor
are Confidential Information of Dow Jones. In addition. information that is
orally disclosed to the other party shall constitute Confidential Information if
within 10 days after such disclosure the disclosing party delivers to the
receiving party a written document describing such Confidential Information and
referencing the place and date of such oral disclosure and the names of the
employees of the party to whom such disclosure was made. Each party agrees that:
(i) all Confidential Information shall remain the exclusive property of the
owner; (ii) it shall maintain, and shall use prudent methods to cause its
employees and agents to maintain, the confidentiality and secrecy of the
Confidential Information; (iii) it shall not, and shall use prudent methods to
ensure that its employees and agents do not, copy, publish, disclose to others
or use (other than pursuant to the terms hereof) the Confidential Information:
and (iv) it shall return or destroy all copies of Confidential Information upon
request of the other party. Notwithstanding the foregoing, Confidential
Information shall not include any information to the extent it (i) is or becomes
a part of the public domain through no act or omission on the part of the
receiving party, (ii) is disclosed to third parties by, the disclosing party
without restriction on such third parties, (iii) is in the receiving party's
possession, without actual or constructive knowledge of an obligation of
confidentiality with respect thereto, at or prior to the time of disclosure
under this Agreement, (iv) is disclosed to the receiving party by a third party
having no obligation of confidentiality with respect thereto, (v) is
independently developed by the receiving party without reference to the
disclosing party's Confidential Information or (vi) is released from
confidential treatment by written consent of the disclosing party.
9. MISCELLANEOUS.
(a) NOTICES. All notices shall be in writing, and delivered by
certified mail, return receipt requested, overnight courier service, or by
facsimile with confirmation to the address set forth on the signature page, or
other address stipulated in writing by a party. Notice shall be deemed delivered
and received on the date it is actually received.
7
<PAGE> 8
(b) AMENDMENT, ASSIGNMENT. This Agreement may not be amended except in
a writing executed by authorized representatives of Distributor and Dow Jones.
Any such purported assignment without such prior written consent shall be void.
Neither party may assign this Agreement, or sublicense, assign or delegate any
right or duty hereunder, without the prior written consent of the other. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns.
(c) SURVIVAL OF CERTAIN PROVISIONS. The rights and obligations in
Sections 3(a), 3(b), 3(c), 5(b), 5(c), 5(d), 5(e), 6, 7(f), 8 and 9 shall
survive termination or expiration of this Agreement for any reason.
(d) CONSEQUENTIAL DAMAGES. Except for amounts payable pursuant to
Section 6 or resulting from a breach of Section 8, neither party shall be liable
to the other for any damages other than direct damages, including but not
limited to consequential, indirect, special, exemplary, or punitive damages, or
any lost revenues or lost profits, even if advised of the possibility of such
damages.
(e) ENTIRE AGREEMENT. This Agreement contains the final and entire
agreement of the parties on the subject matter herein and supersedes all
previous and contemporaneous verbal or written negotiations or agreements on the
subject matter herein.
(f) WAIVER. The failure of either party at any time to require
performance by the other party of any provision hereof shall not affect the full
right to require such performance at any time thereafter, nor shall the waiver
by either party of a breach of any provision hereof be taken or held to be a
waiver of any succeeding breach of such provision or as a waiver of the
provision itself.
(g) SEPARABILITY. If any provision of this Agreement or its application
in a particular circumstance is held to be invalid or unenforceable to any
extent, the remainder of the Agreement, or the application of such provision in
other circumstances, shall not be affected thereby, and each provision shall be
valid and enforced to the fullest extent permitted by law.
(h) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, United States, applicable
to contracts wholly made and wholly performed in the State of New York, United
States. This Agreement will not be governed by the United Nations Convention on
Contracts for the International Sale of Goods.
8
<PAGE> 9
IN WITNESS WHEREOF, duly authorized representatives of both parties
hereto have executed this Agreement as of 1/22/99 ("Effective Date"):
MEDSCAPE, INC. DOW JONES & COMPANY, INC.
By: /s/ Paul T. Sheils By: /s/ Jessica Perry
------------------------- ------------------------------------
Name: Paul T. Sheils Name: Jessica Perry
Title: Title: Director, Internet Distribution
Date: Date: 1-22-99
Address for Notices: Address for Notices:
134 West 29th Street U.S. Highway I at Ridge Road
New York, NY 1000 1-5399 South Brunswick, NJ 08852
Attn.: Executive Director,
Content and Distribution,
Dow Jones Interactive Publishing,
Fax: 609-520-4072
with a copy to the same street address,
but
Attn.: Legal Dept.
Fax: 609-520-4021
9
<PAGE> 10
EXHIBIT A
DESCRIPTION OF THE DISTRIBUTOR SERVICE;
AUTHORIZED DISTRIBUTION METHODS; TERRITORY
Description of Service:
The Distributor Service is a Web site owned and operated by Distributor at
<www.medscape.com>. The Distributor Service provides access to news, information
and services to the medical community. Distributor plans to incorporate a "Money
and Medicine" feature into the Distributor Service ("Restricted Area"). Only
Registered Users will have access to the Restricted Area. The "Money and
Investing" feature will offer Registered Users personal investing news and
information and resources to assist medical professionals in managing their
practice.
Authorized Distribution Methods:
Distributor will only make the Dow Jones Information available through the
Restricted Area to Registered Users and solely through the World Wide Web.
Archive:
Distributor shall only make available the most recent transmission of the Dow
Jones Information to Registered Users.
Additional Terms:
Distributor agrees to submit an application to Dow Jones to become a member of
The Wall Street Journal Interactive Edition Affiliates Program.
10
<PAGE> 11
EXHIBIT B
DESCRIPTION OF THE DOW JONES INFORMATION
The Dow Jones Information will include Dow Jones Online News ("DJON") stories
coded as:
1. Top Health-Care News (stories coded with P/DHZ) ("Health Care
Stories"); and
2. Business and Financial News Summary (stories coded with Pi'DBZ)
("Business and Financial Stories").
DJON is a newswire written and edited for the private investor and business
end-user. Its approximately 300 stories per business day, provide coverage of
corporate developments, and market and economic news.
The DJON stories that Dow Jones delivers to Distributor will not include stories
from The Wall Street Journal, Smart money or Barron's.
11
<PAGE> 12
EXHIBIT C
DELIVERY METHODS
Dow Jones will deliver the Health Care Stories to Distributor every day at 12
noon and 5 p.m. via FTP or email in HTML or ASCII format on an as available
basis.
Dow Jones will deliver the Business and Financial Stories to Distributor
throughout the day via FTP or email in HTML or ASCII format on an as available
basis.
12
<PAGE> 13
EXHIBIT D
MEMBER AGREEMENT
13
<PAGE> 14
Medscape Terms of Service Agreement and Disclaimer
The following provisions govern the use of Medscape by Medscape members. Members
agree to the following by submitting a member registration form. Members receive
free access to all Medscape's features, including a subscription to MedPulse,
the weekly email newsletter listing what's new on Medscape.
Copyright and Trademarks
The entire contents and design of Medscape are protected under U.S. and
international copyrights. Medscape is for your personal noncommercial use. You
may not modify, copy, distribute, transmit, display, or publish any materials
contained on Medscape without the prior written permission of Medscape or the
appropriate copyright owner. Please refer to the copyright notice for more
information. Certain names and logos are trademarks and service marks of
Medscape and third parties and may not be used without permission.
Disclaimer
(i) MEDSCAPE IS PROVIDED ON AN "AS IS" AND "AS AVAILABLE" BASIS, WITHOUT
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, WARRANTIES OF TITLE, OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE; (ii) YOUR USE OF MEDSCAPE IS AT YOUR OWN RISK; (iii)
ACCESS TO MEDSCAPE MAY BE INTERRUPTED AND INFORMATION PROVIDED MAY NOT BE ERROR
FREE; AND (iv) NEITHER MEDSCAPE INC., MEDSCAPE PUBLISHERS' CIRCLE(R) MEMBERS,
NOR ANYONE ELSE INVOLVED IN CREATING, PRODUCING OR DELIVERING MEDSCAPE OR THE
MATERIALS CONTAINED THEREIN, ASSUMES ANY LIABILITY OR RESPONSIBILITY FOR THE
ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY INFORMATION PROVIDED ON MEDSCAPE,
NOR SHALL THEY BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF YOUR USE OF, OR INABILITY TO
USE, MEDSCAPE.
Medical Disclaimer
All clinical material published by Medscape (which excludes materials published
on the MD Web Site) undergoes peer review to ensure fair balance, objectivity,
independence, and relevance to educational need. The editors of the material
herein have consulted sources believed to be reliable in their efforts to
provide information that is in accord with the standards accepted at the time of
posting. However, in view of the possibility of error by the authors, editors,
or publishers of the works contained in Medscape, neither Medscape Inc., nor
Medscape Publishers' Circle members, nor any other party involved in the
preparation of material contained on Medscape represents or warrants that the
information contained herein is in every respect accurate or complete, and they
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are not responsible for any errors or omissions or for the results obtained from
the use of such material. Readers are encouraged to confirm the information
contained herein with other sources. Patients and consumers reading articles
posted on Medscape should review the information carefully with their
professional health care provider. The information is not intended to replace
medical advice offered by physicians. Medscape Inc. and Medscape Publishers'
Circle members make no representations or warranties with respect to any
treatment, action, or application of medication or preparation by any person
following the information offered or provided within or through Medscape.
Medscape Inc. and Medscape Publishers' Circle members will not be liable for any
direct, indirect, consequential, special, exemplary, or other damages arising
therefrom.
The advertisers who purchase BannerLinks(R) on Medscape have no influence on
editorial content or presentation. Moreover, the posting of particular
BannerLinks(R) does not imply endorsement by Medscape or its Editors.
Financial Disclaimer
The financial content, including all financial data, editorial content and
advertising (hereafter referred to together as "Financial Content"), provided on
Medscape is intended for personal use and entertainment and does not constitute
investment advice, nor is it an offer to buy or sell or a solicitation of an
offer to buy or sell any security. For investment decisions, always consult a
professional investment advisor. Financial Content that appears on Medscape does
not mean that Medscape endorses such content. In addition, Medscape makes no
representation that financial information is accurate, complete, or timely.
Stock quotes, provided by S&P Comstock through an agreement with Stockpoint,
are delayed 15 minutes for NASDAQ and 20 minutes for other exchanges. Your
actual receipt of stock quotes may be affected by delays in transmission over
the Internet and by other causes.
Guardian Publishing/TriArc Advisors LLC provide editorial content to Medscape.
Their publications are designed to provide general information in regard to the
subject matter covered, however, if legal or financial advice or other expert
assistance is required, consult a legal or financial professional advisor.
The Medscape 50 Health care Index was assembled based on expert advice from ING
Baring Furman Selz LLC. The purpose of the index is to represent various
categories of the health care industry for informational and entertainment
purposes only. This index should not be used and does not represent a
recommendation for personal investment or portfolio advice and should not be
construed as an endorsement by Medscape.
Medscape may make online trading access available on its site through
relationships with various financial brokerage houses. Typically, you need to
create accounts with these companies through their own specific website and
those companies will be solely responsible for its services to you. Therefore,
Medscape is not liable for any of these services or problems with your account
and you
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agree to not hold Medscape liable for these issues. Medscape is not a registered
broker-dealer and any advertising or promotional arrangements made with these
companies should not be construed as endorsement by Medscape.
The content available through Medscape from Dow Jones is the property of Dow
Jones and is protected by copyright and other intellectual property laws.
Content published by Dow Jones may be displayed, reformatted and printed for
your personal, non-commercial use only. You agree not to reproduce, retransmit,
distribute, display, sell, publish, broadcast or circulate any content published
by Dow Jones to anyone, including but not limited to others in the same company
or organization, without the express prior consent of Dow Jones, with this one
exception:
You may, on an occasional and irregular basis, disseminate an insubstantial
portion of content published by Dow Jones, for a noncommercial purpose, without
charge, and in non-electronic form, to a limited number of individuals, provided
you include all copyright and other proprietary notices with such portion of the
content in the same form in which the notices appear in Dow Jones, and the
phrase "Used with permission from Dow Jones."
Indemnification
You agree to hold harmless and indemnify Medscape Inc., the Publishers' Circle
members, the Editors and their agents, and the contributors to Medscape, against
any liability for any claims and expenses, including reasonable attorney's fees,
relating to any violation of the terms of this Agreement or arising out of any
materials submitted by you.
Governing Law; Jurisdiction; Statute of Limitations. (make a heading)
This Agreement shall be governed by the laws of the State of New York applicable
to agreements wholly made and performed in New York without regard to its
conflict of laws principle. Before seeking legal recourse for any harm you
believe you have suffered from your access to Medscape, you will give Medscape
written notice specifying the harm and 30 days to cure the harm after providing
such notice. In the event that you believe you have been irreparably harmed by
any cause of action relating to Medscape, you agree to inform Medscape Inc. in
writing and grant Medscape Inc. thirty (30) days to cure the harm before
initiating any action. Any legal action, suit or proceeding arising out of or
relating to this Agreement or a breach thereof, shall be instituted in a court
of competent jurisdiction in New York County, New York, and you hereby consent
and submit to personal jurisdiction of such court, waive any objection to venue
in such court and consent to service of process by overnight courier or express
mail at your last known address. Any cause of action initiated by you must be
initiated within one (1) year after the claim or cause of action has arisen or
it will be barred.
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Acceptance Procedure
By submitting a Medscape membership application form or accessing materials on
Medscape you agree with all the terms and conditions of this Agreement. You
further agree that this agreement and the terms and conditions hereof, including
all disclaimers set forth herein, shall inure to the benefit of the Publishers'
Circle members, the editors and their agents, and the contributors to Medscape,
as third party beneficiaries hereto, to the same extent that this agreement
inures to the benefit of Medscape.
Medscape reserves the right, at its sole discretion, to change the terms and
conditions of this Agreement from time to time and your access of Medscape will
be deemed to be your acceptance of and agreement to any changed terms and
conditions.
Medscape may contain links to web sites operated by other parties. Such links do
not imply Medscape's endorsement of material on any other site and Medscape
disclaims all liability with regard to your access of such linked web sites.
Medscape's Policy on Member Privacy
Please see Medscape's Member Privacy Statement.
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EXHIBIT E
Distributor will pay to Dow Jones a monthly fee equal to the greater of.
(i) U.S. $3,500; or
(ii) 50% of all amounts received by Distributor for the sale of
advertising on the same screen display or web page as the Dow Jones Information
with the following exception:
If Distributor displays headlines (without the full-text) from the Dow Jones
Information on the Front Page of the Restricted Area, then Distributor shall not
be required to share revenues with Dow Jones from advertising, that appears on
that page, so long as: (a) the headlines link to the full-text stories, and (b)
the Front Page displays, references or links to a majority, of the following
features:
(1) DJIA Market Index
(2) NASDAQ Market Index
(3) S&P 500 Market Index
(4) Personal portfolios
(5) Stock quote lookup and symbol search
(6) Medscape Index
(7) Financial question of the day feature
(8) Advice column feature
(9) Ask-the-experts email feature
(10) News and information on the topics of Personal Finance,
Physician Finance and Practice Management
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EXHIBIT F
DOW JONES ONLINE ADVERTISING GUIDELINES (AS OF OCTOBER, 1998)
Advertising, or promotional materials related to the following products or
services shall not appear on any screen display or web page on which any Dow
Jones Information, or any Dow Jones Mark, trade name or logo, appears:
Tobacco products
Pornography or "adult services", including, without limitation, massage parlors
or escort services)
Alcohol
Firearms
Employment recruiting
Business research services
Advertisements for any product or service which gratuitously or excessively uses
the word "sex" or other sexually explicit or vulgar term or description
Games of chance, lotteries, gambling sites, and other products, services or web
sites involving wagering.
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Exhibit 10.27
DOW JONES INTERACTIVE PUBLICATIONS LIBRARY
INTERNET GATEWAY AGREEMENT
THIS AGREEMENT dated as of July 14, 1998 (the "Effective Date") is
between DOW JONES & COMPANY, INC., a Delaware corporation ("Dow Jones") and
MEDSCAPE, INC., a legal entity organized under the laws of New York ("Gateway").
Dow Jones publishes, markets, and sells an electronic business and
financial information service through which subscribers can access, display,
search and retrieve business, financial and similar news and information from
databases of content, currently called the Dow Jones Publications Library (the
"Publications Library"), a section of the Dow Jones Interactive service. The
Publications Library is published and accessible via the World Wide Web portion
of the Internet, among other platforms and methods. Gateway owns or has the
legal right to operate an electronic information service, more fully described
and defined on Exhibit A (the "Gateway Service"). Gateway wants to offer
customers of its Gateway Service the opportunity to access, display, search and
retrieve content from the Publications Library (the "Publications Library
Content") through or from the Gateway Service, and Dow Jones wants to grant
Gateway the right to do so, all subject to the terms set forth in this
Agreement. Therefore, Dow Jones and Gateway agree as follows:
1. SPECIFICATIONS; TESTING PROCEDURES.
(a) SPECIFICATIONS. In connection with all aspects of making
access to, and displaying, searching and retrieval of, Publications Library
Content available through the Gateway Service, Gateway shall comply with the
terms of this Agreement and the then-current versions of the Dow Jones
Publications Library Gateway Program Integration Toolkit (collectively, the
"Specifications"), a copy of which Gateway acknowledges having received. In the
event of a conflict or ambiguity between a term in this Agreement and the
Specifications, the term in this Agreement shall prevail in meaning and
interpretation and be deemed to reflect the agreement of the parties.
(b) TESTING PROCEDURES. Upon Gateway's request, Dow Jones will
provide Gateway with a reasonable amount of technical assistance, via telephone
and during Dow Jones's normal business hours, regarding the Specifications,
capacity planning, links integration, and other matters that may be agreed to by
Dow Jones. Prior to permitting any third party to access or receive any
Publications Library Content through or from the Gateway Service, Gateway shall
provide Dow Jones reasonable amounts of unrestricted access to the Gateway
Service, at no charge to Dow Jones, for testing, and review to determine whether
the Gateway Service and its access to, display of, and transmission and delivery
of Publications Library Content complies with the Specifications and this
Agreement (the "Testing Procedures"). If, in Dow Jones' sole discretion, the
Gateway Service successfully completes the Testing Procedures, Dow Jones shall
promptly notify Gateway in writing of such successful completion. If the Gateway
Service does
<PAGE> 2
not complete successfully the Testing Procedures, Gateway may alter or modify
its access to, display of, or transmission or delivery of Publications Library
Content and resubmit the Gateway Service for Testing Procedures. If for any
reason the Gateway Service fails to complete successfully the Testing
Procedures, Dow Jones shall have no obligation to appoint Gateway as an
authorized marketing representative for the Publications Library, or to permit
access to any Publications Library Content through or from the Gateway Service,
and Dow Jones shall have no further obligations to Gateway hereunder.
(c) MODIFICATIONS. Dow Jones may, from time to time, make
modifications to the Publications Library and/or the Specifications
("Modifications"). Dow Jones will deliver to Gateway reasonable advance notice
of any Modifications and of any additional Testing Procedures required in
connection therewith. Gateway, at its expense, shall use reasonable commercial
efforts to make any necessary alterations to the Gateway Service to conform to
such Modifications ("Gateway Alterations"), in accordance with a reasonable
timetable specified by Dow Jones (the "Alteration Schedule"). Gateway shall make
reasonable amounts Of unrestricted access to the revised Gateway Service
available to Dow Jones, at no charge to Dow Jones, for Testing Procedures to
determine whether the Gateway Alterations conform to such Modifications and this
Agreement. In no event will the Alteration Schedule require any Gateway
Alterations and Testing Procedures to be completed in less than sixty (60) days
after Gateway received the Alteration Schedule and Modifications. If Gateway is
unable, after using reasonable commercial efforts, to make the necessary Gateway
Alterations, or if such Gateway Alterations do not successfully complete the
Testing Procedures, either party may terminate this Agreement pursuant to the
terms in Section 9(d) of this Agreement.
2. CERTAIN DEFINITIONS.
(a) GATEWAY SERVICE CUSTOMER DEFINITION. A "Gateway Service
Customer" shall be defined as an individual (i.e., not a legal or juristic
entity) who uses the Gateway Service.
(b) PUBLICATIONS LIBRARY SUBSCRIBER. A "Publications Library
Subscriber" shall be defined as any and each individual who is a Gateway Service
Customer, who agrees to be legally bound by the DJ Subscription Agreement, and
who obtains access to or uses any Publications Library Content through or from
or in connection with or while using the Gateway Service.
(c) DJ SUBSCRIPTION AGREEMENT. A copy of the standard Dow
Jones Interactive Subscription Agreement for individual subscribers, as of the
Effective Date, is attached as Exhibit B. Dow Jones shall have the right to
amend or update the DJ Subscription Agreement at any time in its sole
discretion. Each time Dow Jones revises the DJ Subscription Agreement during the
Term, Dow Jones shall deliver a copy of the revision to Gateway prior to the
effective date of such revision.
(d) COMMERCIAL AVAILABILITY DATE. "Commercial Availability
Date" shall be
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defined as the first date any portion of the Publications Library Content is
first made commercially available to Gateway Service Customers through or from
the Gateway Service.
3. RESPONSIBILITIES AS MARKETING REPRESENTATIVE.
(a) APPOINTMENT. Upon notifying Gateway that the Gateway
Service has successful completed the Testing Procedures, Dow Jones will appoint
Gateway as a non-exclusive authorized marketing representative for the
Publications Library Content through or from the Gateway Service. Gateway hereby
accepts such appointment, and agrees to use commercially reasonable efforts to
promote and market Publications Library Content to customers of the Gateway
Service, and cause Gateway Service Customers to become Publications Library
Subscribers.
(b) NONEXCLUSIVE APPOINTMENT. Nothing in this Agreement shall
in any way limit Dow Jones' right to appoint other authorized marketing
representatives for the Publications Library, or to locate and contract with
Publications Library customers through its own direct efforts.
(c) EQUIPMENT AND COMMUNICATIONS LINES. Gateway shall acquire,
install, operate and maintain, at its expense, all equipment, computers,
software, communications lines (if any), services and related technology
necessary to perform this Agreement and permit Gateway Service Customers to use,
access, display, search and retrieve Publications Library Content in accordance
with the Specifications and this Agreement.
(d) PROMOTIONAL MATERIALS. Gateway shall not use, publish or
distribute, or cooperate with any third party or use, publish, or distribute,
any press releases, or promotional, sales or advertising material
(collectively,"Materials") regarding the Publications Library, or this
Agreement, or containing the marks Dow Jones, The Wall Street Journal, or other
trademark or trade name known by Gateway to be owned by Dow Jones, without the
prior written approval of Dow Jones. Similarly, Dow Jones shall not use, publish
or distribute, or cooperate with any third party to use, publish, or distribute,
any Materials regarding this Agreement, or containing the mark Medscape, or
other trademark or trade name known by Dow Jones to be owned by Gateway, without
the prior written approval of Gateway. The foregoing shall not be construed to
restrict Dow Jones from engaging in any of its normal news gathering or
publishing activities. All samples of such materials delivered by a party to the
other party for such review shall be in English or translated into English. If a
party has not notified the other party of its disapproval within ten (10) days
after such party delivers samples of a particular item of Material, such
Material shall be deemed approved. Any breach by a party of this Section, among
others, shall be deemed a material breach of this Agreement.
(e) CUSTOMER SERVICE. Gateway shall promptly consult with Dow
Jones by email, telephone, or other means agreed to by both parties, regarding
all questions and complaints from Gateway Service Customers regarding the
Publications Library that Gateway personnel
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receive. Gateway shall not answer, and shall promptly refer to Dow Jones by
email, telephone, or other means agreed to by both parties, all questions and
complaints from Publications Library Subscribers regarding use of the
Publications Library, specific items of content within the Publications Library
(such as, but not limited to, allegations of errors or omissions in content,
etc.), and regarding billing and payment for Publications Library Content, and
Dow Jones shall be responsible for promptly and professionally handling such
questions and complaints. Gateway shall have at least one customer service
representative available to Publications Library Subscribers, by telephone and
by email messages, at all times from Monday through Friday, 8AM through 9PM,
Eastern U.S. Time.
(f) CONTACT PERSONS. Each party shall designate one or more
individuals as that party's principal person(s) (each, a "Contact Person") to
contact for problems or questions that arise in the following areas: Technology
and Communications; Customer Service; and Management/Miscellaneous. Each party
shall ensure that such party has at least one Contact Person for Technology and
Communications issues immediately available at all times, 24 hours per day and 7
days per week. Exhibit C lists the Contact Persons for each Party as of the
Effective Date. A party may change designated Contact Persons by delivering
notice pursuant to Section 10(a).
4. PUBLICATIONS LIBRARY PRESENTATION STANDARDS.
(a) RESTRICTIONS. Gateway shall not make any of the
Publications Library available for use, access, display, searching or retrieval:
(1) other than as a separate branded area through or from the Gateway Service;
(2) other than through the Gateway Service as a "gateway"; or (3) through an
additional "gateway" or other third party service which incorporates or
"bundles" the Gateway Service as one information source or service of many
available through such third party's software or service or Internet site.
Gateway shall not permit a Gateway Service Customer to access the Publications
Library via any interactive online or electronic information service other than
the Gateway Service, except to the extent that a Gateway Service Customer uses
one of such services merely to connect to the Internet and then links to the
Gateway Service using browser software. Gateway shall not make the Publications
Library Content available in any "public" or "free" area, or area accessible
without a password, on the World Wide Web, except for Citations that are
displayed as Index Search Results (both defined in the Specifications). Gateway
shall not combine Publications Library Content with any content from third
parties, such that, for example, a single search request displayed results from
the Publications Library as well as results from another information service.
Without Dow Jones' prior written consent in advance, and except for Citations
that are displayed as Index Search Results as set forth in the Specifications,
Gateway shall not make any Publications Library Content available for free, or
without payment of monetary compensation, nor shall Gateway charge any Gateway
Service Customer any amount for access to, searching in, or retrieval of any
Publications Library Content.
(b) NO FRAMING; THIRD PARTY ADVERTISING. Except as set forth
in the
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Specifications, Gateway shall not "frame" or otherwise permit matter not
authorized by Dow Jones to appear on the same screen display as, or obscure, any
portion of the Publications Library. Gateway shall cause all advertising or
promotional material that appear on the same screen display or web page as any
Publications Library Content or any Dow Jones trademark, logo or trade name, to
comply with the then-current Dow Jones Online Advertising Guidelines, as amended
from time to time by Dow Jones in its sole discretion (the "Ad Guidelines"). The
current version of the Ad Guidelines are attached as Exhibit D. Dow Jones will
deliver at least thirty (30) days' advance notice prior to amending the Ad
Guidelines.
(c) NO STORAGE OR ALTERATION. Except as specifically permitted
in the Specifications, Gateway shall not: (1) cache or store, or authorize any
other party (including, without limitation, any Gateway Service Customer) to
cache or store, temporarily or permanently, any Publications Library Content for
subsequent distribution, display or retrieval; or (2) alter, in any manner, the
content, format or presentation of the Publications Library.
(d) FINAL PRESENTATION REVIEW AND SERVICE PRESENTATION.
Gateway shall cause the Publications Library to appear to Gateway Service
Customers as a separate, Dow Jones-branded area or service, and shall not permit
any other content to appear on screen displays with Publication Library Content,
other than advertisements or promotional materials that comply with this
Agreement, and information and navigational features which may appear within the
Top Bar Frame and Left Bar Frame specifically authorized in the Specifications.
Dow Jones shall have the right to approve the final design and presentation of
the Publications Library through or from the Gateway Service prior to the
Commercial Availability Date, and shall have the right to require reasonable
changes in the presentation of links to the Publications Library from time to
time during the Term. Gateway shall provide Dow Jones with a reasonable number
of passwords for the Gateway Service to enable Dow Jones to review, free of
charge, the design and presentation of the Gateway Service.
(e) THIRD PARTY DATABASES. The Publications Library consists
of databases and content owned and supplied by Dow Jones ("DJ Databases") and
databases and content owned and supplied to Dow Jones by third parties ("Third
Party Databases"). Gateway acknowledges and agrees that (1) Dow Jones, in its
sole discretion, may from time to time add or delete DJ Databases and/or Third
Party Databases available through the Publications Library; (2) nothing in this
Agreement shall prohibit the providers of the Third Party Databases from
distributing such Third Party Databases either directly or indirectly; and (3)
the availability of a Third Party Database in the Publications Library for
distribution to certain customers or for access through the Gateway Service is
subject to the continuation and extent of the license agreement between Dow
Jones and the provider of such Third Party Database with respect thereto. If the
number of "Health, Medicine & Biotechnology" sources in the Publication Library
falls below 250, Gateway may terminate this Agreement by delivering 30 days
prior written notice to Dow Jones.
(f) LEGAL RESEARCH SERVICE. Gateway shall not offer any "Legal
Research
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Materials" (as defined below) contained in or available through, either directly
or indirectly, the Gateway Service, in combination with any of the Publications
Library Content, to create an information service or product that is packaged,
priced and marketed specifically to serve the professional legal research needs
of lawyers, legal professionals, accounting professionals or tax professionals
in the United States. "Legal Research Materials" mean any statutes, laws, court
opinions, case reports, regulations, court rules, administrative rulings,
legislative history, legal periodicals, legal treatises or legal citators.
5. PRICING AND BILLING.
(a) PRICING. Dow Jones shall establish, in its sole
discretion, the pricing for access to, use of, display of, searching in, and
retrieval of Publications Library Content through or from the Gateway Service
("Fees"). Dow Jones will deliver its schedule of Fees to Gateway prior to the
Commercial Availability Date. If Dow Jones changes its schedule of Fees at any
time during the Term, Dow Jones will deliver Such amended schedule of Fees to
Gateway at least fifteen (15) days prior to the date such amended schedule will
take effect. Dow Jones shall have the right to retain all revenue from ads sold
on frames designated for Dow Jones' use in the Specifications. Similarly,
Gateway shall have the right to retain all revenue from ads sold in frames
designated for Gateway's use in the Specifications.
(b) BILLING AND COLLECTION. Dow Jones will bill Publications
Library Subscribers for all Fees, and shall use reasonable commercial efforts to
collect all payments due from such billings. In addition, Dow Jones shall bill
Publications Library Subscribers for all applicable sales, use or other similar
taxes and shall remit to the appropriate Government agency the taxes collected
(collectively, "Sales Taxes").
(c) GATEWAY'S COMMISSION. In consideration of its undertakings
hereunder, for each calendar month during the Term, Dow Jones shall pay Gateway
a commission (the "Commission") as defined on Exhibit E.
(d) MONTHLY REPORT; PAYMENT. Within forty-five (45) days after
the end of each calendar month, Dow Jones shall prepare and deliver a written
report (the "Monthly Report") to Gateway listing for the calendar month at issue
the information set forth on Exhibit E. Along with the Monthly Report, Dow Jones
shall deliver a check in an amount equal to the Commission for such month,
calculated and paid in U.S. Dollars.
(e) MAINTENANCE AND INSPECTION OF RECORDS. Each party shall
maintain complete and accurate books and records of all information necessary to
determine compliance with its obligations under this Agreement ("Records"). Each
party shall have the right itself or through its authorized representatives,
upon at least seven (7) days' prior written notice but no more often than once
each calendar year, to inspect the other party's Records at the other party's
location where such Records are kept, during such other party's regular business
hours. All information gained by the inspecting party or its authorized
representatives from any such
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inspection shall be treated as Confidential Information subject to Section 8,
and will be used solely for the purpose of verifying compliance with the
obligations contained herein.
6. PROPRIETARY RIGHTS.
(a) OWNERSHIP; COPYRIGHT. Gateway acknowledges and agrees that
all ownership and proprietary rights (including, without limitation, the
copyright and database proprietary rights) to the Publications Library and the
contents thereof are and shall remain the property of Dow Jones or its
licensors. Gateway shall give proper notice to Gateway Service Customers of Dow
Jones' copyright in the Publications Library, and shall not remove or alter any
copyright notices appearing in any Publications Library Content.
(b) INFRINGEMENT. Gateway shall promptly advise Dow Jones of
any possible infringement of which Gateway becomes aware of any of Dow Jones'
trademarks, copyrights, database proprietary rights, trade secrets or other
proprietary rights, or any misuse of Publications Library Content or breach of
the DJ Subscription Agreement by a Publications Library Subscriber.
7. INDEMNIFICATION; DISCLAIMER.
(a) BY DOW JONES. In the event of any claim by any third party
against Gateway arising out of or resulting from the content in the Publications
Library (other than claims for which Dow Jones may seek indemnification from
Gateway under Section 7(b) below), Gateway shall promptly notify Dow Jones, and
Dow Jones shall defend such claim, Suit or action in Gateway's name but at Dow
Jones' expense. Dow Jones shall indemnify and hold harmless Gateway against any
judgment, liability, loss, cost or damage (including, without limitation,
litigation costs and reasonable attorneys' fees) arising from or related to such
claim, whether or not such claim is successful. Gateway shall have the right, at
its expense, to participate in the defense of such claim through counsel of its
own choosing; provided, however, that Dow Jones shall not be required to pay any
settlement amount that it has not approved in advance, Dow Jones shall direct
and control the conduct of the defense, and Gateway shall pay all costs and
expenses in connection with such chosen counsel.
(b) BY GATEWAY. In the event of any claim by any third party
against Dow Jones arising out of or resulting from: (1) any defect, error or
omission caused by Gateway in reformatting, displaying, retrieving, transmitting
or otherwise distributing content in the Publications Library on or through the
Gateway Service, or (2) an allegation that the Gateway Service infringes any
patent, trade secret, copyright, or other intellectual property right of any
third party, or (3) any use or distribution or display of Publications Library
Content in violation of the Specifications or this Agreement, or (4) the
advertising or promotion for the Publications Library Content by Gateway (except
in the case of third party claims arising out or resulting from language about
the Publications Library in a press release or promotional material that was
approved by Dow Jones), Dow Jones shall promptly notify Gateway, and Gateway
shall defend
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such claim, suit or action in Dow Jones' name but at Gateway's expense. Gateway
shall indemnify and hold harmless Dow Jones against any judgment, liability,
loss, cost or damage (including, without limitation, litigation costs and
reasonable attorneys' fees) arising from or related to such claim, whether or
not such claim is successful. Dow Jones shall have the right, at its expense, to
participate in the defense of such claim through counsel of its own choosing;
provided, however, that Gateway shall not be required to pay any settlement
amount that it has not approved in advance, Gateway shall direct and control the
conduct of the defense, and Dow Jones shall pay all costs and expenses in
connection with such chosen counsel.
(c) DISCLAIMER; LIMITATION ON DAMAGES. DOW JONES PROVIDES THE
PUBLICATIONS LIBRARY CONTENT "AS IS", WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES.
DOW JONES AND ITS LICENSORS DO NOT WARRANT THE ACCURACY, TIMELINESS,
COMPLETENESS, ADEQUACY, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE CONTENT PROVIDED AS PART OF THE PUBLICATIONS LIBRARY.
EXCEPT FOR AMOUNTS OWED TO GATEWAY PURSUANT TO SECTION 7(A) OF THIS AGREEMENT,
DOW JONES AND ITS LICENSORS SHALL NOT BE LIABLE TO GATEWAY OR TO ANY THIRD PARTY
IN RESPECT OF ANY ACTUAL OR ALLEGED ERROR, OMISSION, INACCURACY, UNTIMELINESS,
OR INADEQUACY IN SUCH CONTENT, AND HEREBY DISCLAIM ANY WARRANTIES OF
NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. GATEWAY
SHALL NOT MAKE ANY STATEMENT RESPECTING DOW JONES OR THE PUBLICATIONS LIBRARY
CONTENT THAT IS CONTRADICTORY OR INCONSISTENT WITH THE FOREGOING STATEMENTS OR
WITH THE DJ SUBSCRIPTION AGREEMENT. EXCEPT FOR AMOUNTS PAID PURSUANT TO SECTION
7 OR IN CONNECTION WITH A BREACH OF SECTION 8 OF THIS AGREEMENT, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY HERETO FOR ANY DAMAGES OTHER THAN DIRECT AND
STATUTORY DAMAGES, INCLUDING BUT NOT LIMITED TO CONSEQUENTIAL, SPECIAL,
INDIRECT, AND EXEMPLARY DAMAGES.
8. CONFIDENTIAL INFORMATION.
Gateway and Dow Jones understand and agree that in the
performance of this Agreement each party may have access to private or
confidential information of the other party, including but not limited to, trade
secrets, marketing and business plans, pricing information, and technical,
technological and operational information, which is designated as confidential
by the disclosing party in writing, whether by letter or by the use of a
proprietary stamp or legend, prior to or at the time it is disclosed to the
other party ("Confidential Information"). Gateway acknowledges and agrees that
all Specifications, and all technical, technological and operational information
about the Publications Library, are Confidential Information of Dow Jones. In
addition, private or confidential information that is orally disclosed to the
other party shall constitute Confidential Information if within ten (10) days
after such disclosure the disclosing party delivers to the receiving party a
written document describing such Confidential Information
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and referencing the place and date of such oral disclosure and the names of the
employees of the party to whom such disclosure was made. Each party agrees that
the terms and conditions of this Agreement shall be deemed Confidential
Information of the other party hereto. Each party agrees that: (i) all
Confidential Information shall remain the exclusive property of the owner; (ii)
it shall maintain, and shall use prudent methods to cause its employees and
agents to maintain, the confidentiality and secrecy of the Confidential
Information; (iii) it shall not, and shall use prudent methods to ensure that
its employees and agents do not, copy, publish, disclose to others or use (other
than pursuant to the terms hereof) the Confidential Information; and (iv) it
shall return or destroy all copies of Confidential Information upon request of
the other party. Notwithstanding the foregoing, Confidential Information shall
not include any information to the extent it: (i) is or becomes a part of the
public domain through no act or omission on the part of the receiving party,
(ii) is disclosed to third parties by the disclosing party without restriction
on such third parties, (iii) is in the receiving party's possession, without
actual or constructive knowledge of an obligation of confidentiality with
respect thereto, at or prior to the time of disclosure under this Agreement,
(iv) is disclosed to the receiving party by a third party having no obligation
of confidentiality with respect thereto, (v) is independently developed by the
receiving party without reference to the disclosing party's Confidential
Information, (vi) is released from confidential treatment by written consent of
the disclosing party, or (vii) is required to be disclosed by operation of law.
9. TERM AND TERMINATION.
(a) TERM. The initial term of this Agreement shall commence on
the Effective Date, and unless terminated earlier pursuant to this Agreement,
shall terminate one (1) year after the Commercial Availability Date (the
"Initial Term"). The term hereof shall be extended for consecutive additional
one-year periods (each, a "Renewal Term"), unless either party delivers to the
other party notice of its election not to renew at least ninety (90) days prior
to the end of the Initial Term, or any Renewal Term, as the case may be. The
"Term" shall be defined as the Initial Term and all Renewal Terms, if any.
(b) TERMINATION FOR DEFAULT. If either party defaults in the
performance of or compliance with any provision contained in this Agreement and
such breach is not cured within thirty (30) days after written notice thereof
was given to the appropriate party, the party giving such notice may then give
further written notice to such other party terminating this Agreement, in which
event this Agreement and the rights granted hereunder shall terminate on the
date specified in such further notice. The party giving such notice of
termination shall have such other remedies as the law or equity may afford, and
such party's rights and remedies on breach or default by the other party are
cumulative and not exclusive of those other remedies.
(c) CHANGE IN CONTROL. If there occurs during the term hereof
any change in the effective voting control of Gateway or any merger into or
acquisition by any third party of Gateway, or the sale or transfer of the
Gateway Service or substantially all of Gateway's assets to any third party (a
"Control Event"), Gateway shall notify Dow Jones in writing of such Control
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<PAGE> 10
Event within ten (10) days after its effectiveness, and Dow Jones may, within
thirty (30) days after receipt of such notice, terminate this Agreement upon at
least sixty (60) days' prior written notice. Gateway may notify Dow Jones in
writing of any proposed Control Event prior to its proposed effectiveness, and
Dow Jones shall within thirty (30) days after receipt of such notice, notify
Gateway in writing whether Dow Jones would exercise its right to terminate this
Agreement if such proposed Control Event were consummated.
(d) GATEWAY ALTERATIONS. If, pursuant to Section l(c), Gateway
is unable, after using reasonable commercial efforts, to make the necessary
Gateway Alterations, or if such Gateway Alterations do not successfully complete
the Testing Procedures, either party may terminate this Agreement by delivering
at least thirty (30) days prior notice to the other party.
(e) TERMINATION OF PUBLICATIONS LIBRARY. Either party may
terminate this Agreement, upon at least ninety (90) days advance notice, if Dow
Jones ceases publishing the Publications Library via the World Wide Web, or if
Gateway ceases offering or publishing the Gateway Service substantially as it
existed on the Commercial Availability Date.
(f) INSOLVENCY. In the event that either party shall be
adjudged insolvent or bankrupt, or upon the institution of any proceedings by
such party seeking relief, reorganization or arrangement under any laws relating
to insolvency, or if an involuntary petition in bankruptcy is filed against such
party and said petition is not discharged within sixty (60) days after such
filing, or upon any assignment for the benefit of its creditors, or upon the
appointment of a receiver, liquidator or trustee of any of its assets, or upon
the liquidation, dissolution or winding up of its business (an "Event of
Bankruptcy"), then the party affected by any such Event of Bankruptcy shall
immediately give notice thereof to the other party, and the other party at its
option may terminate this Agreement upon delivery of notice.
(g) EFFECT OF TERMINATION. Upon the expiration or termination
of this Agreement for any reason, Gateway shall immediately (1) cease all
marketing and selling of the Publications Library; (2) inhibit all access to and
display of the Publications Library Content through or from the Gateway Service;
and return to Dow Jones, at Gateway's expense, all Dow Jones Confidential
Information in its possession, together with a written statement by a senior
officer of Gateway that all such Confidential Information has been so returned.
Upon the expiration or termination of this Agreement for any reason, Dow Jones
shall immediately return to Gateway, at Dow Jones' expense, all Gateway
Confidential Information in its possession, together with a written statement by
a senior officer of Dow Jones that all such Confidential Information has been so
returned.
10. MISCELLANEOUS.
(a) NOTICES. All notices, requests and other communications
hereunder ("Notices") shall be in writing. All Notices shall be delivered in
person, by reliable overnight courier service, by facsimile transmission, by
email with confirmation of delivery, or by U.S. first
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<PAGE> 11
class mail, to the address or facsimile number of the party set forth below, or
to such other addresses as may be stipulated in writing by the parties pursuant
hereto. A Notice shall be deemed delivered and received, and effective, on the
date it is officially recorded as delivered, as evidenced by delivery receipt or
equivalent.
(b) AMENDMENT. This Agreement may not be amended except by
written instrument executed by an authorized representative of Gateway and Dow
Jones.
(c) BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be
binding upon and shall inure to the benefit of the undersigned parties and their
respective successors and permitted assigns. No assignment of any right or
delegation of any duty under this Agreement shall be made by either party, by
operation of law or otherwise, without the prior written consent of the other.
Any such purported assignment or delegation or other transfer without such prior
written consent of the other party hereto shall be void.
(d) HEADINGS. The headings of sections and paragraphs are
included for convenience of reference only and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(e) SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding the
expiration or termination of this Agreement, Sections 5(b), 5(c), 5(d), 5(e), 6,
7, 8, 9(g) and 10, and all payment obligations accruing, but not paid, prior to
such expiration or termination, shall survive the expiration or termination of
this Agreement.
(f) WAIVER. The failure of either party at any time to require
performance by the other party of any provision hereof shall in no way affect
the full right to require such performance at any time thereafter, nor shall the
waiver by either party of a breach of any provision hereof be taken or held to
be a waiver of any succeeding breach of such provision or as a waiver of the
provision itself.
(g) SEPARABILITY. If any provision of this Agreement shall be
held to be unenforceable, the remainder of the Agreement shall not be affected
by such holding.
(h) EXCUSE OF PERFORMANCE. Performance by either party under
this Agreement shall be subject to and shall be excused to the extent and during
the period that it shall be rendered impossible by any event, condition or
occurrence beyond the reasonable control of such party.
(i) RELATIONSHIP OF THE PARTIES. This Agreement does not and
shall not be deemed to constitute a partnership or joint venture between the
parties. Neither party nor any of their respective directors, officers,
employees or agents shall, by virtue of the performance of their obligations
under this Agreement, be deemed to be an agent or employee of the other.
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<PAGE> 12
(j) GOVERNING LAW. This Agreement and all rights and
obligations hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York applicable to contracts wholly made and wholly
performed in New York. This Agreement will not be governed by the United Nations
Convention on Contracts for the International Sale of Goods.
(k) COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(l) ENTIRE AGREEMENT. This Agreement contains the final and
entire agreement of the parties on the subject matter herein, and supersedes all
previous oral and written understandings, negotiations, and agreements on the
subject matter hereof.
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Agreement through their respective authorized representatives as of the
Effective Date.
DOW JONES & COMPANY, INC. MEDSCAPE, INC.
By: /s/ Jessica Perry By: /s/ Paul T. Sheils
------------------------------- ----------------------------
Name: Jessica Perry Name: Paul T. Sheils
Title: Director, Distribution Strategy Title: CEO
Date Signed: 7/13/98:
Notice Addresses for Dow Jones: Notice Addresses for Gateway:
U.S. Highway One at Ridge Road 134 West 29th Street
South Brunswick, New Jersey 08852 New York, NY 10001
Attn.: Director, Content Distribution,
Dow Jones Interactive Publishing
phone: 609-520-4902
fax: 609-520-4072
email: [email protected]
with a copy to:
[same address]
Attn.: Legal Department
phone: 609-520-4094
fax: 609-520-4021
email: [email protected]
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<PAGE> 13
SCHEDULE OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
A Definition of Gateway Service
B Standard DJ Subscription Agreement
C Contact Persons for Each Party
D Dow Jones Online Advertising Guidelines
E Commission; Monthly Report
</TABLE>
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EXHIBIT A
DEFINITION OF GATEWAY SERVICE
At www.medscape.com, Gateway maintains a site on the World Wide Web offering
content and services for the medical community. The site is free to users, but
access to certain sections requires that the user first register with the
Gateway. The site's content and services include: Full-text, peer-reviewed
clinical medicine articles; Medscape's Journal Club Forum for member
discussions; Smart "hyper-keyword" searches; Navigable article outline;
graphics; annotated links to Internet resources; ability to search Medscape's
database of full-text articles; medical news Self-assessment features;
continuing medical education resources; free subscription to Medscape's a weekly
email newsletter highlighting what's new on Medscape.
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EXHIBIT B
STANDARD DJ SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT FOR
DOW JONES INTERACTIVE ON THE WEB
THIS AGREEMENT WAS LAST UPDATED ON [MAY 21, 1998].
Dow Jones Interactive is a news and information service from Dow Jones &
Company, Inc. By clicking the "I Accept" button, and using Dow Jones
Interactive, you are indicating that you are 18 years old or older, and that you
agree to be bound by all of the terms in this Subscription Agreement. You may
print and keep a copy of this Agreement. Dow Jones may change the terms in this
Subscription Agreement. When the terms are changed, Dow Jones will notify you by
e-mail and/or online postings. The changes also will appear in this document,
which you can access at any time by selecting Help " ?", then Subscription
Agreement. By accessing Dow Jones Interactive after any change in this
Subscription Agreement is posted, you agree to be bound by all of the changes as
well.
PRIVACY OF INFORMATION
By clicking the "I Accept" button, you also are agreeing that Dow Jones may
store information you provide as part of the registration process and usage
information, and provide aggregate statistical information about subscribers to
advertisers, potential advertisers, and content licensors. Dow Jones also may
use the information to inform you about other Dow Jones publications, products
and services, unless you notify Dow Jones that you do not wish to receive this
information. Dow Jones also may deliver additional messages about the Service to
you by e-mail.
As a general policy, Dow Jones does not disclose to third parties any specific
personal identifying information about you, such as your name, address, phone
number, or email address ("Personal Identifying Information"). Dow Jones will
not disclose any of your Personal Identifying Information to a third party
without first notifying you and giving you an opportunity to elect not to have
your Personal Identifying Information disclosed.
MANUALLY SIGNED PAPER AGREEMENTS
If Dow Jones and you or your employer have manually signed a paper version of a
contract governing your use of Dow Jones Interactive, or if you or your employer
subscribe to Dow Jones Interactive pursuant to an Enterprise Subscription
Agreement, the terms in that manually signed, paper document or Enterprise
Subscription Agreement are not amended by, and supersede, terms in this
Subscription Agreement.
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<PAGE> 16
FEES AND PAYMENTS
You can always find the current Subscription Fees and charges posted in Pricing
"$". Your subscription will continue until terminated by Dow Jones or until you
notify Dow Jones by telephone or electronic mail of your decision to terminate
your subscription. You agree to pay or have paid all fees and charges incurred
in connection with your user name or password at the rates in effect when the
fees and charges were incurred. All fees and charges are nonrefundable. Dow
Jones may charge late fees on overdue accounts, and you agree to pay or to have
paid all costs (including, without limitation, attorneys' fees) incurred to
collect overdue amounts. Dow Jones may change the Subscription Fees and charges
then in effect, or add new fees or charges, by giving you notice in advance.
All fees and charges incurred in connection with your user name or password will
be billed to the credit card you designate during the registration process for
Dow Jones Interactive or the service which provides you access to Dow Jones
Interactive (or, if agreed in advance by Dow Jones, billed by paper invoice.) If
there are any annual, monthly or similar periodic fees for your Dow Jones
Interactive subscription, these fees will be billed automatically to your credit
card at the start of the annual, monthly or similar period, and at the start of
each renewal period, unless you terminate your Subscription before the relevant
period begins. If you want to designate a different credit card or there is a
change in your credit card validity or expiration date, or if you believe
someone has accessed Dow Jones Interactive using your user name or password
without your authorization, you must call Dow Jones Customer Service at the
telephone numbers posted in Help "?". You also are responsible for any fees or
charges incurred to access Dow Jones Interactive through an Internet access
provider or other third party service. YOU, AND NOT DOW JONES, ARE RESPONSIBLE
FOR PAYING ANY AMOUNTS BILLED TO YOUR CREDIT CARD BY A THIRD PARTY, WHICH WERE
NOT AUTHORIZED BY YOU.
IF DOW JONES AND YOU OR YOUR EMPLOYER HAVE MANUALLY SIGNED A PAPER VERSION OF A
CONTRACT GOVERNING YOUR USE OF DOW JONES INTERACTIVE, OR IF YOU OR YOUR EMPLOYER
SUBSCRIBE TO DOW JONES INTERACTIVE PURSUANT TO AN ENTERPRISE SUBSCRIPTION
AGREEMENT, SOME OR ALL OF THESE "FEES AND PAYMENTS" TERMS MAY NOT APPLY TO YOU.
PLEASE CONTACT YOUR EMPLOYER FOR DETAILS.
COPYRIGHT AND LIMITATIONS ON USE
Only one individual may access Dow Jones Interactive at the same time using the
same user name or password, unless agreed otherwise by Dow Jones. The content
available through Dow Jones Interactive is the property of Dow Jones or its
licensors and is protected by copyright and other intellectual property laws.
Content received through Dow Jones Interactive may be displayed, reformatted and
printed for your personal, non-commercial use only. You are not to reproduce,
retransmit, distribute, display, sell, publish, broadcast or circulate any
content received through Dow Jones Interactive to anyone, including but not
limited to others in the same company or organization, without the express prior
consent of Dow Jones, with this one exception:
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<PAGE> 17
You may, on an occasional and irregular basis, disseminate an insubstantial
portion of content retrieved from Dow Jones Interactive, for a noncommercial
purpose, without charge, and in non- electronic form, to a limited number of
individuals, provided you include all copyright and other proprietary notices
with such portion of the content in the same form in which the notices appear in
Dow Jones Interactive, and the phrase "Used with permission from Dow Jones
Interactive." To request consent for other matters, please send an e-mail using
the Feedback icon.
Dow Jones Interactive includes facts, views, opinions and recommendations of
third parties deemed of interest. Dow Jones and its content licensors do not
guarantee the accuracy, completeness or timeliness of, or otherwise endorse,
these views, opinions or recommendations, give tax or investment advice, or
advocate the purchase or sale of any security or investment.
DISCLAIMER OF WARRANTIES AND LIABILITY
Due to the number of sources from which content on Dow Jones Interactive is
obtained, and the inherent hazards of electronic distribution, there may be
delays, omissions or inaccuracies in such content and Dow Jones Interactive. DOW
JONES AND ITS AFFILIATES, AGENTS AND LICENSORS CANNOT AND DO NOT WARRANT THE
ACCURACY, COMPLETENESS, CURRENTNESS, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OF THE CONTENT AVAILABLE THROUGH DOW JONES INTERACTIVE
OR DOW JONES INTERACTIVE ITSELF. DOW JONES AND ITS AFFILIATES, AGENTS OR
LICENSORS SHALL NOT BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR DAMAGE,
OTHER THAN DEATH OR PERSONAL INJURY RESULTING DIRECTLY FROM USE OF DOW JONES
INTERACTIVE, CAUSED IN WHOLE OR PART BY CONTINGENCIES BEYOND THEIR CONTROL OR
NEGLIGENCE IN PROCURING, COMPILING, INTERPRETING, REPORTING OR DELIVERING DOW
JONES INTERACTIVE AND ANY CONTENT THROUGH DOW JONES INTERACTIVE. IN NO EVENT
WILL DOW JONES, ITS AFFILIATES, AGENTS OR LICENSORS BE LIABLE TO YOU OR ANYONE
ELSE FOR ANY DECISION MADE OR ACTION TAKEN BY YOU IN RELIANCE ON SUCH CONTENT.
DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS SHALL NOT BE LIABLE TO YOU OR
ANYONE ELSE FOR ANY DAMAGES OTHER THAN DIRECT DAMAGES (INCLUDING, WITHOUT
LIMITATION, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, OR SIMILAR DAMAGES)
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. YOU AGREE THAT THE LIABILITY
OF DOW JONES, ITS AFFILIATES, AGENTS AND LICENSORS, IF ANY, ARISING OUT OF ANY
KIND OF LEGAL CLAIM (WHETHER IN CONTRACT, TORT OR OTHERWISE) IN ANY WAY
CONNECTED WITH DOW JONES INTERACTIVE OR THE CONTENT IN DOW JONES INTERACTIVE
SHALL NOT EXCEED THE AMOUNT YOU PAID TO DOW JONES FOR THE USE OF DOW JONES
INTERACTIVE IN THE 12 MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH
CLAIM.
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ADDITIONAL LEGAL TERMS AND CONDITIONS
Certain content licensors require Dow Jones to post additional legal terms,
particularly as new content is added to Dow Jones Interactive. Additional legal
terms and notices regarding Dow Jones Interactive and its content are located in
Help "?", under "Additional Legal Terms and Notices." You agree to read and be
bound by these additional legal terms and notices. You are urged to consult Help
" ?" each time you access Dow Jones Interactive. By accessing Dow Jones
Interactive after any additional legal terms or notices are posted, you are
agreeing to be bound by these additional legal terms and notices.
Dow Jones may discontinue or change Dow Jones Interactive or certain content
within Dow Jones Interactive, or its availability to you, at any time, and you
may always terminate your subscription at any time. This Agreement is personal
to you, and you may not assign your rights or obligations to anyone. If any
provision in this Agreement is invalid or unenforceable under applicable law,
the remaining provisions will continue in full force and effect. This Agreement,
your rights and obligations, and all actions contemplated by this Agreement
shall be governed by the laws of the United States of America and New York
State, as if the Agreement was a contract wholly entered into and wholly
performed within New York State. This Agreement will not be governed by the
United Nations Convention on Contracts for the International Sale of Goods.
IF YOU AGREE TO BE BOUND BY ALL OF THE TERMS IN THIS AGREEMENT, PLEASE INDICATE
YOUR ACCEPTANCE BELOW:
[I Accept icon] [I Reject icon]
Copyright 1998 Dow Jones & Company, Inc. All rights reserved.
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EXHIBIT C
CONTACT PERSONS FOR EACH PARTY
FOR DOW JONES
TECHNOLOGY AND COMMUNICATIONS
(From 9AM to 5PM, Monday through
Friday,
Princeton Time)
Steve Catricks
Email: stevec(gsysdev.dowjones.com
Telephone: 609-520-7651
(At all other times)
Dow Jones Global Operations Desk
Telephone: 609-520-4599
BILLING
Greg Baber
Email: [email protected]
Telephone: 609-520-7099
CUSTOMER SERVICE
For Customer Support Questions:
Telephone: 800-369-7466
For Policy & Administration:
Pat Rodeawald
Email: [email protected]
Telephone: 609-520-4066
MANAGEMENT/MISCELLANEOUS
Jessica Perry,
Email: jperry,@wsj.dowjones.com
Telephone: 609-520-4902
FOR GATEWAY
TECHNOLOGY AND COMMUNICATIONS
Bill Seitz
VP Technology
Email: [email protected]
Telephone: 212-760-3190
Fax: 212-760-3147
BILLING
Mary Beth L. Dougherty
Director, Business Development
Email: [email protected]
Telephone: 212-760-3246
Fax: 212-760-3140
CUSTOMER SERVICE
Mary Beth L. Dougherty
Director, Business Development
Email: [email protected]
Telephone: 212-760-3246
Fax: 212-760-3140
MANAGEMENT/MISCELLANEOUS
Mary Beth L. Dougherty
Director, Business Development
Email: [email protected]
Telephone: 212-760-3246
Fax: 212-760-3140
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EXHIBIT D
DOW JONES ONLINE ADVERTISING GUIDELINES (AS OF 12/97)
Advertising or promotional materials related to the following products or
services shall not appear on any screen display or web page on which any
Publications Library Content, or any Dow Jones trademark, trade name or logo,
appears:
Tobacco products
Pornography or "adult services", including, without limitation, massage parlors
or escort services
Alcohol
Firearms
Employment recruiting
Advertisements for any product or service which gratuitously or excessively uses
the word "sex" or other sexually explicit or vulgar term or description
Games of chance, lotteries, gambling sites, and other products, services or web
sites involving wagering or betting
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EXHIBIT E
COMMISSION; MONTHLY REPORT
Commission
For each calendar month during the Term, Dow Jones shall pay Gateway a
Commission equal to twenty percent (20%) of the Fees billed by Dow Jones for
Publications Library usage by Publications Library Subscribers who originated
their Publications Library accounts through the Gateway Service, minus: (1) an
amount reasonably accrued for anticipated bad debt, not to exceed three percent
(3%); (2) billing adjustments (other than bad debt), refunds and credits made in
the ordinary course of business; and (3) sales taxes.
Monthly Report
The Monthly Report will contain information sufficient to determine how Dow
Jones calculated the Commission, including the Fees billed, the amount of the
subtractions set forth above under "Commission", and how the Commission was
calculated.
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<PAGE> 1
Exhibit 10.28
PREFERRED SHARE PURCHASE AGREEMENT
This Preferred Share Purchase Agreement ("Agreement") is made and
entered into as of the _____ day of June, 1999, by and among SOFTWATCH LTD., an
Israeli company (the "Seller" or the "Company"), MEDSCAPE, INC., a Delaware
corporation ("Medscape"), and the persons and entities set forth on Schedule 1
attached hereto (collectively, the "Purchasers"), if any.
In consideration of the mutual promises and covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. BASIC TRANSACTION
1.1 Authorization of Shares. Prior to the Closing (as defined below)
Seller shall have authorized the issuance and sale to the Purchasers of up to
1,085,521 Series A Preferred Shares (the "Shares" or the "Preferred Shares"),
nominal value NIS 0.01 per share, having all of the powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of such preferences and rights set
forth in the Restated Articles of Association of Seller (the "Restated
Articles") attached hereto as Exhibit A, for a total purchase price of up to
$3,130,750 ($2.8841 per Preferred Share) (the "Purchase Price").
1.2 Issuance of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties, covenants and agreements
contained herein, Seller will issue and allot the Shares to the Purchasers, and
the Purchasers will purchase the Shares from Seller, in each case at the Closing
(as hereinafter defined). Each Purchaser shall purchase the number of Shares and
pay the portion of the Purchase Price indicated opposite its name in Schedule 1.
2. CLOSING
2.1 Time and Place. The closing of the transaction provided for in
Section 1.2 above (the "Closing") shall be held three (3) business days after
fulfillment or waiver of all of the closing conditions set forth in Section 2.3
(the "Closing Date") at the offices of Yigal Arnon & Co., 3 Daniel Frisch
Street, Tel Aviv, or at such other location as the parties might otherwise
mutually agree to.
2.2 Closing Deliveries.
2.2.1 Seller shall deliver the following to the Purchasers at
the Closing:
2.2.1.1 A copy of the Restated Articles duly stamped
to indicate
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filing with the Registrar of Companies;
2.2.1.2 A counterpart copy of the Registration Rights
Agreement, by and between Seller and Medscape (the "Registration Rights
Agreement"), substantially in the form of Exhibit E attached hereto, duly
executed on behalf of the Seller and Medscape and any other parties thereto, if
any.;
2.2.1.3 Certificate(s) representing the Shares to be
issued at the Closing duly executed on behalf of Seller and registered in the
name of each Purchaser for the number of shares set forth in Schedule 1;
2.2.1.4 An undertaking to the Seller and Medscape
(the "No Sale Undertaking"), substantially in the form attached hereto as
Exhibit B, duly executed by Amir Kishon and Asaf Evenheim;
2.2.1.5 A counterpart copy of the License and Web
Site Development Agreement, by and between Medscape and Seller (the "License
Agreement"), attached hereto as Exhibit C, duly executed on behalf of Seller;
and
2.2.1.6 An opinion from Goldfarb, Levy, Eran & Co.,
legal counsel to Seller, addressed to the Purchasers, dated as of the Closing
Date, in the form of Exhibit D attached hereto.
2.2.2 The Purchasers shall deliver the following to Seller at
the Closing:
2.2.2.1 The Purchase Price set forth in Section 1.1
by wire transfer in immediately available funds to an account specified by
Seller at least two (2) business days prior to the date of Closing, with each
Purchaser being responsible for its respective portion of the Purchase Price;
2.2.2.2 A counterpart copy of the Registration Rights
Agreement duly executed on behalf of Purchasers; and
2.2.2.3 A counterpart copy of the License Agreement
duly executed on behalf of Medscape.
2.2.3 The deliveries referred to in clauses (a) and (b) of
this Section 2.2 shall be deemed to occur simultaneously with one another, and
are conditions precedent to the Closing of this Agreement.
2.2.4 The Seller hereby agrees, undertakes and covenants that
it shall (i) upon the Closing record the issuance of the Shares in the name of
the Purchasers on the Seller's Registrar of Members, (ii) upon the Closing
provide the Purchasers and their legal counsel with a
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<PAGE> 3
copy of the decision of the Seller's Board of Directors approving the Share
issuance, and (iii) promptly after the Closing, file a copy of the report of
such share issuance with the Registrar of Companies.
2.3 Purchasers' Conditions to Closing. The Purchasers' obligation to
consummate the purchase of the Shares hereunder is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions (any or all of
which may be waived by Medscape on behalf of the Purchasers):
2.3.1 all representations and warranties of the Seller
contained herein to the Purchasers shall be true and correct at the time of the
Closing as though made again at that time, as confirmed by a "bring down
certificate" substantially in the form attached hereto as Schedule 2.3.1;
2.3.2 the Seller shall have performed and complied in all
respects with all obligations and covenants required by this Agreement to be
performed or complied with by it prior to or at the Closing, as confirmed by the
bring down certificate;
2.3.3 by resolution substantially in the form attached hereto
as Schedule 2.3.3, the Board of Directors shall have (i) approved the Seller's
execution of this Agreement; and (ii) issued the Shares to the Purchasers
against payment of the Purchase Price;
2.3.4 by resolution substantially in the form attached hereto
as Schedule 2.3.4, the shareholders of the Seller shall have replaced the
Articles of Association of the Seller with the Restated Articles;
2.3.5 the Seller shall have received all necessary
authorizations, approvals, permits and consents if any, of any governmental
authority or regulatory body of any state, person or entity that are required by
the Seller in connection with the issuance of the Shares as contemplated by this
Agreement including all necessary approvals of the Investment Center and Office
of the Chief Scientist of the Israeli Ministry of Industry and Trade;
2.3.6 the Seller shall have provided the Purchasers with
copies of letters executed by all shareholders waiving all rights of pre-emption
with respect to the issuance of the Shares or shall include a representation to
such effect in the bring down certificate;
2.3.7 there shall have been no material adverse change in the
financial, business or other condition of the Seller;
2.3.8 the Seller shall have delivered to the Purchasers the
opinion and other documents referred to in Section 2.2.1 above;
2.3.9 all loans advanced to the Company by Amir Kishon and/or
Anthony
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Michael Stone shall be evidenced by agreements executed in writing, in a form
reasonably acceptable to Medscape; and
2.3.10 Rich Carpenter, Gary Rancourt, Paul Egerman and
Healthcourt 2% Partnership shall have provided the Company with a letter
substantially in the form of Schedule 2.3.10 attached hereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
In order to induce the Purchasers to enter into this Agreement and
purchase the Shares, Seller represents and warrants to the Purchasers as
follows:
3.1 Organization and Corporate Power. Seller is a company duly
organized and validly existing under the laws of the State of Israel, with all
requisite corporate power and authority to own its properties and to conduct its
business as presently conducted and as presently proposed to be conducted.
Softwatch Inc. (the "Subsidiary") is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with all requisite
corporate authority to own its properties and to conduct its business as
presently conducted and as presently proposed to be conducted. Seller is
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect (as defined
below). Seller has all requisite corporate power and authority to enter into
this Agreement, the Registration Rights Agreement and the License Agreement
(collectively, the "Documents") and to perform its obligations hereunder and
thereunder, including, without limitation, the issuance and allotment of the
Shares.
3.2 Due Authorization; Enforceability; No Conflicts. Prior to Closing,
Seller shall have taken all corporate and shareholder action necessary to
authorize the execution, delivery and performance by it of each of the
Documents. Assuming the due execution and delivery of each of the Documents by
the Purchasers and other parties thereto, each of the Documents shall constitute
a valid and binding obligation of Seller, enforceable against Seller in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to the
enforcement of creditors' rights generally, the availability of equitable
remedies and to general equity principles. The execution, delivery and
performance by Seller of each of the Documents and compliance by Seller with the
terms hereof and thereof will not violate, conflict with or cause an event of
default under Seller's Memorandum of Association or Articles of Association, or
any resolutions of Seller's Board of Directors or shareholders or any agreement,
instrument, judgment, order, law, rule or regulation by which Seller is bound or
to which any of Seller's properties are subject, except where such violation,
conflict or event of default would not result in a material adverse effect on
Seller's business, financial condition, results of operations or properties (a
"Material Adverse Effect"). The Shares, upon issuance in
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accordance with the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free of any liens, claims or
encumbrances ("Encumbrances") other than the terms and provisions of the
Restated Articles and restrictions imposed by applicable Israeli, United States
and state securities laws.
3.3 Capitalization. The authorized capital stock of Seller shall
consist, immediately prior to the Closing of NIS 120,000, divided into (a)
10,914,479 Ordinary Shares, nominal value NIS 0.01 per share, of which 6,236,974
shares will be issued and outstanding immediately prior to the Closing, and (b)
1,085,521 Series A Preferred Shares, of which 1,085,521 will be outstanding upon
the issuance of the Shares to be sold to the Purchasers hereunder. All
outstanding Ordinary Shares as of the date hereof were issued and allotted by
Seller in compliance with all applicable Israeli securities laws. Except with
respect to the Shares or as set forth on Schedule 3.3 annexed hereto or in the
Restated Articles or the Share Purchase Agreement (the "1998 Agreement"), dated
as of August 21, 1998, by and between the Company and Kraft Group LLC, there are
no outstanding subscriptions, rights, options, warrants, conversion rights,
agreements or other claims for the purchase or acquisition from Seller or the
Subsidiary of any shares of their respective share capital or obligating Seller
or the Subsidiary to issue, repurchase or otherwise acquire, any shares of their
respective share capital or any securities convertible into, exercisable or
exchangeable for, or otherwise entitling the holder to acquire, any shares of
the share capital of Seller or the Subsidiary. Except as set forth in the
Restated Articles or the 1998 Agreement, no person is entitled to any preemptive
or similar rights with respect to the issuance of any share capital of Seller or
the Subsidiary. Except as set forth on Schedule 3.3, in the Restated Articles or
as contemplated by the 1998 Agreement, no person has the right to nominate or
elect one or more directors of Seller. The Preferred Shares immediately
following the Closing will represent, in the aggregate, 12.524% of the
outstanding share capital of Seller and the voting power of such issued shares
will represent, in the aggregate no less than 12.524% of the total number of
votes able to be cast on any matter by all voting securities of Seller on the
Closing Date (treating for purposes of these calculations (i) all Shares
issuable hereunder to Purchasers as if they were issued as of such date, (ii)
all securities convertible into, exchangeable or exercisable for Ordinary Shares
(collectively, "Ordinary Share Equivalents") outstanding on the date hereof as
having been converted, exchanged or exercised, and (iii) as having been issued
on the date hereof, any Ordinary Shares or Ordinary Share Equivalents issuable
pursuant to (A) any contract entered into by Seller prior to the date hereof, or
(B) any preemptive right granted by Seller prior to the date hereof).
3.4 Memorandum of Association and Articles of Association. The copies
of Seller's Memorandum of Association and Articles of Association provided to
Medscape or its representatives prior to the date hereof are true, correct and
complete copies thereof as currently in effect.
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3.5 Intentionally Omitted.
3.6 Subsidiaries. Except for the Subsidiary, Seller has no subsidiaries
and does not own of record or beneficially, and has no commitment or obligation
to acquire, any capital stock or equity interest or investment in any
corporation, partnership, limited liability company, joint venture, association,
trust or other business entity. Seller owns all of the issued and outstanding
shares of capital stock of the Subsidiary.
3.7 Taxes. All income tax returns and Value Added Tax reports
(collectively the "Tax Returns") required to be filed by the Company or the
Subsidiary on or before the date hereof, have been or will be filed with the
appropriate government agencies and tax authorities in all jurisdictions in
which such Tax Returns are required to be filed, and all tax liabilities which
are due with respect to each of the tax years for which the statue of
limitations has not barred the assessment of deficiencies for tax purposes have
been or will be fully paid and have been reflected in the Financial Statements
referred to in Section 3.14. Neither Seller nor the Subsidiary is a party to any
pending action, proceeding or, to the Seller's knowledge, investigation by any
governmental authority for the assessment or collection of taxes nor does Seller
or the Subsidiary have knowledge of any such threatened action, proceeding or
investigation. Each of Seller and the Subsidiary has withheld and paid all taxes
required to be withheld in connection with any amounts paid or owing to any
employee, creditor, independent contractor or other third party with respect to
the business of Seller or the Subsidiary.
3.8 Consents. No consent of, order or approval by, or filing with any
governmental authority is required in connection with Seller's execution,
delivery and performance of each of the Documents, including the issuance of the
Shares to Purchasers hereunder, other than the filing of the Restated Articles
with the Registrar of Companies and receipt of approval of the Office of the
Chief Scientist and the Investment Center.
3.9 Offering. Based on the representations, warranties and covenants of
the Purchasers set forth herein, and assuming due compliance by the Purchasers
with the terms of this Agreement and the other Documents in all relevant
respects, the issuance and allotment of the Shares to the Purchasers as
contemplated by this Agreement is exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and applicable
blue sky laws.
3.10 Certain Agreements. Other than as set forth in the Documents, in
the 1998 Agreement or in the Share Purchase and Warrant Investment Agreement
(the "1997 Agreement"), dated as of February 15, 1997, by and between the
Company and Platinum Health Ventures Limited or on Schedule 3.10, there are no
agreements to which Seller is a party pursuant to which Seller is under any
obligation to any person to register for sale under the Securities Act any of
its
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currently outstanding securities or any of its securities that may hereafter be
issued, and, except for the 1998 Agreement and as set forth on Schedule 3.10,
Seller is not a party to, and has no knowledge of, any agreements relating to
the voting of Seller's share capital.
3.11 Litigation. There is neither pending nor, to Seller's knowledge,
threatened, any action, suit, proceeding or claim, to which either Seller or the
Subsidiary is a party, or to which the properties of Seller or the Subsidiary
can reasonably be expected to be subject.
3.12 Properties. (a) The Company and the Subsidiary has no assets other
than office furniture and equipment, computer hardware (the "Assets"), and
Intellectual Property Rights (as defined and described more fully in Section
3.13 below).
(b) The Company is the sole and unconditional owner of, and
has good title to, all Assets, and such Assets are free and clear of any
mortgages, liens, pledges, charges, liens, security interests, or encumbrances
of any kind, except which may arise in the ordinary course of business and which
do not have a Material Adverse Effect.
3.13 Intellectual Property. Seller or the Subsidiary is the sole and
exclusive owner of, with all right, title and interest in and to (free and clear
of any lien) all trademarks, trademark registrations, service marks, service
mark registrations, trade names, company names, patents, design patents,
copyright registrations and copyrights and pending applications therefor, in
each case which are used in or required for the business of Seller or the
Subsidiary as currently being conducted (collectively, the "Intellectual
Property Rights") and has sole and exclusive rights, without being contractually
obligated to pay any compensation to any third party in respect thereof in
respect of which they are being used as of the date of this Agreement or as
otherwise stated in the description of goods and services contained in the
relevant materials relating to any Intellectual Property Rights filed with the
United States Copyright Office or the United States Patent and Trademark Office
or the Israeli equivalents thereof. Except as set forth on Schedule 3.13 and the
License Agreement, neither Seller nor the Subsidiary has granted any licenses or
other rights to the Intellectual Property Rights to any other person and no
other person has granted to Seller or the Subsidiary any licenses or other
rights to the Intellectual Property Rights. Each such license granted to Seller
and/or the Subsidiary is valid and binding on Seller or the Subsidiary, as the
case may be, and to the knowledge of Seller, the other parties thereto, and the
intellectual property used by Seller and/or the Subsidiary pursuant to such
license will be available to Seller and/or the Subsidiary on terms and
conditions after the Closing which are identical to the terms and conditions in
force prior to the Closing. Except as set forth on Schedule 3.13, there are no
interferences, oppositions, cancellations or other contested proceedings
pending, or to the knowledge of Seller threatened, in the United States
Copyright Office, the United States Patent and Trademark Office or comparable
office in the State of Israel or any foreign federal, state or local court or
before any governmental entity, relating to any registration, grant, license or
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pending application with respect to any Intellectual Property Rights and Seller
has no knowledge of any facts that could reasonably be expected to give rise to
any such interferences, oppositions, cancellations or other contested
proceeding.
Except as set forth on Schedule 3.13, (i) neither Seller nor the
Subsidiary has been sued or charged or been a defendant in any claim, suit,
action or proceeding which involves a claim of infringement of any Intellectual
Property Rights, (ii) to the knowledge of Seller, there are no other claims
threatened that either Seller or the Subsidiary is infringing any existing
patent, trademark or copyright or any basis for any such claim, without regard
to whether any such patent, trademark or copyright is ultimately found to be
valid, (iii) to the knowledge of Seller, there are no continuing infringements
by any other person or persons of the Intellectual Property Rights and (iv) to
the knowledge of Seller, the use of the Intellectual Property Rights in
connection with the business of Seller and the Subsidiary as currently being
conducted, does not infringe the patent, trademark, copyright or any other right
of any third party.
3.14 Financial Statements; Obligations. Seller has heretofore delivered
to Medscape or its representatives the following financial statements of Seller:
(i) the audited financial statements for the fiscal years ended December 31,
1998 and 1997 and (ii) the unaudited balance sheet for the fiscal quarter ended
March 31, 1999 (collectively, the "Seller Financial Statements"). The Seller
Financial Statements have been prepared from the books and records of Seller and
fairly present in all material respects the income and assets and liabilities of
Seller for the periods indicated in accordance with Israeli generally accepted
accounting principles consistently applied throughout the periods presented.
Except as reflected in the Seller Financial Statements, there are no material
loan agreements, promissory notes, conditional sale agreements, pledges,
security agreements, financing statements (with respect to the Subsidiary),
documents granting or evidencing a lien on any assets of Seller or the
Subsidiary, guarantees, assumptions of obligations for borrowed money, purchase
money indebtedness or other obligation of reimbursement of any maker of a letter
of credit (collectively, "Obligations") entered into by Seller or the
Subsidiary.
3.15 No Material Adverse Change. Since the end of the most recent
period reflected in the Seller Financial Statements, Seller has in all material
respects conducted its business in the ordinary course consistent with past
practice and there has not been any materially adverse change in the business,
assets, condition (financial or otherwise) or results of operations of Seller.
3.16 No Defaults. There is no existing default, or any event, act or
circumstance which, with the passage of time, the giving of notice or both,
would become a default, by Seller or the Subsidiary under any material contract
or agreement to which Seller or the Subsidiary is a party or by which any
material part of its assets or properties is bound. To the knowledge of Seller,
there is no existing default by any other party under any such contract or any
event, act or circumstance which, with the passage of time, the giving of notice
or both, would become a default by such
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other party under any such contract, which default could reasonably be expected
to have a Material Adverse Effect.
3.17 Compliance With Laws. Neither the Seller nor the Subsidiary is in
material violation of any applicable statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto. Neither Seller nor the
Subsidiary has received notice of any alleged material violation of any statute,
law, regulation, ordinance, rule, judgment, order or decree from any
governmental authority applicable to Seller or the Subsidiary or any of their
respective assets or properties which has not been disposed of to its respective
satisfaction.
3.18 Absence of Undisclosed Liabilities. Except as otherwise disclosed
on any schedule hereto, neither Seller nor the Subsidiary has any material
liabilities or obligations (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due) other than (i) liabilities or
obligations reserved against or otherwise disclosed in Seller Financial
Statements, (ii) liabilities or obligations arising since March 31, 1999 which
were incurred in the ordinary course of business of Seller consistent (in amount
and kind) with past practice and (iii) liabilities or obligations pursuant to
the Documents or the Subsidiary.
3.19 Related Party Transactions. Except as set forth on Schedule 3.19
hereto, no current or former shareholder, director, officer or employee of
Seller or the Subsidiary is presently, or has been directly or indirectly
through such person's affiliation with any other person or entity, a party to
any agreement or transaction with Seller or the Subsidiary, other than in
connection with any such person's duties as a shareholder, director, officer or
employee of Seller or the Subsidiary.
3.20 Disclosure. Neither this Agreement nor any certificate or written
statement furnished or made available to Purchasers pursuant to this Agreement
by or on behalf of Seller contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading; provided, however, the Seller does
not guarantee that any financial projections or other future expectations
presented to the Purchasers will be achieved, but does represent that the
assumptions on which such projections were made were reasonable under the
circumstances and are, to the Company's best knowledge, reasonable on the date
hereof.
3.21 Insurance. Schedule 3.21 hereto sets forth a list of all insurance
coverage carried by Seller or the Subsidiary, the carrier and the terms and
amount of coverage.
3.22 Information Technology. Seller has provided to Medscape or its
representatives true, correct and complete copies of all internal analyses
prepared by it, if any, addressing the "Year 2000" issue. Except as set forth on
Schedule 3.22, each of Seller and the Subsidiary has the unrestricted right to
use all software associated with its databases. All computer programming
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software of the Company and the Subsidiary offered for licensing or in use on
the internet has been written and tested to be Year 2000 Compliant (as defined
below). As used in this Agreement, the term "Year 2000 Compliant" shall mean the
ability of the software to provide the following functions:
(a) Handle date information before, during and after January
1, 2000, including but not limited to accepting date input, providing date
output and performing calculations on dates or portions of dates;
(b) Function accurately in accordance with its specifications
before, during and after January 1, 2000 without any material change in
operations associated with the advent of a new century; and
(c) Respond to two digit data input in a way that resolves
ambiguity as to century in a disclosed, defined and predetermined manner.
3.23 Contracts. Schedule 3.23 contains a true and complete list of all
material contracts as of the date hereof. Except for contracts listed on
Schedule 3.23 (the "Contracts"), neither Seller nor the Subsidiary is a party to
or bound by, or derives any benefit from, any material contract which is a:
(a) contract not made in the ordinary course of business;
(b) covenant not to compete or confidentiality agreement;
(c) contract for the sale of any of the assets of Seller or
the Subsidiary (other than sales of inventory to customers in the ordinary
course of business) or the grant of any preferential rights to purchase any
assets of Seller or the Subsidiary or requiring the consent of any party to the
transfer thereof;
(d) any loan agreement, indenture, promissory note or
conditional sales agreement or any pledge, security agreement, deed of trust,
financing statement or other document granting any lien on any asset or property
of Seller or the Subsidiary;
(e) any revocable or irrevocable power of attorney to any
person for any reason;
(f) contract with or permit by or from any governmental entity
(except those as to which the failure to possess would not have a Material
Adverse Effect);
(g) contract which involves or is reasonably expected to
involve aggregate future payments, obligations or revenues in excess of Fifty
Thousand Dollars ($50,000) (whether in payment of a debt, as a result of any
guarantee or indemnification, for services or goods or
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otherwise and including any barter arrangements) or which, as of the Closing
Date, will have a remaining term exceeding one year, in each case other than
orders to purchase or sell goods or services in the ordinary course of business
consistent with past practice;
(h) any agreement with the Office of the Chief Scientist, BIRD
Foundation or Investment Center.
Except as disclosed on Schedule 3.23, each Contract is a valid and
binding obligation of Seller or the Subsidiary, as the case may be, and, to the
knowledge of Seller, the other parties thereto, enforceable in accordance with
its terms, except as such enforceability may be limited by the effect of
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity, and is in full force and effect. Except as
disclosed on Schedule 3.23, neither Seller nor the Subsidiary is (with or
without the lapse of time or the giving of notice, or both) in material breach
or default under any Contract and, to the knowledge of Seller, the other parties
thereto are not (with or without the lapse of time or the giving of notice, or
both) in material breach or default under any such Contract. Neither Seller nor
the Subsidiary has, except as disclosed on Schedule 3.23, received or given any
notice of the intention of any party to terminate or to modify in any material
respect any Contract. True and complete copies of all Contracts referred to on
Schedule 3.23, together with all modifications, amendments and proposed
modifications thereto, have been previously delivered to Medscape or its
representatives.
3.24 Employees. Schedule 3.24 is a true and complete list of the names
of each individual who is employed or retained as an independent contractor or
consultant (either directly or indirectly) by Seller or the Subsidiary who is
paid a base salary plus bonus or commission, a retainer or a fee for services
rendered at an annual rate of Fifty Thousand Dollars ($50,000) or more and who
devotes all or substantially all of his or her time to the business of Seller or
the Subsidiary on the date hereof, along with his or her current job title,
compensation, and any employee benefit enjoyed which is not generally available
to employees of Seller. Neither Seller nor the Subsidiary is a party to any
agreements with labor unions or associations representing employees of Seller or
the Subsidiary. No work stoppage against Seller or the Subsidiary is pending or,
to the knowledge of Seller, threatened. Neither Seller nor the Subsidiary is
involved in or, to the knowledge of Seller, threatened with any labor dispute,
arbitration, lawsuit or administrative proceeding (other than immaterial
grievances) relating to labor matters involving the employees of Seller or the
Subsidiary (excluding workers compensation and unemployment compensation
claims). Except as otherwise disclosed in Schedule 3.24, all employees, officers
and consultants of the Company are parties to undertakings of confidentiality
and non-competition in favor of the Company.
3.25 Employee Benefit Plans and Employment Agreements. All amounts
which the
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Seller is required by law or by agreement with its employees to deduct from such
employees' salaries and/or transfer to such employees' pension, life insurance,
incapacity insurance, continuing education fund or other plans have been duly
paid into the appropriate fund or funds, and the Seller does not have any
outstanding obligation to make any such transfer or provision. There are no
agreements or arrangements (whether or not legally enforceable) for the payment
of any pensions, allowances, lump sums or other like benefits on retirement,
death or termination or during periods of sickness or disablement for the
benefit of any officer or former officer or employee or former employee of the
Seller or for the benefit of the dependents of any such person in effect as of
the date hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
In order to induce Seller to enter into this Agreement and issue and
sell the Shares, each Purchaser, severally and not jointly, represents and
warrants solely with respect to itself to Seller as follows:
4.1 Organization, Good Standing and Corporate Power. Such Purchaser has
all requisite power and authority to own its properties, conduct its business,
enter into this Agreement and the other Documents and perform its obligations
hereunder and thereunder.
4.2 Due Authorization; Enforceability; No Conflicts. Such Purchaser has
taken all action necessary to authorize the execution, delivery and performance
by it of each of the Documents. Assuming the due execution and delivery of this
Agreement and the other Documents by Seller and other parties thereto, each of
the Documents constitutes a valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to the enforcement of creditors' rights generally, the
availability of equitable remedies and general equity principles. The execution,
delivery and performance by such Purchaser of each of the Documents and
compliance by such Purchaser with the terms hereof and thereof will not violate,
conflict with or cause an event of default under such Purchaser's Certificate of
Incorporation (if applicable), or any other agreement, instrument, judgment,
order, law, rule or regulation by which such Purchaser is bound or to which any
properties of such Purchaser are subject.
4.3 Consents. No consent of, order or approval by, or filing with any
governmental authority or other third party is required in connection with such
Purchaser's execution, delivery and performance of each of the Documents,
including the purchase of the Shares by such Purchaser hereunder.
4.4 Suitability as an Investor. Such Purchaser is an experienced
investor capable of evaluating the merits and risks of the investment
contemplated by this Agreement. Without
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derogating from the representations and warranties made by Seller, such
Purchaser has reviewed and inspected all of the information provided to it by
Seller in connection with this Agreement and the transactions contemplated
hereby and has been afforded the opportunity to ask questions and receive
answers from representatives of the Seller. Such Purchaser represents that it
can bear the economic risk of its investment in the Shares and is investing in
its own name and for its own account.
4.5 Investment Intent. Such Purchaser is acquiring the Shares for
investment for its own account and not with view to, or for resale in connection
with, any distribution thereof. Such Purchaser understands that the Shares have
not been registered under the Securities Act or applicable state securities laws
by reason of certain exemptions from the registration provisions thereof that
depend upon, among other things, the truth and accuracy of such Purchaser's
representations and warranties herein. Such Purchaser has not taken or
authorized anyone else to take, and will not take or authorize anyone else to
take, any action hereafter that would cause the loss of the exemptions for the
issuance of the Shares from the requirements of the Securities Act and any
applicable blue sky laws.
4.6 Restricted Transferability. Such Purchaser acknowledges that the
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available, and that
certificates for such Shares will bear the legend referred to in the
Registration Rights Agreement.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of Seller set forth in Section 3 shall survive
the Closing until the second anniversary of the date thereof, except those set
forth in Sections 3.3 and 3.7 which shall survive until the expiration of the
applicable statute of limitations. The representations and warranties of
Purchasers set forth in Section 4 shall survive the Closing until the second
anniversary of the date thereof. The covenants of Seller set forth in this
Agreement which relate to periods following the Closing shall survive the
Closing indefinitely.
5.2 Indemnification by Seller. Seller agrees to indemnify and hold
harmless Medscape from and against any and all assessments, judgments, debts,
obligations, liabilities, losses, costs, damages or expenses (including
interest, penalties and reasonable out-of-pocket fees, expenses and
disbursements in connection with any action, suit or proceeding) (collectively,
"Damages"), suffered, paid or incurred by Medscape resulting from or caused by
or arising out of: (i) any breach of the representations and warranties made by
Seller to Purchasers in this Agreement and (ii) any failure by Seller to perform
any covenant or agreement of Seller contained in this
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Agreement.
5.3 Indemnification by Purchaser. Each Purchaser, severally and not
jointly, agrees to indemnify and hold harmless Seller from and against any and
all Damages suffered, paid or incurred by Seller resulting from or caused by or
arising out of: (i) any breach of the representations and warranties made by
such Purchaser to Seller in this Agreement and (ii) any failure by such
Purchaser to perform any agreement of such Purchaser contained in this
Agreement.
5.4 Limitations on Indemnity. Notwithstanding the foregoing and with
the exception of a claim asserted pursuant to Section 5.5 below, no claims shall
be asserted under this Section 5 unless the amount claimed is in excess of
$50,000, in which case a claim can be submitted for the entire amount at issue).
In no event other than intentional misrepresentation or fraud shall the
liability of any party for breach of representations and warranties under this
Section 5 or this Agreement exceed the Purchase Price.
5.5 Indemnity Regarding Capitalization. Notwithstanding anything to the
contrary in this Section 5 and in addition to any other remedies available to
the Purchasers hereunder, in the event the Seller breaches any of the
representations and warranties as contained in Section 3.3 above, in a manner
which results in the dilution of a Purchaser's relative shareholding in the
Company as contemplated herein, or otherwise injures a Purchaser, then such
Purchaser shall be entitled to the issuance of such number of additional
Preferred Shares, or, at such Purchaser's sole discretion, Ordinary Shares of
the Company, as is necessary to maintain such Purchaser's relative shareholding
in the Company as contemplated herein or remedy such injury.
5.6 Exclusive Remedy. Purchasers and Seller acknowledge and agree that
the foregoing indemnification provisions in this Section 5 shall be the
exclusive remedy of Purchasers and Seller with respect to the transactions
contemplated by this Agreement; provided, however, that the foregoing
indemnification provisions are in addition to, and not in derogation of, any
non-monetary equitable remedies available to the parties and any statutory,
equitable or common law remedy any party hereto may have for fraud or other
intentional malfeasance.
6. COVENANTS OF SELLER
6.1 Information Rights. For so long as Seller is not subject to the
periodic reporting requirements of Section 12 of the Securities Exchange Act of
1934, as amended, Medscape shall have the right to receive the information
stated in this Section 6.1 from Seller:
6.1.1 Periodic Financial and Other Information. So long as
Medscape is the holder of at least 3% of the Seller's issued and outstanding
Ordinary Shares (on an as-converted basis):
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6.1.1.1 within 120 days after the end of each fiscal
year of Seller, commencing with the year ending December 31, 1999, Seller will
provide Medscape with financial statements of Seller for such fiscal year,
consisting of an income statement, balance sheet and statement of changes in
financial position, which shall have been duly audited by an independent
certified public accounting firm, and prepared in accordance with Israeli
generally accepted accounting principles consistently applied ("Israeli GAAP");
6.1.1.2 within 45 days after the end of each
quarterly accounting period of each fiscal year of Seller, commencing with the
quarter ending June 30, 1999, Seller will provide Medscape with unaudited but
reviewed financial statements for such period which will be prepared in
accordance with Israeli GAAP; and
6.1.1.3 within ten days of receipt or transmittal by
Seller, Seller will provide Medscape with notification of any actual or
threatened litigation which could, if determined adversely to Seller or the
Subsidiary, have a Material Adverse Effect.
6.1.2 Additional Information. So long as Medscape is the
holder of at least 3% of the Seller's issued and outstanding Ordinary Shares (on
an as-converted basis), Seller will permit Medscape or any representative of
Medscape to visit and inspect Seller's premises and properties, including its
books and records of account, from time to time, and to discuss Seller's
business, finances and accounts with Seller's officers at reasonable times
during Seller's regular business hours, upon reasonable advance written notice
to Seller and in a manner that will not unreasonably interfere with the normal
business operations of Seller.
6.1.3 Confidentiality. Each Purchaser agrees that any
information obtained pursuant to Sections 6.1.1 or 6.1.2 or from its
representation on Seller's Board of Directors will not be disclosed without the
prior written consent of Seller; provided that, in connection with periodic
reports to its shareholders, each Purchaser may, without first obtaining such
written consent, make general statements, not containing technical or other
confidential information, regarding the nature of progress of Seller's business.
Notwithstanding any provision herein to the contrary, it is hereby clarified
that (a) Medscape shall not be entitled to receive pursuant to Sections 6.1.1 or
6.1.2 any information that relates to any direct or indirect competitor of
Medscape; (b) Medscape shall not be entitled to receive pursuant to Sections
6.1.1 or 6.1.2 copies of, or information relating to the terms of, any
agreements between Seller and any of Seller's customers; and (c) the information
rights provided to Medscape in Sections 6.1.1 and 6.1.2 shall automatically
terminate in the event that there is a Change of Control (as defined below) of
Medscape involving a Seller Competitor (a list of Seller Competitors is provided
on Schedule 6.1.3 attached hereto). As used herein, "Change of Control" means
the merger or consolidation of Medscape into or with, or the acquisition of
Medscape by, another entity, or the sale of all or substantially all of the
shares, properties or assets of Medscape, in each case under circumstances
15
<PAGE> 16
in which the holders of a majority (by voting power) of the outstanding capital
stock of Medscape immediately prior to such merger, consolidation, acquisition
or sale own less than a majority (by voting power) of outstanding capital stock
of Medscape or the surviving or resulting entity or acquirer, as the case may
be, immediately following such merger, consolidation, acquisition or sale.
6.1.4 Books and Records. So long as Medscape is the holder of
any Shares, Seller will keep books and records of account in which full,
accurate and correct entries in all material respects will be made of all
dealings and transactions in relation to the business and affairs of Seller in
accordance with Israeli GAAP.
6.2 Use of Proceeds. Seller will use the proceeds from the sale of the
Shares for the purposes set forth in the Seller's Business Plan, a copy of which
has been provided to the Purchasers. In addition, Seller will be responsible for
paying all stamp tax incurred in connection with the issuance of the Shares.
6.3 Budget and Operating Forecast. So long as Medscape is the holder of
at least 3% of the Seller's issued and outstanding Ordinary Shares (on an
as-converted basis): (a) the business of Seller shall be conducted in all
material respects in accordance with an annual operating plan and budget (the
"Budget") for every fiscal year of Seller. The Budget shall be prepared by
Seller and shall be submitted to, at least thirty (30) days before the beginning
of each fiscal year of Seller for approval by, the Board of Directors of Seller.
(b) Seller shall provide Medscape with a copy of its Budget
for fiscal year 1999, which shall be approved by the Board of Directors of
Seller within 45 days of the date hereof. So long as Medscape is the holder of
at least 3% of the Seller's issued and outstanding Ordinary Shares (on an
as-converted basis), Seller shall deliver to Medscape a copy of each annual
Budget duly approved by the Board of Directors of Seller within 15 days of such
approval.
6.4 System of Accounting. Until the end of the Exclusivity Period (as
defined in Section 6.8(c) below), the books of account and other financial and
corporate records of Seller and the Subsidiary shall be maintained in accordance
with good business and accounting practices and the financial condition of
Seller shall be accurately reflected in the financial statements referred to in
Section 6.1.
6.5 Compliance with Laws. Until the end of the Exclusivity Period (as
defined in Section 6.8(c) below), Seller shall comply with, and cause the
Subsidiary to comply with, all applicable laws, rules, regulations and orders in
all material respects.
6.6 Insurance. Until the end of the Exclusivity Period (as defined in
Section 6.8(c) below), each of Seller and the Subsidiary shall maintain
insurance by reputable insurers
16
<PAGE> 17
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practices. Seller will
obtain and keep in effect key man life insurance, naming the Company as
beneficiary, with respect to Amir Kishon and Asaf Evenhaim in the amount of
$1,000,000 each.
6.7 Intellectual Property Rights. Unless otherwise decided by the
Company's Board of Directors, Seller shall cause all Intellectual Property
Rights, including, without limitation, technological developments, inventions,
discoveries or improvements made by employees or agents of Seller and the
Subsidiary to be fully documented in appropriate engineering form in accordance
with the prevailing industrial professional standards, and where possible and
appropriate, file and prosecute United States and foreign patent applications
relating to and protecting such developments. In addition, Seller shall use its
best efforts to cause all Intellectual Property Rights, including, without
limitation, all technological developments, inventions, discoveries or
improvements made by any employee of Seller or the Subsidiary to be owned by
Seller and, where possible and appropriate, obtain legal protection for the
benefit of Seller with respect to such property.
6.8 Acquisition or Licensing Proposals. (a) Seller agrees that neither
it nor the Subsidiary nor any of the officers and directors of it or the
Subsidiary shall and that it shall direct and use its best efforts to cause its
and the Subsidiary's representatives not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to (i) a merger, reorganization, share exchange,
consolidation or similar transaction involving any Seller Competitor (as defined
below), or any purchase of, or tender offer for, 15% or more of the equity
securities of it or the Subsidiary or 15% or more of its and the Subsidiary's
assets (based on the fair market value thereof) taken as a whole by any Medscape
Competitor (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or (ii) a licensing agreement with any Medscape
Competitor with respect to its Intellectual Property Rights (any such proposal
or offer being hereinafter referred to as a "Licensing Proposal"). Seller
further agrees that neither it nor the Subsidiary nor any of the officers and
directors of it or the Subsidiary shall, and that it shall direct and use its
best efforts to cause its representatives not to, directly or indirectly, have
any discussions with or provide any confidential information or data to any
person relating to an Acquisition Proposal or Licensing Proposal or engage in
any negotiations concerning an Acquisition Proposal or Licensing Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal or Licensing Proposal. Seller agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal or
Licensing Proposal. Seller also agrees that it will promptly request each person
that has heretofore executed a confidentiality agreement in connection with its
consideration of any Acquisition Proposal or Licensing Proposal to return all
confidential
17
<PAGE> 18
information heretofore furnished to such person by or on behalf of it or the
Subsidiary. For the purposes of this Agreement, a "Medscape Competitor" is as
defined in Schedule 6.8 attached hereto..
(b) Seller agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.8.
(c) The obligations of Seller and the Subsidiary under this
Section 6.8 shall expire on September 30, 1999; provided, however, that the
obligations of Seller under this Section 6.8 shall continue until October 31,
1999, with respect to the following persons: WebMD, Healtheon and InteliHeatlh.
The period through October 31, 1999 shall be called the "Exclusivity Period".
6.9 Warrants and Option. Seller hereby undertakes to use its
best efforts to ensure that, by Closing, or as soon as practicable thereafter,
all outstanding warrants and options to purchase shares of the Company as at the
date of Closing shall be evidenced by agreements executed in writing.
7. EXERCISE OF PRE-EMPTION RIGHTS
7.1 Pre-emption Rights. It is hereby clarified that the Shares
issued hereunder to those Purchasers other than Medscape, are issued pursuant
to, and in full satisfaction of, their rights of pre-emption with respect to the
issuance of the Shares to Medscape and such Purchasers hereby waive any further
rights of pre-emption with respect to such issuance to Medscape that they may
have.
8. MISCELLANEOUS
8.1 Expenses. Each party will pay all of its own expenses in connection
with the negotiation of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated hereby.
8.2 Further Assurance. Purchasers and Seller covenant and agree to take
any and all such further action and to execute, acknowledge and deliver such
instruments, documents and agreements as the other party hereto may reasonably
request to effectuate, consummate or confirm the transactions contemplated
hereby.
8.3 Amendment and Waiver. This Agreement may be amended only in a
writing signed by the parties hereto. Any provision of this Agreement may be
waived by the party entitled to the benefit thereof only in a writing executed
by the party against whom such waiver is sought to be enforced. No waiver shall
be deemed a waiver of any other provision of this Agreement,
18
<PAGE> 19
and no waiver of a breach hereunder shall be deemed a waiver of any other or
subsequent breach of this Agreement.
8.4 Notice. All notices, demands and other communications to be given
or delivered hereunder shall be in writing and will be deemed to have been given
if personally delivered, sent by overnight courier or telecopied (in each such
case delivery will be effective upon receipt) or mailed by certified mail,
postage prepaid, return receipt requested (delivery will be effective three days
after the date of mailing) to the addresses indicated below or to such other
addresses as the parties may specify on notice as herein provided:
If to Medscape:
Medscape, Inc.
134 West 29th Street
New York, New York 10001-5399
Attention: Mr. Paul Sheils
President and Chief Operating Officer
Telecopier: (212) 760-3140
With a copies to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
Attention: Jeffrey E. LaGueux, Esq.
Telecopier: (212) 336-2222
and
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem, Israel
Attention: Barry Levenfeld, Esq.
Telecopier: (972-2) 623-9236
If to Seller:
Softwatch Ltd.
1 Ta'as Street
19
<PAGE> 20
Ramat Gan, Israel
Attention: Amir Kishon
Telecopier: (972-3) 751-1732
With a copy to:
Goldfarb, Levy, Eran & Co.
Eliahu House
2 Ibn Gvirol Street
Tel Aviv 64077, Israel
Attention: Barak S. Platt
Telecopier: (972-3) 695-4344
If to Minols, Ltd:
Minols Ltd.
84 Moraia Blvd.
PO Box 7360
Haifa, 31072, Israel
Attention: Edwin Slonim
If to A. Heifetz:
A. Heifetz
22 Kanfei Nesharim
Jerusalem 95464
Attention: A Heifetz
If to Kraft Group LLC:
Kraft Group LLC
One Boston Place, 34th Floor
Boston, Massachusetts, 02108
Attention: Robert K. Kraft/Jonathan A. Kraft
With a copy to:
20
<PAGE> 21
Binham Dana LLP
150 Federal Street
Boston, Massachusetts, 02101
Attention: David L. Engel Esq./
Jonathan K. Bernstein Esq.
8.5 Binding Agreement; Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. No Purchaser will
be entitled to assign any of its rights and obligations hereunder to any third
party without the prior written consent of Seller which may be granted or
withheld in the sole and absolute discretion of Seller.
8.6 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
8.7 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement and all provisions of this Agreement will be enforced and construed as
if no captions had been used in this Agreement.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which need not contain signatures of more than one party,
but all such counterparts taken together will constitute one and the same
instrument. Signatures may be exchanged by telecopy, with original signatures to
follow. Each party to this Agreement agrees that it will be bound by its own
telecopied signature and that it accepts the telecopied signatures of the other
party to this Agreement.
8.9 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Israel, without reference
to the choice of law provisions thereof.
[Remainder of the page intentionally left blank]
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Share
Purchase Agreement to be executed and delivered on their behalf as of the day
and year first above written.
SOFTWATCH LTD. MEDSCAPE, INC.
by: /s/ Amir Kishon by: /s/ Paul T. Sheils
--------------------- ---------------------
name : Amir Kishon name: Paul T. Sheils
------------------ ---------------------
title: CEO and President title: President and CEO
------------------ ---------------------
KRAFT GROUP LLC MINOLS LTD.
by: /s/ Robert Kraft by: /s/ S. Slonim
--------------------- ---------------------
name: Robert Kraft name: S. Slonim
------------------ ---------------------
title: title: CEO
------------------ ---------------------
/s/ A. Heifetz
- -------------------------
A. HEIFETZ
22
<PAGE> 23
Exhibits and Schedules
Exhibit A Restated Articles
Exhibit B No Sale Undertaking
Exhibit C License Agreement
Exhibit D Opinion of Counsel
Exhibit E Registration Rights Agreement
Schedule 1 The Purchasers and Number of Shares Purchased
by Each
Schedule 2.3.1 Bring Down Certificate
Schedule 2.3.3 Board of Directors Resolution
Schedule 2.3.4 Shareholders Resolution
Schedule 2.3.10 Healthcourt Letter
Schedule 3.3 Capitalization
Schedule 3.10 Agreements
Schedule 3.13 Intellectual Property
23
<PAGE> 24
Schedule 3.19 Related Party Transactions
Schedule 3.21 Insurance
Schedule 3.22 Information Technology
Schedule 3.23 Contracts
Schedule 3.24 Employees
Schedule 6.1.3 Seller Competitors
Schedule 6.8 Medscape Competitors
24
<PAGE> 25
SCHEDULE 1: THE PURCHASERS
<TABLE>
<CAPTION>
NAME PURCHASE PRICE FOR PREFERRED SHARES SERIES A PREFERRED SHARES
- ---- ----------------------------------- -------------------------
<S> <C> <C>
Medscape, Inc. $2,999,954 1,040,170
Kraft Group LLC $ 122,998 42,647
Minols Ltd. $ 5,998 2,080
A. Heifetz $ 1,799 624
</TABLE>
25
<PAGE> 26
Exhibits and Schedules
Exhibit A Restated Articles
Exhibit B No Sale Undertaking
Exhibit C License Agreement
Exhibit D Opinion of Counsel
Exhibit E Registration Rights Agreement
Schedule 1 The Purchasers and Number of Shares Purchased by Each
Schedule 2.3.1 Bring Down Certificate
Schedule 2.3.3 Board of Directors Resolution
Schedule 2.3.4 Shareholders Resolution
Schedule 2.3.10 Healthcourt Letter
Schedule 3.3 Capitalization
Schedule 3.10 Agreements
Schedule 3.13 Intellectual Property
Schedule 3.19 Related Party Transactions
Schedule 3.21 Insurance
Schedule 3.22 Information Technology
Schedule 3.23 Contracts
Schedule 3.24 Employees
Schedule 6.1.3 Seller Competitors
Schedule 6.8 Medscape Competitors
<PAGE> 27
THE COMPANIES ORDINANCE
A COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
SOFTWATCH LTD.
PRELIMINARY
1. Second Schedule Excluded
The regulations contained in the second schedule to the Company's
Ordinance (New Version) 5743-1983 (the "Companies Ordinance") shall not apply to
the Company.
2. Interpretation
(a) Unless the subject or the context otherwise requires: words
and expressions defined in the Companies Ordinance in force on the date when
these Articles or any amendment thereto, as the case may be, first became
effective shall have the same meanings herein; words and expressions importing
the singular shall include the plural and vice versa; words and expressions
importing the masculine gender shall include the feminine gender; and words and
expressions importing persons shall include bodies corporate.
(b) The captions in these Articles are for convenience only and
shall not be deemed a part hereof or affect the construction of any provision
hereof.
3. Private Company
The Company is a private company, and accordingly:
(a) the number of members for the time being of the Company
(exclusive of persons who are in the employment of the Company and of persons
who having been formerly in the employment of the Company were, while in such
employment, and have continued after termination of such employment to be,
members of the Company), shall not exceed fifty (50), but where two or more
persons jointly own one or more shares in the Company, they shall, for the
purposes of this Article, be treated as a single member;
(b) any invitation to the public to subscribe for any shares or
debentures or debenture stock of the Company is hereby prohibited; and
(c) the right to transfer shares in the Company shall be
restricted as hereinafter provided.
<PAGE> 28
SHARE CAPITAL
4. Share Capital
The share capital of the Company is One Hundred Twenty Thousand New
Israeli Shekels (NIS 120,000) divided into 10,914,479 (ten million nine hundred
fourteen thousand four hundred seventy nine) Ordinary Shares of a nominal value
of One Agora (NIS 0.01) each ("Ordinary Shares") and 1,085,521 (one million
eighty five thousand five hundred twenty one) Series A Preferred Shares of a
nominal value of One Agora (NIS 0.01) each ("Preferred Shares"). The Preferred
Shares shall have the rights, preference, privileges and restrictions granted to
and imposed on Preferred Shares as may be specifically indicated herein and/or
as the context may so reasonably require. The Ordinary Shares shall have all
residual rights not specifically associated with the Preferred Shares.
5. The Preferred Shares
5.1 Dividend Provisions. The holders of Preferred Shares shall be
entitled to receive dividends, in respect of their holdings on an as-converted
basis as of the record date for such distribution.
5.2 Liquidation Preference
5.2.1 In the event of (i) any dissolution of the Company,
followed by the liquidation and winding up of the Company, (ii) any liquidation
or winding up of the Company as a result of any bankruptcy, reorganization or
similar proceedings, (iii) any foreclosure by creditors of substantially all of
the assets of, or equity interests in the Company, or (iv) any deemed
liquidation, dissolution or winding up of the Company pursuant to subarticle
5.2.4, the holders of Preferred Shares shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Company to the
holders of Ordinary Shares by reason of their ownership thereof, an amount per
share in US dollars equal to the greater of: (i) the amount paid or credited as
paid for the purchase of such Preferred Share (the "Original Issue Price"), plus
all declared but unpaid dividends; or (ii) the amount which would be received if
the Preferred Share was converted into an Ordinary Share (the "Series A
Liquidation Preference").
5.2.2 If the assets and funds distributed to the holders of
the Preferred Shares shall be insufficient to permit payment to such holders of
the full Series A Liquidation Preference, then the entire assets or property of
the Company legally available for distribution shall be distributed ratably to
the holders of the Preferred Shares in proportion to the aggregate Series A
Liquidation Preference.
5.2.3 After payment to the holders of the Preferred Shares
in the amounts set forth in subarticle 5.2.1, the entire remaining assets and
funds of the Company legally available for distribution, if any, shall be
distributed among the holders of Ordinary Shares in proportion to
<PAGE> 29
the Ordinary Shares then held by them.
5.2.4 For purposes of subarticle 5.2.1, in the event of any
merger of the Company or sale of all or substantially all of the assets or
shares of the Company other than any such transaction following which the
shareholders of the Company retain by virtue of their share ownership in the
Company a majority equity interest in the surviving or successor corporation,
the holders of a majority of the Preferred Shares then outstanding shall have
the right to determine whether such transaction will be treated as a liquidation
event pursuant to Sub-article 5.2.1.
5.3 Conversion. The holders of the Preferred Shares shall have
conversion rights as follows (the "Conversion Rights"):
5.3.1 Right to Convert; Automatic Conversion
5.3.1.1 Subject to subarticle 5.3.3, each Preferred
Share shall be convertible, at the option of the holder of such share, at any
time after the date of issuance of such share, into such number of fully paid
and nonassessable Ordinary Shares of the Company as is determined by dividing
the applicable Original Issue Price for such share by the Conversion Price at
the time in effect for such share. The initial Conversion Price per Preferred
Share shall be the Original Issue Price, or US$2.8841, provided, however, that
the Conversion Prices for the Preferred Shares shall be subject to adjustment as
set forth in subarticles 5.3.3 and 5.3.4.
5.3.1.2 Each Preferred Share shall automatically be
converted into Ordinary Shares at the Conversion Price at the time in effect for
such Preferred Share (i) immediately prior to the consummation of the Company's
sale of its Ordinary Shares to the public in an underwritten public offering in
which (A) the proceeds to the Company are not less than US$10 million (net of
underwriting discounts) and (B) the offering price to the public (prior to
underwriting commissions and expenses) is at least three times the Original
Issue Price per share (subject to adjustment for share splits, share dividends,
reclassifications and like events) (a "Qualified IPO") or (ii) upon the
affirmative vote of seventy-five percent (75%) of the outstanding Preferred
Shares.
5.3.2 Mechanics of Conversion. Before any holder of
Preferred Shares shall be entitled to convert the same into Ordinary Shares the
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Company or of any transfer agent for the Preferred Shares,
and shall give written notice by registered mail, postage prepaid, to the
Company at its principal corporate office, of the election to convert the same
and shall state therein the name or names of any nominee for such holder in
which the certificate or certificates for shares of Ordinary Shares are to be
issued. The Company shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Preferred Shares, or to the nominee or nominees
of such holder, a certificate or certificates for the number of Ordinary Shares
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the Preferred
<PAGE> 30
Shares to be converted, and the person or persons entitled to receive the
Ordinary Shares issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Ordinary Shares as of such date. If the
conversion is in connection with an underwritten public offering of securities,
the conversion may, at the option of any holder tendering Preferred Shares for
conversion, be conditioned upon the closing of the sale of securities pursuant
to such offering, in which event the person(s) entitled to receive the Ordinary
Shares issuable upon such conversion of the Preferred Shares shall not be deemed
to have converted such Preferred Shares until immediately prior to the closing
of such sale of securities.
5.3.3 Conversion Price Adjustments of Preferred Shares. The
Conversion Price of the Preferred Shares shall be subject to adjustment from
time to time as follows:
5.3.3.1 Adjustment of Conversion Price Upon Issuance
of Additional Ordinary Shares. Upon each bona fide issuance by the Company of
any Additional Ordinary Shares (including Additional Ordinary Shares deemed to
be issued pursuant to subarticle 5.3.3.1.5) at a price per share less than the
Conversion Price, the Conversion Price of the Preferred Shares will be reduced
to an amount equal to the existing Conversion Price multiplied by a fraction (i)
the numerator of which is the sum of (A) the total number of shares of Ordinary
Shares outstanding (on a fully-diluted basis after giving effect to all options
and warrants to purchase Ordinary Shares and assuming the conversion into
Ordinary Shares of all Preferred Shares or convertible securities) plus (B) the
number of Additional Ordinary Shares that can be purchased at the existing
Conversion Price for the total consideration received for the issuance of
Additional Ordinary Shares and (ii) the denominator of which is the number of
outstanding Ordinary Shares on a fully diluted basis and on an as converted
basis, plus the number of Additional Ordinary Shares issued in the new issuance.
The formula can be expressed algebraically as follows:
P' = P x N + np/P
--------
N + n
where:
N = Number of Ordinary Shares outstanding prior to the
dilutive issuance of shares (on a fully-diluted basis after
giving effect to all options and warrants to purchase Ordinary
Shares and assuming the conversion into Ordinary Shares of all
Preferred Shares or convertible securities)
P = Conversion Price of the Preferred Shares prior to the
dilutive issuance
P'= New Conversion Price of the Preferred Shares after the
dilutive issuance
n= Number of Additional Ordinary Shares issued in the dilutive
issuance
p= Price per share in the dilutive issuance
<PAGE> 31
5.3.3.1.2 No adjustments of the Conversion
Price for the Preferred Shares shall be made in an amount less than one cent per
share provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. No adjustment of such Conversion Price pursuant to subarticles
5.3.3.1.1 through 5.3.3.1.6 shall be made if it has the effect of increasing the
Conversion Price above the Conversion Price in effect immediately prior to such
adjustment.
5.3.3.1.3 In the case of the issuance of
Additional Ordinary Shares for cash, the consideration shall be deemed to be the
amount of cash received therefor after giving effect to any discounts or
commissions, paid or incurred by the Company for any underwriting or otherwise
in connection with the issuance and sale thereof.
5.3.3.1.4 In the case of the issuance of
Additional Ordinary Shares for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to be the fair value
thereof as determined (in good faith) by the Board of Directors.
5.3.3.1.5 In the case of the issuance of
warrants or options to purchase or rights to subscribe for Additional Ordinary
Shares, or securities by their terms convertible into or exchangeable for
Additional Ordinary Shares or options or warrants to purchase or rights to
subscribe for such convertible or exchangeable securities, the aggregate maximum
number of Additional Ordinary Shares deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including without limitation
the passage of time, but without taking into account potential antidilution
adjustments) of such options or warrants to purchase or rights to subscribe for
Additional Ordinary Shares or upon conversion or an exchange of such convertible
or exchangeable securities shall be deemed to have been issued at the time full
consideration for such options or warrants to purchase or securities by their
terms convertible into or exchangeable for or rights to subscribe for Additional
Ordinary Shares have been paid for at a consideration equal to the consideration
(determined in the manner provided in subarticles 5.3.3.1.3 and 5.3.3.1.4), if
any, received by the Company upon the issuance of such options, warrants or
rights or securities plus any additional consideration payable to the Company
pursuant to the term of such options or rights or securities (without taking
into account potential antidilution adjustments) for the Additional Ordinary
Shares covered thereby.
5.3.3.1.6 For purposes of subarticle 5.3.3.1
hereof, the consideration for any Additional Ordinary Shares shall be taken into
account at the U.S. dollar equivalent thereof, on the day such Additional
Ordinary Shares are issued or deemed to be issued pursuant to subarticle
5.3.3.1.5.
5.3.3.2 "Additional Ordinary Shares" shall mean
shares of any class issued (or deemed to have been issued pursuant to
subarticle_5.3.3.1.5) by the Company other than:
<PAGE> 32
5.3.3.2.1 Ordinary Shares issued pursuant to
a transaction described in subarticles 5.3.3.3, 5.3.3.4, 5.3.3.5, 5.3.4 or 5.3.5
hereof;
5.3.3.2.2 Ordinary Shares or any other
securities pursuant to a share option or other incentive plan or as part of a
compensation arrangement to an officer, employee, director or consultant
approved by the Board of Directors;
5.3.3.2.3 Ordinary Shares issued on
conversion of Preferred Shares;
5.3.3.2.4 Ordinary Shares issued in the
Company's Qualified IPO;
5.3.3.2.5 Ordinary Shares issued pursuant to
a merger or acquisition that is approved by the Board of Directors.
5.3.3.3 Adjustment of Conversion Price Upon
Subdivision or Combination of Ordinary Shares. If the Company shall subdivide or
combine its Ordinary Shares, the Conversion Price shall be proportionately
reduced, in case of subdivision of shares, as at the effective date of such
subdivision, or if the Company shall fix a record date for the purpose of so
subdividing, as at such record date, whichever is earlier, or shall be
proportionately increased, in the case of combination of shares, as at the
effective date of such combination or, if the Company shall fix a record date
for the purpose of so combining, as at such record date, whichever is earlier.
5.3.3.4 Adjustment of Conversion Price Upon Share
Dividend Declaration. If the Company at any time shall pay a dividend payable in
additional Ordinary Shares or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
Ordinary Shares (hereinafter referred to as "Ordinary Share Equivalents"), then
the Conversion Price shall be adjusted as at the date the Company shall fix as
the record date for the purpose of receiving such dividend (or if no such record
date is fixed, as at the date of such payment), to that price determined by
multiplying the Conversion Price in effect immediately prior to such record date
(or if no such record date is fixed then immediately prior to such payment) by a
fraction, (a) the numerator of which shall be the total number of Ordinary
Shares outstanding and those issuable with respect to such Ordinary Share
Equivalents being determined from time to time in the manner provided for deemed
issuance in subarticle 5.3.3.1.5) immediately prior to such dividend, and (b)
the denominator of which shall be the total number of Ordinary Shares
outstanding and those issuable with respect to such Ordinary Share Equivalents
(determined as aforesaid) immediately after such dividend (plus, in the event
that the Company paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Company issued fractional
shares in connection with such dividend).
5.3.3.5 If the Company at any time shall make a
distribution of its assets to
<PAGE> 33
the holders of its Ordinary Shares as a dividend in liquidation or partial
liquidation or by way of return of capital or other than as a dividend payable
out of earnings or surplus legally available for dividends, the holders of
Preferred Shares shall, upon exercise of the Conversion Rights, be entitled to
receive, in addition to the number of Ordinary Shares receivable thereupon, and
without payment of any additional consideration therefor, a sum equal to the
amount of such assets as would have been payable to such holder as owner of that
number of Ordinary Shares of the Company receivable by exercise of the
Conversion Rights had such holder been the holder of record of such Ordinary
Shares on the record date for such distribution; and an appropriate provision
therefor shall be made a part of any such distribution. Notwithstanding the
foregoing, this subarticle 5.3.3.5 shall not apply where an equivalent
distribution is declared for the benefit of the Preferred Shares (calculated on
the basis of the number of Ordinary Shares into which such Preferred Shares
could then be converted) at the same time as the dividend is declared for the
Ordinary Shares.
5.3.4 Other Distributions. In the event the Company shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options, warrants or rights not referred to in subarticle 5.3.3.3
then, in each such case for the purpose of this subarticle 5.3.4, the holders of
the Preferred Shares shall be entitled to receive such distribution in respect
of their holdings, on an as-converted basis as of the record date for such
distribution.
5.3.5 Recapitalizations. If at any time or from time to
time there shall be a recapitalization of the Ordinary Shares (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Article or Article 5.4), provision shall be made so that the
holders of the Preferred Shares shall thereafter be entitled to receive upon
conversion of the Preferred Shares the number of Ordinary Shares or other
securities or property of the Company or otherwise, to which a holder of
Ordinary Shares deliverable upon conversion would have been entitled immediately
prior to such recapitalization. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Article with respect to the
rights of the holders of the Preferred Shares after the recapitalization to the
end that the provisions of this Article (including adjustment of the Conversion
Price then in effect and the number of shares issuable upon conversion of the
Preferred Shares) shall be applicable after that event as nearly equivalent as
may be practicable.
5.3.6 No Impairment. The Company will not, by amendment of
its Articles of Association or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Article 5 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Shares against impairment.
5.3.7 No Fractional Shares and Certificate as to
Adjustments.
<PAGE> 34
5.3.7.1 No fractional shares shall be issued upon
conversion of the Preferred Shares, and the aggregate number of Ordinary Shares
to be issued of to each converting holder shall be rounded to the nearest whole
share.
5.3.7.2 Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Preferred Shares pursuant to this
Article 5, the Company, at its expense, shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Preferred Shares a certificate setting forth each adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall furnish or cause to be furnished to
such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of Ordinary Shares and the amount, if any, of other property which at the time
would be received upon the conversion of a Preferred Share.
5.3.8 Notices of Record Date. In the event of any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (including a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of any class or any
other securities or property, or to receive any other right, the Company shall
mail to each holder of Preferred Shares, at least 20 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
5.3.9 Notices. Any notice required by the provisions of
this Article 5 to be given to the holders of Preferred Shares shall be deemed
given 10 business days after being deposited in the Israeli mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of this Company; provided that, in the case of shareholders located
outside of Israel, such notice shall be sent by airmail or by telex or
telecopier or other rapid form of written communication, and confirmation of
such notice shall be sent by airmail.
5.4 Reclassification
5.4.1 In case of any reclassification or change of
outstanding securities issuable upon exercise of the Conversion Rights (other
than a change in nominal value, or as a result of a subdivision or combination),
the Company shall, without payment of any additional consideration therefor,
issue to the holders of Preferred Shares new Preferred Shares, as applicable,
with the same respective rights, preferences, privileges and restrictions
granted to and imposed on the Preferred Shares in these Articles but providing
that the holder of the new Preferred Shares shall have the right to exercise the
conversion rights granted by such new Preferred Shares and procure upon such
exercise of such conversion rights, in lieu of each Ordinary Share theretofore
issuable upon exercise of the Conversion Rights of the Preferred Shares, the
kind and amount of shares of stock, other securities, money and assets
receivable upon such reclassification or change by a holder of one Ordinary
Share issuable upon exercise of the Conversion Rights had they been exercised
immediately prior to such reclassification or
<PAGE> 35
change. The provisions of this subarticle 5.4.1 shall similarly apply to
successive reclassifications and changes.
5.4.2 The Company shall give each holder of record of
Preferred Shares written notice of such impending transaction not later than
twenty-one (21) days prior to the shareholders' meeting called to approve such
transaction, or twenty-one (21) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Article 5.4, and the Company shall thereafter give such holders prompt
notice of any material changes.
5.4.3 The provisions of this Article 5.4 are in addition to
the provisions of Article 5.3 and the protective provisions of Article 5.6
hereof. Nothing in this Article 5.4 shall prevent the holders of the Preferred
Shares from exercising the rights to convert the Preferred Shares into Ordinary
Shares prior to the conclusion of a transaction contemplated herein.
5.5 Voting Rights. The holder of each share of the Preferred
Shares shall have the right to one vote for each share of Ordinary Shares into
which such Preferred Shares could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Ordinary
Shares, and shall be entitled, notwithstanding any provision hereof, to notice
of any shareholders' meeting in accordance with the Articles of Association of
the Company, and shall be entitled to vote, together with holders of Ordinary
Shares, with respect to any question upon which holders of Ordinary Shares have
the right to vote.
5.6 Specific Voting Provisions
5.6.1 Notwithstanding any other provision of these Articles
to the contrary, any action or resolution of the Company's general meeting, or
of the Company's Board of Directors or any committee thereof, as applicable,
regarding any of the following issues shall require the consent of Medscape,
Inc., a Delaware corporation ("Medscape") and, in addition and if applicable,
the consent of a Director appointed by Medscape as well. The consent of Medscape
and/or a Director appointed by Medscape as set forth above shall be required (i)
with respect to sub-articles (b), (c), and (e) below, until the earlier of (x)
the closing of a Qualified IPO, and (y) Medscape ceasing to hold at least 7% of
the issued and outstanding share capital of the Company (on an as converted
basis); and (ii) with respect to sub-articles (a), (d) and (f) through (i)
below, until October 31, 1999 (the "Exclusivity Period"):
(a) any increase in the number of authorized
share capital of the Company;
(b) authorization, creation or issue of any
shares of any class or series of shares or any other securities convertible into
equity securities of the Company, or
<PAGE> 36
reclassification of any existing shares to equity securities or any of the
securities convertible into equity securities, with a liquidation priority
superior to the Preferred Shares;
(c) declaration or payment of any dividends on
the Company's Ordinary Shares without making a similar payment with respect to
the Company's Preferred Shares;
(d) the entering into of a transaction that
would occasion the sale of all or substantially all of the Company's assets or
the acquisition of the Company by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of the Company
for securities or consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary, unless the shareholders of the Company hold at
least 50% of the voting power of the surviving corporation in such a
transaction.
(e) amendment of the Memorandum of Association
or Articles of Association of the Company in a manner that adversely affects the
rights attached only to the Preferred Shares (as compared to the rights of other
classes of shares);
(f) guaranty by the Company of any material
obligation of any third party except in the ordinary course of business;
(g) creation of a mortgage, pledge or security
interest in, or the granting of consent to any affiliate for the creation of a
mortgage, pledge or security interest in, all or substantially all of the assets
of the Company or of any affiliate, as the case may be;
(h) (i) any material change to the compensation
of management personnel of the Company from that being provided as of [Closing
Date]; and (ii) where the aggregate compensation to be provided to all
management personnel is to be in excess of an annual amount of $1,500,000; or
(i) establishment of a committee of the Board of
Directors or establishment of the board of directors of a subsidiary without a
representative of the holders of the Preferred Shares.
5A. Increase of Share Capital
(a) Subject to the provisions of Article 5.6, the Company may,
from time to time, by Special Resolution, whether or not all the shares then
authorized have been issued, and whether or not all the shares theretofore
issued have been called up for payment, increase its share capital by the
creation of new shares. Any such increase shall be in such amount and shall be
divided into share of such nominal amounts, and such shares shall confer such
rights and preferences, and shall be subject to such restrictions, as such
Special Resolution shall provide.
(b) Except to the extent otherwise provided in such Special
Resolution, such new
<PAGE> 37
shares shall be subject to all the provisions applicable to the shares of the
original capital.
6. Special Rights; Modifications of Rights
(a) Subject to the provisions of the Memorandum of Association of
the Company, and without prejudice to any special rights previously conferred
upon the holders of existing shares in the Company, the Company may, from time
to time, by Special Resolution, provide for shares with such preferred or
deferred rights or rights of redemption or other special rights and/or such
restrictions, whether in regard to dividends, voting, repayment of share capital
or otherwise, as may be stipulated in such Special Resolution.
(b) (i) If at any time the share capital is divided into
different classes of shares, the rights attached to any class, unless otherwise
provided by these Articles, may be modified or abrogated by the Company, by
Special Resolution, subject to the consent in writing of the holders of
seventy-five per cent (75%) of the issued shares of such class or the sanction
of a Special Resolution passed at a separate General Meeting of the holders of
the shares of such class.
(ii) The provisions of these Articles relating to General
Meetings shall, mutatis mutandis, apply to any separate General Meeting of the
holders of the shares of a particular class, provided, however, that the
requisite quorum at any such separate General Meeting shall be one or more
members present in person or proxy and holding not less than seventy-five per
cent (75%) of the issued shares of such class.
(iii) Unless otherwise provided by these Articles, the
enlargement of an existing class of shares, or the issuance of additional shares
thereof, shall not be deemed, for purposes of this Article 6(b), to modify or
abrogate the rights attached to the previously issued shares of such class or of
any other class.
7. Consolidation, Subdivision, Cancellation and Reduction of Share Capital
(a) Subject to Article 5.6, the Company may, from time to time, by
Special Resolution (subject, however, to the provisions of Article 6(b) hereof
and to applicable law):
(i) consolidate and divide all or any of its issued or
unissued share capital into shares of larger nominal value than its existing
shares,
(ii) subdivide its shares (issued or unissued) or any of
them, into shares of smaller nominal value than is fixed by the Memorandum of
Association (subject, however, to the provisions of the Companies Ordinance),
and the resolution whereby any share is subdivided may determine that, as among
the holders of the shares resulting from such subdivision, one or more of the
shares may, as compared with the others, have any such preferred or deferred
rights or rights of redemption or other special rights, or be subject to any
such restrictions, as the Company has power to attach to unissued or new shares.
<PAGE> 38
(iii) cancel any shares which, at the date of the adoption
of such Special Resolution, have not been taken or agreed to be taken by any
person, and diminish the amount of its share capital by the amount of the shares
so cancelled, or
(iv) reduce its share capital in any manner, and with and
subject to any incident authorized, and consent required, by law.
(b) With respect to any consolidation of issued shares into shares
of larger nominal value, and with respect to any other action which may result
in fractional shares, the Board of Directors may settle any difficulty which may
arise with regard thereto, as it deems fit, including, inter alia, resort to one
or more of the following actions:
(i) determine, as to the holder of shares so
consolidated, which issued shares shall be consolidated into each share of
larger nominal value;
(ii) allot, in contemplation of or subsequent to such
consolidation or other action, such shares or fractional shares sufficient to
preclude or remove fractional share holdings;
(iii) redeem, in the case of redeemable preference shares,
and subject to applicable law, such shares or fractional shares sufficient to
preclude or remove fractional share holdings;
(iv) cause the transfer of fractional shares by certain
shareholders of the Company to other shareholders thereof so as to most
expediently preclude or remove any fractional shareholdings, and cause the
transferees to pay the transferors the fair value of fractional shares so
transferred, and the Board of Directors is hereby authorized to act as agent for
the transferors and transferees with power of substitution for purposes of
implementing the provisions of this sub-Article 7(b)(iv).
SHARES
8. Issuance of Share Certificates; Replacement of Lost Certificates
(a) Share certificates shall be issued under the seal of the
rubber stamp of the Company and shall bear the signatures of two Directors (or
if there be only one Director, the signature of such Director), or of any other
person or persons authorized thereto by the Board of Directors.
(b) Each member shall be entitled to one numbered certificate for
all the shares of any class registered in his name, and if the Board of
Directors so approves, to several certificates, each for one or more of such
shares. Each certificate may specify the serial numbers of the shares
represented thereby and may also specify the amount paid up thereon.
<PAGE> 39
(c) A share certificate registered in the names of two or more
persons shall be delivered to the person first named in the Registrar of Members
in respect of such co-ownership.
(d) If a share certificate is defaced, lost or destroyed, it may
be replaced, upon payment of such fee, and upon the furnishing of such evidence
of ownership and such indemnity, as the Board of Directors may think fit.
9. Registered Holder
Except as otherwise provided in these Articles, the Company shall be
entitled to treat the registered holder of any share as the absolute owner
thereof, and, accordingly, shall not, except as ordered by a court of competent
jurisdiction, or as required by statute, be bound to recognize any equitable or
other claim to, or interest in such share on the part of any other person.
10. Allotment of Shares
(a) The unissued shares from time to time shall be under the
control of the Board of Directors, who shall have the power to allot, subject to
any agreement of the Company, shares or otherwise dispose of them to such
persons, on such terms and conditions (including inter alia terms relating to
calls as set forth in Article 12(f) hereof), and either at nominal value or at a
premium, or, subject to the provisions of the Companies Ordinance, at a
discount, and at such times, as the Board of Directors may think fit, and the
power to give to any person the option to acquire from the Company any shares,
either at par or at a premium, or, subject as aforesaid, at a discount, during
such time and for such consideration as the Board of Directors may think fit.
(b) Notwithstanding the provisions of Article 10(a), the Company
will not, prior to the closing of a Qualified IPO, issue any Ordinary Shares,
any rights to subscribe for or to purchase, or any options or warrants for the
purchase of, Ordinary Shares or any other shares or other securities convertible
into or exchangeable for Ordinary Shares or any Ordinary Shares issued upon
exercise thereof (in each case, a "Ordinary Share Equivalent") for a purchase
price of $2.8841 or more per Ordinary Share (appropriately adjusted for any
subsequent change in the capitalization of the Company effectuated after the
date hereof) without first complying with the provisions of this Article 10(b).
The Company grants to each holder of Preferred Shares, to Kraft Group LLC and to
the HiTec Investors Group (collectively, the "Designated Shareholders") the
preemptive right to purchase its pro rata portion of any Ordinary Shares or
Ordinary Share Equivalents that the Company may, from time to time, propose to
sell or issue. In the event that the Company proposes to issue or sell any
additional Ordinary Shares or Ordinary Share Equivalents, it shall give each of
the Designated Shareholders written notice of its intention, describing the
price and terms upon which the Company proposes to issue or sell such Ordinary
Shares or Ordinary Share Equivalents. Each Designated Shareholder shall have
thirty (30) days from the date of receipt of any such notice to elect to
purchase up to its pro rata share of the Ordinary Shares or Ordinary Share
Equivalents, as the case may be, being issued or sold for the price and upon the
terms specified in the notice from the Company by giving written notice (a
"Preemptive Rights Notice") to the Company and stating therein the quantity of
Ordinary Shares
<PAGE> 40
or Ordinary Share Equivalents to be purchased by such Designated Shareholder.
The closing for any purchase by a Designated Shareholder pursuant to this
Article 10(b) shall occur within thirty (30) days from the date of the receipt
by the Company of the Preemptive Rights Notice at a place and time chosen by the
Designated Shareholder. At such closing the Designated Shareholder will deliver
the purchase price to the Company and the Company will issue and deliver the
certificate(s) representing the Ordinary Shares or Ordinary Share Equivalents,
as the case may be, to be issued to such Designated Shareholder. Notwithstanding
the foregoing, the aforesaid rights of the Designated Shareholders shall not
apply to Ordinary Shares and Ordinary Share Equivalents issued or issuable: (i)
upon conversion of Preferred Shares; (ii) granted to employees, consultants, or
directors pursuant to stock option, stock grant, stock purchase, or similar
plans and arrangements approved by the Board of Directors; (iii) as a dividend
or other distribution; (iv) in a merger or acquisition that is approved by the
Board of Directors; or (v) upon exercise or conversion of securities with
respect to which the Designated Shareholders previously had an opportunity to
exercise the pre-emptive right pursuant to this Article 10(b).
11. Payment in Installments
If by the terms of allotment of any share, the whole or any part of the
price thereof shall be payable in installments, every such installment shall,
when due, be paid to the Company by the then registered holder(s) of the share
of the person(s) entitled thereto.
12. Calls on Shares
(a) The Board of Directors may, from time to time, make such calls
as it may think fit upon members in respect of any sum unpaid in respect of
shares held by such members which is not, by the terms of allotment thereof or
otherwise, payable at a fixed time, and each member shall pay the amount of
every call so made upon him (and of each installment thereof if the same is
payable in installments), to the person(s) and at the time(s) and place(s)
designated by the Board of Directors, as any such time(s) may be thereafter
extended and/or such person(s) or place(s) changed. Unless otherwise stipulated
in the resolution of the Board of Directors (and in the notice hereafter
referred to), each payment in response to a call shall be deemed to constitute a
pro rata payment on account of all shares in respect of which such call was
made.
(b) Notice of any call shall be given in writing to the member(s)
in question not less than fourteen (14) days prior to the time of payment,
specifying the time and place of payment, and designating the person to whom
such payment shall be made, provided, however, that before the time for any such
payment, the Board of Directors may, by notice in writing to such member(s),
revoke such call in whole or in part, extend such time, or alter such person
and/or place. In the event of a call payable in installments, only one notice
thereof need be given.
(c) If, by the terms of allotment of any share or otherwise, any
amount is made payable at any fixed time, every such amount shall be payable at
such time as if it were a call duly made by the Board of Directors and of which
due notice had been given, and all the provisions herein contained with respect
to such calls shall apply to each such amount.
<PAGE> 41
(d) The joint holders of a share shall be jointly and severally
liable to pay all calls in respect thereof and all interest payable thereon.
(e) Any amount unpaid in respect of a call shall bear interest
from the date on which it is payable until actual payment thereof, at such rate
(not exceeding the then prevailing debitory rate charged by leading commercial
banks in Israel), and at such time(s) as the Board of Directors may prescribe.
(f) Upon the allotment of shares, the Board of Directors may
provide for differences among the allottees of such shares as to the amount of
calls and/or the times of payment thereof.
13. Prepayment
With the approval of the Board of Directors, any member may pay to the
Company any amount not yet payable in respect of his shares, and the Board of
Directors may approve the payment of interest on any such amount until the same
would be payable if it had not been paid in advance, at such rate and time(s) as
may be approved by the Board of Directors. The Board of Directors may at any
time cause the Company to repay all or any part of the money so advanced,
without premium or penalty. Nothing in this Article 13 shall derogate from the
right of the Board of Directors to make any call before or after receipt by the
Company of any such advance.
14. Forfeiture and Surrender
(a) If any member fails to pay any amount payable in respect of a
call, or interest thereon as provided for herein, on or before the day fixed for
payment of the same, the Company, by resolution of the Board of Directors, may
at any time thereafter, so long as the said amount or interest remains unpaid,
forfeit all or any of the shares in respect of which said call had been made.
Any expense incurred by the Company in attempting to collect any such amount or
interest, including, inter alia, attorneys' fees and costs of suit, shall be
added to, and shall, for all purposes (including the accrual of interest
thereon), constitute a part of the amount payable to the Company in respect of
such call.
(b) Upon the adoption of a resolution of forfeiture, the Board of
Directors shall cause notice thereof to be given to such member, which notice
shall state that, in the event of the failure to pay the entire amount so
payable within a period stipulated in the notice (which period shall not be less
than fourteen (14) days and which may be extended by the Board of Directors),
such shares shall be ipso facto forfeited, provided, however, that, prior to the
expiration of such period, the Board of Directors may nullify such resolution of
forfeiture, but no such nullification shall estop the Board of Directors from
adopting a further resolution of forfeiture in respect of the non-payment of the
same amount.
(c) Whenever shares are forfeited as herein provided, all
dividends theretofore declared in respect thereof and not actually paid shall be
deemed to have been forfeited at the
<PAGE> 42
same time.
(d) The Company, by resolution of the Board of Directors, may
accept the voluntary surrender of any share.
(e) Any share forfeited or surrendered as provided herein shall
become the property of the Company, and the same, subject to the provisions of
these Articles, may be sold, re-allotted or otherwise disposed of as the Board
of Directors thinks fit.
(f) Any member whose shares have been forfeited or surrendered
shall cease to be a member in respect of the forfeited or surrendered shares,
but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the
Company, all calls, interest and expenses owing upon or in respect of such
shares at the time of forfeiture or surrender, together with interest thereon
from the time of forfeiture or surrender until actual payment, at the rate
prescribed in Article 12(e) above, and the Board of Directors, in its
discretion, may enforce the payment of such moneys, or any part thereof, but
shall not be under any obligation to do so. In the event of such forfeiture or
surrender, the Company, by resolution of the Board of Directors, may accelerate
the date(s) of payment of any or all amounts then owing by the member in
question (but not yet due) in respect of all shares owned by such member, solely
or jointly with another, and in respect of any other matter or transaction
whatsoever.
(g) The Board of Directors may at any time, before any share so
forfeited or surrendered shall have been sold, re-allotted or otherwise disposed
of, nullify the forfeiture or surrender on such conditions as it thinks fit, but
no such nullification shall estop the Board of Directors from re-exercising its
powers of forfeiture pursuant to this Article 14.
15. Intentionally omitted.
16. Sale after Forfeiture or Surrender or in Enforcement of Lien
Upon any sale of shares after forfeiture or surrender or for enforcing
a lien, the Board of Directors may appoint some person to execute an instrument
of transfer of the shares so sold and cause the purchaser's name to be entered
in the Register of Members in respect of such shares, and the purchaser shall
not be bound to see to the regularity of the proceedings, or to the application
of the purchase money, and after his name has been entered in the Register of
Members in respect of such shares, the validity of the sale shall not be
impeached by any person, and the remedy of any person aggrieved by the sale
shall be in damages only and against the Company exclusively.
17. Redeemable Shares
The Company may, subject to applicable law, issue redeemable shares and
redeem the same.
18. Conversion of Shares into Stock
<PAGE> 43
(a) The Board of Directors may, with the sanction of the members
previously given by Special Resolution, convert any paid-up shares into stock,
and may, with like sanction, reconvert any stock into paid-up shares of any
denomination.
(b) The holders of stock may transfer the same, or any part thereof, in
the same manner and subject to the same regulations, as the shares from which
the stock arose might have been transferred prior to conversion, or as near
thereto as circumstances admit, provided, however, that the Board of Directors
may from time to time fix the minimum amount of stock so transferable, and
restrict or forbid the transfer of fractions of such minimum, but the minimum
shall not exceed the nominal value of each of the shares from which such stock
arose.
(c) The holders of stock shall, in accordance with the amount of stock
held by them, have the same rights and privileges as regards dividends, voting
at meetings of the Company and other matters as if they held the shares from
which such stock arose, but no such right or privilege, except participation in
the dividends and profits of the Company, shall be conferred by any such aliquot
part of such stock as would not, if existing in shares, have conferred that
right or privilege.
(d) Such of the Articles of the Company as are applicable to paid-up
shares shall apply to stock, and the words "share" and "shareholder" (or
"member") therein shall include "stock" and "stockholder."
TRANSFER OF SHARES
19. Effectiveness and Registration
(a) Except as otherwise provided in this Article 19, no transfer of
shares in the Company, and no assignment of an option to acquire such shares
from the Company, shall be effective unless the transfer or assignment has been
approved by the Board of Directors, and the Board of Directors may, either
approve or refuse to approve any such transfer or assignment, provided that such
approval shall not be unreasonably withheld.
(b) No transfer of shares shall be registered unless a proper
instrument of transfer (in form and substance satisfactory to the Board of
Directors) has been submitted to the Company, together with the share
certificate(s) and such other evidence of title as the Board of Directors may
reasonably require. Until the transferee has been registered in the Register of
Members in respect of the shares so transferred, the Company may continue to
regard the transferor as the owner thereof. The Board of Directors, may, from
time to time, prescribe a fee for the registration of a transfer.
(c) Without derogating from the provisions of Article 19(a) or (b), the
following provisions shall govern transfers of shares in the Company, except to
the extent waived in
<PAGE> 44
writing (before or after the effective date of these Articles) by a shareholder
who would otherwise be entitled thereto or under Article 20(d):
(i) Any shareholder proposing to transfer all or any of his
shares (the "Offeror") shall first request the Company, by written notice (which
shall contain all the information necessary to enable the Company so to do), to
offer such shares (the "Offered Shares"), on the terms of the proposed transfer,
to all the other shareholders in the Company (the "Offerees"). The Company shall
comply with such request by sending the Offerees a written notice (the "Offer"),
stating therein the identity of the Offeror and of the proposed transferee(s)
and the proposed terms of sale of the Offered Shares. Any Offeree may accept
such offer in respect of all or any of the Offered Shares by giving the Company
notice to that effect within fifteen (15) days after being served with the
Offer.
(ii) If the acceptances, in the aggregate, are in respect of
all of, or more than, the Offered Shares, then the accepting Offerees shall
acquire the Offered Shares, on the terms aforementioned, in proportion to their
respective holdings provided that no Offerees shall be entitled to acquire under
the provisions of this Article 19(c)(ii) more than the number of Offered Shares
initially accepted by such Offeree, and upon the allocation to him of the full
number of shares so accepted, he shall be disregarded in any subsequent
computations and allocations hereunder. Any shares remaining after the
computation of such respective entitlements shall be re-allocated among the
accepting Offerees (other than those to be disregarded as aforesaid), in the
same manner, until one hundred per cent (100%) of the Offered Shares have been
allocated as aforesaid.
(iii) If the acceptances, in the aggregate, are in respect of
less than the number of Offered Shares, the Offeror, at the expiration of the
aforementioned fifteen-day period, shall be entitled, at his option, to transfer
to the accepting Offerees (but not to less than all of them) the numbers of
shares as to which they respectively accepted the Offer (or such lesser numbers
as they may then respectively agree to accept), and to transfer all or any part
of the balance of the Offered Shares to the proposed transferee(s) identified in
the Offer, or, in such event, he may, at his option, regard the Offer as
entirely rejected, and thereupon transfer all (but not less than all) of the
Offered Shares to such proposed transferee(s), provided, however, that in no
event shall the Offeror transfer any of the Offered Shares to any transferee
other than such accepting Offerees or such proposed transferee(s) or transfer
the same on terms more favorable to the buyer(s) than those stated in the Offer,
and provided further that any of the Offered Shares not transferred within
ninety (90) days after the expiration of such fifteen-day period shall again be
subject to the provisions of this Article 19(c).
(iv) For the purposes of any Offer under this Article 19(c),
the respective holdings of any number of accepting Offerees shall mean the
respective proportions of the aggregate number of Ordinary Shares held by such
accepting Offerees, treating all Preferred Shares as if converted into Ordinary
Shares, as determined prior to such Offer.
(v) Anything in this Article 19(c) to the contrary
notwithstanding, a corporate
<PAGE> 45
shareholder may transfer any of its shares to any successor of such shareholder
by amalgamation, merger, or consolidation, or to any person, firm or corporation
to which, at the same time, substantially all the business and assets of such
shareholder are being sold, or to a subsidiary of such shareholder or to a
corporation of which such shareholder is a subsidiary; and an individual
shareholder may transfer his shares to any relative (herein defined as any
lineal ascendant or descendant of the shareholder (including any descendant of
the shareholder recognized by law as his descendant), his spouse, any ascendant
or descendant of said shareholder's spouse, or the spouse of any of said
shareholder's ascendant or descendant), but no subsequent transfer of any of
such shares may be made except in conformity with the provisions of Article
19(c) provided, however, that no such transfer shall be made to any transferee,
unless such transferee agrees in writing to be bound by all agreements binding
upon the shareholders immediately prior to such transfer.
(vi) In the event that the Company has outstanding shares of
more than one class, the following rules shall apply in respect of Article
19(c):
(1) Shares of each such class may be offered in the
proportionate, as nearly as may be, to the outstanding shares of each such
class.
(2) Offers pursuant to Article 19(c)(i) shall be
given to each shareholder only in respect of shares of the class(es) then owned
by him.
(d) Without derogating from the provisions of Articles 19(a), or (b)
and subject to Article 19(f) below, until the earlier to occur of (i) [two years
from the Closing Date] or (ii) the closing of a Qualified IPO, the following
provisions shall govern transfers of shares in the Company, except to the extent
waived in writing (before or after the effective date of these Articles) by a
shareholder who would otherwise be entitled thereto or under Article 19(e):
(i) If the right of first refusal set forth in Article 19(c) above
is not exercised and if at any time either Amir Kishon or Asaf Even-Haim (in
this Article, the "Selling Shareholder") intends to sell any shares, other than
a transfer in accordance with Article 19(c)(v) above, such Selling Shareholder
shall so notify the holders of the Preferred Shares (the "Preferred
Shareholders"), describing in such notification the material terms of such
proposed sale. Upon receipt of such notice, each Preferred Shareholder shall
have the right to exercise the option contained in sub-article 19(d)(ii) below.
(ii) Each Preferred Shareholder shall have the option, exercisable
by written notice to the Selling Shareholder, within 10 business days after
receipt of the notice described in Article 19(d)(i) above, to require the
Selling Shareholder to provide as part of his proposed sale that such Preferred
Shareholder be given the right to participate in the sale, pro rata in
proportion to the respective numbers of Ordinary Shares owned by the Selling
Shareholder and all Preferred Shareholders electing to participate in the
proposed sale (on an as-converted basis) at such time, on the same terms and
conditions as the Selling Shareholder. If such option is exercised by any
Preferred Shareholder, the Selling Shareholder shall not proceed with such sale
unless such
<PAGE> 46
Preferred Shareholder is given the right to participate.
(e) Notwithstanding anything to the contrary in this Article 19, the
shares held by Kraft Group LLC may be transferred to any members of the family
of Robert K. Kraft and to any entity directly controlled him.
(f) In the event that any person or entity makes an offer to purchase
all of the issued and outstanding share capital of the Company, and the
shareholders holding more than 80% of the issued and outstanding share capital
of the Company entitled to vote at General Meetings of the Company indicate
their acceptance of such offer, and such offer is approved by a majority of the
Company's Board of Directors, then, at the closing of such transactions, all of
the holders of all shares in the Company shall transfer such shares to such
person or entity; provided, however, that the consideration for all of the
Company's shares shall in any event be allocated among the members in accordance
with Article 5.2 of these Articles.
20. Suspension of Registration
The Board of Directors may suspend the registration of transfers during
the fourteen (14) days immediately preceding the Annual General Meeting.
TRANSMISSION OF SHARES
21. Decedents' Shares
(a) In case of a share registered in the names of two or more holders,
the Company may recognize the survivor(s) as the sole owner(s) thereof unless
and until the provisions of Article 21(b) have been effectively invoked.
(b) Any person becoming entitled to a share in consequence of the death
of any person, upon producing evidence of the grant of probate or letters of
administration or declaration of succession (or such other evidence as the Board
of Directors may reasonably deem sufficient that he sustains the character in
respect of which he proposes to act under this Article or of his title), shall
be registered as a member in respect of such share, or may, subject to the
regulations as to transfer herein contained, transfer such share.
22. Receivers and Liquidators
(a) The Company may recognize the receiver or liquidator of any
corporate member in winding-up or dissolution, or the receiver or trustee in
bankruptcy of any member, as being entitled to the shares registered in the name
of such member.
(b) The receiver or liquidator of a corporate member in winding-up or
dissolution, or the receiver or trustee in bankruptcy of any member, upon
producing such evidence as the Board
<PAGE> 47
of Directors may deem sufficient that he sustains the character in respect of
which he proposes to act under this Article or of his title, shall with the
consent of the Board of Directors (which the Board of Directors may grant or
refuse in its absolute discretion), be registered as a member in respect of such
shares, or may, subject to the regulations as to transfer herein contained,
transfer such shares.
GENERAL MEETINGS
23. Annual General Meeting
An Annual General Meeting shall be held once in every calendar year at
such time (within a period of not more than fifteen (15) months after the last
preceding Annual General Meeting) and at such place either within or without the
State of Israel as may be determined by the Board of Directors.
24. Extraordinary General Meetings
All General Meetings other than Annual General Meetings shall be called
"Extraordinary General Meetings." The Board of Directors may, whenever it thinks
fit, convene an Extraordinary General Meeting at such time and place, within or
without the State of Israel, as may be determined by the Board of Directors, and
shall be obliged to do so upon a requisition in writing in accordance with
Section 109 of the Companies Ordinance.
25. Notice of General Meetings; Omission to Give Notice
(a) Not less than seven (7) business days' prior notice shall be given
of every General Meeting, provided, however, that a Special Resolution shall not
be passed unless at least twenty-one (21) days' prior notice shall have been
given of the meeting at which it is proposed to pass the same. Each such notice
shall specify the place and the day and hour of the meeting and the general
nature of each item to be acted upon thereat. Notice shall be given to all
members who would be entitled to attend and vote at such meeting, if it were
held on the date when such notice is issued. Anything herein to the contrary
notwithstanding, with the consent of all members entitled to vote thereon, a
resolution may be proposed and passed at such meeting although a lesser notice
than hereinabove prescribed has been given.
(b) The accidental omission to give notice of a meeting to any member,
or the non-receipt of notice sent to such member, shall not invalidate the
proceedings at such meeting, provided, that such member confirms to the Company,
in writing, that it agrees to the proceedings and resolutions adopted in such
meeting.
PROCEEDINGS AT GENERAL MEETINGS
<PAGE> 48
26. Quorum
(a) Two or more members (not in default in payment of any sum referred
to in Article 32(a) hereof), present in person or by proxy and holding shares
conferring in the aggregate a majority of the voting power of the Company shall
constitute a quorum at General Meetings. No business shall be transacted at a
General Meeting, or at any adjournment thereof, unless the requisite quorum is
present when the meeting proceeds to business.
(b) If within an hour from the time appointed for the meeting a quorum
is not present, the meeting, if convened upon requisition under Sections 109 or
110 of the Companies Ordinance, shall be dissolved, but in any other case it
shall stand adjourned to the same day in the next week, at the same time and
place, or to such day and at such time and place as the Chairman may determine
with the consent of the holders of a majority of the voting power represented at
the meeting in person or by proxy and voting on the question of adjournment. No
business shall be transacted at any adjourned meeting except business which
might lawfully have been transacted at the meeting as originally called. At such
adjourned meeting, any two (2) members (not in default as aforesaid) present in
person or by proxy, shall constitute a quorum.
27. Chairman
The Chairman, if any, of the Board of Directors shall preside as
Chairman at every General Meeting of the Company. If there is no such Chairman,
or if at any meeting he is not present within fifteen (15) minutes after the
time fixed for holding the meeting or is unwilling to act as Chairman, the
members present shall choose someone of their number to be Chairman. The office
of Chairman shall not, by itself, entitle the holder thereof to vote at any
General Meeting nor shall it entitle such holder to a second or casting vote
(without derogating, however, from the rights of such Chairman to vote as a
shareholder or proxy of a shareholder if, in fact, he is also a shareholder or
such proxy).
28. Adoption of Resolutions at General Meetings
(a) (i) An Ordinary Resolution shall be deemed adopted if approved by
the holders of a majority of the voting power represented at the meeting in
person or by proxy and voting thereon.
(ii) A Special or Extraordinary Resolution shall be deemed
adopted if approved by the holders of not less than seventy-five percent (75%)
of the voting power represented at the meeting in person or by proxy and voting
thereon.
(b) Every question submitted to a General Meeting shall be decided by a
show of hands, but if a written ballot is demanded by any member present in
person or by proxy and entitled to vote at the meeting, the same shall be
decided by such ballot. A written ballot may be demanded before the proposed
resolution is voted upon or immediately after the declaration by the Chairman of
the results of the vote by a show of hands. If a vote by written ballot is taken
<PAGE> 49
after such declaration, the results of the vote by a show of hands shall be of
no effect, and the proposed resolution shall be decided by such written ballot.
The demand for a written ballot may be withdrawn at any time before the same is
conducted, in which event another member may then demand such written ballot.
The demand for a written ballot shall not prevent the continuance of the meeting
for the transaction of business other than the question on which the written
ballot has been demanded.
(c) A declaration by the Chairman of the meeting that a resolution has
been carried unanimously, or carried by a particular majority, or lost, and an
entry to that effect in the minute book of the Company, shall be conclusive
evidence of the fact without proof of the number or proportion of the votes
recorded in favor of or against such resolution.
(d) Shareholders may participate in a General Meeting by means of a
conference telephone call or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this Article shall constitute presence in person at
such meeting.
29. Resolutions in Writing
A resolution in writing signed by all members of the Company then
entitled to attend and vote at General Meetings or to which all such members
have given their written consent (by letter, facsimile, telecopier, telegram,
telex or otherwise), or their oral consent by telephone (provided that a written
summary thereof has been approved and signed by the Chairman of the Board of
Directors of the Company) shall be deemed to have been unanimously adopted by a
General Meeting duly convened and held.
30. Power to Adjourn
(a) The Chairman of a General Meeting at which a quorum is present may,
with the consent of the holders of a majority of the voting power represented in
person or by proxy and voting on the question of adjournment (and shall if so
directed by the meeting), adjourn the meeting from time to time and from place
to place, but no business shall be transacted at any adjourned meeting except
business which might lawfully have been transacted at the meeting as originally
called.
(b) It shall not be necessary to give any notice of an adjournment,
whether pursuant to Article 26(b) or Article 30(a), unless the meeting is
adjourned for thirty (30) days or more in which event notice thereof shall be
given in the manner required for the meeting as originally called.
31. Voting Power
Subject to the provisions of Articles 5.6 and 32(a) and subject to any
provision hereof conferring special rights as to voting, or restricting the
right to vote, every member shall have one
<PAGE> 50
vote for each share held by him of record, on every resolution, without regard
to whether the vote hereon is conducted by a show of hands, by written ballot or
by any other means.
32. Voting Rights
(a) No member shall be entitled to vote at any General Meeting (or be
counted as a part of the quorum thereat), unless all calls and other sums then
payable by him in respect of his shares in the Company have been paid, but this
Article shall not apply to separate General Meetings of the holders of a
particular class of shares pursuant to Article 6(b).
(b) A company or other corporate body being a member of the Company
may, by resolution of its directors or any other managing body thereof,
authorize any person to be its representative at any meeting of the Company. Any
person so authorized shall be entitled to exercise on behalf of such member all
the power which the latter could have exercised if it were an individual
shareholder. Upon the request of the Chairman of the meeting, written evidence
of such authorization (in form acceptable to the Chairman) shall be delivered to
him.
(c) Any member entitled to vote may vote either personally or by proxy
(who need not be a member of the Company), or, if the member is a company or
other corporate body, by a representative authorized pursuant to Article 32(b).
(d) If two or more persons are registered as joint holders of any
share, the vote of the senior who tenders a vote, in person or by proxy, shall
be accepted to the exclusion of the vote(s) of the other joint holder(s); and
for this purpose seniority shall be determined by the order in which the names
stand in the Register of Members.
PROXIES
33. Instrument of Appointment
(a) The instrument appointing a proxy shall be in writing and shall be
substantially in the following form:
"I _____________________ of __________________________________
(Name of Shareholder) (Address of Shareholder)
being a member of ___________________________ hereby appoint
(Name of the Company)
________________________of _____________________________
(Name of Proxy) (Address of Proxy)
as my proxy to vote for me and on my behalf at the General Meeting of the
Company to be held on the _____ day of ___________, 19__ and at any
adjournment(s) thereof.
<PAGE> 51
Signed this ______ day of ____________, 19__.
_________________________________
(Signature of Appointer)
or in any usual or common form or in such other form as may be approved by the
Board of Directors. It shall be duly signed by the appointer or his duly
authorized attorney or, if such appointer is a company or other corporate body,
under its common seal or stamp or the hand of its duly authorized agent(s) or
attorney(s).
(b) The instrument appointing a proxy (and the power of attorney or
other authority, if any, under which such instrument has been signed) shall
either be delivered to the Company (at its Registered Office, or at its
principal place of business or at the offices of its registrar and/or transfer
agent or at such place as the Board of Directors may specify) not less than
forty-eight (48) hours before the time fixed for the meeting at which the person
named in the instrument proposes to vote, or presented to the Chairman at such
meeting.
34. Effect of Death of Appointor or Revocation of Appointment
A vote cast pursuant to an instrument appointing a proxy shall be valid
notwithstanding the previous death of the appointing member (or of his
attorney-in-fact, if any, who signed such instrument), or the revocation of the
appointment or the transfer of the share in respect of which the vote is cast,
provided no written intimation of such death, revocation or transfer shall have
been received by the Company or by the Chairman of the meeting before such vote
is cast and provided, further, that the appointing member, if present in person
at said meeting, may revoke the appointment by means of a writing, oral
notification to the Chairman, or otherwise.
BOARD OF DIRECTORS
35. Powers of Board of Directors
(a) In General
The management of the business of the Company shall be vested
in the Board of Directors, which may exercise all such powers and do all such
acts and things as the Company is authorized to exercise and do, and are not
hereby or by law required to be exercised or done by the Company in General
Meeting. The authority conferred on the Board of Directors by this Article 35
shall be subject to the provisions of the Companies Ordinance, of these Articles
and any regulation or resolution consistent with these Articles adopted from
time to time by the Company in General Meeting, provided, however, that no such
regulation or resolution shall invalidate any prior act done by or pursuant to a
decision of the Board of Directors which would have been valid if such
regulation or resolution had not been adopted.
<PAGE> 52
(b) Borrowing Power
The Board of Directors may from time to time, in its
discretion, cause the Company to borrow or secure the payment of any sum or sums
of money for the purposes of the Company, and may secure or provide for the
repayment of such sum or sums in such manner, at such times and upon such terms
and conditions in all respects as it thinks fit, and, in particular, by the
issuance of bonds, perpetual or redeemable debentures, debenture stock, or any
mortgages, charges, or other securities on the undertaking or the whole or any
part of the property of the Company, both present and future, including its
uncalled or called but unpaid capital for the time being.
(c) Reserves
The Board of Directors may, from time to time, set aside any
amount(s) out of the profits of the Company as a reserve or reserves for any
purpose(s) which the Board of Directors, in its absolute discretion, shall think
fit, and may invest any sum so set aside in any manner and from time to time
deal with and vary such investments, and dispose of all or any part thereof, and
employ any such reserve or any part thereof in the business of the Company
without being bound to keep the same separate from other assets of the Company,
and may subdivide or redesignate any reserve or cancel the same or apply the
funds therein for another purpose, all as the Board of Directors may from time
to time think fit.
36. Exercise of Powers of Directors
(a) A meeting of the Board of Directors at which a quorum is present
shall be competent to exercise all the authorities, powers and discretions
vested in or exercisable by the Board of Directors.
(b) Subject to Article 5.6, a resolution proposed at any meeting of the
Board of Directors shall be deemed adopted if approved by a majority of the
Directors present when such resolution is put to a vote and voting thereon.
(c) A resolution in writing signed by all Directors then in office and
lawfully entitled to vote thereon (as conclusively determined by the Chairman of
the Audit Committee ("Va'adat Bikoret"), and in the absence of such
determination - by the Chairman of the Board of Directors) or to which all such
Directors have given their consent (by letter, telegram, telex, facsimile,
telecopier or otherwise), or their oral consent by telephone (provided that a
written summary thereof has been approved and signed by the Chairman of the
Board of Directors of the Company) shall be deemed to have been unanimously
adopted by a meeting of the Board of Directors duly convened and held.
37. Delegation of Powers
(a) The Board of Directors may, subject to the provisions of the
Companies
<PAGE> 53
Ordinance, delegate any or all of its powers to committees, each consisting of
two or more persons (all of whose members must be Directors), and it may from
time to time revoke such delegation or alter the composition of any such
committee. Any Committee so formed (in these Articles referred to as a
"Committee of the Board of Directors"), shall, in the exercise of the powers so
delegated, conform to any regulations imposed on it by the Board of Directors.
The meetings and proceedings of any such Committee of the Board of Directors
shall, mutatis mutandis, be governed by the provisions herein contained for
regulating the meetings of the Board of Directors, so far as not superseded by
any regulations adopted by the Board of Directors under this Article. Unless
otherwise expressly provided by the Board of Directors in delegating powers to a
Committee of the Board of Directors, such Committee shall not be empowered to
further delegate such powers.
(b) Without derogating from the provisions of Article 50, the Board of
Directors may, subject to the provisions of the Companies Ordinance, from time
to time appoint a Secretary to the Company, as well as officers, agents,
employees and independent contractors, as the Board of Directors may think fit,
and may terminate the service of any such person. The Board of Directors may,
subject to the provisions of the Companies Ordinance, determine the powers and
duties, as well as the salaries and emoluments, of all such persons, and may
require security in such cases and in such amounts as it thinks fit.
(c) The Board of Directors may from time to time, by power of attorney
or otherwise, appoint any person, company, firm or body of persons to be the
attorney or attorneys of the Company at law or in fact for such purpose(s) and
with such powers, authorities and discretions, and for such period and subject
to such conditions, as it thinks fit, and any such power of attorney or other
appointment may contain such provisions for the protection and convenience of
persons dealing with any such attorney as the Board of Directors may think fit,
and may also authorize any such attorney to delegate all or any of the powers,
authorities and discretions vested in him.
38. Number of Directors
Until otherwise determined by Ordinary Resolution of the Company, the
Board of Directors of the Company shall consist of not less than two (2) nor
more than seven (7) Directors.
39. Appointment and Removal of Directors
The Board of Directors shall be composed of seven (7) directors
appointed by written notice to the Company as follows: one (1) Director shall be
appointed by HITEC Investors Group (H.I.G.) for as long as it holds, together,
at least six percent (6%) of the Company's issued and paid-up share capital, one
(1) Director shall be appointed by Kraft Group LLC. for as long as it holds at
least four percent (4%) of the Company's issued and outstanding share capital;
and, during the Exclusivity Period only, one (1) Director shall be appointed by
the holders of a majority in interest of the Preferred Shares. The remaining
four (4) directors will be appointed by written notice to the Company given by
the holders, from time to time, of shares conferring a majority of the voting
power of the Company. Any Director(s) may only be removed from office
<PAGE> 54
by the shareholder(s) that designated such Director, and any vacancy, however
created, in the Board of Directors may only be filled by the shareholder(s) that
designated the previous incumbent of such vacancy. The director appointed by the
holders of a majority of the Preferred Shares, if appointed by Medscape, shall
not attend or participate in any discussions or votes of the Board of Directors
regarding transactions between the Company and any direct competitor of
Medscape.
40. Qualification of Directors
No person shall be disqualified to serve as a Director by reason of his
not holding shares in the Company or by reason of his having served as a
Director in the past.
41. Continuing Directors in the Event of Vacancies
Subject to the provisions of Article 39, in the event of one or more
vacancies in the Board of Directors, the continuing Directors may continue to
act in every matter, and, pending the filling of any vacancy pursuant to the
provisions of Article 39, may temporarily fill any such vacancy, provided,
however, that if they number less than a majority of the number provided for
pursuant to Article 38 hereof, they may only act in an emergency, and may call a
General Meeting of the Company for the purpose of electing Directors to fill any
or all vacancies, so that at least a majority of the number of Directors
provided for pursuant to Article 38 hereof are in office as a result of said
meeting.
42. Vacation of Office
(a) The office of a Director shall be vacated, ipso facto, upon his
death, or if he be found lunatic or become of unsound mind, or if he become
bankrupt, or, if the Director is a company, upon its winding-up.
(b) The office of a Director shall be vacated by his written
resignation. Such resignation shall become effective on the date fixed therein,
or upon the delivery thereof to the Company, whichever is later.
43. Remuneration of Directors
No Director shall be paid any remuneration by the Company for his
services as Director except as may be approved pursuant to the provisions of the
Companies Ordinance.
44. Conflict of Interests
Subject to the provisions of the Companies Ordinance, the Company may
enter into any contract or otherwise transact any business with any Director in
which contract or business such Director has a personal interest, directly or
indirectly; and may enter into any contract of otherwise transact any business
with any third party in which contract or business a Director has a personal
interest, directly or indirectly.
<PAGE> 55
45. Alternate Directors
(a) A Director may, by written notice to the Company, appoint an
alternate for himself (in these Articles referred to as "Alternate Director"),
remove such Alternate Director and appoint another Alternate Director in place
of any Alternate Director appointed by him whose office has been vacated for any
reason whatsoever. Unless the appointing Director, by the instrument appointing
an Alternate Director or by written notice to the Company, limits such
appointment to a specified period of time or restricts it to a specified meeting
or action of the Board of Directors, or otherwise restricts its scope, the
appointment shall be for an indefinite period, and for all purposes.
(b) Any notice given to the Company pursuant to Article 45(a) shall
become effective on the date fixed therein, or upon the delivery thereof to the
Company, whichever is later.
(c) An Alternate Director shall have all the rights and obligations of
the Director who appointed him, provided, however, that he may not in turn
appoint an alternate for himself (unless the instrument appointing him otherwise
expressly provides), and provided further that an Alternate Director shall have
no standing at any meeting of the Board of Directors or any committee thereof
while the Director who appointed him is present.
(d) Any natural person, whether or not he be a member of the Board of
Directors, may act as an Alternate Director. One person may act as Alternate
Director for several Directors, and in such event he shall have a number of
votes (and shall be treated as the number of persons for purposes of
establishing a quorum) equal to the number of Directors for whom he acts as
Alternate Director. If an Alternate Director is also a Director in his own right
his rights as an Alternate Director shall be in addition to his rights as a
Director.
(e) An Alternate Director shall alone be responsible for his own acts
and defaults, and he shall not be deemed the agent of the Director(s) who
appointed him.
(f) The office of an Alternate Director shall be vacated under the
circumstances, mutatis mutandis, set forth in Article 42, and such office shall
ipso facto be vacated if the Director who appointed such Alternate Director
ceases to be a Director.
PROCEEDINGS OF THE BOARD OF DIRECTORS
46. Meetings
(a) The Board of Directors may meet and adjourn its meetings and
otherwise regulate such meetings and proceedings as the Directors think fit.
(b) Any Director may at any time, and the Secretary, upon the request
of such Director, shall, convene a meeting of the Board of Directors, but not
less than two (2) days'
<PAGE> 56
notice (oral or written) shall be given of any meeting so convened.
(c) Directors may attend any meeting via telephone so long as all
Directors participating in the meeting may hear each other and be heard by each
other.
47. Quorum
Until otherwise unanimously decided by the Board of Directors, a quorum
at a meeting of the Board of Directors shall be constituted by the presence of a
majority of the Directors then in office who are lawfully entitled to
participate in the meeting (as conclusively determined by the Chairman of the
Audit Committee and in the absence of such determination - by the Chairman of
the Board of Directors), but shall not be less than two.
48. Chairman of the Board of Directors
The Board of Directors may from time to time elect one of its members
to be the Chairman of the Board of Directors, remove such Chairman from office
and appoint another in its place. The Chairman of the Board of Directors shall
preside at every meeting of the Board of Directors, but if there is no such
Chairman, or if at any meeting he is not present within fifteen (15) minutes of
the time fixed for the meeting, or if he is unwilling to take the chair, the
Directors present shall choose one of their number to be the chairman of such
meeting.
49. Validity of Acts Despite Defects
Subject to the provisions of the Companies Ordinance, all acts done
bona fide at any meeting of the Board of Directors, or of a Committee of the
Board of Directors, or by any person(s) acting as Director(s), shall,
notwithstanding that it may afterwards be discovered that there was some defect
in the appointment of the participants in such meetings or any of them or any
person(s) acting as aforesaid, or that they or any of them were disqualified, be
as valid as if there were no such defect or disqualification.
GENERAL MANAGER
50. General Manager
The Board of Directors may from time to time appoint one or more
persons, whether or not Directors, as General Manager(s) of the Company and may
confer upon such person(s), and from time to time modify or revoke, such
title(s) (including Managing Director, Director General or any similar or
dissimilar title) and such duties and authorities of the Board of Directors as
the Board of Directors may deem fit, subject to such limitations and
restrictions as the Board of Directors may from time to time prescribe. Such
appointment(s) may be either for a fixed term or without any limitation of time,
and the Board of Directors may from time to time (subject to the provisions of
the Companies Ordinance and of any contract between any such person and the
<PAGE> 57
Company) fix his or their salaries and emoluments, remove or dismiss
him or them from office and appoint another or others in his or their place or
places.
MINUTES
51. Minutes
(a) Minutes of each General Meeting and of each meeting of the Board of
Directors shall be recorded and duly entered in books provided for that purpose.
Such minutes shall, in all events, set forth the names of the persons present at
the meeting and all resolutions adopted thereat.
(b) Any minutes as aforesaid, if purporting to be signed by the
chairman of the meeting or by the chairman of the next succeeding meeting, shall
constitute prima facia evidence of the matters recorded therein.
DIVIDENDS
52. Declaration of Dividends
Subject to Article 5.6, the Board of Directors may from time to time
declare, and cause the Company to pay, such interim dividend as may appear to
the Board of Directors to be justified by the profits of the Company. The final
dividend in respect of any fiscal period shall be proposed by the Board of
Directors and shall be payable only after the same has been approved by Ordinary
Resolution of the Company, but no such resolution shall provide for the payment
of an amount exceeding that proposed by the Board of Directors for the payment
of such final dividend, and no such resolution or any failure to approve a final
dividend shall affect any interim dividend theretofore declared and paid. The
Board of Directors shall determine the time for payment of such dividends, both
interim and final, and the record date for determining the shareholders entitled
thereto.
53. Funds Available for Payment of Dividends
No dividend shall be paid otherwise than out of the profits of the
Company.
54. Amount Payable by Way of Dividends
Subject to the rights of the holders of shares with special rights as
to dividends, any dividend paid by the Company shall be allocated among the
members entitled thereto in proportion to the nominal value of their respective
holdings of the shares in respect of which such dividend is being paid.
<PAGE> 58
55. Interest
No dividend shall carry interest as against the Company.
56. Payment in Specie
Upon the recommendation of the Board of Directors approved by Ordinary
Resolution of the Company, a dividend may be paid, wholly or partly, by the
distribution of specific assets of the Company or by distribution of paid up
shares, debentures or debenture stock of the Company or of any other companies,
or in any one or more of such ways.
57. Capitalization of Profits, Reserves etc.
Upon the recommendation of the Board of Directors approved by Ordinary
Resolution of the Company, the Company -
(a) may cause any moneys, investments, or other assets forming part of
the undivided profits of the Company, standing to the credit of a reserve fund,
or to the credit of a reserve fund for the redemption of capital, or in the
hands of the Company and available for dividends, or representing premiums
received on the issuance of shares and standing to the credit of the share
premium account, to be capitalized and distributed among such of the
shareholders as would be entitled to receive the same if distributed by way of
dividend and in the same proportion, on the footing that they become entitled
thereto as capital, or may cause any part of such capitalized fund to be applied
on behalf of such shareholders in paying up in full, either at par or at such
premium as the resolution may provide, any unissued shares or debentures or
debenture stock of the Company which shall be distributed accordingly, in
payment, in full or in part, of the uncalled liability on any issued shares or
debentures or debenture stock; and
(b) may cause such distribution or payment to be accepted by such
shareholders in full satisfaction of their interest in the said capitalized sum.
58. Implementation of Powers under Articles 56 and 57
For the purpose of giving full effect to any resolution under Articles
56 or 57, and without derogating from the provisions of Article 7(b) hereof, the
Board of Directors may settle any difficulty which may arise in regard to the
distribution as it thinks expedient, and, in particular, may issue fractional
certificates, and may fix the value for distribution of any specific assets, and
may determine that cash payments shall be made to any members upon the footing
of the value so fixed, or that fractions of less value than the nominal value of
one share may be disregarded in order to adjust the rights of all parties, and
may vest any such cash, shares, debentures, debenture stock or specific assets
in trustees upon such trusts for the persons entitled to the dividend or
capitalized fund as may seem expedient to the Board of Directors. Where
requisite, a proper contract shall be filed in accordance with Section 130 of
the Companies Ordinance, and the Board of Directors may appoint any person to
sign such contract on behalf of the persons entitled
<PAGE> 59
to the dividend or capitalized fund.
59. Deductions from Dividends
The Board of Directors may deduct from any dividend or other moneys
payable to any member in respect of a share any and all sums of money then
payable by him to the Company on account of calls or otherwise in respect of
shares of the Company and/or on account of any other matter of transaction
whatsoever.
60. Retention of Dividends
(a) The Board of Directors may retain any dividend or other moneys
payable or property distributable in respect of a share on which the Company has
a lien, and may apply the same in or toward satisfaction of the debts,
liabilities, or engagements in respect of which the lien exists.
(b) The Board of Directors may retain any dividend or other moneys
payable or property distributable in respect of a share in respect of which any
person is, under Articles 21 or 22, entitled to become a member, or which any
person is, under said Articles, entitled to transfer, until such person shall
become a member in respect of such share or shall transfer the same.
61. Unclaimed Dividends
All unclaimed dividends or other moneys payable in respect of a share
may be invested or otherwise made use of by the Board of Directors for the
benefit of the Company until claimed. The payment by the Directors of any
unclaimed dividend or such other moneys into a separate account shall not
constitute the Company a trustee in respect thereof, and any dividend unclaimed
after a period of seven (7) years from the date of declaration of such dividend,
and any such other moneys unclaimed after a like period from the date the same
were payable, shall be forfeited and shall revert to the Company, provided,
however, that the Board of Directors may, at its discretion, cause the Company
to pay any such dividend or such other moneys, or any part thereof, to a person
who would have been entitled thereto had the same not reverted to the Company.
62. Mechanics of Payment
Any dividend or other moneys payable in cash in respect of a share may
be paid by check or warrant sent through the post to, or left at, the registered
address of the person entitled thereto or by transfer to a bank account
specified by such person (or, if two or more persons are registered as joint
holders of such share or are entitled jointly thereto in consequence of the
death or bankruptcy of the holder or otherwise, to any one of such persons or to
his bank account), or to such person and at such address as the person entitled
thereto may by writing direct. Every such check or warrant shall be made payable
to the order of the person to whom it is sent, or to such person as the person
entitled thereto as aforesaid may direct, and payment of the check or warrant
<PAGE> 60
by the banker upon whom it is drawn shall be a good discharge to the Company.
Every such check or warrant shall be sent at the risk of the person entitled to
the money represented thereby.
63. Receipt from a Joint Holder
If two or more persons are registered as joint holders of any share, or
are entitled jointly thereto in consequence of the death or bankruptcy of the
holder or otherwise, any one of them may give effectual receipts for any
dividend or other moneys payable or property distributable in respect of such
share.
ACCOUNTS
64. Books of Account
The Board of Directors shall cause accurate books of account to be kept
in accordance with the provisions of the Companies Ordinance and of any other
applicable law. Such books of account shall be kept at the Registered Office of
the Company, or at such other place or places as the Board of Directors may
think fit, and they shall always be open to inspection by all Directors. No
member, not being a Director, shall have any right to inspect any account or
book or other similar document of the Company, except as conferred by law or
authorized by the Board of Directors or by Ordinary Resolution of the Company.
65. Audit
At least once in every fiscal year the accounts of the Company shall be
audited and the correctness of the profit and loss account and balance sheet
certified by one or more duly qualified auditors.
66. Auditors
The appointment, authorities, rights and duties of the auditor(s) of
the Company, shall be regulated by applicable law, provided, however, that in
exercising its authority to fix the remuneration of the auditor(s), the members
in General Meeting may, by Ordinary Resolution, act (and in the absence of any
action in connection therewith shall be deemed to have so acted), to authorize
the Board of Directors to fix such remuneration subject to such criteria or
standards, if any, as may be provided in such Ordinary Resolution, and if no
such criteria or standards are so provided, such remuneration shall be fixed in
an amount commensurate with the volume and nature of the services rendered by
such auditor(s).
BRANCH REGISTERS
67. Branch Registers
<PAGE> 61
Subject to and in accordance with the provisions of Sections 71 to 80,
inclusive, of the Companies Ordinance and to all orders and regulations issued
thereunder, the Company may cause branch registers to be kept in any place
outside Israel as the Board of Directors may think fit, and, subject to all
applicable requirements of law, the Board of Directors may from time to time
adopt such rules and procedures as it may think fit in connection with the
keeping of such branch registers.
RIGHTS OF SIGNATURE, STAMP AND SEAL
68. Rights of Signature, Stamp and Seal
(a) The Board of Directors shall be entitled to authorize any person or
persons (who need not be Directors) to act and sign on behalf of the Company,
and the acts and signature of such person(s) on behalf of the Company shall bind
the Company insofar as such person(s) acted and signed within the scope of his
or their authority.
(b) The Company shall have at least one official stamp.
(c) The Board of Directors may provide for a seal. If the Board of
Directors so provides, it shall also provide for the safe custody thereof. Such
seal shall not be used except by the authority of the Board of Directors and in
the presence of the person(s) authorized to sign on behalf of the Company, who
shall sign every instrument to which such seal is affixed.
(d) The Company may exercise the powers conferred by Section 102 of the
Companies Ordinance regarding a seal for use abroad, and such powers shall be
vested in the Board of Directors.
NOTICES
69. Notices
(a) Any written notice or other document may be served by the Company
upon any member either personally or by sending it by prepaid registered mail
(airmail if sent to a place outside Israel) addressed to such member at his
address as described in the Register of Members or such other address as he may
have designated in writing for the receipt of notices and other documents. Any
written notice or other document may be served by any member upon the Company by
tendering the same in person to the Secretary or the General Manager of the
Company at the principal office of the Company or by sending it by prepaid
registered mail (airmail if posted outside Israel) to the Company at its
Registered Address. Any such notice or other document shall be deemed to have
been served two (2) business days after it has been posted (seven (7) business
days if sent to a place not located on the same continent as the place from
where it was posted), or when actually received by the addressee if sooner than
two days or
<PAGE> 62
seven days, as the case may be, after it has been posted, or when
actually tendered in person, to such member (or to the Secretary or the General
Manager), provided, however, that notice may be sent by cablegram, telex,
telecopier (facsimile) or other electronic means and confirmed by registered
mail as aforesaid, and such notice shall be deemed to have been given
twenty-four (24) hours after such cablegram, telex, telecopy or other electronic
communication has been sent or when actually received by such member (or by the
Company), whichever is earlier. If a notice is, in fact, received by the
addressee, it shall be deemed to have been duly served, when received,
notwithstanding that it was defectively addressed or failed, in some respect, to
comply with the provisions of this Article 69(a).
(b) All notices to be given to the members shall, with respect to any
share to which persons are jointly entitled, be given to whichever of such
persons is named first in the Register of Members, and any notice so given shall
be sufficient notice to the holders of such share.
(c) Any member whose address is not described in the Register of
Members, and who shall not have designated in writing an address for the receipt
of notices, shall not be entitled to receive any notice from the Company.
INSURANCE AND INDEMNITY
70. Insurance and Indemnity
(a) For purposes of these Articles, the term "Office Holder" shall mean
every Director and every officer of the Company, including, without limitation,
each of the persons defined as "Nosei Misra" in Chapter D'1 of the Companies
Ordinance.
(b) Subject to the provisions of the Companies Ordinance, the Company
may enter into a contract for the insurance of all or part of the liability of
any Office Holder, in respect of one of the following:
(i) a breach of his duty of care to the Company or to another
person;
(ii) a breach of his fiduciary duty to the Company, provided
that the Office Holder acted in good faith and had reasonable cause to assume
that such act would not prejudice the interests of the Company;
(iii) a financial obligation imposed on him in favor of
another person in respect of an act performed in his capacity as an Office
Holder.
(c) Subject to the provisions of the Companies Ordinance, the Company
may indemnify an Office Holder in respect of one of the following:
(i) a financial obligation imposed on him in favor of another
person by a court judgment, including a compromise judgment or an arbitrator's
award approved by court, in
<PAGE> 63
respect of an act performed in his capacity as an Office Holder;
(ii) reasonable litigation expenses, including attorneys'
fees, expended by an Office Holder or charged to him by a court, in a proceeding
instituted against him by the Company or on its behalf or by another person, or
in a criminal charge from which he was acquitted, all in respect of an act
performed in his capacity as an Office Holder.
(d) The provisions of Articles 70(a), 70(b) and 70(c) above are not
intended, and shall not be interpreted, to restrict the Company in any manner in
respect of the procurement of insurance and/or in respect of indemnification (i)
in connection with any person who is not an Office Holder, including, without
limitation, any employee, agent, consultant or contractor of the Company who is
not an Office Holder, and/or (ii) in connection with any Office Holder to the
extent that such insurance and/or indemnification is not specifically prohibited
under law; provided that the procurement of any such insurance and/or the
provision of any such indemnification shall be approved by the Audit Committee
of the Company.
WINDING UP
71. Winding Up
If the Company be wound up, then, subject to applicable law and to the
rights of the holders of shares with special rights upon winding up, the assets
of the Company available for distribution among the members shall be distributed
to them in proportion to the nominal value of their respective holdings of the
shares in respect of which such distribution is being made.
<PAGE> 64
May __, 1999
Mr. Paul Sheils
Medscape, Inc.
134 West 29th Street
New York, New York 10001-5399
United States
Dear Mr. Sheils:
Reference is hereby made to the Share Purchase Agreement (the
"Agreement") dated as of May __, 1999 by and between Medscape, Inc., Softwatch
Ltd. (the "Company') and each of the other Purchasers (as defined therein). In
accordance with Section 2.2.1.4 of the Agreement and in order to induce you to
enter into and consummate the transactions contemplated in the Agreement, we
hereby undertake, beginning as of the Closing (as defined in the Agreement) and
terminating upon the conclusion of the Exclusivity Period (as defined in the
Agreement), not to sell, transfer, encumber or otherwise dispose of any shares
of the Company owned by us, either beneficially or of record, without your prior
written consent.
Very truly yours,
Amir Kishon Assaf Evenhaim
<PAGE> 65
June __, 1999
Medscape, Inc. (the "PURCHASER")
134 West 29th Street
New York, New York 10001-5399
Ladies and Gentlemen:
We have acted as legal counsel to Softwatch Ltd. (the "COMPANY"), a
private company established under the laws of Israel, in connection with the
Preferred Share Purchase Agreement dated as of June __, 1999 (the "Agreement")
by and among the Company, Medscape, Inc. and the individuals and entities listed
on Schedule 1 attached thereto. We are providing you this opinion pursuant to
Section 2.2.1.6 of the Agreement. All capitalized terms used herein have the
meaning ascribed to such terms in the Agreement unless otherwise defined herein.
As such counsel, we have examined a final copy of the Agreement, the
Registration Rights Agreement and such other documents as we have considered
necessary or desirable to examine for the purpose of rendering this opinion. In
all such examinations, we have assumed the due execution and delivery of such
other documents by the parties thereto (pursuant to due authorization) (other
than the Company), the genuineness of all signatures, the authenticity and
completeness of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic
copies, the authenticity of the originals of such latter documents and the legal
capacity of all signatories to such documents (other than the signatories of the
Company). As to matters of fact, we have relied upon the representations and
warranties of the Company contained in the Agreement and have made no
independent checks or verification of such factual matters. Except as expressly
set forth in this opinion, we have not undertaken any independent investigation
(other than review of the Company's Memorandum and Articles of Association and
the Board Resolution which authorises the issuance of the Shares) to determine
the existence or absence of such facts and have not conducted a "due diligence"
review of the Company. We have not examined any records of any court,
administrative tribunal or other similar entity in connection with our opinions
expressed herein. Except to the extent expressly set forth herein or as we
otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of the Company or the rendering of the opinion
set forth below. All of our opinions herein are based on our actual knowledge,
namely the
<PAGE> 66
current actual knowledge of the attorney(s) of this firm who have worked on the
transactions referred to herein. Our opinions below are further subject to the
following qualifications and exceptions:
(i) We express no opinion as to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating
to or affecting the rights of creditors generally, including, without
limitation, laws relating to fraudulent transfers or conveyances,
preferences and equitable subordination; and
(ii) We express no opinion as to limitations imposed by general principles
of equity upon the availability of equitable remedies with respect to
any documents referred to herein; and
(iii) We express no opinion as to the effect of foreign laws, judicial
determinations or governmental actions affecting creditors' rights or
the Company's performance of its obligations under the Agreement or the
Registration Rights Agreement; and
(iv) Our opinions expressed herein are based upon current statues, rules,
regulations, cases and official interpretive opinions which, in our
experience, are normally applicable to the type of transaction provided
for in the Agreement ; and
(v) We are members of the Israel Bar and we express no opinion as to any
matter relating to the laws of any jurisdiction other than the laws of
Israel. Our opinion relates only to Israeli laws. Any opinion herein
which relates to laws of any jurisdiction other than the State of
Israel is qualified by the assumption that the laws of such
jurisdiction are identical in all respects to the laws of the State of
Israel. We express no opinion as to the effect of foreign laws,
judicial determinations or governmental actions affecting creditors'
rights or the Company's performance of its obligations under the
Agreement or the Registration Rights Agreement.
Except as otherwise indicated, our opinions expressed herein are
rendered as of, and are based upon the facts in existence and known to us on,
the date hereof.
Based upon and subject to the qualifications set forth in this letter
and to any factual matters, documents or events not disclosed to us and except
as set forth in the Agreement and the Schedules thereto, we are of the opinion
that as of the Closing:
1. The Company is a private company duly organized and validly existing
under the laws of the State of Israel.
2. (a) The registered share capital of the Company immediately prior
to the Closing is one hundred twenty thousand New Israeli Shekels (120,000)
divided into 10,914,479 Ordinary Shares, nominal value NIS 0.01 each, and
1,085,521 Series A Preferred Shares, nominal value NIS 0.01 each.
(b) The Shares, when paid for in accordance with the Agreement,
will be duly authorized, validly issued, fully paid, nonassessable, and, free of
any third-party preemptive rights (other than pre-emptive rights specified in
Section 3.3 of the Agreement or Schedule 3.3 which have not been exercised or
waived until the date hereof) and, except as may have been created by them, the
holders of the Shares will have good title to such shares, free and clear of all
liens, security interests, pledges, charges, encumbrances, shareholders'
agreements and voting trusts.
(c) Except as disclosed on Schedule 3.3 to the Agreement, to the
best of our knowledge, there are not as of the date hereof any outstanding or
authorized subscriptions, options, warrants,
<PAGE> 67
calls, rights, commitments, or any other agreements of any character directly
obligating the Company to issue (i) any additional shares or (ii) any securities
convertible into or exchangeable for any shares.
3. All corporate action on the part of the Company necessary for the
authorization, execution, delivery, and performance of all the of Company's
obligations under the Agreement and the Registration Rights Agreement and for
the authorization, issuance, and allotment of the Shares being issued and
allotted under the Agreement has been taken prior to the Closing, except for
such obligations which by their terms are to be taken following the Closing.
Each of the Agreement and the Registration Rights Agreement has been executed
and delivered by or on behalf of the Company, and the Agreement constitutes the
valid and legally binding obligation of the Company, legally enforceable against
the Company in accordance with its terms. No material consent of, approval of or
filing with, any governmental authority on the part of the Company is required
that has not been obtained by the Company prior to the Closing in connection
with the valid execution, delivery and performance of this Agreement and the
Registration Rights Agreement or the issuance and allotment of the Shares.
4. Neither the execution and delivery of the Agreement or the Registration
Rights Agreement nor compliance by the Company with the terms and provisions
thereof, will conflict with, or result in a breach or violation of, any of the
terms, conditions and provisions of the Company's Memorandum of Association or
the Company's Articles of Association.
5. The Articles of Association of the Company as they appear in Exhibit A
to the Agreement were validly adopted and are in full force and effect.
This opinion is rendered only to you and is solely for your benefit in
connection with the Agreement. This opinion may not be relied upon by you for
any other purpose; nor may this opinion be provided to, quoted to or relied upon
by any other person (other than your attorneys and accountants in respect of the
transactions contemplated under the Agreement) or entity for any purpose without
our prior written consent.
This opinion is provided to you as a legal opinion only and not as a
guaranty or warranty of the matters addressed herein. This opinion is based upon
currently existing statutes, rules, regulations and judicial decisions, and we
disclaim any obligation to advise you of any change in any of these sources of
law or subsequent legal or factual developments which might affect any matters
or opinions set forth herein.
Yours faithfully,
Goldfarb, Levy, Eran & Co.
<PAGE> 68
Exhibit E
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") made as of the
____ day of June, 1999, by and among Softwatch Ltd., an Israeli company (the
"Company"), Medscape, Inc., a Delaware corporation ("Medscape"), Kraft Group
LLC, a Delaware limited liability corporation ("Kraft"), Platinum Health
Ventures Ltd., a British Virgin Islands company ("Platinum") and Adi Raviv
("Raviv").,
In consideration of the mutual promises and covenants set forth herein,
the parties hereby agree as follows:
1. Registration. The following provisions govern the registration
of the Company's securities:
1.1 Definitions. As used herein, the following terms have the
following meanings:
"Holder" means any holder of outstanding Registrable Shares or shares
convertible into Registrable Shares, who acquired such Registrable
Shares or shares convertible into Registrable Shares in a transaction
or series or transactions not involving any registered public offering.
"Form S-3" means Form S-3 or Form F-3 under the Securities Act, as in
effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the Securities and Exchange Commission
("SEC") which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with
the SEC.
"Initiating Holders" means Holders (with the exception of Adi Raviv)
holding fifty percent (50%) of the Registrable Shares, assuming for
purposes of such determination the conversion of all shares convertible
into Registrable Shares.
"Register", "registered" and "registration" refer to a registration
effected by filing a registration statement in compliance with the
Securities Act and the declaration or ordering by the SEC of
effectiveness of such registration statement.
"Registrable Shares": (i) All Ordinary Shares issuable upon conversion
of the Series A Preferred Shares, (ii) all Ordinary Shares issued to
Kraft pursuant to the Share Purchase Agreement between the Company and
Kraft dated as of August 21, 1998, (iii) all Ordinary Shares issued to
Platinum pursuant to the Share Purchase and Warrant Investment
Agreement between the Company and Platinum dated as of February 15,
1997, (iv) all Ordinary Shares issued to Raviv pursuant to a Consulting
Agreement between the Company and Raviv dated as of January 1, 1996 and
(v) all Ordinary Shares issued by the Company in respect of such
shares, including bonus shares, share dividends and all Ordinary Shares
that may be purchased pursuant to preemptive rights or rights of first
refusal, or any other similar right.
<PAGE> 69
"Securities Act" means the U.S. Securities Act of 1933,as amended.
1.2 Incidental Registration. Following an initial public offering
of Ordinary Shares of the Company registered under the Securities Act ("IPO"),
if the Company at any time proposes to register any of its securities, other
than in a demand registration under Section 1.3 or Section 1.4 of this
Agreement, it shall give notice to the Holders of such intention. Upon the
written request of any Holder given within twenty (20) days after receipt of any
such notice, the Company shall include in such registration all of the
Registrable Shares indicated in such request, so as to permit the disposition of
the shares so registered. Notwithstanding any other provision of this Section
1.2, if the managing underwriter advises the Company in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
there shall be excluded from such registration and underwriting to the extent
necessary to satisfy such limitation, first shares held by shareholders other
than the Holders, then to the extent necessary, shares held by the Holders (pro
rata to the respective number of Registrable Shares required by the Holders to
be included in the registration); provided, however, that in any event all
Registrable Shares must be included in such registration prior to any other
shares of the Company (with the exception of shares to be issued by the Company
to the public).
1.3 Demand Registration.
(a) At any time beginning nine (9) months following the closing of
the IPO and until the fifth anniversary thereafter, the Initiating Holders may
request in writing that all or part of the Registrable Shares shall be
registered for sale under the Securities Act. Any such demand must request the
registration of shares in a minimum amount of five million United States dollars
($5,000,000). Within twenty (20) days after receipt of any such request, the
Company shall give written notice of such request to the other Holders and shall
include in such registration all Registrable Shares held by all such Holders who
wish to participate in such demand registration and provide the Company with
written requests for inclusion therein within fifteen (15) days after the
receipt of the Company's notice. Thereupon, the Company shall effect the
registration of all Registrable Shares as to which it has received requests for
registration for sale under the Securities Act specified in the request for
registration; provided, however, that the Company shall not be required to
effect any registration under this Section 1.3 within a period of one hundred
and eighty (180) days following the effective date of a previous registration.
Notwithstanding any other provision of this Section 1.3, if the managing
underwriter advises the Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then there shall be
excluded from such registration and underwriting to the extent necessary to
satisfy such limitation, first shares held by shareholders other than the
Holders, then shares which the Company may wish to register for its own account,
and thereafter, to the extent necessary, shares held by the Holders (pro rata to
the respective number of Registrable Shares required by the Holders to be
included in the registration); provided, however, that in any event all
Registrable Shares must be included in such registration prior to any other
shares of the Company. The Company shall not register securities for sale for
its
<PAGE> 70
own account in any registration requested pursuant to this Section 1.3 unless
permitted to do so by the written consent of Holders who hold at least
seventy-five percent (75%) of the Registrable Shares as to which registration
has been requested. The Company may not cause any other registration of
securities for sale for its own account (other than a registration effected
solely to implement an employee benefit plan) to be initiated after a
registration requested pursuant to Section 1.3 and to become effective less than
one hundred twenty (120) days after the effective date of any registration
requested pursuant to Section 1.3. The Company shall not be required to effect
more than two (2) registrations under this Section 1.3.
(b) The Company shall not be required to effect any registration
requested pursuant to this Section 1.3 if the registration rights granted
pursuant to this Section 1.3 have been exercised by the Holders on two previous
occasions. The right of the Holders under this Section 1.3 shall not be deemed
to have been exercised if:
(i) the requisite notice given by the Initiating
Holders pursuant to this Section 1.3 is withdrawn prior to the date of filing of
registration statement or if a registration statement filed by the Company under
the Securities Act pursuant to this Section 1.3 is withdrawn prior to its
effective date, in either case, by written notice to the Company from the
Initiating Holders that have elected not to proceed with the offering
contemplated by such registration statement because (y) a development in the
Company's affairs has occurred or has become known to the Initiating Holders
subsequent to the date of the notice by the Initiating Holders to the Company
requesting registration or the filing of such registration statement which, in
the reasonable judgment of Initiating Holders or the managing underwriter of the
proposed public offering, adversely affects the market price or marketability of
such Registrable Securities or (z) a registration statement filed by the Company
pursuant to this Section 1.3, in the judgment of the Initiating Holders or the
managing underwriter of the proposed public offering, contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which made (other than any such statement or
omission relating to the Initiating Holders and based on information supplied or
failed to be supplied by the Initiating Holders) and the Company has not,
promptly after written notice thereof, corrected such statement or omission in
an amendment to such registration statement filed pursuant to Section 1.3; or
(ii) a registration statement pursuant to this
Section 1.3 shall have become effective under the Securities Act and (x) the
underwriters shall not purchase any Registrable Securities because of a failure
of condition contained in the underwriting agreement (other than a condition to
be performed by the Holders) relating to the offering covered by such
registration statement or (y) the offering of any Registrable Securities
pursuant to such registration statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court.
1.4 Form 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 Registrable Shares where the aggregate net proceeds from the sale of
such Registrable Shares equals at least Five Hundred Thousand United States
dollars ($500,000), the Company will within twenty (20) days after receipt of
any such request give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders, and include in such
registration all Registrable Shares held by all such Holders who wish to
participate in such registration and provide the Company with written requests
for inclusion therein within fifteen (15) days after the receipt of the
Company's notice. Thereupon, the Company shall effect such registration under
the Securities Act and all such qualifications and compliances
<PAGE> 71
as may be so requested and as would permit or facilitate the sale and
distribution 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 fifteen (15) days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 1.4, (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 sell 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 Five Hundred Thousand
United States dollars ($500,000); (iii) if the Company shall furnish to the
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 be
seriously detrimental to the Company or its stockholders for such Form S-3
registration statement to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration statement
for a period of not more than ninety (90) days after receipt of the request of
the Holder or Holders under this Section 1.4; provided, however, that the
Company shall not utilize this right more than once in any twelve (12) month
period; (iv) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two (2) registrations on Form S-3 for
the Holders pursuant to this Section 1.4; (v) during the period starting with
the date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date six (6) months immediately following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith; or (vi) 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; (iv) the Holders have previously
required the Company to file six (6) S-3 registrations.
1.5 Designation of Underwriter. (a) In the case of any
registration effected pursuant to Section 1.3 or 1.4, the Initiating Holders
that submitted the request for registration shall have the right to designate
the managing underwriter(s) in any underwritten offering.
(b) In the case of any registration initiated by the
Company, the Company shall have the right to designate the managing underwriter
in any underwritten offering.
1.6 Expenses. All expenses incurred in connection with any
registration under Section 1.2, Section 1.3 or Section 1.4 shall be borne by the
Company; provided, however, that each of the Holders participating in such
registration shall pay its pro rata portion of discounts or commissions payable
to any underwriter.
1.7 Indemnities. In the event of any registered offering of
Ordinary Shares pursuant to this Section 1:
<PAGE> 72
1.7.1 The Company will indemnify and hold harmless, to the
fullest extent permitted by law, any Holder and any underwriter for such Holder,
and each person, if any, who controls the Holder or such underwriter, from and
against any and all losses, damages, claims, liabilities, joint or several,
costs and expenses (including any amounts paid in any settlement effected with
the Company's consent) to which the Holder or any such underwriter or
controlling person may become subject under applicable law or otherwise, insofar
as such losses, damages, claims, liabilities (or actions or proceedings in
respect thereof), costs or expenses arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement filed under the Securities Act pursuant to the
provisions of this Agreement or included in the related prospectus, as amended
or supplemented, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they are made, not
misleading, and the Company will reimburse the Holder, such underwriter and each
such controlling person of the Holder or the underwriter, promptly upon demand,
for any reasonable legal or any other expenses incurred by them in connection
with investigating, preparing to defend or defending against or appearing as a
third-party witness in connection with such loss, claim, damage, liability,
action or proceeding; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished in writing by a Holder, such underwriter or such controlling persons
in writing specifically for inclusion therein; provided, further, that this
indemnity shall not be deemed to relieve any underwriter of any of its due
diligence obligations; provided, further, that the indemnity agreement contained
in this subsection 1.7.1 shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld or delayed. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the selling shareholder,
the underwriter or any controlling person of the selling shareholder or the
underwriter, and regardless of any sale in connection with such offering by the
selling shareholder. Such indemnity shall survive the transfer of securities by
a selling shareholder.
1.7.2 Each Holder participating in a registration hereunder
will indemnify and hold harmless the Company, any underwriter for the Company,
and each person, if any, who controls the Company or such underwriter, from and
against any and all losses, damages, claims, liabilities, costs or expenses
(including any amounts paid in any settlement effected with the selling
shareholder's consent) to which the Company or any such controlling person
and/or any such underwriter may become subject under applicable law or
otherwise, insofar as such losses, damages, claims, liabilities (or actions or
proceedings in respect thereof), costs or expenses arise out of or are based on
(i) any untrue or alleged untrue statement of any material fact contained in the
registration statement or included in the prospectus, as amended or
supplemented, or (ii) the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, and each such Holder will reimburse the Company, any underwriter and
each such controlling person of the Company or any underwriter, promptly upon
demand, for any reasonable legal or other expenses incurred by them in
connection with investigating,
<PAGE> 73
preparing to defend or defending against or appearing as a third-party witness
in connection with such loss, claim, damage, liability, action or proceeding; in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in strict
conformity with written information furnished by such Holder specifically for
inclusion therein. The foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary prospectus
but eliminated or remedied in the amended prospectus at the time the
registration statement becomes effective or in the final prospectus included in
any registration statement declared effective under the Securities Act pursuant
to the provisions of this Agreement, such indemnity agreement shall not inure to
the benefit of (i) the Company and (ii) any underwriter, if a copy of the final
prospectus was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act; provided, further, that this indemnity shall not be
deemed to relieve any underwriter of any of its due diligence obligations;
provided, further, that the indemnity agreement contained in this subsection
1.7.2 shall not apply to amounts paid in settlement of any such claim, loss,
damage, liability or action if such settlement is effected without the consent
of the indemnifying Holder, which consent shall not be unreasonably withheld or
delayed. In no event shall the liability of a Holder exceed the gross proceeds
from the offering received by such Holder.
1.7.3 Promptly after receipt by an indemnified party
pursuant to the provisions of Sections 1.7.1 or 1.7.2 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said Section
1.7.1 or 1.7.2, promptly notify the indemnifying party of the commencement
thereof. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and there is a conflict of
interests which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall have
the right to select one separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said Sections 1.7.1 or 1.7.2 for any legal
or other expense subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
counsel in accordance with the provision of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action and within 15 days after
written notice of the indemnified party's intention to employ separate counsel
pursuant to the previous sentence, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term
<PAGE> 74
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
1.7.4 If recovery is not available under the foregoing
indemnification provisions, for any reason other than as specified therein, the
parties entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses as more fully set forth in an
underwriting agreement to be executed in connection with such registration. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the parties' relative knowledge and access
to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission, and
any other equitable considerations appropriate under the circumstances.
1.8 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Shares, the Company
shall, as expeditiously as possible:
1.8.1 prepare and file with the SEC, within sixty (60) days
of a request therefor, a registration statement with respect to such Registrable
Shares and use its best efforts to cause such registration statement to become
effective, and, upon the request of the holders of a majority of the Registrable
Shares registered thereunder, keep such registration statement effective for a
period of up to nine (9) months or, if sooner, until the distribution
contemplated in the Registration Statement has been completed.
1.8.2 prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by such registration statement.
1.8.3 furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Shares
owned by them.
1.8.4 in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
1.8.5 notify each holder of Registrable Shares covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
1.8.6 cause all Registrable Shares registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
<PAGE> 75
1.8.7 provide a transfer agent and registrar for all
Registrable Shares registered pursuant hereunder and a CUSIP number for all such
Registrable Shares, in each case not later than the effective date of such
registration.
1.8.8 furnish, at the request of any Holder requesting
registration of Registrable Shares pursuant to this Section 1, on the date that
such Registrable Shares are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 3, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Shares and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Shares.
1.9 Assignment of Registration Rights. Any of the Holders may
assign its rights to cause the Company to register Shares pursuant to this
Section 1 to a transferee of all or any part of its Registrable Shares. The
transferor shall, within twenty (20) days after such transfer, furnish the
Company with written notice of the name and address of such transferee and the
securities with respect to which such registration rights are being assigned,
and the transferee's written agreement to be bound by this Section 1.
1.10 Lock-Up. In any registration of the Company's shares all
Holders agree that any sales of Registrable Shares may be subject to a "lock-up"
period restricting such sales for up to one hundred and eighty (180) days, and
all Holders will agree to abide by such customary "lock-up" period of up to one
hundred and eighty (180) days as is required by the underwriter in such
registration, provided, however, that the Holders shall only be required to so
agree if all directors, executive officers and other affiliates of the Company
shall also agree to abide by such customary "lock-up" period under identical
terms.
1.11 Public Information. At any time and from time to time after
the earlier of the close of business on such date as (a) a registration
statement filed by the Company under the Securities Act becomes effective, (b)
the Company registers a class of securities under Section 12 of the United
States Securities Exchange Act of 1934, as amended, or any federal statute or
code which is a successor thereto (the "Exchange Act"), or (c) the Company
issues an offering circular meeting the requirements of Regulation A under the
Securities Act, the Company shall undertake to make publicly available and
available to the Holders pursuant to Rule 144, such information as is necessary
to enable the Holders to make sales of Registrable Shares pursuant to that Rule.
The Company shall comply with the current public information requirements of
Rule 144 and shall furnish thereafter to any Holder, upon request, a written
statement executed by the Company as to the steps it has taken to so comply.
<PAGE> 76
2. Termination of Prior Registration Rights. Any registration
rights granted by the Company to any of the parties hereto are hereby superceded
in their entirety by this Agreement, and such prior registration rights are no
longer of any force or effect.
3. Miscellaneous
3.1 Further Assurances. Each of the parties hereto shall perform
such further acts and execute such further documents as may reasonably be
necessary to carry out and give full effect to the provisions of this Agreement
and the intentions of the parties as reflected thereby.
3.2 Governing Law. This Agreement shall be governed by and
construed according to the laws of the State of New York, without regard to the
conflict of laws provisions thereof.
3.3 Successors and Assigns; Assignment. Except as otherwise
expressly limited herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. Notwithstanding any other provision
contained herein, no party hereto shall be authorized to assign any portion of
its rights or obligations hereunder without the prior written consent of the
other party hereto.
3.4 Entire Agreement; Amendment and Waiver. This Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subject matters hereof. Any term of this Agreement may be
amended and the observance of any term hereof may be waived (either
prospectively or retroactively and either generally or in a particular instance)
only with the written consent of all of the parties to this Agreement.
3.5 Notices, etc. All notices and other communications required or
permitted hereunder to be given to a party to this Agreement shall be in writing
and shall be telecopied or mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand or by messenger, addressed to such
party's address as set forth below:
If to Medscape, Inc.:
Medscape, Inc.
134 West 29th Street
New York, New York 10001-5399
Attention: Mr. Paul Sheils
President and Chief Operating
Officer
Telecopier: (212) 760-3140
With copies to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
Attention: Jeffrey E. LaGueux, Esq.
Telecopier: (212) 336-2222
and
<PAGE> 77
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem, Israel
Attention: Barry Levenfeld, Esq.
Telecopier: (972-2) 623-9236
If to Kraft Group LLC:
Kraft Group LLC
One Boston Place, 34th Floor
Boston, Massachusetts, 02108
Attention: Robert K. Kraft/Jonathan A. Kraft
With a copy to:
Binham Dana LLP
150 Federal Street
Boston, Massachusetts, 02101
Attention: David L. Engel Esq./
Jonathan K. Bernstein Esq.
If to Platinum Health Ventures Ltd.:
Platinum Health Ventures Ltd.
c\o David Schottenfels, Adv.
29B Keren Hayesod Street
Jerusalem, 94188, Israel
Telecopier: (972-2)625-7751
If to Adi Raviv:
Adi Raviv
__________________________
__________________________
__________________________
Attention: _______________
Telecopier: ______________
if to the Company:
Softwatch Ltd.
1 Ta'as Street
Ramat Gan, Israel
Attention: Amir Kishon
<PAGE> 78
Telecopier: (972-3) 751-1732
With a copy to:
Goldfarb, Levy, Eran & Co.
Eliahu House
2 Ibn Gvirol Street
Tel Aviv 64077, Israel
Attention: Barak S. Platt
Telecopier: (972-3) 695-4344
or such other address with respect to a party as such party shall notify each
other party in writing as above provided. Any notice sent in accordance with
this Section 3.5 shall be effective (i) if mailed, ten (10) business days after
mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via
telecopier, upon transmission and electronic confirmation of receipt or (if
transmitted and received on a non-business day) on the first business day
following transmission and electronic confirmation of receipt.
3.6 Delays or Omissions. No delay or omission to exercise any
right, power, or remedy accruing to any party upon any breach or default under
this Agreement, shall 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 party of any breach or default under
this Agreement, or any waiver on the part of any party 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 of the parties, shall be
cumulative and not alternative.
3.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and enforceable against
the parties actually executing such counterpart, and all of which together shall
constitute one and the same instrument.
[Remainder of the page intentionally left blank]
<PAGE> 79
IN WITNESS WHEREOF the parties have signed this Agreement as of the
date first hereinabove set forth.
SOFTWATCH LTD. MEDSCAPE, INC.
by: ________________________ by: ________________________
name: ________________________ name: ________________________
title: ________________________ title: ________________________
KRAFT GROUP LLC PLATINUM HEALTH VENTURE LTD.
by: ________________________ by: ________________________
name: ________________________ name: ________________________
title: ________________________ title: ________________________
_________________________________
ADI RAVIV
by: ________________________
name: ________________________
title: ________________________
<PAGE> 80
SCHEDULE 1: THE PURCHASERS
<TABLE>
<CAPTION>
NAME PURCHASE PRICE FOR PREFERRED SHARES SERIES A PREFERRED SHARES
- ---- ----------------------------------- -------------------------
<S> <C> <C>
Medscape, Inc. $2,999,954 1,040,170
Kraft Group LLC $ 122,998 42,647
Minols Ltd. $ 5,998 2,080
A. Heifetz $ 1,799 624
</TABLE>
22
<PAGE> 81
BRING DOWN CERTIFICATE
June __, 1999
To the Purchasers (as defined in the Preferred
Share Purchase Agreement)
Ladies and Gentlemen:
Pursuant to Sections 2.3.1 and 2.3.2 of the Preferred Share Purchase
Agreement dated as of June __, 1999 (the "Agreement") by and among Softwatch
Ltd. (the "Company"), Medscape, Inc., and the persons and entities set forth on
Schedule 1 attached to the Agreement, if any, the undersigned hereby certifies
that as of the date of Closing (as defined in the Agreement):
1. The representations and warranties of the Company are true and correct
in all material respects with the same force and effect as the same were true
and correct as of the date of the Agreement, except to the extent such
representations and warranties expressly relate to an earlier time.
2. All covenants and agreements required by the Agreement to have been
performed by the Company at or prior to the Closing have been performed or
complied with in all respects.
Very truly yours,
SOFTWATCH LTD.
By: ____________________________
<PAGE> 82
SOFTWATCH LTD.
(the "Company")
UNANIMOUS ACTION OF THE BOARD OF DIRECTORS
The undersigned, being all the members of the Board of Directors of the
Company, in writing and without a meeting, pursuant to the Company's Articles of
Association of the Company, hereby unanimously adopt the following resolutions
as of this __ day of ___, 1999:
IT IS HEREBY RESOLVED AS FOLLOWS:
1. RESOLVED, unanimously, that the execution, delivery and performance of the
Share Purchase Agreement (the "Purchase Agreement") dated as of June __, 1999 by
and among the Company, Medscape, Inc. ("Medscape") and the individuals and
entities listed on Schedule 1 to the Purchase Agreement be, and they hereby are,
approved.
2. RESOLVED, unanimously, that the execution, delivery and performance of the
Registration Rights Agreement (the "Rights Agreement") dated as of June __, 1999
by and among the Company, Medscape, Kraft Group LLC, Platinum Health Ventures
Ltd. and Adi Raviv be, and they hereby are, approved.
3. RESOLVED, unanimously, to issue and allot Series A Preferred Shares of the
Company, nominal value NIS 0.01 each, to each of the Purchasers in accordance
with the number of shares listed next to the name of each such Purchaser on
Schedule 1 to the Purchase Agreement upon receipt of the purchase price from
such Purchaser as listed next to the name of each such Purchaser on Schedule 1
to the Purchase Agreement.
4. RESOLVED, unanimously, that Amir Kishon be, and he hereby is, authorized and
empowered, in the name and on behalf of the Company, to make or cause to be
made, and to execute and deliver, the Purchase Agreement, the Rights Agreement
and all such additional agreements, documents, instruments and certificates, and
to do or cause to be done all such acts and things, and to take all such steps
as he may at any time or from time to time deem necessary or desirable in
connection with or in furtherance of the consummation of the transactions
described in the foregoing resolutions, and in connection with or in furtherance
of the consummation of the transactions contemplated under the Purchase
Agreement.
5. RESOLVED, unanimously, that the Consulting Agreement by and between the
Company and Joe Zibrak dated May 11, 1998 is hereby approved, ratified and
confirmed.
6. RESOLVED, unanimously (without the participation of Paul Egerman, who has a
personal interest in the matter), subject to approval by the Company's
shareholders, that the Consulting Agreement by and between the Company and Paul
Egerman dated June 15, 1997 is hereby approved, ratified and confirmed.
<PAGE> 83
7. RESOLVED, unanimously (without the participation of Rob Friedman, who has a
personal interest in the matter), subject to approval by the Company's
shareholders, that the Consulting Agreement by and between the Company and Rob
Friedman dated March 8, 1998 together with the amendment thereto dated January
5, 1999 are hereby approved, ratified and confirmed and attached hereto as
Exhibit A.
8. RESOLVED, unanimously, that the Letter of Understanding (the "Letter of
Understanding") by and among the Company, Softwatch, Inc., Gary Rancourt and
Healthcourt Technologies, Inc. dated April 2, 1998 is hereby approved, ratified
and confirmed.
9. RESOLVED, unanimously (without the participation of Paul Egerman, who has a
personal interest in the matter), subject to approval by the Company's
shareholders, that the Convertible Loan Agreement by and among the Company, Gary
Rancourt Rich Carpentar and Paul Egerman dated May 10, 1998 is hereby approved,
ratified and confirmed.
10. RESOVLED, unanimously, to amend Section 14.1 of the Company's Key Employee
and Directors Share Option Plan as follows: the year 1996 is hereby replaced
with the year 2006.
11. RESOLVED, unanimously, to issue to HealthCourt 1% Partnership
("HealthCourt") 455 Ordinary Shares of the Company, nominal value NIS 0.01 each,
which is the difference between the number of shares actually issued (55,090) to
HealthCourt pursuant to the Letter of Understanding and the number of shares
(55,545) which should have been issued to HealthCourt by the Company pursuant to
the Letter of Understanding.
12. RESOLVED, unanimously (without the participation of Amir Kishon, who has a
personal interest in the matter), subject to approval by the Company's
shareholders, that the Loan Agreement by and among the Company and Amir Kishon,
attached hereto as Exhibit B is hereby approved, ratified and confirmed.
13. RESOLVED, unanimously, that the terms set forth in the draft Term Sheet by
and among the Company and Amir Vardi dated September 30, 1996 are hereby
approved, ratified and confirmed.
14. RESOLVED, unanimously (without the participation of Amir Kishon and Asaf
Evenhaim, who have a personal interest in the matter), that the Share Purchase
Agreement by and among the Company, Amir Kishon and Asaf Evenhaim dated
September 1, 1995 is hereby approved, ratified and confirmed.
15. RESOLVED, unanimously (without the participation of Anthony Michael Stone,
who has a personal interest in the matter), subject to approval by the Company's
shareholders, that the Loan Agreement by and among the Company and Anthony
Michael Stone dated August 5, 1997 is hereby approved, ratified and confirmed.
16. RESOLVED, unanimously (without the participation of Anthony Michael Stone,
who has a personal interest in the matter), subject to approval by the Company's
shareholders, that the
<PAGE> 84
Loan Agreement by and among the Company and Anthony Michael Stone, attached
hereto as Exhibit C is hereby approved, ratified and confirmed.
17. RESOLVED, to approve the execution of warrant and option agreements in favor
of the following parties, in respect of such warrants and options previously
granted to such parties:
Tom Morrison, William Cowan, Anthony Michael Stone and Platinum Health
Ventures
18. It is hereby clarified that by a Consulting Agreement between the Company
and Rob Friedman ("Friedman") dated March 8, 1998 (the "Original Agreement"),
the Company agreed to grant Friedman options to purchase an aggregate of 88,650
ordinary shares. In the amendment to such Consulting Agreement dated January 5,
1999 (the "Amending Agreement") it is mistakenly stated that "Mr. Friedman will
be compensated for his services by receiving an additional 79,982 share options.
This will be added to his total existing 86,650 share options". This mistake was
subsequently corrected by the Company and Friedman stating that, in accordance
with the Original Agreement, Friedman is entitled to options to purchase an
aggregate of 88,650 ordinary shares and by the Amending Agreement he is entitled
to additional options to purchase an aggregate of 77,982 ordinary shares. IT IS
THEREFORE RESOLVED, unanimously, that any previous resolution of the Company's
Board which may be deemed to issue additional shares to Friedman be deemed
amended in accordance with the above.
19. RESOLVED, unanimously (without the participation of Anthony Michael Stone,
who has a personal interest in the matter), subject to approval by the Company's
shareholders, that the issuance by the Company of 63 Ordinary Shares to Anthony
Michael Stone pursuant to the Board of Directors resolution dated June 10, 1996
is hereby approved, ratified and confirmed.
20. RESOLVED, unanimously, that the execution by the Company of the following
lease agreements is hereby approved, ratified and confirmed:
The lease agreement between the Company and Marodi Menashe dated June 13, 1996,
as amended on April 29, 1999;
The lease agreement between the Company and Altira Properties (1979) Ltd.,
Altira Investments Ltd. and Altira (1993) Ltd. dated May 16, 1999.
<PAGE> 85
IN WITNESS WHEREOF, the undersigned have signed this instrument as of the date
first set forth above.
______________________________ _______________________________
Amir Kishon Asaf Evenhaim
______________________________ _______________________________
Paul Egerman Tony Stone
______________________________ _______________________________
Edwin Slonim Robert Friedman
<PAGE> 86
SOFTWATCH LTD.
Private Company No. 51-185670-0
(the "Company")
Minutes of an extraordinary meeting (the "Meeting") of the shareholders
of the Company, held at the Company's offices on June ___, 1999.
Present: Legal Quorum
Chairman: Dr. Amir Kishon
THE FOLLOWING RESOLUTIONS WERE ADOPTED BY THE SHAREHOLDERS AT THE MEETING:
1. RESOLVED, as a special resolution (which was approved by no less
than seventy-five percent (75%) of the shareholders present in person or by
proxy voting on such resolution) to increase the share capital of the Company by
the amount of NIS 20,000, so that following such increase the share capital of
the Company shall be NIS 120,000, divided into 10,800,000 Ordinary Shares,
nominal value NIS 0.01 each, and 1,200,000 Series A Preferred Shares, nominal
value NIS 0.01 each..
2. RESOLVED, as a special resolution (which was approved by no less
than seventy-five percent (75%) of the shareholders present in person or by
proxy voting on such resolution) to approve and adopt the Amended Articles of
Association (the "Amended Articles") of the Company, in the form attached hereto
as Exhibit A and that the Amended Association replace in their entirety the
previously existing Articles of Association of the Company.
3. RESOLVED, that the execution, delivery and performance of the Share
Purchase Agreement (the "Purchase Agreement") dated as of June __, 1999 by and
among the Company, Medscape, Inc. ("Medscape") and the individuals and entities
listed on Schedule 1 to the Purchase Agreement be, and they hereby are,
approved.
4. RESOLVED, that the execution, delivery and performance of the Registration
Rights Agreement (the "Rights Agreement") dated as of June __, 1999 by and among
the Company, Medscape, Kraft Group LLC, Platinum Health Ventures Ltd. and Adi
Raviv be, and they hereby are, approved.
5. RESOLVED, that the Consulting Agreement by and between the Company and Paul
Egerman dated June 15, 1997 is not adverse to the best interests of the Company
and is hereby approved, ratified and confirmed.
6. RESOLVED, that the Consulting Agreement by and between the Company and Rob
Friedman dated March 8, 1998 together with amendment thereto dated January 5,
1999 are not adverse to the best interests of the Company and are hereby
approved, ratified and confirmed and attached hereto as Exhibit B.
<PAGE> 87
7. RESOLVED, that the Letter of Understanding (the "Letter of Understanding") by
and among the Company, Softwatch, Inc., Gary Rancourt and Healthcourt
Technologies, Inc. dated August 11, 1998 is not adverse to the best interests of
the Company and is hereby approved, ratified and confirmed.
8. RESOLVED, that the Convertible Loan Agreement by and among the Company, Gary
Rancourt Rich Carpentar and Paul Egerman dated May 10, 1998 is not adverse to
the best interests of the Company and is hereby approved, ratified and
confirmed.
9. RESOLVED, that the provision of a loan to the Company in the amount of
$209,663 by Amir Kishon between 1994 and 1997 on the terms described to the
shareholders at the Meeting is not adverse to the best interests of the Company
and is hereby approved, ratified and confirmed.
10. RESOLVED, that the Loan Agreement by and among the Company and Anthony
Michael Stone dated August 5, 1997 is not adverse to the best interests of the
Company and is hereby approved, ratified and confirmed.
11. RESOLVED, to approve the execution of warrant and option agreements in favor
of the following parties, in respect of such warrants and options previously
granted to such parties:
Tom Morrison;
William Cowan;
Anthony Michael Stone; and
Platinum Health Ventures.
12. RESOLVED, that the transaction described in the Board of Directors
resolution dated August 10, 1994, in which the Company issued certain shares to
Asaf Evenhaim and granted Amir Kishon the right to repurchase such shares, is
not adverse to the best interests of the Company and is hereby approved,
ratified and confirmed.
13. RESOLVED, that the issuance of shares to Asaf Evenhaim pursuant to
the Board of Directors resolution dated May 14, 1996 is not adverse to the best
interests of the Company and is hereby approved, ratified and confirmed.
14. RESOLVED, that the issuance of shares to Adi Raviv pursuant to the
Board of Directors resolution dated July 10, 1996 is not adverse to the best
interests of the Company and is hereby approved, ratified and confirmed.
15. RESOLVED, that the grant of options to Asaf Evenhaim pursuant to
the Board of Directors resolution dated November 27, 1996 is not adverse to the
best
<PAGE> 88
interests of the Company and is hereby approved, ratified and confirmed.
16. RESOLVED, that the issuance of shares to Adi Raviv pursuant to the
Board of Directors resolution dated December 26, 1996 is not adverse to the best
interests of the Company and is hereby approved, ratified and confirmed.
17. RESOLVED, that the amendments to the Company's Directors and Key
Employee Share Option Plan and International Employee Stock Option Plan pursuant
to the Board of Directors resolution dated November 27, 1996 and February 3,
1997 are not adverse to the best interests of the Company and are hereby
approved, ratified and confirmed.
18. RESOLVED, that the amendments to the terms of options granted to
Asaf Evenhaim pursuant to the Board of Directors resolution dated April 2, 1997
are not adverse to the best interests of the Company are hereby approved,
ratified and confirmed.
19. RESOLVED, that the grant of options to Asaf Evenhaim pursuant to
the Board of Directors resolution dated August 1, 1997 is not adverse to the
best interests of the Company and is hereby approved, ratified and confirmed.
20. RESOLVED, that the issuance of shares to Paul Egerman and the
conversion into share options of a debt owed by the Company to Adi Raviv
pursuant to the Board of Directors resolution dated December 9, 1998 is not
adverse to the best interests of the Company and is hereby approved, ratified
and confirmed.
21. RESOLVED, that the issuance of shares to Adi Raviv and Tony Stone
pursuant to the Board of Directors resolution dated February 10, 1998 is not
adverse to the best interests of the Company and is hereby approved, ratified
and confirmed.
22. RESOLVED, that the Loan Agreement between the Company and Tony
Stone dated August 5, 1997 and the warrants granted to Tony Stone as of August
5, 1997 are not adverse to the best interests of the Company and are hereby
approved, ratified and confirmed.
23. RESOLVED, that the issuance of shares to Asaf Evenhaim pursuant to
the Board of Directors resolution dated May 14, 1996 is not adverse to the best
interests of the Company and is hereby approved, ratified and confirmed.
24. RESOLVED, that the issuance by the Company of 63 Ordinary Shares to Anthony
Michael Stone pursuant to the Board of Directors resolution dated June 10, 1996
is not adverse to the best interests of the Company and is hereby approved,
ratified and confirmed.
25. RESOLVED, that the Share Purchase Agreement by and among the Company, Amir
Kishon and Asaf Evenhaim dated September 1, 1995 is not adverse to the best
interests of the Company and is hereby approved, ratified and confirmed.
<PAGE> 89
26. RESOLVED, that the Softwatch Ltd. International Employee Stock Option Plan
is hereby approved, ratified and confirmed.
------------------
Dr. Amir Kishon
Chairman
<PAGE> 90
1
To: Softwatch Ltd.
On May 10, 1998, we, the undersigned, Rich Carpenter, Gary
Rancourt and Paul Egerman (collectively, the "Investors") entered into a
convertible loan agreement (the "Loan Agreement") with Softwatch Ltd. (the
"Company") pursuant to which the Investors lent the Company the amount of
$65,000 (the "Loan"), which Loan was stated to be convertible into shares at a
price per share of US$0.71.
By a Letter of Understanding by and between the Company, SoftWatch
Inc., Gary Rancourt and Healthcourt Technologies Inc. ("Healthcourt
Technologies") dated August 11, 1998 superceding and replacing a Letter of
Understanding by and between the parties dated April 2, 1998, (the "Investment
Agreement"), the Investors and all other shareholders in Healthcourt (together,
the "Healthcourt Shareholders") were granted the right to purchase 111,090
Ordinary Shares of the Company during a subsequent investment in the Company at
a price per share as provided for in such subsequent investment, or as otherwise
mutually agreed.
By a Share Purchase Agreement by and between the Company and Kraft
Group LLC dated August 21, 1998, the Healthcourt Shareholders were granted the
right to exercise their right to purchase up to 111,090 Ordinary Shares pursuant
to the Letter of Understanding dated August 11, 1998.
Pursuant to and in accordance with the rights given to the
Healthcourt Shareholders in the Investment Agreement and the Kraft Group Share
Purchase Agreement dated August 21, 1998, on March 19, 1999, and at the request
of Healthcourt Technologies and the Healthcourt Shareholders, the Company issued
111,090 Ordinary Shares to a limited partnership called Healthcourt 2%
Partnership ("Healthcourt").
It is hereby confirmed that only certain of the 111,090 Ordinary
Shares were issued to Healthcourt Technologies pursuant to the Investment
Agreement. Instead, the following actions were taken: (i) The Investors fully
converted the Loan into
<PAGE> 91
2
91,549 Ordinary Shares, which shares were issued, at the Investors' request,
directly to Healthcourt Shareholders; (ii) The Investors waived all rights to
purchase 91,549 Ordinary Shares pursuant to the Investment Agreement; and (iii)
The balance of the 111,090 Ordinary Shares (being 19,541 Ordinary Shares) were
issued directly to the Healthcourt Shareholders, for valuable consideration,
pursuant to the Investment Agreement.
<PAGE> 92
3
We, the undersigned, hereby confirm that we have no claim for the
issuance to us by the Company of any further shares, options, warrants or other
securities of the Company resulting from the Loan Agreement, the Investment
Agreement or an Agreement of Accession between ourselves and the Company dated
November 6, 1998.
Dated:
-------------
- ------------------- ----------------------
Rich Carpenter Gary Rancourt
- ------------------- ----------------------
Paul Egerman Healthcourt 2%
Partnership
<PAGE> 93
SCHEDULE 3.3
CAPITALIZATION
CURRENT CAPITALIZATION TABLE AS OF THE EFFECTIVE DATE OF THE AGREEMENT:
<TABLE>
<CAPTION>
SHAREHOLDER SHARES OPTIONS TOTAL %
- ----------- ------ ------- ----- ------
<S> <C> <C> <C> <C>
Amir Kishon 3,400,000 3,400,000 44.84%
Asaf Evenhaim 519,800 360,312 880,112 11.61%
Tony Stone 545,299 29,450 574,749 7.58%
Kraft Group 309,440 309,440 4.08%
Platinum Health Ventures 283,088 283,088 3.73%
Adi Raviv 223,075 30,944 254,019 3.35%
Rob Friedman 140,712 100,218 240,930 3.18%
Ronit Kishon 200,000 200,000 2.64%
Prof. I. Kronzon 100,000 100,000 200,000 2.64%
Paul Egerman 62,487 104,145 166,632 2.20%
Gary Rancourt 144,554 144,554 1.91%
Firepond (T. Morrison & W. Cowen) 136,584 136,584 1.80%
Healthcourt 2% 111,090 111,090 1.47%
MDC Group LLC 106,778 106,778 1.41%
Employees (ESOP) (<1%) 287,860 287,860 3.80%
Other stakeholders (<1%) 235,205 50,936 286,141 3.77%
----------------------- -------------- -------- -----
TOTAL 6,236,974 1,345,003 7,581,977 100%
</TABLE>
PURSUANT TO A CONSULTING AGREEMENT BY AND BETWEEN THE COMPANY AND DR. JOE ZIBRAK
DATED MAY 11, 1998, DR. ZIBRAK WILL BE PARTLY COMPENSATED FOR HIS ONGOING
CONSULTING SERVICES BY ISSUING OPTIONS TO PURCHASE SHARES IN LIEU OF HIS
CONSULTING FEES. THIS TABLE ONLY ACCOUNTS FOR OPTIONS PREVIOUSLY ACCOUNTED TO
DR. ZIBRAK PURSUANT TO SAID CONSULTING AGREEMENT.
THE RESTATED ARTICLES OF ASSOCIATION REFLECT ALL OF THE COMPANY'S COMMITMENTS
WITH REGARDS TO THE ELECTION OF BOARD MEMBERS.
EXCEPT FOR THE PREEMPTIVE RIGHTS PROVIDED IN THE AGREEMENT BY AND BETWEEN THE
COMPANY AND HITEC INVESTORS GROUP DATED JANUARY 29, 1998 AND THE SHARE PURCHASE
AGREEMENT BY AND BETWEEN THE COMPANY AND THE KRAFT GROUP LLC DATED AUGUST 21,
1998 NO OTHER PERSON OR ENTITY IS ENTITLED TO PREEMPTIVE RIGHTS AS OF THE
EFFECTIVE DATE OF THIS AGREEMENT.
<PAGE> 94
SCHEDULE 3.10
CERTAIN AGREEMENTS
CONSULTING AGREEMENT BY AND BETWEEN THE COMPANY AND ADI RAVIV DATED JANUARY 1,
1996.
<PAGE> 95
SCHEDULE 3.13
INTELLECTUAL PROPERTY
THE FOLLOWING TABLE REPRESENTS ALL CONTRACTS REGARDING SOFTWATCH'S INTELLECTUAL
PROPERTY LICENSE CONTRACTS:
<TABLE>
<CAPTION>
LTD./INC. PARTIES AGREEMENT TITLE DATE
<S> <C> <C> <C>
LTD Teva Marion Partners License Agreement 13-Jan-98
LTD Teva Marion Partners Escrow Agreement 13-Feb-98
INC Accordant Health Services LOI License 2-Jul-98
LTD Teva Marion Partners Service and Maintenance Agreement 6-Jul-98
INC HMR/Hrava /product Group LOU License 5-Jan-99
INC HMR Diabetes Group LOU License 22-Jan-99
INC Procter &Gamble License agreement 19-Feb-99
INC Third Age Media MEDIA PARTNER CO-BRANDING Agreement 19-Feb-99
INC McCann-Erickson Letter 4-May-99
INC MediSense License agreement 6-May-99
</TABLE>
<PAGE> 96
SCHEDULE 3.19
RELATED PARTY TRANSACTIONS
Agreements with current or former shareholder, director, officer, or employee of
Seller or the Subsidiary.
<TABLE>
<CAPTION>
LTD./INC. PARTIES AGREEMENT TITLE DATE
<S> <C> <C> <C>
LTD Asaf Evenhaim Employment Agreement 7-Aug-94
LTD Asaf Evenhaim Terms 1-Aug-95
LTD Asaf Evenhaim Share Purchase Agreement 1-Sep-95
LTD Adi Raviv Consulting and Investment Agreement 1-Jan-96
LTD Anthony Michael Stone Consulting Agreement 18-Jul-96
LTD Anthony Michael Stone Investment Agreement 18-Jul-96
LTD Adam Low Consulting Agreement 15-Feb-97
LTD Anthony Michael Stone Loan Agreement 5-Aug-97
LTD Anthony Michael Stone Warrant 11-Aug-97
LTD Rob Friedman Consulting Agreement I 8-Mar-98
LTD Rich Carpenter, Paul Egerman, Gary Loan Agreement 10-May-98
Rancourt
LTD Paul Egerman Consulting Agreement 15-Jun-98
LTD/INC Gary Rancourt & Healthcourt LQLI 11-Aug-98
LTD Healthcourt Technologies Inc Agreement of Accession 6-Nov-98
Investors
LTD Rob Friedman Amendment To Consulting Agreement(11)(as 5-Jan-99
subsequently amended)
LTD Gary Rancourt & Healthcourt 1% Share restriction Agreement 1% 14-Jan-99
Investors
LTD Healthcourt Technologies Inc Asset Purchase Agreement 14-Jan-99
LTD Gary Rancourt & Healthcourt 2% Share Restriction Agreement 2% 19-Mar-99
Investors
LTD/INC Rob Friedman Consulting Agreement II 7-Apr-99
LTD Amir Kishon Loan Understanding 1997 (date unknown)
</TABLE>
<PAGE> 97
SCHEDULE 3.21
INSURANCE
SOFTWATCH LTD. HAS OBTAINED THE FOLLOWING INSURANCE COVERAGE FROM MENORA
INSURANCE COMPANY LTD. IN THE FOLLOWING AMOUNTS:
BURGLARY - 97,037 NIS
FIRE - 217, 830 NIS
BUSINESS - 1,272,370 NIS
ELECTRONIC EQUIPMENT - 96,700 NIS EARTHQUAKES AND OTHER NATURAL DISASTERS -
762,060 NIS THIRD PARTY (WORK RELATED ACCIDENTS) - COVERAGE OF UP TO $5,000,000.
THE POLICY EXPIRES ON JULY 31, 1999.
SOFTWATCH INC. HAS OBTAINED THE FOLLOWING INSURANCE COVERAGE: LIABILITY
INSURANCE IN THE FOLLOWING AMOUNTS:
GENERAL AGGREGATED - $2,000,000
PRODUCTS - $2,000,000
PERSONAL INJURY - $1,000,000
EACH OCCURRENCE - $ 1,000,000
FIRE DAMAGE - $ 50,000
MEDICAL EXPENSES - $5,000
EQUIPMENT INSURANCE IN THE AMOUNT OF $10,000 COVERING ALL OFFICE EQUIPMENT AND
OFFICE FURNITURE. SOFTWATCH INC. ALSO INSURES THE COMPANY CAR.
<PAGE> 98
SCHEDULE 3.22
INFORMATION TECHNOLOGY
SOFTWATCH SOFTWARE HAS BEEN WRITTEN AND DESIGNED WITH THE INTENT TO BE YEAR 2000
COMPLIANT. THE COMPANY HAS NOT DONE A COMPREHENSIVE TESTING OF THE SYSTEM FOR
THE YEAR 2000.
<PAGE> 99
SCHEDULE 3.23
MATERIAL CONTRACTS
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
LTD/INC Parties Agreement Title Date
<S> <C> <C> <C>
LTD Asat Evenhaim Employment Agreement 7-Aug-94
LTD Office of chief scientist R&D Grant Num 17511 13-Sep-94
LTD Dr. I. Kronzon Consulting Agreement 1-Oct-94
LTD Dr. I. Kronzon Finder Agreement 23-Oct-94
LTD Asat Evenhaim Terms 1-Aug-95
LTD Asat Evenhaim Share Purchase Agreement 1-Sep-95
LTD Dr. Danny Kliger Consulting Agreement 24-Oct-95
LTD Ministry of Industry and Trade Export Grant File 2 - 645195 12-Dec-95
LTD Adi Raviv Consulting and Investment Agreement 1-Jan-96
LTD Office of chief scientist R&D Grant Num 20019 22-Jan-96
LTD/INC Susan Griffin (Ex employee) Employee Agreement 23-Apr-96
LTD/INC Marc Jaffe (Ex consultant) Term Sheet 1-May-96
LTD Marodi Menashe Office Lease 13-Jun-96
LTD Anthony Michael Stone Consulting Agreement 18-Jul-96
LTD Anthony Michael Stone Investment Agreement 18-Jul-96
LTD Dr. Amir Vardi Consulting Agreement - Term Sheet (unsigned) 30-Sep-96
LTD Amir Kishon Loan Understanding 1997 (date unknown)
LTD Adam Low Consulting Agreement 15-Feb-97
LTD Platinum Health Ventures Limited Share Purchase And Warrant Investments Agreement 15-Feb-97
LTD/INC AccessNet Ltd Finder Agreement 9-Jun-97
LTD Anthony Michael Stone Loan Agreement 5-Aug-97
LTD Anthony Michael Stone Warrant 11-Aug-97
LTD Triangle Technologies Finder Agreement 1-Sep-97
LTD Platinum Health Ventures Limited Warrant (II) 7-Oct-97
LTD Ministry of Industry and Trade Approved Enterprise Program 13-Oct-97
LTD Firepond Consulting Agreement I (includes warrant) 1-Nov-97
LTD Ministry of Industry and Trade Export Grant File 2 - 365196 3-Nov-97
LTD/INC Medical Telecommunications Agreement for Defining a Business Relationship 21-Nov-97
Associations LLC
LTD Eva Marion Partners License Agreement 13-Jan-98
LTD Hitec Investors Group (HIG) Letter of Company Undertaking 29-Jan-98
INC Center of Burlington Office Lease 4-Feb-98
LTD Teva Marion Partners Escrow Agreement 13-Feb-98
LTD Rob Friedman Consulting Agreement I 8-Mar-95
LTD Office of chief scientist R&D Grant Num 22754 24-Mar-96
LTD SoftWatch Inc Loan Agreement 1-Apr-98
LTD Software FX, Inc Agreement 033098 License and Rights 6-Apr-98
LTD CIS LOU 13-Apr-98
LTD Health Concepts Inc LOU 15-Apr-98
LTD Goldfarb Levy Eran Legal Consulting (Warrants) 19-Apr-98
LTD Rich Carpenter, Paul Egerman, Gary Loan Agreement 10-May-98
Rancourt
LTD/INC Dr. Joe Zibrak Consulting Agreement 11-May-98
LTD Firepond Consulting Agreement II 1-Jun-98
LTD Paul Egerman Consulting Agreement 15-Jun-98
INC Mike Welch MD Letter 29-Jun-98
INC Accordant Health Services LOI License 2-Jul-96
LTD Teva Marion Partners Service and Maintenance Agreement 6-Jul-96
INC Mike Welch MD Letter 24-Jul-98
LTD/INC Gary Rancourt & Healthcourt LOU 11-Aug-98
LTD Kraft LLC Share Purchase Agreement 21-Aug-98
LTD Direct Computation Computer leasing Agreement 7-Oct-98
LTD Healthcourt Technologies Inc Agreement of Accession 6-Nov-98
Investors
LTD Rob Friedman Amendment to Consulting Agreement (II) (as 6-Jan-99
subsequently amended)
INC HMR/Hrava/product Group LOU License 5-Jan-99
LTD Gary Rancourt & Healthcourt 1% Share restriction Agreement 1% 14-Jan-99
Investors
LTD Healthcourt Technologies Inc Asset Purchase Agreement 14-Jan-99
INC HMR Diabetes Group LOU License 22-Jan-99
INC Proctor & Gamble License agreement 18-Feb-99
INC Third Age Media MEDIA PARTNER CO-BRANDING Agreement 19-Feb-99
INC Center of Burlington Amendment to Office Lease and Services Agreement 26-Feb-99
LTD Gary Rancourt & Healthcourt 2% Share Restriction Agreement 2% 19-Mar-99
Investors
LTD/INC Rob Friedman Consulting Agreement II 7-Apr-99
INC Harvard Net Service and Maintenance Agreement 12-Apr-99
INC HR LOGIC Service and Maintenance Agreement 13-Apr-99
INC Center of Burlington Office Lease 16-Apr-99
LTD Marodi Meneshe Office Lease 29-Apr-99
INC McCann-Erickson Letter 4-May-99
INC MediSense License agreement 6-May-99
INC Harvard Net Service and Maintenance Agreement 14-May-99
LTD Altira Office Lease 16-May-99
</TABLE>
<PAGE> 100
THE COMPANY IS USING THE SERVICES OF A SUBCONTRACTOR TO PROVIDE ACCOUNT
MANAGEMENT, CONTENT SERVICES AND SITE SUPPORT SERVICES FOR THREE OF SOFTWATCH'S
ACCOUNTS: HMR RHEUMATOID ARTHRITIS GROUP; HMR DIABETES GROUPS AND PROCTER &
GAMBLE OSTEOPOROSIS GROUP. THE SUBCONTRACTOR CALLED INTOUCH SOLUTIONS IS ALSO
PROVIDING ADDITIONAL SALES AGENT SERVICES AND IS LOCATED IN KANSAS CITY. IT WAS
AGREED THAT INTOUCH SOLUTIONS WILL BE RECEIVING 40% OF THE REVENUES ON THOSE
SPECIFIC DEALS. THE FINAL AGREEMENT IS IN NEGOTIATIONS AND IS EXPECTED TO COVER
THE NEXT 12 MONTHS.
<PAGE> 101
SCHEDULE 6.1.3
SELLER COMPETITORS
The following is a list of Seller Competitors:
Agency.com
BroadVision
Caresoft
Clarify
CyberDiet
Dr. Koop
eDiets
Exchange Applications
HealthDesk
Healtheon
HealthMagic
Jenny Craig
Mediconsult
Patinet Info systems
peregrine Systems
PHDI
Phys
remedy Corp
Siebel
USWeb
Vantive
Vignette
WebMD
WeightWatchersgency.com
<PAGE> 102
SCHEDULE 6.8
DEFINITION OF MEDSCAPE COMPETITOR
"Medscape Competitor" shall mean any web-site or online service that provides
healthcare news, information and/or interactive tools or features to physicians,
allied healthcare professionals or consumers, including, without limitation,
those listed below; provided, however, that the Term Medscape Competitor shall
not include any web-site operated by a pharmaceutical or medical device company
focussed on a single product or medical condition (e.g., MSWatch by Teva).
InteliHealth
Healtheon
WebMD
OnHealth
Dr. Koop/Empower
Mediconsult
MD Consult
BetterHealth
Women.com
iVillage/Thrive
HealthScout
HealthGate
Physician's Online
Mayo Clinic Health Oasis
PlanetRx
Drugstore.com
CVS/Soma
Walmart
Walgreen
RiteAide
Salu.net
CareInsite
AOL
Excite
Lycos
GO Network
Infoseek
@Home
AltaVista
Snap
MSN
MSNBC
Mining Company
Ask Dr. Weil
America's Doctor
QD Online
CyBear
Medicalogic
Medsite
<PAGE> 1
Exhibit 10.29
- --------------------------------------------------------------------------------
LICENSE AND WEB SITE DEVELOPMENT AGREEMENT
between
MEDSCAPE, INC.
and
SOFTWATCH INC.
----------------------------------
Dated as of June 15, 1999
----------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE 1. LICENSE OF SOFTWARE, CUSTOMIZATIONS;
DIETWATCH WEBSITE......................................................................1
Section 1.1 (a) SoftWatch Software License Grant.....................................1
(b) Medscape Consumer Site Defined................................................2
(c) Internet Defined..............................................................2
(d) SoftWatch Software Further Defined............................................2
(e) Licence For Use in Connection with Multiple Sclerosis.........................3
(f) Copying.......................................................................3
Section 1.2 Customization Services........................................................3
Section 1.3 DietWatch Site License........................................................4
(a) Exclusive Diet Center.........................................................4
(b) General Health and Wellness Center; Hyperlink.................................4
(c) Branding......................................................................4
(d) Member Information............................................................5
(e) Medscape Content; Editorial and Artistic Control;
Look and Feel of Tools.......................................................6
(f) Limited Use License As to Medscape Content....................................6
ARTICLE 2. MEDSCAPE CONSUMER SITE DEVELOPMENT SERVICES............................................6
Section 2.1 Development Services..........................................................6
ARTICLE 3. ADDITIONAL MEDSCAPE CONSUMER SITE
DEVELOPMENT SERVICES AND CO-BRANDED
DIET CENTER CRITERIA...................................................................7
Section 3.1 Content and Uploading of Content..............................................7
Section 3.2 Editorial and Artistic Control................................................7
ARTICLE 4. DELIVERY, TESTING AND ACCEPTANCE; RESPONSIBILITIES
OF THE PARTIES.........................................................................8
Section 4.1 Commencement of Services......................................................8
Section 4.2 Certification Testing.........................................................8
Section 4.3 Final Certification; Deemed Acceptance........................................8
Section 4.4 Retesting.....................................................................9
Section 4.5 Failure to Achieve Final Certification........................................9
Section 4.6 Delivery Delays..............................................................10
Section 4.7 Medscape Responsibilities with respect
to Deliverables..............................................................10
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ARTICLE 5. MAINTENANCE AND SUPPORT SERVICES......................................................11
Section 5.1 Maintenance Period...........................................................11
Section 5.2 SoftWatch Services; Outside Consultants......................................11
Section 5.3 Medscape.com Website.........................................................12
ARTICLE 6. FEES FOR DEVELOPMENT AND CUSTOMIZATION
SERVICES; ROYALTIES..................................................................12
Section 6.1 SoftWatch Software Basic License Fee
and Customization Fee........................................................12
Section 6.2 Maintenance Fees.............................................................12
Section 6.3 Royalty Payments.............................................................13
(a) End-User Tools Royalties.....................................................13
(b) Co-Branded Diet Center Royalties.............................................13
(c) Nutrition/General Health and Wellness
Center Royalties.............................................................14
Section 6.4 Payment Terms; Taxes.........................................................15
Section 6.5 (a) Reporting by Medscape for purposes
of Calculating Royalties.....................................................15
(b) Independent Auditor on Change of Control.....................................16
Section 6.6 (a) Audit Rights.............................................................16
(b) Audit Report on Change of Control............................................16
(c) Change in Control............................................................16
Section 6.7 Expense Reimbursement........................................................17
ARTICLE 7. INTELLECTUAL PROPERTY RIGHTS..........................................................17
Section 7.1 SoftWatch Owned Software and Customizations..................................17
Section 7.2 Medscape-Owned Materials; Customization
User Interfaces..............................................................17
Section 7.3 Shared Materials.............................................................18
Section 7.4 Trademarks, Etc..............................................................18
Section 7.5 Limited License..............................................................18
Section 7.6 Third Party Materials........................................................18
ARTICLE 8. TRADEMARKS; COPYRIGHT NOTICES.........................................................18
Section 8.1 Incorporation of Marks.......................................................18
Section 8.2 Mutual Covenants as to Marks and Notices.....................................19
ARTICLE 9. CONFIDENTIALITY; NON-COMPETE..........................................................19
Section 9.1 Confidentiality Obligations..................................................19
Section 9.2 Confidential Information.....................................................19
</TABLE>
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Section 9.3 Exclusivity; Non-Competition Covenants.......................................20
Section 9.4 Specific Performance.........................................................21
ARTICLE 10. REPRESENTATIONS, WARRANTIES, COVENANTS,
AND INDEMNITIES..............................................................22
Section 10.1 SoftWatch....................................................................22
Section 10.2 SoftWatch, Ltd...............................................................23
Section 10.3 Medscape.....................................................................24
Section 10.4 Indemnification..............................................................24
Section 10.5 Indemnification Procedures...................................................25
ARTICLE 11. PRODUCT RELATED WARRANTIES AND
COVENANTS...................................................................25
Section 11.1 General Provisions...........................................................25
Section 11.2 Viruses......................................................................25
Section 11.3 Year 2000 Compliance.........................................................25
Section 11.4 Limited Warranty.............................................................26
Section 11.5 Limitation of Liability......................................................26
Section 11.6 Adequate Controls............................................................26
Section 11.7 Reverse Engineering..........................................................27
Section 11.8 Encryption Covenant..........................................................27
Section 11.9 Medscape.com Website.........................................................27
ARTICLE 12. SALES AGENCY..........................................................................27
Section 12.1 Appointment..................................................................27
Section 12.2 Scope of Agency; Right of Approval..........................................27
Section 12.3 Medscape's Obligations.......................................................27
Section 12.4 Commission...................................................................27
Section 12.5 Expenses.....................................................................28
Section 12.6 SoftWatch's Responsibilities.................................................28
Section 12.7 Payment Terms; Taxes.........................................................28
Section 12.8 (a) Reporting by SoftWatch for purposes of
Calculating Sales Commissions................................................28
(b) Independent Auditor on Change of Control.....................................28
Section 12.9 (a) Audit Rights........................................................28
(b) Audit Report on Change of Control............................................29
(c) Medscape Change in Control...................................................29
ARTICLE 13. TERM AND TERMINATION..................................................................30
Section 13.1 Term.........................................................................30
Section 13.2 Termination for Breach.......................................................30
</TABLE>
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Section 13.3 Bankruptcy and Related Events................................................30
Section 13.4 Obligations Upon Termination or Expiration...................................30
Section 13.5 Transfer of Site.............................................................30
Section 13.6 Survival.....................................................................31
ARTICLE 14. GUARANTY OF SOFTWATCH, LTD............................................................31
Section 14.1 Guaranty.....................................................................31
Section 14.2 Obligations Unconditional....................................................31
Section 14.3 Successors and Assigns; Applicable Law.......................................31
ARTICLE 15. GENERAL PROVISIONS....................................................................32
Section 15.1 No Joint Venture Created.....................................................32
Section 15.2 Entire Agreement.............................................................32
Section 15.3 Assignment...................................................................32
Section 15.4 Waiver.......................................................................32
Section 15.5 Notices......................................................................32
Section 15.6 Force Majeure................................................................33
Section 15.7 Publicity....................................................................33
Section 15.8 Governing Law................................................................34
Section 15.9 Including....................................................................34
Section 15.10 Schedules and Exhibits.......................................................34
Section 15.11 Captions.....................................................................34
Section 15.12 Counterparts.................................................................34
Section 15.13 SoftWatch, Ltd as Party......................................................34
Section 15.14 Right of Offset..............................................................34
Exhibit 1.1 LICENSED SOFTWARE.....................................................................36
Exhibit 1.2 SPECIFICATIONS........................................................................39
Exhibit 1.3 THE CO-BRANDED DIET CENTER SPECIFICATIONS.............................................42
Exhibit 9.3 MEDSCAPE COMPETITIVE BUSINESSES.......................................................44
INDEX OF DEFINED TERMS..................................................................................46
</TABLE>
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<PAGE> 6
LICENSE AND WEB SITE DEVELOPMENT AGREEMENT
This LICENSE AND WEB SITE DEVELOPMENT AGREEMENT (this "Agreement") is
made as of June 15, 1999 (the "Effective Date"), between MEDSCAPE, INC., a
Delaware corporation, with offices at 134 W. 29th Street, New York, New York
10001-5399 ("Medscape"), SOFTWATCH INC., a Delaware corporation, with offices at
67 South Bedford St., Burlington, MA 01803 ("SoftWatch" and together with
Medscape, collectively, the "Parties," and each a "Party"), and solely with
respect to the provisions of Article 9 (Non-Compete, Confidentiality), Section
10.2 (Representations and Warranties), and Article 14 (Guaranty), SOFTWATCH,
LTD., a corporation organized under the laws of Israel, with offices at 1 Ta'as
Street, Ramat-Gan 52512, Israel, and the direct parent of wholly-owned
subsidiary SoftWatch ("SoftWatch, Ltd."). Unless otherwise specified herein,
capitalized terms used in this Agreement have the meanings defined in this
Agreement and the Schedules and Exhibits hereto.
ARTICLE 1. LICENSE OF SOFTWARE, CUSTOMIZATIONS; DIETWATCH WEBSITE
Section 1.1 (a) SoftWatch Software License Grant. Subject to
Section 9.3 and the other terms and conditions of this Agreement, SoftWatch
grants to Medscape and its Affiliates during the Term a non-exclusive, worldwide
license (the "SoftWatch Software License"):
(i) to use, execute and display on the Medscape Consumer Site and the
Co-Branded Diet Center SoftWatch's end-user interactive healthcare
tools identified on Exhibit 1.1 (the "End-User Tools"); and
(ii) to use, execute and display for and in connection with the development,
construction, enhancement and continuing operation and maintenance of,
the Medscape.com website, the Medscape Consumer Site and the Co-Branded
Diet Center SoftWatch's content creation, data management, display and
other tools identified on Exhibit 1.1 (the "Creation Tools," and
together with the End-User Tools, collectively the"SoftWatch
Software"), in each case at any location or locations around the world.
In addition:
(x) SoftWatch agrees that the foregoing grant of license with respect to
the End-User Tools includes the right of all end-users of the Medscape
Consumer Site and the Co-Branded Diet Center, wherever such end-users
are located, to use, execute and display the End-User Tools within and
in connection with services and functionalities made available in the
Medscape Consumer Site and the Co-Branded
<PAGE> 7
Diet Center; and the foregoing grant of license with respect to the
End-User Tools includes the right of any and all of Medscape's
employees, contractors and agents (including any operator or host of
the Medscape Consumer Site and/or the Co- Branded Diet Center),
wherever such employees, contractors and agents are located, to use,
display and execute the End-User Tools in connection with the
development, construction, operations, maintenance, and hosting of the
Medscape Consumer Site and/or the Co-Branded Diet Center; and
(x) the foregoing grant of license with respect to the Creation Tools
includes the right of any and all of Medscape's employees, contractors
and agents (including any operator or host of the Medscape.com website,
the Medscape Consumer Site and/or the Co-Branded Diet Center), wherever
such employees, contractors and agents are located, to use, display and
execute the Creation Tools in connection with the development,
construction, operations, maintenance, and hosting of the Medscape.com
website, the Medscape Consumer Site and/or the Co-Branded Diet Center.
(b) Medscape Consumer Site Defined. As used in this Agreement
the "Medscape Consumer Site" means: (i) Medscape's principal publicly available
website on the Internet containing medical and healthcare information which
Medscape makes available to consumers or other members of the general public,
and (ii) all other eHealth service sites or other commercial on-line service
sites (whether or not mainly providing healthcare news, information and/or
related tools or features) on or available through the Internet (including such
as may be made available to private entities and individuals in connection with
a customized "intranet" service) which contain Medscape's proprietary marks and
contain substantially all the content and functionality as Medscape's principal
publicly available website on the Internet referred to above.
(c) Internet Defined. For purposes of this Agreement,
"Internet" means the public collection of computer networks referred to
generally as the "internet" as in existence on the date hereof and any evolution
thereof or successor network thereto, and includes privately available computer
networks connected to the Internet (e.g. so-called "intranets") or which use (x)
Internet standards and/or (y) other use standards which are compatible with, or
essentially similar in functionality to, such networks (including websites, HTML
or other similar delivery systems). The term "Internet" shall also mean and
include any and all other commercial on-line services, whether or not based on
Internet compatible use standards such as HTML.
(d) SoftWatch Software Further Defined. The term "SoftWatch
Software" shall be deemed to mean and include all enhancements, modifications,
customizations and corrections to the SoftWatch Software made by or on behalf of
SoftWatch during the Term, including as part of the Customization Services
referred to in Section 1.2 or the Maintenance Services referred to in Section
5.1. The term "SoftWatch Software" shall
2
<PAGE> 8
expressly exclude new modules or other developments which add to, or
substantially increase the functionality of, the SoftWatch Software which
SoftWatch generally makes available to third parties for an additional license
fee, unless Medscape has agreed to license the same and pay to SoftWatch any
such additional license fee.
(e) Licence For Use in Connection with Multiple Sclerosis. It
is expressly understood and agreed by the parties that the SoftWatch Software
License is intended by the Parties to include Medscape's right to use, on all
the terms and conditions set forth in this Section 1.1, the SoftWatch Software
in connection with a specific disease channel on the Medscape Consumer Site
dedicated to the medical condition Multiple Sclerosis. If by September 30, 1999
SoftWatch: (i) is unable to secure the necessary rights to permit Medscape to
use the SoftWatch Software in relation to a specific disease channel for
Multiple Sclerosis on all the terms and conditions set forth in this Section
1.1, or (ii) otherwise to secure, at SoftWatch's expense, the license to
Medscape of a functional equivalent of the SoftWatch Software satisfactory to
Medscape (in its sole discretion) which can be used in a specific disease
channel on the Medscape Consumer Site for Multiple Sclerosis on all the terms
and conditions set forth in this Section 1.1, then SoftWatch shall pay to
Medscape (x) on September 30,1999 an amount equal to $125,000, and (y) on
September 30, 2000 an amount equal to $100,000, provided, however, that if at
any date after September 30, 1999, but prior to September 30, 2000, SoftWatch is
able to secure the rights contemplated in clause (i) or (ii) above, and Medscape
elects (in its sole discretion) to accept a license of such rights, then
SoftWatch shall have no obligation to make the payment of $100,000 referred to
in the foregoing clause (y).
(f) Copying. Medscape may not copy the SoftWatch Software
except as necessary for maintenance, backup, test and disaster recovery
purposes, or as otherwise authorized or permitted by SoftWatch. Notwithstanding
the foregoing, Medscape may, without the consent of SoftWatch, make non-revenue
generating demonstration copies of the SoftWatch Software for use in connection
with Medscape's general marketing and promotion activities. This Agreement does
not provide Medscape with title or ownership of the SoftWatch Software, but only
a right of limited use. Subject to Article 7 and the terms of the SoftWatch
Software License granted under this Agreement, SoftWatch retains sole and
exclusive ownership of, and all right, title and interest in and to the
SoftWatch Software and all copies thereof.
Section 1.2 Customization Services. SoftWatch agrees to
perform customization services (the "Customization Services") in respect of the
SoftWatch Software in accordance with the specifications, and subject to the
delivery terms attached hereto as Exhibit 1.2 (the "Customization
Specifications"). As used in this Agreement, "Customize," "Customized" and
related words means the modeling of the existing SoftWatch Software for a
specific use, purpose or application as provided in the relevant Customization
Specifications, and the term "Customization" means any such SoftWatch
3
<PAGE> 9
Software as so modeled. The Certification Testing procedures specified in
Article 4 shall be applicable to any Customization to be delivered pursuant to
this Agreement.
Section 1.3 DietWatch Site License. Subject to the terms of
this Agreement, SoftWatch grants to Medscape a worldwide license during the Term
to create, operate and maintain using the SoftWatch Software, and/or otherwise
to incorporate and display within and in connection with the Medscape Consumer
Site, a version of SoftWatch's proprietary Internet web-site service known as
"DietWatch.com," as modified in accordance with the specifications (the
"Co-Branded Diet Center Specifications") set forth on Exhibit 1.3 attached
hereto (the "Co-Branded Diet Center"). Except as otherwise provided in this
Agreement, the term "Co-Branded Diet Center" shall be deemed to mean and include
all enhancements, modifications, customizations and corrections to the Co-
Branded Diet Center. The foregoing license shall be subject to the following
additional terms, and such other terms as may be agreed by the Parties in the
Co-Branded Diet Center Specifications:
(a) Exclusive Diet Center. Medscape agrees that the Co-Branded Diet Center
will be the exclusive weight management and dieting center for the
Medscape Consumer Site, provided, however that the foregoing shall not
limit or otherwise restrict Medscape from integrating third-party tools
or other software components not proprietary to SoftWatch in the
Co-Branded Diet Center;
(b) General Health and Wellness Center; Hyperlink. The Co-Branded Diet
Center will be maintained separate and apart from, and will contain
content distinct from that of, any "general health and wellness"
service or channel maintained on the Medscape Consumer Site (the
"General Health and Wellness Center"), provided, however, that the
General Health and Wellness Center may contain End-User Tools similar
to those contained in the Co-Branded Diet Center (e.g. a diary tool).
In addition, Medscape agrees that: (i) any such General Health and
Wellness Center shall be designed and maintained in such a manner as to
permit users thereof to directly link to the Co-Branded Diet Center if
they wish to access content and features specifically relating to
dieting and weight management or control, and (ii) the General Health
and Wellness Center will not be exclusively or primarily related to
dieting and/or nutrition.
(c) Branding. The Co-Branded Diet Center will be branded as the "Medscape
Diet Center powered by DietWatch.com" (or such other name and SoftWatch
product reference as may be mutually agreed by the Parties). The
DietWatch.com logo will be displayed at not less than 50% of the scale
of, and with substantially similar graphics, visibility and other
characteristics as, the "Medscape Diet Center" logo (or other Medscape
proprietary mark) in order to properly convey the co-branding of the
Co-Branded Diet Center.
4
<PAGE> 10
(d) Member Information; All customer information (the "Member Information")
relating to registered members of the Medscape Consumer Site
("Members") using the Medscape Consumer Site and/or the Co-Branded Diet
Center during the Term (including personal dietary diary information
collected from such Members) shall be owned exclusively by Medscape,
provided, however, that at least thirty (30) days prior to termination
or other expiration of this Agreement (or if termination is by Medscape
for any cause in respect of which Medscape has an immediate right of
termination, then upon notice of termination), Medscape will coordinate
with SoftWatch to provide a mutually agreeable e-mail notice to all
registered Co-Branded Diet Center users:
(i) announcing the termination of the relationship contemplated
hereby and alerting them to the existence of the independent
"DietWatch.com" website; and
(ii) advising such users that they may, by written or electronic
notice to Medscape, authorize and direct Medscape to promptly
release and transfer a copy of such of their personnel Member
Information as is maintained as part of the Co-Branded Diet
Center to SoftWatch for use in the independent "DietWatch.com"
website.
If a Member requests the release and transfer of his or her Member
Information as contemplated in clause (ii), Medscape will, subject to
any privacy laws then in effect, exercise reasonable commercial efforts
to promptly as technically practicable transfer a copy of the relevant
Member Information to SoftWatch so that SoftWatch may provide
continuous service to such Member on the DietWatch.com website.
Medscape further agrees to provide SoftWatch with a non-exclusive,
perpetual, royalty free license to use such Member Information solely
for the purpose of continuing to provide service to such Member on the
DietWatch.com website. Notwithstanding the foregoing: (x) SoftWatch
will have no right to obtain or use any of Medscape's proprietary
clinical content, and (y) Medscape shall have no responsibility for the
accuracy or completeness of any data released and transferred to
SoftWatch and makes no representation or warranty that such information
will be incorrupt or error free. It is further understood and agreed
that, after any termination or expiration of this Agreement,
information provided directly to SoftWatch by users who directly log-in
to, or otherwise access, the DietWatch.com website service shall be the
property of SoftWatch, and that nothing herein shall restrict or
prohibit SoftWatch from compiling and using customer information
gathered through its own efforts or those of its agents, except to the
extent constituting Medscape Confidential Information derived directly
or indirectly in the course of the services being performed by
SoftWatch's under this Agreement.
5
<PAGE> 11
(e) Medscape Content; Editorial and Artistic Control; Look and Feel of
Tools. Medscape will have the right to integrate Medscape Content into
the Co-Branded Diet Center. Medscape will have exclusive editorial and
artistic control over the Co- Branded Diet Center and all elements
thereof, including (i) the selection of the Medscape Content, (ii) the
selection, from among those set out in Schedule 1.3 or otherwise
included in the grants of license made by SoftWatch's under this
Agreement, of the functionalities and features from DietWatch.com that
Medscape wishes to include in the Co-Branded Diet Center, and (iii) the
determination of the design and look and feel of all visual elements
(including the End-User Tools), appearing in the Co-Branded Diet
Center. Medscape acknowledges that the exercise of its rights to
editorial and artistic control may materially alter the Specifications
as then in effect, and that the same may result in an extension of, or
other change to the relevant Delivery and Milestone Schedule and/or
additional expense to Medscape. SoftWatch will promptly notify Medscape
if any change requested by Medscape will result in any such extension
of, or other change and/or additional expense, and will not undertake
the same without Medscape's prior authorization.
(f) Limited Use License As to Medscape Content. If applicable, and subject
to Article 7 and the other terms and conditions of this Agreement,
Medscape grants SoftWatch a non-exclusive, non-transferable license
during the Term to reproduce, display and perform Medscape Content and
other Medscape Materials within and in connection with the
construction, development, operations and maintenance of the Co-Branded
Diet Center and for such other purposes as Medscape may authorize or
request in writing. SoftWatch will comply with such restrictions and
requirements regarding the use of such Medscape Content as may be
specified in the Co-Branded Diet Center Specifications, or as may be
otherwise notified by Medscape to SoftWatch from time to time.
ARTICLE 2. MEDSCAPE CONSUMER SITE DEVELOPMENT SERVICES
Section 2.1 Development Services. In consultation with
Medscape, SoftWatch will develop and build for Medscape the Medscape Consumer
Site in accordance with the Site Specifications and the Co-Branded Diet Center
Specifications. As used herein, "Site Specifications" means the site
specifications for the Medscape Consumer Site attached hereto as Exhibit 1.2,
and "Specifications" means, collectively, the Site Specifications, the
Customization Specifications, the Co-Branded Diet Center Specifications and any
other specifications agreed by the parties pursuant to this Agreement.
The foregoing development services (the "Development Services") shall be subject
to Medscape's testing and acceptance as provided in Article 4 and shall include
the following:
6
<PAGE> 12
(a) the coordination with Medscape's technical personnel and vendors to
develop:
(i) the input system to accept, organize and store the Medscape
Content; and
(ii) the tools and user interface components to surface and display
the Medscape Content on the Medscape Consumer Site; and
(b) implementing the overall Site Design in consultation with Medscape and
any third party design vendor retained by Medscape;
(c) integrating any third-party components (including chat software and
existing professional content and/or other applications) specified in
the Specifications ("Third Party Components"), which Medscape will be
responsible for providing to SoftWatch at Medscape's expense; and
(d) the development by SoftWatch of certain other functionalities as
provided in the Specifications.
ARTICLE 3. ADDITIONAL MEDSCAPE CONSUMER SITE DEVELOPMENT SERVICES
AND CO-BRANDED DIET CENTER CRITERIA.
Section 3.1 Content and Uploading of Content. Medscape will
provide to SoftWatch Medscape's proprietary data and content that Medscape
determines will be part of the Medscape Consumer Site and/or the Co-Branded Diet
Center, including text and visual material regarding itself, Medscape products,
services, pricing, Medscape Trademarks, and conditions for the Medscape Consumer
Site and the Co-Branded Diet Center (including proprietary notices) ("Medscape
Content"). In accordance with the Specifications, SoftWatch will provide
Medscape with web-based interfaces to enable Medscape to upload Medscape Content
to the Medscape Consumer Site and the Co- Branded Diet Center, and Medscape will
maintain the on-going responsibility for uploading content to, and managing the
content on, the Medscape Consumer Site and the Co- Branded Diet Center.
Section 3.2 Editorial and Artistic Control. Medscape will have
exclusive editorial and artistic control over the Medscape Consumer Site and all
elements thereof, including the selection of the Medscape Content and Third
Party Components, and the design and look and feel of all visual elements
(including the End-User Tools), appearing in the Medscape Consumer Site.
Medscape acknowledges that the exercise of its rights to editorial and artistic
control may materially alter the Specifications as then in effect, and that the
same may result in an extension of, or other change to the relevant Delivery and
Milestone Schedule and/or additional expense to Medscape. SoftWatch will
promptly notify Medscape if any change requested by Medscape will result in any
such extension of, or
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<PAGE> 13
other change and/or additional expense, and will not undertake the same without
Medscape's prior authorization.
ARTICLE 4. DELIVERY, TESTING AND ACCEPTANCE; RESPONSIBILITIES OF THE
PARTIES.
Section 4.1 Commencement of Services. The services to be
performed under this Agreement shall commence no later than the execution hereof
and shall proceed in accordance with the relevant Delivery and Milestone
Schedule included in the Specifications. The Parties acknowledge and agree that
certain services contemplated in this Agreement have been performed prior to,
and are in the course of being performed as of the Effective Date, and that all
of the terms and conditions of this Agreement shall be applicable to the same
extent and with the same effect as if such services had been performed after the
Effective Date. The Parties anticipate and intend that a commercial launch of
the initial phase of the Medscape Consumer Site will occur on July 7, 1999 (the
"Phase I Delivery Date"), and that all remaining deliveries to be made by
SoftWatch shall be made by September 30, 1999 (the "Phase II Delivery Date").
Each Party will provide or otherwise make available to the other each
deliverable ("Deliverable") or other materials identified in the Specifications
on the date (the "Delivery Date") specified therefor in the relevant Delivery
and Milestone Schedule. Medscape acknowledges that if it requests SoftWatch to
implement a material change in the Specifications (as in effect from time to
time), such a request may result in an extension of, or other change to the
relevant Delivery and Milestone Schedule and/or additional expense to Medscape.
SoftWatch will promptly notify Medscape if any change requested by Medscape will
result in any such extension of, or other change and/or additional expense, and
will not undertake the same without Medscape's prior authorization.
Section 4.2 Certification Testing. Promptly upon Medscape's
receipt of each Deliverable on the relevant Delivery Date, Medscape shall
conduct tests to determine whether the relevant Deliverable contains the
features and is capable of performing the operations set forth in the
Specifications (each such test a "Certification Test" and the process of
performing them, "Certification Testing"). Each Deliverable shall be accepted by
Medscape upon the first to occur of: (x) Medscape's written notice to SoftWatch
specifying successful completion of Final Certification, (y) Medscape's written
waiver of such Certification Tests, or (z) deemed acceptance pursuant to Section
4.3. SoftWatch may observe or participate in any Certification Tests performed
by Medscape.
Section 4.3 Final Certification; Deemed Acceptance. If: (i)
the relevant Deliverable is in conformity in all material respects with the
relevant Specifications, as Medscape in its reasonable judgment determines (but
subject to the understanding that no initial release software operates
uninterrupted or error free); or (ii) if Medscape determines to waive
Certification Testing with respect to such Deliverable), then Medscape
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<PAGE> 14
shall notify SoftWatch of its acceptance thereof ("Final Certification"). If
Medscape either (i) fails to give notice of Final Certification or a notice of
non-conformity within thirty (30) days after Medscape receives the relevant
Deliverable, or (ii) makes the relevant Deliverable commercially available to
the public on the Internet for revenue generating purposes (i.e. not as or part
of a beta test version), then Medscape will be deemed to have accepted such
Deliverable on the earlier to occur of (x) the date on which such thirty (30)
day period ends or (y) the date on which the relevant Deliverable becomes so
available to the public, provided, however, that deemed acceptance by Medscape
of any Deliverable pursuant to either of clause (i) or (ii) shall not constitute
a waiver of, or otherwise affect, any rights or claims which Medscape may have
hereunder with respect to any such Deliverable under the warranty and
maintenance provisions hereof, all of which rights and claims are expressly
reserved by Medscape. In addition, deemed acceptance shall not in any way affect
any rights or claims which Medscape may have against SoftWatch for fraud or
gross negligence.
Section 4.4 Retesting. If the relevant Deliverable fails to
meet all or any part of the relevant Certification Tests, Medscape shall
promptly deliver to SoftWatch a written notice of non-conformity, specifying in
detail the manner in which the same does not conform to the Specifications.
Promptly upon its receipt of such notice, SoftWatch shall have ten (10) days
thereafter, or such longer period of time as may be agreed by the Parties, to
correct the deficiencies cited by Medscape so as to meet the criteria set forth
in such Specifications, and to deliver a corrected version to Medscape. Upon its
receipt thereof, Medscape shall have an additional ten (10) days to reinitiate
and complete an additional round of Certification Tests (the "Retesting") of the
relevant Deliverable as so corrected. SoftWatch shall be permitted, in any such
case, to direct, oversee and perform additional testing in order to determine
the cause or causes for any error or malfunction. Medscape shall be responsible
for all direct costs and expenses which Medscape incurs in connection with any
required Retesting.
Section 4.5 Failure to Achieve Final Certification. Medscape
and SoftWatch shall follow the delivery, testing and cure procedure set forth in
Section 4.4 until such time as the relevant Deliverable has been finally
accepted by Medscape as provided in Section 4.3, provided, however, that unless
such failure has resulted from (x) conditions which were beyond the reasonable
control of SoftWatch, or (y) conditions which were caused by Medscape, or which
Medscape should have disclosed to SoftWatch, but failed to do so, on the date
the Specifications therefor were agreed, then the failure of such Deliverable to
meet in all material respects the criteria set forth in such Specifications
(subject to the understanding that no initial release software operates
uninterrupted or error free) upon completion of two (2) rounds of Certification
Testing shall, at Medscape's option, be deemed to be a failure by SoftWatch to
deliver, and upon delivery of written notice by Medscape to SoftWatch referring
to this Section 4.5, Medscape shall have the right, exercisable in its sole
discretion, to reject and to refuse payment for such
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Deliverable, and, if prior payment has been made in respect thereof, to receive
a credit equal to the pro rata portion of the Development Fee attributable
thereto.
Section 4.6 Delivery Delays. Each Party will cooperate with
the other in good faith to facilitate the completion, testing and acceptance of
the Deliverables. Each Party will promptly give notice to the other if such
Party determines at any time prior to the Delivery Date of any Deliverable, or
prior to the date specified in the Delivery and Milestone Schedule for any
information or materials due pursuant thereto, that there has occurred any
condition or event which adversely affects such Party's ability to deliver the
same by its Delivery Date or other applicable date. Medscape shall have the
right to delay any payments due to SoftWatch hereunder in connection with the
Development Services or the Customization Services if SoftWatch fails to deliver
any Deliverable within thirty (30) days of its scheduled Delivery Date, unless
Medscape has given its prior consent to such delay, or if such delay has
resulted, in whole or in part, from an event of force majeure or any delay or
failure by Medscape to perform its obligations hereunder.
Section 4.7 Medscape Responsibilities with respect to
Deliverables. In conjunction with SoftWatch's performance of the Development
Services and the Customization Services, Medscape is responsible for performing
and bearing all costs of the following actions:
(a) determining whether the Deliverables meet the applicable
Specifications;
(b) procuring, installing, and operating hardware and operating systems to
run the Deliverables in accordance with the Specifications;
(c) providing a proper environment and proper utilities for the computers
on which the Deliverables operate, including an uninterrupted power
supply;
(d) selecting and training personnel who can operate computers and are
familiar with the accounts and records that serve as input and output
for the relevant Deliverables;
(e) establishing adequate operational back-up provisions to protect against
data loss and/or a defect or malfunction that renders any Deliverable
or the computer systems on which it runs non-operational; and
(f) identifying and making available during the Term, specific project
managers to serve as Medscape's contacts with SoftWatch.
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ARTICLE 5. MAINTENANCE AND SUPPORT SERVICES
Section 5.1 Maintenance Period. Subject to the terms and
conditions of this Agreement, SoftWatch will provide such maintenance services
to Medscape (the "Maintenance Services") as may be required to maintain and
update the Medscape Consumer Site, the Co-Branded Diet Center, the SoftWatch
Software and the individual components thereof. The initial one-year Maintenance
Services period (the "Initial Maintenance Period") shall begin on the date of
Final Certification of the Phase I Deliverables (as set forth in the
Specifications), and subject to the payment of the fees specified in Section
6.2, each additional one-year maintenance period thereafter shall begin on the
date immediately following the date on which the preceding maintenance period
ends (each such period a "Paid Maintenance Period" and together with the Initial
Maintenance Period, the "Maintenance Period"). The Maintenance Services shall be
of the same scope and character as are generally provided by SoftWatch to its
best maintenance customers, and shall include Medscape's right, so long as it
remains current in Maintenance Fees owed to SoftWatch as provided in Section
6.2, to receive at no additional costs all updates, bug fixes and other standard
modifications provided by SoftWatch to its other maintenance customers.
Maintenance Services shall not include the distribution of new modules or other
developments which add to, or substantially increase the functionality of, the
SoftWatch Software or the Co-Branded Diet Center and which SoftWatch generally
makes available to third parties at additional cost. During the Maintenance
Period, SoftWatch will promptly correct any material errors, defects, bugs,
viruses, design flaws or other malfunctions (taking into account the severity
and technical difficulty in fixing the same) in the SoftWatch Software, the
Customizations, the Medscape Consumer Site, the Co-Branded Diet Center, or any
other Deliverable, in each case, which result from causes within SoftWatch's
control and which have not resulted from the inoperability or incompatibility
of Third Party Components or any other material supplied by Medscape.
Section 5.2 SoftWatch Services; Outside Consultants. If
Medscape requests maintenance or consulting services beyond the scope of those
either identified in the Development Services or otherwise being provided
pursuant to this Agreement, SoftWatch will provide such services, subject to
SoftWatch's resources and the requirements of its other customers, at
SoftWatch's then current rates. Notwithstanding the foregoing, during the
one-year period following the Effective Date, SoftWatch will make available to
Medscape at a rate of $175/hour up to 4000 hours of additional services beyond
those specified in Exhibit 1.2. In each subsequent year, SoftWatch will make
available to Medscape at its then current rates up to 4,000 hours, of additional
consulting and/or maintenance services. Medscape agrees to provide advance
notice to SoftWatch, which notice shall be reasonable under the circumstances,
if Medscape requires any of the above-referenced additional hours of service.
SoftWatch agrees to use its reasonable commercial efforts to timely respond to
and address any emergency or other exigent
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request. The Parties anticipate developing an annual plan describing additional
consulting and/or maintenance services to be performed during the proceeding
year, including financial terms for budgeting purposes, and such plan, shall,
upon agreement by the Parties, become a part of this Agreement. If during any
year Medscape requires out-of- scope consulting and/or maintenance services
which require hours in excess of those contemplated above, Medscape and
SoftWatch shall cooperate in good faith to negotiate the terms on which
SoftWatch will perform such services, taking into account such resource
constraints which SoftWatch may have at the relevant time. SoftWatch's agreement
to provide the foregoing out-of-scope maintenance and/or consulting services
shall in no way expand, or be construed to expand, the scope of the licenses
granted by SoftWatch under this Agreement.
Section 5.3 Medscape.com Website. Notwithstanding anything in
this Article 5 to the contrary, the Maintenance Services shall not include the
correction of any operability, functionality or compatibility errors or
malfunctions relating to the use of the Creation Tools with the Medscape.com
website, or the provision of general maintenance service in respect of the
Creation Tools to the extent relating exclusively to the use of the Creation
Tools in or with the Medscape.com website, it being understood that any
maintenance or consulting services requested by Medscape in connection with the
Creation Tools, as used in or with the Medscape.com website, shall be considered
out-of-scope consulting and/or maintenance services subject to the provisions
of Section 5.2.
ARTICLE 6. FEES FOR DEVELOPMENT AND CUSTOMIZATION SERVICES;
ROYALTIES.
Section 6.1 SoftWatch Software Basic License Fee and
Customization Fee. Medscape will pay a basic license fee of $1,000,000 with
respect to the SoftWatch Software (the "SoftWatch Software License Fee") and a
fee of $500,000 for SoftWatch's Customization Services and Development Services,
with such total payable as follows: (i) one third ($500,000) on the execution of
this Agreement, (ii) one third ($500,000) on Final Certification of the Phase I
Deliverables (as set forth in the Specifications); and (iii) the balance
($500,000) on Final Certification of the Phase II Deliverables (as set forth in
the Specifications).
Section 6.2 Maintenance Fees. During the Initial Maintenance
Period, SoftWatch shall perform Maintenance Services at no cost to Medscape.
Unless Medscape terminates (or gives prior notice of its intent to terminate)
this Agreement as provided in Section 13.1 or 13.2, from and after the date on
which the Initial Maintenance Period ends, Medscape agrees to subscribe, on an
annual basis, for continuing Maintenance Services at SoftWatch's then-current
standard annual maintenance fee rates (the "Maintenance Fee"). Medscape's annual
Maintenance Fee for the one year period immediately following the end of the
Initial Maintenance Period shall be fixed at $150,000,
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\with the first monthly installment of $12,500 due on the first anniversary of
the date of Final Certification of the Phase I Deliverables. All Maintenance
Fees shall be payable on a monthly basis in advance.
Section 6.3 Royalty Payments. Subject to the terms of this
Article 6 and for so long as the grants of license made in Article 1 and
elsewhere in this Agreement remain in effect, the following royalties
(collectively "Royalties") shall be payable to SoftWatch by Medscape:
(a) End-User Tools Royalties. Medscape shall pay to SoftWatch
the following royalties with respect to the End-User Tools:
(i) for each quarterly period during the Term, an amount equal to five
percent (5%) of all Net Advertising Revenue derived from the sales for
such quarter of Sponsorships specifically tied to a specific End-User
Tool (other than as appear in the Co-Branded Diet Center, and other
than as appear in Nutrition/GHW Sponsorship Pages) (e.g. Claritin
Sponsorship of the diary End-User Tool in the "Medscape Allergy
Center") (the "Quarterly Sponsorship Royalty"); and
(ii) for each quarterly period during the Term, an amount equal to two and
one-half percent (2.5%) of all Net Advertising Revenue derived from the
sale of Run-of-Site banner advertisements on the Medscape Consumer Site
for such quarter multiplied by a fraction, the numerator of which is
the total number of page views on which an End-User Tool application
(not just a link to the application) appears on the Medscape Consumer
Site (other than in the Co-Branded Diet Center and other than in
Nutrition/GHW ROS Banner Pages) during such quarter and the denominator
of which is the number of total page views displayed in the Medscape
Consumer Site for the same quarter (the "Quarterly ROS/Tool Banner
Royalty").
(b) Co-Branded Diet Center Royalties. Medscape shall pay to
SoftWatch the following royalties with respect to Co-Branded Diet Center:
(i) for each quarterly period during the Term, an amount equal to fifty
percent (50%) of all Net Advertising Revenue derived from the sale of
Sponsorships for such quarter specifically tied to the Co-Branded Diet
Center multiplied by a fraction, the numerator of which is the number
of total page views appearing in the Co-Branded Diet Center during such
quarter less the total number of page views on which content provided
by Medscape (not just links to such Medscape content) appears during
the same quarter, and the denominator of which is the number of total
page views displayed in the Co-Branded Diet Center during the same
quarter (the "Quarterly Diet Center Tools Sponsorship Royalty");
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(ii) for each quarterly period during the Term, an amount equal to
twenty-five percent (25%) of all Net Advertising Revenues derived from
the sale of Sponsorships for such quarter specifically tied to the
Co-Branded Diet Center multiplied by a fraction, the numerator of which
is the number of total page views on which content provided by Medscape
(not just links to such Medscape content) appears in the Co-Branded
Diet Center during such quarter, and the denominator of which is the
total number of page views displayed in the Co-Branded Diet Center
during the same quarter (the "Quarterly Diet Center Medscape Content
Sponsorship Royalty");
(iii) for each quarterly period during the Term, an amount equal to fifty
percent (50%) of Diet Center/ROS Tools Banner Revenue. For purposes
hereof, "Diet Center/ROS Tools Banner Revenue" means all Net
Advertising Revenue derived from the sale of Run-of-Site banner
advertisements appearing on the Medscape Consumer Site during such
quarter multiplied by a fraction, the numerator of which is the number
of total page views appearing in the Co-Branded Diet Center during such
quarter less the total number of page views on which content provided
by Medscape (not just links to such Medscape content) appears in the
Co-Branded Diet Center during the same quarter and the denominator of
which is the number of total page views displayed in the Medscape
Consumer Site during the same quarter (the "Quarterly ROS/Diet Center
Tools Banner Royalty");
(iv) for each quarterly period during the Term, an amount equal to
twenty-five percent (25%) of Diet Center/ROS Content Banner Revenue.
For purposes hereof, "Diet Center/ROS Content Banner Revenue" means all
Net Advertising Revenues derived from the sale of Run-of-Site banner
advertisements in the Medscape Consumer Site for such quarter
multiplied by a fraction, the numerator of which is total number of
page views appearing in the Co-Branded Diet Center for such quarter on
which content provided by Medscape (not just links to such Medscape
content) appears and the denominator of which is the number of total
page views displayed in the Medscape Consumer Site for the same quarter
(the "Quarterly ROS/Diet Center Content Banner Royalty").
(c) Nutrition/General Health and Wellness Center Royalties.
Medscape shall pay to SoftWatch the following royalties with respect to
"Nutrition" pages appearing in the General Health and Wellness Center:
(i) for each quarterly period during the Term, an amount equal to fifteen
percent (15%) of all Net Advertising Revenue derived from the sales for
such quarter of Sponsorships which are displayed when a user of the
General Health and Wellness Center clicks on or otherwise selects any
"Nutrition" icon featured within such General Health and Wellness
Center (each such display a "Nutrition/GHW Sponsorship Page"); and
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(ii) for each quarterly period during the Term, an amount equal to fifteen
percent (15%) of all Net Advertising Revenue derived from the sale of
Run-of-Site banner advertisements on the Medscape Consumer Site for
such quarter multiplied by a fraction, the numerator of which is the
total number of page views displayed during such quarter as a result of
a General Health and Wellness Center user's clicking or otherwise
selecting any "Nutrition" icon featured within such General Health and
Wellness Center (each such display a "Nutrition/GHW ROS Banner Page"),
and the denominator of which is the number of total page views
displayed in the Medscape Consumer Site for the same quarter.
For purposes of this Section 6.3: "Net Advertising Revenue"
means all advertising revenue actually received by Medscape less all related
sales credits, rebates, taxes and third-party ad sales commissions, paid or
issued by Medscape; "Run-of Site" or "ROS" means advertising by one or more
advertisers which is evenly distributed throughout the web-site; and
"Sponsorship" means all other advertising which is not ROS (e.g. is unevenly
distributed or is specifically tied to a particular feature, tool or content set
in the Medscape Consumer Site or the Co-Branded Diet Center). By way of example
only, Schering Plough's purchase of all or a portion of the ad impressions
delivered in the "Medscape Asthma interactive diary" is a Sponsorship. Medscape
agrees that it will not use the Co-Branded Diet Center or any "Nutrition" icon
or nutrition management tool identified in Schedule 1.1 (or the related
functionality of any of foregoing) featured in the General Health and Wellness
Center as a "loss leader."
Section 6.4 Payment Terms; Taxes. All payments due to
SoftWatch under this Agreement are stated and payable in U.S. dollars and shall
be paid by wire transfer to such account as SoftWatch shall from time to time
notify Medscape in writing. Amounts subject to Royalty and received by Medscape
during each Reporting Period shall be paid to SoftWatch within thirty (30) days
after the end of such Reporting Period, and each such payment shall be
accompanied by a copy of the report specified in Section 6.5. All payments
specified in this Agreement are exclusive of, and Medscape agrees to pay, any
applicable sales or use tax related to the transactions described herein (other
than taxes based on the net income to SoftWatch). Unless otherwise specified in
this Agreement, invoices are payable within 30 days of receipt. SoftWatch
reserves the right to charge a late fee of up to 1.5% per month (or, if less,
the maximum rate permitted by law) on any balance remaining unpaid for more than
forty-five (45) days.
Section 6.5 (a) Reporting by Medscape for purposes of
Calculating Royalties. Subject to Section 6.5(b), within thirty (30) days after
the end of each calendar quarter during the Term (each such quarterly period a
"Reporting Period" with the first such Reporting Period to end on the last day
of the first full calendar quarter to occur after commercial launch of the
Medscape Consumer Site), Medscape shall send a statement to SoftWatch
summarizing, and certifying as to, the information used by Medscape to calculate
the Royalties payable to SoftWatch for such Reporting Period in order to confirm
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the actual amount of Net Advertising Revenues received or projected to be
received by Medscape during the applicable Reporting Period for each category
specified in Section 6.3.
(b) Independent Auditor on Change of Control. If at any time
after the Restricted Period a Change of Control occurs, all reports required to
be delivered by Medscape to SoftWatch pursuant to Section 6.5(a) shall be
delivered to and subject to review by an independent auditor reasonably
acceptable to both parties, who shall agree to be bound by the confidentiality
obligations set forth in Article 9 (an "Independent Auditor"). The Independent
Auditor shall prepare a report confirming the accuracy of information provided
by Medscape. SoftWatch shall have the right to receive solely the results of
such review only, and shall have no right to receive, review or consult actual
information provided by Medscape in its reports, Medscape's books of account, or
any workpapers prepared by the Independent Auditor in connection with its
review. The costs of any such Independent Auditor shall be borne equally by the
parties.
Section 6.6 (a) Audit Rights. Medscape will maintain for at
least three (3) years its records, contracts and accounts relating to each sale,
license, service, or other transaction in respect of which a Royalty is payable
by Medscape hereunder, and will permit examination not more frequently than once
per calendar year of that information upon reasonable request and during normal
business hours by an Independent Auditor. In addition, but subject to Section
6.6(b), SoftWatch shall be entitled annually to appoint an Independent Auditor
to audit the books of account of Medscape, at SoftWatch's expense, during normal
business hours, with at least two weeks' prior notice. If during the course of
such audit, it is discovered that Medscape has underpaid SoftWatch by an amount
in excess of five percent (5%) of the amount determined to be due for the
audited period, then the cost of such audit shall be borne by Medscape.
Furthermore, any error discovered by the Independent Auditor shall be promptly
remedied by Medscape after receipt of notice by SoftWatch. All information
received by a Party in the course of such audit shall be treated as Confidential
Information and shall not be disclosed to any third party (other than its
attorneys and accountants) or used for any purpose whatsoever other than to
determine compliance with this Article 6.
(b) Audit Report on Change of Control. If at any time after
the Restricted Period a Change of Control occurs, SoftWatch shall have the right
to receive solely the results of any audit performed pursuant to Section 6.6(a),
and shall have no right to receive, review or consult Medscape's books of
account, the Independent Auditor's audit report, or any workpapers prepared by
the Independent Auditor in connection with its audit.
(c) Change in Control. A "Change of Control" means the sale or
other transfer of all or substantially all of the assets of SoftWatch, Ltd. or
SoftWatch or the acquisition of SoftWatch, Ltd. or SoftWatch by, or other merger
of SoftWatch, Ltd. or SoftWatch with or into, any Competitive Business, or if
there shall occur any other event
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which results in the direct or indirect possession or exercise by any
Competitive Business of voting control over SoftWatch, Ltd. or SoftWatch, or the
direct or indirect holding by any Competitive Business of a majority of the
equity interests in SoftWatch, Ltd. or SoftWatch The foregoing shall not be
applicable to any change in the ownership of any publicly held stock of
SoftWatch, Ltd. or SoftWatch to the extent that such change does not result in
the acquisition by any Competitive Business of ownership or control of more than
49% of any class of publicly held stock entitled to vote for the election of
directors. A "Change of Control" shall also be deemed to occur if any officer,
director, employee, shareholder (or other equity participant) of, or other
individual associated with, any Competitive Business shall become a director of
either SoftWatch or SoftWatch, Ltd.
Section 6.7 Expense Reimbursement. In addition to the other
fees payable by Medscape pursuant to this Agreement, Medscape agrees to
reimburse SoftWatch for the reasonable and necessary out-of-pocket travel and
living expenses related to the provision of the Services, including travel,
lodging meals, incidentals and miscellaneous materials and supplies, provided,
however, that any individual item, or series of related items, of expense in
excess of $750.00 shall require the prior written authorization of Medscape.
ARTICLE 7. INTELLECTUAL PROPERTY RIGHTS
Section 7.1 SoftWatch Owned Software and Customizations.
SoftWatch owns all copyright and other proprietary rights in the SoftWatch
Software, Customizations and all other extensions and derivative works created
by SoftWatch pursuant to this Agreement or otherwise (the foregoing,
collectively, the "SoftWatch Materials"). This Agreement does not provide
Medscape with title or ownership of the SoftWatch Software, but only a right of
limited use as provided in Article 1. Subject to the grants of license made
pursuant to Article 1, and to the restrictions contained in Section 9.3,
SoftWatch retains sole and exclusive ownership of all right, title and interest
in and to the SoftWatch Software and all copies thereof.
Section 7.2 Medscape-Owned Materials; Customization User
Interfaces. Medscape owns all copyright and other proprietary rights in all of
the materials Medscape supplies to SoftWatch under this Agreement, including all
Medscape proprietary marks and brands, the specific user interface design
elements for or related to the Medscape Consumer Site and the Customizations
(including the particular look and feel and navigation thereof), all Medscape
Content (including as may be integrated in the Co- Branded Diet Center),
customer and professional data (including Member Information embodied in, or
relating to, the SoftWatch Software and Customizations thereof), metadata
structure and registration questionnaire (all of the foregoing, collectively,
the "Medscape Materials").
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Section 7.3 Shared Materials. Each Party shall contribute
materials pursuant to this Agreement which are to be used jointly throughout the
Term (collectively, the "Shared Materials"). Each Party retains ownership of
whatever material that Party contributed to the Shared Materials pursuant to
this Agreement both during the Term and thereafter, and each Party may
re-implement or otherwise use (subject, in the case of SoftWatch, to the
provisions of Section 9.3) its respective portion of the Shared Material both
during and after the Term. Under no circumstances will either Party use after
the Term any portion of the Shared Materials that the other Party contributed to
the Shared Materials.
Section 7.4 Trademarks, Etc. Medscape owns all rights in its
Trademarks, and SoftWatch owns all rights in its Trademarks.
Section 7.5 Limited License. Medscape grants SoftWatch a
non-exclusive, non-transferable license during the Term, to reproduce, display
and perform the Medscape Materials for the limited purpose of designing,
building, and maintaining the Medscape Consumer Site. SoftWatch may make only
such copies of the foregoing as may be necessary to perform its obligations
under this Agreement.
Section 7.6 Third Party Materials. For any material
incorporated in any Deliverable included in the Specifications that is not
original material created by, or licensed to, SoftWatch or is not in the public
domain (but excluding Third Party Components (including chat software) which are
provided to SoftWatch by Medscape), SoftWatch will have the responsibility to
obtain at its expense, on Medscape's behalf, all permissions necessary to
incorporate and use such third-party material on an irrevocable, worldwide,
perpetual basis (except as a result of a breach by Medscape or its sub-
licensors) as part of the Medscape Consumer Site. Medscape may obtain (or shall
have the right to request SoftWatch to obtain on Medscape's behalf) at
Medscape's expense such rights as Medscape may require to incorporate additional
third party materials not included in the Specifications (e.g. new features, or
enhancements) in the Medscape Consumer Site.
ARTICLE 8. TRADEMARKS; COPYRIGHT NOTICES.
Section 8.1 Incorporation of Marks. Medscape and SoftWatch
shall incorporate the other's trademarks, service marks, trade names, logos and
other similar proprietary rights ("Trademarks") as they may mutually agree in
good faith, provided that each of Medscape and SoftWatch shall comply with such
restrictions and requirements as may be notified to it from time to time by the
other with respect to the use of the same. Neither Party shall incorporate the
other's Trademarks without first submitting a sample of the use to the Trademark
owner and obtaining written consent.
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Section 8.2 Mutual Covenants as to Marks and Notices.
SoftWatch covenants and agrees that it shall not knowingly delete any Trademarks
or copyright notices of Medscape or any of its Affiliates that are present in or
on, or displayed by, the Medscape Consumer Site or the Co-Branded Diet Center,
or otherwise use without Medscape's consent any of Medscape's Trademarks or
other identifiers in any manner other than as is expressly provided by this
Agreement, Medscape covenants and agrees that it shall not knowingly delete any
Trademarks or copyright notices of SoftWatch that are present in or on, or
displayed by, the Medscape Consumer Site or the Co-Branded Site, or otherwise
use without SoftWatch's consent any of SoftWatch's Trademarks or other
identifiers in any manner other than as is expressly provided by this Agreement.
If either Party for any reason deletes or causes the deletion of any Trademark
or copyright notice of the other Party or any of its Affiliates that are present
in or on, or displayed by, the Medscape Consumer Site or the Co-Branded Diet
Center, such Party shall, upon notice by the affected Party, promptly take such
remedial actions as the affected Party may request.
ARTICLE 9. CONFIDENTIALITY; NON-COMPETE
Section 9.1 Confidentiality Obligations. Each Party
acknowledges that it and its subcontractors(if any) have had prior to the
Effective Date, and in performing its obligations under this Agreement, it and
its subcontractors (if any) will have access to or be directly or indirectly
exposed to Confidential Information . Each Party covenants and agrees that it
shall hold confidential all Confidential Information and shall not use or
disclose such Confidential Information without the express consent of the
disclosing Party. Each Party shall take reasonable measures and efforts to
provide protection for the disclosing Party's Confidential Information,
including measures at least as strict as those the receiving Party uses to
protect its own Confidential Information. Such measures will include requiring
employees and any independent contractors to sign a non-disclosure agreement
before obtaining access to the disclosing Party's Confidential Information. The
confidentiality obligations of the Parties shall survive any termination or
other expiration of this Agreement.
Section 9.2 Confidential Information. "Confidential
Information" means information in the possession or under the control of a Party
relating to a Party's technical, marketing, product and business affairs,
including customer, price, and other proprietary and trade secret information,
whether oral, graphic, written, electronic or in machine readable form, and
includes the computer code embodying the Medscape Consumer Site, the SoftWatch
Software and any Customizations thereof, and the underpinnings of the
DietWatch.com website, and the terms and conditions of this Agreement (except
that any Party may disclose the Agreement to its legal and financial advisers
for the purpose of obtaining legal or financial advice). In the case of
Medscape, Confidential Information includes the Medscape Content, source code of
any software Deliverables, Member
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Information and other customer and user information, including any information
pertaining to usage of the Medscape Consumer Site or the Medscape.com website.
Confidential Information does not include information which (A) was known to the
receiving Party or in the public domain before disclosure; (B) becomes part of
the public domain after disclosure by a publication or other means except by a
breach of this Agreement by the receiving Party, (C) or was received from a
third party under no duty or obligation of confidentiality to the disclosing
Party. Upon termination or other expiration of this Agreement, all Confidential
Information disclosed by a Party to a receiving Party will be returned to the
disclosing Party or, upon the request of the disclosing Party, will be promptly
destroyed and certified as destroyed by the receiving Party.
Section 9.3 Exclusivity; Non-Competition Covenants. (a) Each
of SoftWatch, Ltd. and SoftWatch hereby agrees for itself and on behalf of its
Affiliates, that it shall not independently or in connection with any other
person or entity, directly or indirectly until the end of the Restricted Period:
(i) license or sell to any Competitive Business, or otherwise
authorize, permit, or allow (with or without its consent) any
Competitive Business to use: (1) DietWatch or the
DietWatch.com website or any part thereof, (2) the SoftWatch
Software, (3) any Customizations thereof, or (4) any other
tools substantially similar to the SoftWatch Software or such
Customizations; and
(ii) negotiate or conclude any license, acquisition, merger,
partnership, joint venture or similar arrangement, or sale of
all or substantially all of its assets or equity interests,
with, or otherwise establish, acquire, participate or own any
interest in, any Competitive Business established or
conducting business anywhere in the world;
"Competitive Business" means (1) the business entities set
forth on Exhibit 9.3 hereof or (2) any other business that owns or operates an
"eHealth Service". "Restricted Period" means (x) with respect to any
Competitive Business (other than WebMD, Healtheon and InteliHealth), the period
beginning on the Effective Date and ending on September 30, 1999, and with
respect to WebMD, Healtheon and InteliHealth only, the period beginning on the
Effective Date and ending on October 31, 1999. "eHealth Service" means an
Internet, website or online service that mainly provides healthcare news,
information and/or interactive tools or features to physicians, allied
healthcare professionals or consumers, including, those listed on Exhibit 9.3,
provided, however, that the term "eHealth Service" shall not include any website
operated or developed by a pharmaceutical or medical device company, ad agency
or other nutrition, sports or wellness organization focused on a limited number
of closely related products or medical conditions (e.g., MSWatch by Teva).
"Affiliate", as to any Party, means any person or entity directly or indirectly
controlling, controlled by or under common control with such Party, and shall
include any officer, director and partner of any such Party. A
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Party shall be deemed to control another person if it owns or has the power to
exercise voting rights with respect to more than 50 percent of the voting
securities of such other person or entity.
(b) Notwithstanding the provisions of Section 9.3(a) above,
nothing in this Agreement shall prevent or otherwise restrict SoftWatch from:
(i) the marketing and sale of its products and services (including the
SoftWatch Software and the DietWatch.com website) to any entity after
the Restricted Period, or to any entity other than a Competitive
Business during the Restricted Period; and
(ii) performing its obligations under its existing arrangements with Third
Age, the material terms of which SoftWatch has previously disclosed to
Medscape.
(c) Each of SoftWatch and SoftWatch, Ltd. acknowledges that
Medscape's business, insofar as its relates to provision of content and services
over World Wide Web of the Internet, is global in scope, and that, accordingly,
competition with Medscape's business is possible from nearly every part of the
world. Each of SoftWatch and SoftWatch, Ltd. further acknowledges and agrees
that the restrictions set forth in this Section 9.3 are reasonable in scope and
duration and are necessary to protect, and to enable Medscape to receive the
anticipated benefits of this Agreement and the arrangements contemplated hereby.
The Parties hereto agree that, if any of the length of time, the geographical
area, the scope or another parameter of the restrictions set forth above is
deemed to be unlawfully restrictive by a court of competent jurisdiction, such
provision shall be deemed to be amended and shall be construed by such court to
have the broadest type, scope and duration permissible under applicable law, and
if no validating construction is possible, shall be severable from the rest of
this Agreement, and the validity, legality or enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
Section 9.4 Specific Performance. The parties recognize that
the performance of the obligations by the Parties of their respective
obligations under this Article 9 is special, unique and extraordinary in
character. In addition to such other rights and remedies as a non-breaching
Party may have at equity or in law with respect to any breach of this Agreement,
if a Party commits a breach of any of the provisions of this Article 9, the
non-breaching Party shall have the right and remedy to have such provisions
specifically enforced by any court of competent jurisdiction or to enjoin the
breaching Party from performing any act being taken by the breaching Party in
violation of this Article 9, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the non-breaching
Party, its business, proprietary marks and brands, and the goodwill associated
therewith and that money damages will not provide an adequate remedy to the
non-breaching Party.
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ARTICLE 10. REPRESENTATIONS, WARRANTIES, COVENANTS, AND
INDEMNITIES
Section 10.1 SoftWatch. SoftWatch represents, warrants, and
covenants that:
(a) all of the services it performs under this Agreement will be
performed in a professional and workmanlike manner, consistent
with generally accepted industry standards, using trained
personnel;
(b) all Deliverables and the Medscape Consumer Site, in light of
the fact that no software operates uninterrupted or is
error-free, will be designed and operate in all material
respects in conformity with the relevant Specifications and
the terms and conditions of this Agreement. Notwithstanding
the foregoing, but subject to Section 11.4, SoftWatch makes no
representation or warranty that the operation of the Medscape
Consumer Site or any other Deliverable will not be adversely
affected by documented or other known errors in any Microsoft
or other standard third-party operating system or similar
software in generally accepted industry use (including
Webserver and database and other e-commerce software) included
in the Medscape Consumer Site or such Deliverable, or on which
their operations rely;
(c) SoftWatch has full authority to enter into this Agreement, and
the person signing on behalf of SoftWatch is authorized to
sign on SoftWatch's behalf;
(d) SoftWatch is the owner, or has the right to use, license,
reproduce, and distribute all materials and methodologies,
including computer programs, used, licensed or supplied by
SoftWatch in connection with the services it is providing
under this Agreement;
(e) SoftWatch owns, or has the right to use, and has the right to
authorize Medscape to use, the SoftWatch Software and other
materials supplied by SoftWatch pursuant to this Agreement;
(f) none of the materials that SoftWatch supplies pursuant to this
Agreement (including non-standard or custom designed
third-party materials such as charting software) infringes any
copyright, patent, trademark, trade secret or other third
party proprietary right. Notwithstanding the foregoing, it is
expressly understood and agreed by the Parties that SoftWatch
makes no representation or warranty, and shall have no
liability, with respect to any claim that any Microsoft or
other standard third-party operating system or similar
software which is in generally accepted industry use
(including
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Webserver and database and other e-commerce software) (or any
use thereof) infringes the rights of any third party; and
(g) SoftWatch will comply with all applicable and material
federal, state, and local laws and regulations in the
performance of its obligations under this Agreement, including
laws concerning the encryption and import/export of software
products;
Section 10.2 SoftWatch, Ltd. SoftWatch, Ltd. represents,
warrants, and covenants that:
(a) SoftWatch, Ltd. has full authority to enter into the
provisions of this Agreement applicable to, and the person
signing on behalf of SoftWatch, Ltd. is authorized to sign on
SoftWatch, Ltd.'s behalf;
(b) upon execution and delivery of this Agreement by SoftWatch,
Ltd., this Agreement shall be the legal, valid, and binding
obligation of SoftWatch, Ltd., enforceable against it in
accordance with the terms hereof;
(c) the performance by SoftWatch, Ltd of its obligations
hereunder, and its compliance with the terms hereof, do not
and will not violate any provisions of applicable Israeli law;
(d) SoftWatch, Ltd. is the owner, or has the right to use,
reproduce, and distribute all materials and methodologies,
including computer programs, licensed to SoftWatch for
SoftWatch's use in connection with the services its is
providing pursuant to this Agreement;
(e) SoftWatch, Ltd. owns, or has the right to use, the SoftWatch
Software and other materials (including third-party materials)
licensed by SoftWatch, Ltd to SoftWatch; and
(f) None of the materials that SoftWatch, Ltd. licenses to
SoftWatch (including non-standard or custom designed
third-party materials such as charting software) infringes any
copyright, patent, trademark, trade secret or other third
party proprietary right. Notwithstanding the foregoing, it is
expressly understood and agreed by the Parties that SoftWatch,
Ltd. makes no representation or warranty, and shall have no
liability, with respect to any claim that any Microsoft or
other standard third-party operating system or similar
software which is in generally accepted industry use
(including Webserver and database and other e-commerce
software) infringes the rights of any third party.
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Section 10.3 Medscape. Medscape represents, warrants, and
covenants:
(a) Medscape has full authority to enter into this Agreement, and
the person signing on behalf of Medscape is authorized to sign
on Medscape's behalf;
(b) the Medscape Content and any other materials (including Third
Party Components) supplied by Medscape pursuant to this
Agreement do not and will not infringe any copyright, patent,
trademark, trade secret, or other third- party proprietary
right. Notwithstanding the foregoing, it is expressly
understood and agreed by the Parties that Medscape makes no
representation or warranty, and shall have no liability, with
respect to any claim that any Microsoft or other standard
third-party operating system or similar software which is in
generally accepted industry use (including Webserver and
database and other e-commerce software) (or any use thereof)
infringes the rights of any third party;
(c) Medscape is the owner, or has the right to use, reproduce, and
distribute all materials and methodologies, including computer
programs used or supplied by Medscape in connection with this
Agreement;
(d) Medscape will comply will all applicable and material federal,
state and locals laws and regulations in the performance of
its obligations under this Agreement, including any applicable
laws concerning the encryption and import/export of software
products; and
(e) Medscape will use its reasonable commercial efforts to promote
the Medscape Consumer Site and the Co-Branded Diet Center, and
to market and sell of advertising on such sites.
Section 10.4 Indemnification. Each Party agrees to defend and
indemnify the other Party, its directors, officers, employees, and agents
against any claim, demand, suit, debt, liability, or costs, including reasonable
attorney's fees ("Losses"), to the extent that it is based on a claim that: (a)
constitutes a breach of the indemnifying Party's warranties, representations,
and undertakings in this Agreement; or (b) arises out of the gross negligence or
willful misconduct of the indemnifying Party, provided, however, that neither
Party shall not have any liability pursuant to this Section 10.4 unless the
aggregate of all Losses for which the indemnifying Party would, but for this
proviso, be liable, exceeds on a cumulative basis $25,000, in which case the
indemnifying Party shall be liable for the aggregate of all Losses (i.e.,
without regard to the foregoing limitation). Notwithstanding the foregoing, the
limitation on liability contained in the foregoing proviso shall not be
applicable in the case of any Losses on account of any breach of a Party's
representations and warranties pertaining to (x) the infringement of any
copyright, patent, trademark, trade secret or other third party proprietary
right or (y) compliance with any applicable and
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material federal, state, and local laws, it being understood that the
indemnifying Party shall be liable to the indemnified Party in all events for
the aggregate amount of all such Losses.
Section 10.5 Indemnification Procedures. The Party claiming
indemnification pursuant to Section 10.4, shall notify the other Party promptly
of the claim. The indemnified Party may, at its own expense, assist in the
defense if it so chooses, provided that the indemnifying Party controls the
defense and all negotiations relative to any settlement and further provided
that any settlement intended to bind the indemnified Party is not final without
the indemnified Party's consent. Without limiting the foregoing, if a third
party makes a claim against Medscape alleging that any Deliverable infringes the
intellectual or other proprietary rights, SoftWatch (x) shall, at its expense,
secure for Medscape the right to continue to use the relevant Deliverable in the
territory or jurisdiction to which the infringement claim relates, or if the
claim relates to worldwide rights, everywhere throughout the world (the
"Affected Territory"), or (y) modify or replace the Deliverable so as to make it
non-infringing, or (z) if neither of the foregoing options is available in
SoftWatch's reasonably commercial judgment, require Medscape to either cease
using the Deliverable in the Affected Territory or return the Deliverable, in
each case, for a credit equal to a pro-rata portion of the previously paid
license fee (if any), in either of which event Medscape's obligation to pay
royalties with respect to such Deliverable to the extent relating to the
Affected Territory shall terminate with effect from the date on which the third
party infringement claim is first made, and Medscape shall be entitled to a
refund of any royalty actually paid to SoftWatch with respect to any period
occurring after such date to the extent relating to the Affected Territory.
ARTICLE 11. PRODUCT RELATED WARRANTIES AND COVENANTS.
Section 11.1 General Provisions. The provisions of this
Article 11 shall be applicable to each Deliverable required to be delivered by
SoftWatch to Medscape pursuant to the Specifications.
Section 11.2 Viruses. SoftWatch represents and warrants that
prior to delivery of any media containing any Deliverable, it shall use
reasonable efforts, consistent with generally accepted industry practice, to
ensure that the relevant Deliverable is free of any programming devices (e.g.,
viruses, key locks, back doors, Trojan horses, worms, etc.) that are designed to
disrupt or are capable of disrupting the use of the Deliverable or any system
with which the Deliverable operates, or destroy or damage data or make it
delayed or inaccessible, except for file and purge routine functioning of the
relevant Deliverable.
Section 11.3 Year 2000 Compliance. SoftWatch represents and
warrants that the Deliverables and the Medscape Consumer Site, when operated
according to the applicable Specifications, will accurately recognize, record,
store and process (including
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calculating, comparing, and sequencing) date data from, into and between the
years 1999 and 2000 and the twentieth and twenty-first centuries; will
accurately perform leap-year calculations; will accurately recognize, record,
store and process two- and four-digit dates; and will not cause other
information technology to fail or generate errors related to two-or four-digit
dates.
Section 11.4 Limited Warranty. SoftWatch makes no
representation or warranty that the operations of any Deliverable will be error
free or uninterrupted in all circumstances. If any Deliverable (including
standard third-party operating systems or similar software in generally accepted
industry use) or the media of which it is contained is found to contain an
operability problem, bug, virus or other destructive programming device (whether
or not any of the same are documented), then SoftWatch's sole obligation and
liability hereunder shall be upon the request of Medscape, and if appropriate
upon Medscape's return of the defective Deliverable, to correct the operability
problem, bug, virus or other programming device (such as by providing an
effective by-pass or patch where technically practicable) at no charge to
Medscape, or, if SoftWatch is unable to do so, to replace the affected
Deliverable with a functional equivalent. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, SOFTWATCH MAKES NO WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY.
SOFTWATCH SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
Section 11.5 Limitation of Liability. THE CUMULATIVE LIABILITY
OF EITHER PARTY FOR ALL CLAIMS RELATING TO ARISING UNDER OR IN CONNECTION WITH
THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL NOT EXCEED THE
TOTAL AMOUNT OF ALL FEES PAYABLE BY MEDSCAPE TO SOFTWATCH UNDER THIS AGREEMENT
DURING THE TWENTY- FOUR (24) MONTH PERIOD IMMEDIATELY PRECEDING THE DATE ON
WHICH THE RELEVANT CLAIM IS MADE. NOTWITHSTANDING THE FOREGOING, THIS LIMITATION
SHALL NOT APPLY TO LOSSES RELATING TO CLAIMS ASSERTED BY THIRD PARTIES WITH
RESPECT TO INFRINGEMENT OF INTELLECTUAL PROPERTY OR OTHER PROPRIETARY RIGHTS.
NEITHER PARTY SHALL IN ANY EVENT BE LIABLE TO THE OTHER FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) INCLUDING LOSS OF REVENUE, LOSS
OF DATA, OR ANTICIPATED PROFITS OR LOST BUSINESS.
Section 11.6 Adequate Controls. SoftWatch covenants and agrees
that, at all times during the Term, it shall implement and maintain systems that
provide for the effective back-up and recovery of all data relating to the
Development Services.
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Section 11.7 Reverse Engineering. Medscape will not cause or
permit the reverse engineering, disassembly or decompilation of the SoftWatch
Software, whether alone or as used in any Deliverable.
Section 11.8 Encryption Covenant. At the specific request of
Medscape, SoftWatch will encrypt each Deliverable in the manner reasonably
directed by Medscape, but then only to the extent such encryption is permissible
under applicable law.
Section 11.9 Medscape.com Website. Notwithstanding anything in
this Article 11 to the contrary, SoftWatch makes no representation or warranty
as to the Creation Tools, when and to the extent used or operated in or with the
Medscape.com website.
ARTICLE 12. SALES AGENCY.
Section 12.1 Appointment. During the Term, SoftWatch appoints
Medscape, and Medscape shall act, as SoftWatch's non-exclusive agent for the
purpose of soliciting advertising, sponsorship and co-branded distribution sales
in the United States and elsewhere throughout the world related to DietWatch.com
(the "Sales Agency Services").
Section 12.2 Scope of Agency; Right of Approval. Medscape has
no power or authority to execute any advertising agreements or other contracts
for or on behalf of SoftWatch. All orders procured by Medscape in the
performance of the Sales Agency Services are subject to final acceptance and
approval by SoftWatch, in its sole discretion.
Section 12.3 Medscape's Obligations. Medscape will:
(a) forward all orders to SoftWatch for its approval or disapproval;
(b) arrange for direct billing by and payment to SoftWatch with respect to
each advertiser, sponsorship or other account approved by SoftWatch;
and
(c) unless authorized or directed by SoftWatch, make no representation with
respect to any SoftWatch product which is at variance with SoftWatch's
own representations, and indemnity SoftWatch for all claims or damages
resulting for any representations made by Medscape which are at
variance with SoftWatch's own representations and which are not
otherwise authorized or directed by SoftWatch.
Section 12.4 Commission. In consideration of Medscape's Sales
Agency Services, SoftWatch will pay to Medscape a sales commission ("Sales
Commission") equal
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to fifty (50%) of each order solicited by Medscape for which SoftWatch actually
receives payment.
Section 12.5 Expenses. Unless otherwise agreed by SoftWatch in
advance in writing, Medscape is responsible for all costs and expenses incurred
by Medscape in performing the Sales Agency Services under this Agreement.
Section 12.6 SoftWatch's Responsibilities. SoftWatch will
furnish Medscape with all necessary promotional and other materials and will pay
Medscape the compensation set out in Section 12.4.
Section 12.7 Payment Terms; Taxes. All payments due to
Medscape under this Article 12 are stated and payable in U.S. dollars and shall
be paid by wire transfer to such account as Medscape shall from time to time
notify SoftWatch in writing. Amounts subject to Sales Commission shall be paid
to Medscape within thirty (30) days after the end of the relevant SoftWatch
Reporting Period . Medscape reserves the right to charge a late fee of up to
1.5% per month (or, if less, the maximum rate permitted by law) on any balance
remaining unpaid for more than forty-five (45) days.
Section 12.8 (a) Reporting by SoftWatch for purposes of
Calculating Sales Commissions. Subject to Section 12.8(b), within thirty (30)
days after the end of each calendar quarter during the Term (each such quarterly
period a "SoftWatch Reporting Period," with the first such SoftWatch Reporting
Period to end on the last day of the first full calendar quarter to occur after
Medscape begins conducting the Sales Agency Services), SoftWatch shall send a
statement to Medscape summarizing, and certifying as to, the information used by
SoftWatch to calculate the Sales Commissions payable to Medscape in order to
confirm the actual amount of Sales Commissions due or projected to be due to
Medscape during the applicable SoftWatch Reporting Period.
(b) Independent Auditor on Change of Control. If at any time
after the Restricted Period a Medscape Change of Control occurs, all reports
required to be delivered by SoftWatch to Medscape pursuant to Section 12.8(a)
shall be delivered to an Independent Auditor, who shall agree to be bound by the
confidentiality obligations set forth in Article 9. The Independent Auditor
shall prepare a report confirming the accuracy of information provided by
SoftWatch only. Medscape shall have the right to receive solely the results of
such review only, and shall have no right to receive, review or consult actual
information provided by SoftWatch in its reports, SoftWatch's books of account,
or any workpapers prepared by the Independent Auditor in connection with its
review. The costs of any such Independent Auditor shall be borne equally by the
parties.
Section 12.9 (a) Audit Rights. SoftWatch will maintain for at
least three (3) years its records, contracts and accounts relating to each
transaction in respect of which a Sales Commission is payable to Medscape
hereunder, and will permit examination
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not more frequently than once per calendar year of that information upon
reasonable request and during normal business hours by an Independent Auditor.
In addition, Medscape shall be entitled annually to appoint an Independent
Auditor to audit the books of account of SoftWatch, at Medscape's expense,
during normal business hours, with at least two weeks' prior notice. If during
the course of such audit, it is discovered that SoftWatch has underpaid Medscape
by an amount in excess of five percent (5%) of the amount determined to be due
for the audited period, then the cost of such audit shall be borne by SoftWatch.
Furthermore, any error discovered by the Independent Auditor shall be promptly
remedied by SoftWatch after receipt of notice by Medscape. All information
received by a Party in the course of such audit shall be treated as Confidential
Information and shall not be disclosed to any third party (other than its
attorneys and accountants) or used for any purpose whatsoever other than to
determine compliance with this Article 12.
(b) Audit Report on Change of Control. If at any time after
the Restricted Period a Medscape Change of Control occurs, Medscape shall have
the right to receive solely the results of any audit performed pursuant to
Section 12.9(a), and shall have no right to receive, review or consult
SoftWatch's books of account, the Independent Auditor's audit report, or any
workpapers prepared by the Independent Auditor in connection with its audit.
(c) Medscape Change in Control. A "Medscape Change of Control"
means the merger or consolidation of Medscape into or with any SoftWatch
Competitor, or the acquisition of Medscape by a SoftWatch Competitor, or the
sale of all or substantially all of the shares, properties or assets of Medscape
to a SoftWatch Competitor, in each case under circumstances in which the holders
of a majority (by voting power) of the outstanding capital stock of Medscape
immediately prior to such merger, consolidation, acquisition or sale own less
than a majority (by voting power) of outstanding capital stock of Medscape or
the surviving or resulting entity or acquirer, as the case may be, immediately
following such merger, consolidation, acquisition or sale. A "Medscape Change of
Control" shall also be deemed to occur if any officer, director, employee,
shareholder (or other equity participant) of, or other individual associated
with any SoftWatch Competitor shall become a director of Medscape. For purposes
hereof, a "SoftWatch Competitor" means (i) each of Agency.com, BroadVision,
Caresoft, Clarify, CyberDiet, Dr. Koop, eDiets, Exchange Applications,
HealthDesk, Healtheon, HealthMagic, Jenny Craig, Mediconsult, Patinet Info
systems, peregrine Systems, PHDI, Phys, remedy Corp, Siebel, USWeb, Vantive,
Vignette, WebMD, WeightWatchersgency.com, or (ii) any other entity, including
those referred to in the foregoing clause (i), whose primary business is: (1)
the development and sale of web software relating to healthcare, self-care
management, or healthcare relationship marketing, or (2) the development,
marketing and sale of on-line diet/nutrition information services.
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ARTICLE 13. TERM AND TERMINATION
Section 13.1 Term. This Agreement will begin on the date that
it is signed by Medscape, SoftWatch and SoftWatch, Ltd. and, unless sooner
terminated, shall continue until the date which is twelve months after the date
on which Medscape notifies SoftWatch of its intent to terminate all or a portion
of this Agreement. Medscape shall have the right to terminate all or any portion
of the services being provided by SoftWatch under this Agreement at any time
after the Development Services have been completed.
Section 13.2 Termination for Breach. Either Medscape or
SoftWatch may terminate this Agreement on thirty (30) days' notice if the other
materially breaches any of its obligations hereunder unless the breach is cured
within the thirty (30) day period, provided, however, this Agreement shall be
subject to termination (x) by Medscape, effective immediately upon written
notice, if either SoftWatch or SoftWatch, Ltd. breaches any of its obligations
under Article 9, or (y) by SoftWatch effective immediately upon written notice,
if Medscape breaches its confidentiality obligations under Section 9.1.
Section 13.3 Bankruptcy and Related Events. Either Party may
terminate this Agreement, effective immediately upon written notice, if (a) all
or a substantial portion of the other Party's assets are transferred to an
assignee for the benefit of creditors or to a receiver or trustee in bankruptcy;
(b) a proceeding is commenced by or against the other Party for relief under the
bankruptcy or similar laws and such proceeding is not dismissed within thirty
(30) days; or (c) the other Party is adjudged bankrupt or insolvent. In
addition, the foregoing terminate right shall be exercisable by Medscape if any
of the specified events shall occur with respect to SoftWatch, Ltd.
Section 13.4 Obligations Upon Termination or Expiration. Upon
termination or expiration of this Agreement, (a) SoftWatch shall immediately
return to Medscape all copies of the Medscape Confidential Information and all
records pertaining to Medscape's Member Information or other proprietary user
information in SoftWatch's possession or control, except as specifically
provided to the contrary in Section 1.3(d); and (b) Medscape shall immediately
return to SoftWatch all copies of the SoftWatch Confidential Information. In
addition, each Party shall promptly pay to the other Party any and all amounts
due and owing by such Party to such other Party for all periods up to and
including the date of termination or expiration.
Section 13.5 Transfer of Site. Upon Medscape's request, or
upon the termination or expiration of this Agreement (other than as a result of
Medscape's breach), whichever occurs first, SoftWatch shall provide all
reasonable assistance to Medscape and third parties authorized by Medscape to
transfer the Medscape Consumer Site or parts of it to an alternate server to be
owned and operated by whatever entity Medscape chooses. Unless termination has
resulted from a breach by SoftWatch of SoftWatch, Ltd. of their
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respective obligations hereunder, such assistance shall be provided to Medscape
at SoftWatch's then-current cost for such services. Such transition assistance
may include: (A) delivery of full and complete copies of all computer programs
that are not SoftWatch Software; and (B) assignment of all necessary rights
under third-party agreements to Medscape or a new hosting service.
Section 13.6 Survival. The provisions of Section 6.6, Article
7, Article 8, Section 9.1, Section 9.2 , Section 10.4 , Section 12.9, Section
13.5, Article 14 , Section 15.8 and any other provision of this Agreement
necessary for the interpretation of any of the foregoing shall survive the
termination or expiration of this Agreement.
ARTICLE 14. GUARANTY OF SOFTWATCH, LTD.
Section 14.1 Guaranty. SoftWatch, Ltd. irrevocably and
unconditionally guarantees all financial obligations and liabilities of
SoftWatch under this Agreement, and the due performance and compliance by
SoftWatch with the terms hereof. All payments by SoftWatch, Ltd. pursuant to
this Article 14 shall be made on the same basis as are required to be made by
SoftWatch pursuant to this Agreement. SoftWatch, Ltd. hereby waives notice of
acceptance of this guaranty, presentment, demand of payment, protest, notice of
dishonor or nonpayment, and any suit or taking of other action by Medscape
against, and any other notice to, SoftWatch. SoftWatch, Ltd. waives, to the
fullest extent permitted by law, the benefit of any statute of limitations
affecting its liability hereunder or the enforcement thereof. This guaranty
shall be binding upon SoftWatch, Ltd. and its successors and assigns and shall
inure to the benefit of Medscape and its successors and assigns.
Section 14.2 Obligations Unconditional. The obligations of
SoftWatch, Ltd. under this Article 14 are absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including termination of this Agreement. The guaranty
made by SoftWatch, Ltd. pursuant to this Article 14 is a primary obligation of
SoftWatch, Ltd. No failure or delay on the part of Medscape in exercising any
right, power or privilege hereunder and no course of dealing between SoftWatch,
Ltd. and Medscape shall operate as a waiver thereof; 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. The rights, powers and remedies herein expressly provided are
cumulative and not exclusive of any rights, powers or remedies which Medscape
may otherwise have.
Section 14.3 Successors and Assigns; Applicable Law. The
provisions of this Article 14 shall be binding upon SoftWatch, Ltd. and its
successors and assigns and shall inure to the benefit of Medscape and its
successors and assigns.
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ARTICLE 15. GENERAL PROVISIONS
Section 15.1 No Joint Venture Created. Nothing in this
Agreement shall be construed so as to constitute SoftWatch and Medscape as joint
venturers, partners, or agents of each other, and neither SoftWatch nor Medscape
shall have the power to obligate or bind the other in any way whatsoever.
Section 15.2 Entire Agreement. This Agreement constitutes the
complete agreement between the parties and supersedes all other agreements
(including confidentiality agreements), promises, representations, and
negotiations, whether written or oral, between the parties regarding the subject
matter of the Agreement. No amendment of this Agreement shall be valid or take
effect unless it is in writing and signed by all the parties.
Section 15.3 Assignment. SoftWatch may not assign this
Agreement without Medscape's prior written permission, except that from and
after the end of the Restricted Period, SoftWatch may assign this Agreement (and
any license contained in it) to any of its Affiliates or any person or entity
that acquires its business. Medscape may assign this Agreement (and any license
contained in it) to any of its Affiliates, any person or entity that acquires
all or portion its business, or to any other person that operates and maintains
the Medscape Consumer Site. Any assignment in violation of this provision will
be null and void.
Section 15.4 Waiver. No waiver of any term or condition or of
any breach of this Agreement or of any part of it, shall be deemed a waiver of
any other term or condition or of any later breach of the Agreement or of any
part of it.
Section 15.5 Notices. Any notice, consent, approval or
disapproval, required or permitted under this Agreement, including any change to
this Section 15.5, shall not be valid unless in writing and shall be given
either personally; by certified mail, return receipt requested, or by fax which
the sending Party must confirm at the following addresses or telephone and fax
numbers:
If to Medscape:
Medscape, Inc.
134 W. 29th Street
New York, New York
10001-5399
Attn: Paul Sheils
Phone: (212) 760-3200
Fax: (212) 265-9228
32
<PAGE> 38
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
Attn: John P. Schmitt
Phone: (212) 336-2849
Fax: (212) 336-2222
If to SoftWatch:
SoftWatch, Inc.
67 South Bedford St.
Burlington, MA 01803
Attn: Asaf Evenhaim, Executive VP
Tel: 781-229-5802
Fax: 781-229-5878
with a copy to:
Lucash, Gesmer & Updegrove, LLP
40 Broad Street
Boston, MA 02109
Attention: Peter M. Moldave, Esq.
Tel: 617-350-6800
Fax: 617-350-6878
Section 15.6 Force Majeure. Neither Party shall be deemed in
default of this Agreement to the extent that performance of its obligations or
attempts to cure any breach are delayed, restricted, or prevented by reason of
any act of God or government, fire, natural disaster, labor stoppage, the
failure of necessary power systems or connections, or any other act or condition
beyond the reasonable control of the Parties, or agents appointed by such
Parties, provided that the Party so affected uses its commercially reasonable
efforts to avoid or remove the causes of nonperformance and continues
performance immediately after those causes are removed. Notwithstanding this
provision, any delay that exceeds (2) two months shall entitle the Party whose
performance is not affected by the relevant event of force majeure to terminate
the Agreement and to revert any rights granted hereunder.
Section 15.7 Publicity. A Party may use the name of the other
Party in press releases, sales material and literature only with the written
consent of the other Party.
33
<PAGE> 39
Section 15.8 Governing Law. This Agreement shall be governed
by and construed under the laws of the State of New York and of the United
States, without regard to their conflicts of laws provisions.
Section 15.9 Including. The word "including" shall mean
"including without limitation."
Section 15.10 Schedules and Exhibits. The Schedules and
Exhibits hereto are an integral part of this Agreement, and any reference herein
to this Agreement shall be deemed to mean and include a reference to such
Schedules and Exhibits.
Section 15.11 Captions. Headings and captions throughout this
Agreement are for convenience only and should not be considered part of the
Agreement.
Section 15.12 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 and the same document.
Section 15.13 SoftWatch, Ltd as Party. All references in
Article 9 and the other provisions of this Agreement to a "Party" or "Parties"
shall be deemed to mean and include reference to SoftWatch, Ltd. to the extent
such provisions are expressly applicable to SoftWatch, Ltd., or the context so
requires.
Section 15.14 Right of Offset. Medscape shall have the right
to offset against any and all amounts due and owing by Medscape to SoftWatch
hereunder any and all amounts due by SoftWatch to Medscape hereunder. SoftWatch
shall have the right to offset against any and all amounts due and owing by
SoftWatch to Medscape hereunder any and all amounts due by Medscape to SoftWatch
hereunder.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
34
<PAGE> 40
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed and delivered on its behalf, as of the date and year first written
above, by its duly authorized representative.
MEDSCAPE INC.
By: /s/ Paul T. Sheils
----------------------------------
Name: Paul T. Sheils
Title: President & CEO
SOFTWATCH INC.
By: /s/ Asaf Evenhaim
----------------------------------
Name: Asaf Evenhaim
Title: Executive Vice President
SoftWatch, Ltd. joins this
Agreement solely for purposes
of Article 9, Section 10.2,
and Article 14
SOFTWATCH, LTD.
By: /s/ Amir Kishon
----------------------------
Name: Amir Kishon
Title: CEO & President
35
<PAGE> 41
Exhibit 1.1
LICENSED SOFTWARE
FRAMEWORK SERVICES
Enrollment-registration (*)(+)
Logins/lost passwords (*)(+)
Access control, privacy and security tracking (*)(-)
Back-end tools for content management and reports (*)(-)
Database (*)(-)
User consoles
Consumer (*)(+)
Reporting (*)(-)
Community administrator (back-end administration for content,
discussion groups and other community functionality) (*)(-)
News administrator (*)(-)
Medical expert (*)(-)
System administrator (*)(-)
SEGMENTATION
Additional risk assessment/segmentation questionnaire to cluster users in
registration phase to segments (+)
Target specific content and functionality to specific segment (-)
Targeted messaging lists (-)
Targeted reporting (example: which services where utilized most by segment
1 users, etc.) (-)
SELF-CARE MANAGEMENT TOOLS
Diary (*) (+)
Weight (*)(+)
Medication (**)(+)
Doctor visits (**)(+)
Memos (*)(+)
To Dos (*)(+)
Peak flow (+)
Blood pressure (+)
Glucose level (+)
Health journal (condition specific) (**)(+)
Graphs (Chart effects standard license) (*)(+)
36
<PAGE> 42
NUTRITION MANAGEMENT TOOLS
Nutrition tracking (*)(+)
USDA and user contributed food database (over 10,000 foods) (*)(+)
BMI calculation, RDA guidelines and personal nutritional goal setting (*)
(+)
Add new food, recipe, or meal (*)(+)
Interactive database search (*)(+)
Immediate visual feedback (*)(+)
Graphs and reports of nutritional information (*)(+)
Diary-to-go (*)(+)
EXERCISE MANAGEMENT TOOLS
Exercise and activity tracking (*)(+)
A database of activities (*)(+)
Calculations of time and energy burnt (*)(+)
Add new physical activity (*)(+)
Graphs and reports of exercise information (*)(+)
COMMUNITY INFORMATION TOOLS FOR END-USERS
Ask-an-expert (*)(+)
Personal stories (*)(+)
Recommend a friend (*)(+)
Vote of the week (*)(+)
Library (*)(+)
COMMUNITY NEWS TOOLS FOR END-USERS
Health news (3rd party news feed) (**)(+)
Community news (what's new on the site) (*)(+)
COMMUNITY COMMUNICATION TOOLS FOR END-USER
Chat ( Third party "eshare" with standard license for 50 users included)
(*)(+) (moderated chat option (-))
Discussion forums (*)(+)
Instant messaging (*)(+)
Buddy list (*)(+)
White pages (*)(+)
Postcards (*)(+)
MESSAGING SYSTEM UNI-DIRECTIONAL
Support for newsletter attachments (*)(-)
Broadcast messages to members (*)(-)
Attachments capability (for forms, questionnaires, surveys, instruments)
(*)(-)
37
<PAGE> 43
MESSAGING SYSTEM BI-DIRECTIONAL
Adds the consumer-to-consumer messages (*)(+)
Adds consumer to company messages (customer service or technical support).
Messages may be in a structured form format (*)(+)
KEY TO SYMBOLS
(*) substantially as in www.DietWatch.com
(**) substantially as in www.MSWatch.com
(+) this component/functionality is part of the End-User Tools.
(-) this component/functionality is part of the Creation Tools.
Capitalized terms used herein without definition have the respective meanings
provided in the License and Web Site Development Agreement.
38
<PAGE> 44
Exhibit 1.2
SPECIFICATIONS
The specifications for the customization services are outlined below.
Capitalized terms used herein without definition have the respective meanings
provided in the License and Web Site Development Agreement. The full
Specifications, which will be negotiated and mutually agreed upon between the
Parties within 30 days of the Effective Date, will provide that Phase I will not
exceed 10 man-months work and Phase II will not exceed 10 man-months work. The
specifications will be provided by Medscape, and shall include:
1. the architectural and graphical design components of the Medscape
Consumer Site, including a complete storyboard description showing the
opening pages, content and link structure, logo design, page layout,
descriptions of elements, and sample interactions within the Medscape
Consumer Site ("Site Design"), which Medscape will be responsible for
providing to SoftWatch in a timely manner and in a form reasonably
acceptable to SoftWatch;
2. specifications for any Third Party Components and integration
requirements;
3. a delivery and milestone schedule for performance of the Development
Services (as may be modified from time to time by agreement of the
Parties( the "Delivery and Milestone Schedule");
4. guidelines and specifications pertaining to generally accepted
technical standards applicable to the computer program and web-site
development industry ("Process Certification Requirements");
5. specifications for the use of standard encryption technologies (e.g.,
Secure Socket Layer) to provide a secure environment for all transfer
of personal, confidential user information and transactions; and
6. registration process specifications to implement registration of
existing Medscape users and existing DietWatch users;
7. specifications of Medscape document structure and tagging scheme; and
8. other information reasonably necessary for the implementation of the
Medscape Consumer Site.
39
<PAGE> 45
The Specifications will be based on the following outline:
PHASE I FOR JULY 7 LAUNCH (VERSION 1.0) OUTLINE:
- - Implementation of Medscape look and feel
- - Implement the Medscape Consumer Registration Process (Phase I will
include a single tier registration process with 10 questions)
- - Consumer / Professional / DW registration and login transparency
- - Enhance content loading tools and surfacing to users based on Medscape
personalization and metadata structure and 18 conditions
- - At least one custom event per health condition
- - Adopt Medscape platform requirements: development, staging and
production.
- - Start integration of existing Professional Site Components that will be
implemented by a third party with the Medscape Consumer Site (These
components include: (i) MEDLINE; (ii) AIDSLINE; (iii) TOXLINE; (iv)
Drug database; (v) Medical dictionary; and (vi) importing of existing
~40K HTML articles from Medscape Professional Site to the Medscape
Consumer Site database) as agreed based on effort and impact. Final
integration specification will be mutually developed by June 15, 1999.
- - External ad service integration (e.g. Doubleclick)
- - Implementation of the Co-Branded Diet Center Specifications
- - Track and report defined measurements such as page view calculations to
support revenue share calculations
- - Partial site search of defined areas using SQL search
- - Establish and meet SoftWatch promulgated system performance
measurements
PHASE II FOR SEPTEMBER 30 LAUNCH (VERSION 1.1):
- - Implement look and feel overhaul as supplied by design firm, in html,
by July 30, 1999. Project not to exceed 3 man months.
- - Completion of Professional Site Components integration (as defined
above)
- - Full site search using commercial search engine
- - Nutrition support for current generation on at least one Macintosh
browser platform
- - Make major user screens bookmark-able
- - Implement 2-tier registration process
- - Bulk load of content sets where appropriate and automatable.
Specification to be mutually developed by June 18, 1999.
- - Resource assignment to address future defined projects not to exceed
40 man-days and must be functionally defined by June 18.
- - Support for multiple web servers and database servers to permit
hardware scalability
40
<PAGE> 46
CUSTOM MODULES
Currently all the professional site components are defined as "custom
modules."
41
<PAGE> 47
Exhibit 1.3
THE CO-BRANDED DIET CENTER SPECIFICATIONS
Capitalized terms used herein without definition have the respective meanings
provided in the License and Web Site Development Agreement.
OVERALL PLAN: The Co-Branded Diet Center will use templates created and
delivered by Medscape (Medscape look and feel with appropriate co-branding as
specified in the Agreement). Final layouts and HTML pages will be provided by
Medscape to SoftWatch by June 20, 1999;
Additionally, Medscape will provide DietWatch editorial the Medscape Consumer
Editorial Guidelines as updated from time to time. DietWatch editorial will
follow these guidelines for all DietWatch content that will be presented in the
Co-Branded Diet Center. The existing Medscape Consumer Editorial Guidelines will
be provided to SoftWatch by June 20, 1999.
The following is the list of features for the Co-Branded Diet Center:
Featured article: DietWatch feature article (not "announcements") content would
be used, in addition to Medscape Consumer featured articles. The DietWatch
article would be served from the DietWatch server and the Medscape articles from
the Medscape server. Both would be presented on the page, with the Medscape
article in the first position. May involve some coordination between editorial
groups for content programming. DietWatch editorial will follow Medscape
Consumer Editorial Guidelines for all feature articles.
News: News content will come from Medscape Consumer only.
Ask-an-expert: The Co-Branded Diet Center will include DietWatch's
Ask-an-expert. DietWatch experts will follow Medscape Consumer Editorial
Guidelines for all Ask-an-Expert questions. In the future Medscape may offer
additional experts from its own network of experts.
Personal Zone/Stories: The Co-Branded Diet Center will include the DietWatch
personal stories. All existing and future personal stories will be in compliance
with Medscape Consumer Editorial Guidelines.
42
<PAGE> 48
Recipe of the Week: DietWatch Recipe of the Week content will not be used on the
Co-Branded Diet Center.
Vote: DietWatch Vote will be available on the Co-Branded Diet Center. All votes
will be selected by DietWatch community manager in compliance with Medscape
Consumer Editorial Guidelines.
Activist: This feature will not be used on the Co-Branded Diet Center.
Feedback: Medscape will receive and process this information per the
functionality specified for Medscape Consumer 1.0. SoftWatch will receive a copy
of user feedback for the Co-Branded Diet Center for the purpose of enhancing its
tools and content.
Chat: Only DietWatch's moderated chat sessions will be offered in the Co-Branded
Diet Center according to Medscape Consumer Editorial Guidelines regarding the
topic and schedule; no unmoderated chat will be offered; In the future, Medscape
may expand this offering using moderators in its expert network
Discussion Groups: The Co-Branded Diet Center will not have DietWatch or other
discussion groups.
Users Online: To be integrated per 1.0 template specifications
Postcards: To be integrated per 1.0 template specifications
Diary to Go: To be integrated per 1.0 template specifications; needs to include
Medscape logo
Tips: The Co-Branded Diet Center will not include DietWatch Tips section. It
will use the Medscape Consumer Tips functionality.
Humor: The Co-Branded Diet Center will not include DietWatch or other humor
content.
Newsletter: The Co-Branded Diet Center will not include DietWatch newsletter. It
will include the general Medscape Consumer newsletter.
43
<PAGE> 49
Exhibit 9.3
MEDSCAPE COMPETITIVE BUSINESSES
AltaVista
America's Doctor
AOL
Ask Dr. Weil
@Home
BetterHealth
CareInsite
CVS/Soma
CyBear
Dr. Koop/Empower
Drugstore.com
Excite
GO Network
Healtheon
HealthGate
HealthScout
Infoseek
InteliHealth
iVillage/Thrive
Lycos
Mayo Clinic Health Oasis
MD Consult
Medicalogic
Mediconsult
Medsite
Mining Company
MSN
MSNBC
OnHealth
Physician's Online
PlanetRx
QD Online
RiteAide
Salu.net
Snap
Walgreen
44
<PAGE> 50
Walmart
WebMD
Women.com
45
<PAGE> 51
INDEX OF DEFINED TERMS
"Affected Territory" - Section 10.5
"Affiliate" - Section 9.3(a)
"Agreement" - Preamble
"Certification Test" - Section 4.2
"Certification Testing" - Section 4.2
"Change of Control" - Section 6.6(c)
"Co-Branded Diet Center Specifications" - Section 1.3
"Co-Branded Diet Center" - Section 1.3
"Competitive Business" - Section 9.3(a)
"Confidential Information" - Section 9.2
"Creation Tools" - Section 1.1(a)(ii)
"Customization" - Section 1.2
"Customization Services" - Section 1.2
"Customization Specifications" - Section 1.2
"Customize", "Customized" and related words - Section 1.2
"Deliverable" - Section 4.1
"Delivery and Milestone Schedule" - Exhibit 1.2 (Specifications)
"Delivery Date" - Section 4.1
"Development Services" - Section 2.1
46
<PAGE> 52
"Diet Center/ROS Content Banner Revenue" - Section 6.3(b)(iv)
"Diet Center/ROS Tools Banner Revenue" - Section 6.3 (b)(iii)
"Effective Date" - Preamble
"eHealth Service" - Section 9.3(a)
"End-User Tools" - Section 1.1(a)(i)
"Final Certification" - Section 4.3
"General Health and Wellness Center" - Section 1.3(b)
"Including" - Section 15.9
"Independent Auditor" - Section 6.5(b)
"Initial Maintenance Period" - Section 5.1
"Internet" - Section 1.1(c)
"Losses" - Section 10.4
"Maintenance Fee" - Section 6.2
"Maintenance Period" - Section 5.1
"Maintenance Services" - Section 5.1
"Medscape" - Preamble
"Medscape Change in Control" - Section 12.9(c)
"Medscape Consumer Site" - Section 1.1(b)
"Medscape Content" - Section 3.1
"Medscape Materials" - Section 7.2
"Member Information" - Section 1.3(d)
47
<PAGE> 53
"Members" - Section 1.3(d)
"Net Advertising Revenue" - Section 6.3
"Nutrition/GHW Sponsorship Page" - Section 6.3(c)
"Nutrition/GHW ROS Banner Page" - Section 6.3(c)
"Paid Maintenance Period" - Section 5.1
"Parties" - Preamble
"Party" - Preamble
"Phase I Delivery Date" - Section 4.1
"Phase II Delivery Date" - Section 4.1
"Process Certification Requirements" - Exhibit 1.2 (Specifications)
"Quarterly Diet Center Medscape Content Sponsorship Royalty" - Section
6.3(b)(ii)
"Quarterly Diet Center Tools Sponsorship Royalty" - Section 6.3(b)(i)
"Quarterly ROS/Diet Center Tools Banner Royalty" - Section 6.3(b)(iii)
"Quarterly ROS/Diet Center Content Banner Royalty" - Section 6.3(b)(iv)
"Quarterly ROS/Tool Banner Royalty" - Section 6.3(a)(ii)
"Quarterly Sponsorship Royalty" - Section 6.3(a)(i)
"Reporting Period" - Section 6.5(a)
"Restricted Period" - Section 9.3(a)
"Retesting" - Section 4.4
"Royalties" - Section 6.3
"Run-of Site" ("ROS") - Section 6.3
48
<PAGE> 54
"Sales Agency Services" - Section 12.1
"Sales Commissions" - Section 12.4
"Shared Materials" - Section 7.3
"Site Design" - Exhibit 1.2 (Specifications)
"Site Specifications" - Section 2.1
"SoftWatch" - Preamble
"SoftWatch Competitor" - Section 12.9(c)
"SoftWatch, Ltd." - Preamble
"SoftWatch Materials" - Section 7.1
"SoftWatch Reporting Period" - Section 12.8(a)
"SoftWatch Software" - Section 1.1
"SoftWatch Software License" - Section 1.1
"SoftWatch Software License Fee" - Section 6.1
"Specifications" - Section 2.1
"Sponsorship" - Section 6.3
"Third Party Components" - Section 2.1(c)
"Trademarks" - Section 8.1
49
<PAGE> 1
Exhibit 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of June
28, 1999, is by and between MEDSCAPE, INC., a Delaware corporation with offices
at 134 West 29th Street, New York, New York 10001 ("Medscape"), and MARK E.
BOULDING, an individual with an address at 4630 Edgefield Road, Bethesda, MD
20814 ("Boulding"),
W I T N E S S E T H:
WHEREAS, Medscape desires to employ Boulding as its General
Counsel and Vice President of Regulatory Affairs, and Boulding is willing to
undertake such employment on the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Employment. Medscape hereby employs Boulding during the
Term (as hereinafter defined) as General Counsel and Vice President of
Regulatory Affairs, and he will report to Medscape's President. As such,
Boulding's responsibilities will include those customarily undertaken by
corporate general counsel, management of regulatory issues and those duties and
responsibilities as the President may assign from time to time.
2. Performance of Services. Boulding hereby accepts such
employment and agrees that throughout the period of his employment hereunder he
will devote such business time and attention, as well as his full knowledge and
skills, faithfully, diligently and to the best of his ability, in furtherance of
the business of Medscape in connection with the performance of his duties as
described in Paragraph 1 hereof, and subject, at all times, to the policies of
Medscape generally applicable to its employees.
3. Term. Boulding shall be employed for an initial term
commencing as of the date hereof (the "Commencement Date"), and ending on the
third anniversary of such date (the "Term"), unless his employment is terminated
prior to the expiration of the Term pursuant to the provisions hereof.
4. Compensation.
(a) Base Compensation. As compensation for his
services hereunder, during the Term, Medscape will pay to Boulding a salary (the
"Base Salary")
<PAGE> 2
at the rate of One Hundred Fifty Thousand ($150,000.00) Dollars per annum,
payable in accordance with Medscape's standard payroll procedures. The Base
Salary may be increased annually based on the recommendation of Medscape's
President and the approval of its Board of Directors
(b) Signing Cash Bonus. Boulding will be entitled to
a signing bonus payment of Sixteen Thousand Five Hundred ($16,500) Dollars,
payable within 30 days of the Commencement Date.
(c) Annual Cash Bonus. In addition to Boulding's Base
Salary, Boulding will be eligible for an annual cash bonus payment of up to
Twenty Five Thousand ($25,000) Dollars ("Annual Cash Bonus"), based on his
meeting or exceeding performance objectives to be developed by Medscape's
President and approved by its Board of Directors.
(d) Stock Options. In addition to Boulding's Base
Salary and Annual Cash Bonus, Boulding will be granted upon the execution of
this Agreement 95,000 options to purchase Medscape's Class B Common Stock, at an
exercise price of Ten ($10.00) Dollars per share, pursuant to the Medscape 1996
Stock Option Plan, as amended (the "Stock Options"), which shall vest as
provided in the Incentive Stock Option Agreement entered into by Medscape and
Boulding as of the date hereof. The Stock Options will be treated as "incentive
stock options" as defined under and to the extent permitted under Section 422 of
the Internal Revenue Code of 1986, as amended, for federal income tax purposes.
5. Expenses. Medscape shall reimburse Boulding for all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder and the business of Medscape, upon the submission to Medscape of
appropriate vouchers therefor, all in accordance with Medscape's policies and
procedures as in effect from time to time.
6. Vacation. Boulding shall be entitled to three week's paid
vacation each year during the period of his employment hereunder in accordance
with Medscape's policies.
7. Benefits. Boulding shall be entitled to such family health and
medical benefits (including dental), life and disability insurance, and such
other benefits as are provided to Medscape senior executive employees generally.
8. Development Rights and Confidential Information.
(a) Boulding agrees that any developments by way of
invention, design, copyright, trademark, software or other matters which may be
developed or
2
<PAGE> 3
perfected by him during the Term or which are in process or under investigation
during the Term, and which relate to the business of the Company or its
subsidiaries ("Developments"), shall be the property of Medscape. Boulding will,
at the request and expense of Medscape, assist Medscape in applying for and
prosecuting letters patent for any Development in the United States or in
foreign countries if Medscape reasonably requests, and will assign and will
transfer the same to Medscape together with any letters patent, copyrights,
trademarks and applications therefor.
(b) Boulding agrees not to disclose or use
Confidential Information (as hereinafter defined) of Medscape except in
connection with his employment by Medscape. For purposes of this Section 9(b),
the term "Confidential Information" shall mean all information in any manner
relating to Medscape's business including, but not limited to, information
regarding business plans and strategies, trade secrets, "know how," inventions,
software, finances, markets, properties, methods of doing business, processes,
customers, staff resumes, employee compensation, or suppliers, whether or not
such information is labeled or otherwise identified as confidential.
Irrespective of the foregoing, no information will be deemed "Confidential
Information" if such information: (i) is part of the public knowledge or
literature or becomes part of the public knowledge or literature, in either case
from a source other than Boulding or a source acting at his direction, (ii) is
received by Boulding in writing from a third party who is entitled to convey
such information to the public, or (iii) is required by law or court order to be
disclosed. Upon termination of Boulding's employment hereunder, he will deliver
to Medscape all equipment, records, copies of records and any other written
information of or pertaining to Medscape or any subsidiary of Medscape which are
then in his possession.
10. Representation and Warranty. Boulding represents and warrants
to Medscape that he is not a party to any prior employment agreement or other
agreement which restricts, interferes with or impairs, or which might be claimed
to restrict, interfere with or impair, in any way, Boulding's use of any
information or Boulding's execution or performance of this Agreement.
11. Restrictive Covenants.
(a) Boulding agrees that his services hereunder are
of a special, unique, extraordinary and intellectual character, and his position
with Medscape places him in a position of confidence and trust with the
customers and employees of Medscape and its affiliates. Boulding further
acknowledges that the rendering of services to the customers of Medscape and its
affiliates necessarily requires the disclosure of Confidential Information of
Medscape. The parties hereto agree that in the course of Boulding's employment
with Medscape, Boulding may develop a personal acquaintanceship and relationship
with Medscape's and its affiliates' customers, and a knowledge of those
customers' affairs and requirements
3
<PAGE> 4
which may constitute the primary contact of Medscape and its affiliates with
such customers. Boulding acknowledges that Medscape's and its affiliates'
relationships with its established customers may therefore be placed in
Boulding's hands in confidence and trust. Boulding consequently agrees that it
is reasonable and necessary for the protection of the goodwill and business of
Medscape that Boulding make the covenants contained herein. Accordingly,
Boulding agrees that, so long as he shall be in Medscape's employ and for a
period of one year after the termination of such employment for any reason
whatsoever other than by Medscape without Good Cause, he shall not, whether as
an owner, shareholder (other than in his capacity as holder of less than two
(2%) percent of the shares of any corporation whose shares are traded on a
national securities exchange or over the counter which shall be excepted from
this restriction), partner, employee, consultant, advisor, independent
contractor or otherwise, directly or indirectly compete with the business of
Medscape in any manner. Nothing in this Agreement, however, restricts Boulding's
right to practice law. Additionally, Boulding agrees that so long as he shall be
in Medscape's employ and for a period of one year after the termination of such
employment for any reason whatsoever, he will not, within the United States and
its territories and possessions, or in any other geographical area in which
Medscape has an office or a client (the "Medscape Territory"), directly or
indirectly, on Boulding's own behalf or on behalf of anyone else engaged in a
business which is directly competitive with Medscape, without the prior written
consent of Medscape: (i) persuade or attempt to persuade any customer of
Medscape or its affiliates as of the date of the termination of Boulding's
employment, to cease doing business with, or to reduce the amount of business it
does with, Medscape or its affiliates or solicit the business of any of
Medscape's or its affiliates' customers as of the date of the termination of
Boulding's employment hereunder; (ii) render to or for any customer of Medscape
as of the date of the termination of Boulding's employment hereunder any
services of the type rendered by Medscape to its customers unless such services
are rendered as an employee or consultant of Medscape; or (iii) solicit or
encourage to leave the employ of Medscape or its affiliates, or to become
employed by any person other than Medscape, any employee of Medscape or its
affiliates, or any individual who was an employee of Medscape or its or
affiliates during the one year prior to the termination of Boulding's
employment. Boulding further agrees that so long as he shall be in Medscape's
employ and for a period of one year after the termination of such employment for
any reason whatsoever, Boulding will not, within the Medscape Territory,
directly or indirectly, on Boulding's own behalf or on behalf of anyone else
engaged in a business which is directly competitive with Medscape, without the
prior written consent of Medscape, employ any employee of Medscape or its
affiliates, or any individual who was an employee of Medscape or its affiliates
during the six months prior to the termination of Boulding's employment.
(b) Boulding has carefully considered the nature and
extent of the restrictions upon him and the rights and remedies conferred upon
Medscape under
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<PAGE> 5
this Agreement, and hereby acknowledges and agrees that the same (i) are
reasonable in time and territory, (ii) are designed to eliminate competition
which otherwise would be unfair to Medscape, (iii) do not stifle the inherent
skill and experience of Boulding, (iv) would not operate as a bar to Boulding's
sole means of support, (v) are fully required to protect the legitimate
interests of Medscape and (vi) do not confer a benefit upon Medscape
disproportionate to the detriment to Boulding or the benefit otherwise afforded
him by this Agreement and the Purchase Agreement.
(c) Boulding and Medscape acknowledge and agree that
the restrictions and obligations imposed on Boulding by virtue of this Paragraph
11 are, in light of the circumstances, fair and reasonable as to type, scope and
period of time, and are reasonably required for the protection of Medscape and
the goodwill associated with the business of Medscape. However, it is the intent
of Boulding and Medscape that this Agreement be enforceable and restrict
Boulding's activities only to the extent permitted by applicable law. Therefore,
if any provision of this Paragraph 11 as presently written shall be construed to
be illegal, invalid or unenforceable by a court of competent jurisdiction, said
illegal, invalid or unenforceable provision shall be deemed to be amended and
shall be construed by the court to have the broadest type, scope and duration
permissible under applicable law, and if no validating construction is possible,
shall be severable from the rest of this Agreement, and the validity, legality
or enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
12. Certain Remedies. The parties hereto acknowledge that, in the
event of a breach or a threatened breach by Boulding of any of his obligations
under Paragraphs 9 or 11 of this Agreement, Medscape will not have an adequate
remedy at law. Accordingly, in the event of any such breach or threatened breach
by Boulding, Medscape shall be entitled to such equitable and injunctive relief
as may be available to restrain Boulding and any business, firm, partnership,
individual, corporation or entity participating in such breach or threatened
breach from the violation of the provisions hereof. Nothing herein shall be
construed as prohibiting Medscape from pursuing any other remedies available at
law or in equity for such breach, including the recovery of damages.
13. Termination of Employment; Compensation. Boulding's employment
hereunder shall terminate upon his resignation or death and may be terminated by
Medscape at any time for or without Good Cause (as hereinafter defined) or by
reason of Boulding's Disability. In the event that Boulding's employment is
terminated by reason of his death or resignation, or by Medscape for Good Cause
or because of Boulding's Disability, Boulding or his estate, as the case may be,
shall be entitled only to his accrued and unpaid Base Salary as of the date of
termination. In the event that Boulding's employment is terminated by Medscape
without Good Cause (and not because of Boulding's Disability) during the Term
hereof, Boulding shall be
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<PAGE> 6
entitled to receive an amount equal to any accrued but unpaid Base Salary as of
the date of termination plus nine months of his then Base Salary.
For purposes of this Agreement, "Disability" means a mental or
physical condition that renders Boulding incapable of performing his duties and
obligations under this Agreement for a period of six consecutive months, or more
than 210 days in any eight month period, in the written opinion of a competent
physician specializing in such condition selected by the Board who has
personally examined and evaluated his condition. Medscape shall have the right
to terminate the employment of Boulding hereunder at any time following his
Disability.
For purposes of this Agreement, "Good Cause" means gross
misconduct, gross neglect of duties (including by reason of alcohol or drug
dependency), acts involving moral turpitude, conviction of a felony, material
breach by Boulding of this Agreement that is not substantially cured within 30
business days after receipt of written notice from Medscape of such breach, or
any act or omission involving fraud, embezzlement or misappropriation of any
property of the Company by Boulding.
14. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and no
amendment, waiver or modification hereof shall be valid or binding unless made
in writing and signed by the party against whom enforcement thereof is sought.
This Agreement supersedes all prior agreements, representations and
understandings of the parties hereto relating to the employment of Boulding by
Medscape.
15. No Reliance. The parties hereto each represent to the other
that in executing this Agreement each does not rely upon, and has not relied
upon, any representation or statement not set forth herein with regard to the
subject matter, basis or effect of this Agreement or otherwise.
16. Notices. All notices, consents, waivers or other
communications required or permitted to be given or made pursuant to any of the
provisions of this Agreement (collectively, "Notices") shall be in writing and
shall be deemed to have been duly given or made for all purposes if sent by
certified or registered mail, return receipt requested, and postage prepaid,
hand delivered, sent by confirmed telecopy or other confirmed electronic means
or by express mail service or other verified overnight courier service to the
party at its or his address as it appears on the first page of this Agreement,
or at such other address as either party may specify by Notice given to the
other party in accordance with this Paragraph 16 and with copies to the parties
indicated below. A Notice shall only be deemed given or received on a business
day (any day other than Saturday, Sunday or Federal legal holiday). The date any
such Notice shall be deemed given and received is: (i) if hand delivered, on the
date of hand
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<PAGE> 7
delivery; (ii) if sent by registered or certified mail, three (3) business days
following the posting of the mail; (iii) if sent by express mail or other
verified overnight courier service, the date received; or (iv) if sent by
confirmed telecopy or other confirmed electronic means, the date when receipt is
confirmed by the same means (The telecopy number for Medscape is: (212)
760-3140. The telecopy number for Boulding is:
________________).
If a notice is being provided to Medscape, a copy shall also be provided to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036-6710
Telecopy No.: (212) 336-2222
Attention: John P. Schmitt, Esq.
17. No Assignment. Neither this Agreement nor the right to receive
any payments hereunder may be assigned by Boulding, and any attempted assignment
shall be null and void and of no effect. This Agreement shall be binding upon
Boulding, his heirs, executors and administrators and upon Medscape, its
successors and assigns.
18. No Modification. No termination, alteration, modification or
variation or waiver of this Agreement or any of the provisions hereof shall be
effective unless in writing executed by the parties hereto, or in the case of a
waiver, by the party or parties waiving compliance. No waiver of any default or
breach of this Agreement shall be deemed a continuing waiver or a waiver of any
other breach or default. No course of dealing nor any delay on the part of
either party in exercising any rights hereunder shall operate as a waiver of any
such rights.
19. Governing Law. This Agreement shall be governed, interpreted
and construed according to the internal laws of the State of New York without
regard to conflict of laws principles. Any legal action or proceeding with
respect to this Agreement or any transaction related hereto shall be brought in
the courts of the State of New York or of the United States District Court for
the Southern District of New York, and, by the execution and delivery of this
Agreement, each of the parties hereto hereby consents for itself and in respect
of its property to the exclusive jurisdiction of the aforesaid courts and agrees
that service of process in any legal action or proceeding with respect to this
Agreement or any transaction related hereto may be made on such party by
delivery of such process by certified mail, return receipt requested, to such
party at its address set forth in the heading hereof with the same effect as if
such process was personally served on such party within the State of New York.
Each of the parties hereto hereby irrevocably waives, to the extent permitted by
applicable law, any objection, including, but not limited to, any objection to
the laying of venue or based on
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<PAGE> 8
the ground of forum non_conveniens, which it may now or hereafter have to
the bringing of any action or proceeding in such jurisdictions in respect of
this Agreement or any transaction related hereto. Nothing contained herein shall
affect the right of any party hereto to serve process in any other manner
permitted by law.
20. Severability. Should any clause, paragraph or part of this
Agreement be held or declared to be void or illegal for any reason by a court of
competent jurisdiction, such provision shall be ineffective, but all other
clauses, paragraphs or parts of this Agreement which can be effected without
such illegal clause, paragraph or part shall nevertheless remain in full force
and effect.
21. Headings. The headings and captions contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
22. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by Medscape hereunder to Boulding shall be subject
to withholding of such amounts relating to taxes as Medscape may reasonably
determine it should withhold pursuant to any applicable law or regulation.
23. Survival. The provisions of Paragraphs 9, 10, 11, 12, 13, 14,
15, 19 and 20 and of this Paragraph 23 shall survive the termination or
expiration of this Agreement.
24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which shall
constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed on the day and year first above written.
MEDSCAPE, INC.
By: /s/ Paul T. Sheils /s/ Mark E. Boulding
------------------------------------- -----------------------------
Paul T. Sheils Mark E. Boulding
President and Chief Executive Officer
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<PAGE> 1
Exhibit 10.31
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") dated as of
July 4, 1999 is entered into by and among Medscape, Inc., a Delaware corporation
(the "Company"), and CBS Corporation, a Pennsylvania corporation (the
"Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Sale of Securities. Subject to the terms and conditions of this
Agreement, at the Closing (as defined below), the Company will sell and issue to
the Purchaser, and the Purchaser will purchase from the Company, 7,397,208
shares of Class A Common Stock and 6,541,160 shares of Class B Common Stock
(collectively, the "Shares"), which are calculated based on the Company's
capitalization as set forth on Exhibit A hereto, for the aggregate purchase
price of (x) $139,383.68 (the "Cash Purchase Price"), which shall be paid in
cash at the Closing, and (y) $156,860,616.32 (the "Non-Cash Purchase Price"),
which shall be paid through the provision by the Purchaser to the Company of
advertising services in accordance with the Advertising and Promotion Agreement
and provision to the Company of certain licenses and services in accordance with
the Trademark and Content Agreement (as defined herein). The Cash Purchase Price
and the Non-Cash Purchase Price are sometimes referred to herein together as,
the "Purchase Price." Subject to the provisions of the Advertising and Promotion
Agreement, the obligation of the Purchaser to pay the Non-Cash Purchase Price is
a binding obligation of the Purchaser. The Purchase Price shall be allocated
among the Shares.
2. The Closing.
2.1 The closing (the "Closing") of the sale and purchase of
the Shares under this Agreement shall take place at the offices of Brobeck,
Phleger & Harrison LLP, 1633 Broadway, New York, New York at 10:00 a.m. on the
second business day after the satisfaction or waiver of all conditions to the
obligations of the parties to consummate the transactions hereby (other than the
delivery of the closing certificates, opinions, Ancillary Documents (as defined
in Section 3.1) and other instruments and documents referred to in Section 6),
or at such other time, date and place as are mutually agreeable to the parties.
The date of the Closing is hereinafter referred to as the "Closing Date."
(1) At the Closing:
(i) the Company shall deliver to the
Purchaser the various certificates,
instruments and documents referred
to in Section 6.2;
(ii) the Purchaser shall deliver to the
Company the various certificates,
instruments and documents referred
to in Section 6.3; and
(iii) the Company shall deliver to the
Purchaser a certificate for the
Shares being purchased at the
Closing by the Purchaser,
<PAGE> 2
registered in the name of the
Purchaser, against payment to the
Company of the Cash Purchase Price,
by wire transfer of immediately
available funds to an account
designated by the Company in writing
to the Purchaser at least two days
prior to the Closing.
3. Representations of the Company. Except as disclosed by the Company
in Exhibit A hereto, the Company hereby represents and warrants to the Purchaser
that the statements contained in this Section 3 are true, complete and correct
as of the date of this Agreement.
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to conduct its
business as presently conducted and as presently proposed to be conducted by it
and to enter into and perform this Agreement and the other agreements executed
in connection herewith (collectively, the "Ancillary Agreements") and to carry
out the transactions contemplated by this Agreement and the Ancillary
Agreements. The Company is duly qualified to do business as a foreign
corporation in every other jurisdiction in which the failure so to qualify would
have a material adverse effect on the business, assets or financial condition of
the Company and its subsidiaries, taken as whole (a "Company Material Adverse
Effect"). The Company has furnished to the Purchaser true and complete copies of
its Certificate of Incorporation, as amended to date and presently in effect and
By-Laws, as amended to date and presently in effect.
3.2 Capitalization. (a) The authorized capital stock of the
Company consists of:
(i) 42,500,000 shares of common stock, $0.01
par value per share (the "Common Stock"), of which (A) 27,500,000 shares have
been designated Class A Common Stock and (B) 15,000,0000 shares have been
designated Class B (NonVoting) Common Stock; and
(ii) 4,956,643 shares of Preferred Stock,
$0.01 par value per share, of which (A) 788,200 shares have been designated
Series A Preferred Stock, (B) 1,478,359 shares have been designated Series C
Preferred Stock, (C) 932,401 shares have been designated Series C-1 Preferred
Stock, and (D) 1,757,683 shares have been designated Series D Preferred Stock.
(b) As of the date hereof, (i) 1,079,000 shares of Class A
Common Stock, (ii) 6,995,602.5 shares of Class B (NonVoting) Common Stock, (iii)
788,200 shares of Series A Preferred Stock, (iv) 1,478,359 shares of Series C
Preferred Stock, (v) 932,401 shares of Series C-1 Preferred Stock and (vi)
1,757,683 shares of Series D Preferred Stock are issued and outstanding. All of
the issued and outstanding shares of Class A Common Stock, Class B (NonVoting)
Common Stock, Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock and Series D Preferred Stock have been duly authorized and
validly issued, are fully paid and nonassessable and were issued in compliance
with all applicable state and federal securities laws. Except for (a) the
conversion privileges of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series C-1 Preferred Stock and Series D Preferred
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<PAGE> 3
Stock, (b) any rights provided for in this Agreement, and (c) 8,250,000 shares
of Class B Common Stock reserved under the Company's stock plans, of which
4,832,417.5 shares are subject to outstanding options, (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Company is authorized
or outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right to issue or distribute to holders of any shares of its capital stock any
evidences of indebtedness or assets of the Company, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof, and (iv) there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company.
3.3 Subsidiaries, Etc. The Company has no subsidiaries and
does not own or control, directly or indirectly, any shares of capital stock of
any other corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.
3.4 Securityholder Lists and Agreements. Included on Exhibit A
is a true and complete list of the securityholders of the Company as of the date
of this Agreement, showing the number of shares of Common Stock or other
securities of the Company held by each securityholder as of the date of this
Agreement and, in the case of options, warrants and other convertible
securities, the exercise price thereof and the number and type of securities
issuable thereunder. Except as provided in this Agreement, there are no
agreements, written or oral, between the Company and any holder of its
securities, relating to the acquisition (including without limitation rights of
first refusal, anti-dilution or pre-emptive rights), disposition, registration
under the Securities Act of 1933, as amended (the "Securities Act"), or voting
of the capital stock of the Company.
3.5 Issuance of Shares. The issuance, sale and delivery of the
Shares have been duly authorized by all necessary corporate action on the part
of the Company. The Shares when so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement, will be duly and
validly issued, fully paid and nonassessable.
3.6 Authority for Agreement; No Conflict. The execution,
delivery and performance by the Company of this Agreement and the Ancillary
Agreements, and the consummation by the Company of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action.
This Agreement and the Ancillary Agreements, when executed at the Closing, will
be duly executed and delivered by the Company and will constitute valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws affecting generally the
enforcement of creditors' rights and general equitable principles and subject to
a court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies. The execution of and
performance of the transactions contemplated by this Agreement and the Ancillary
Agreements and compliance with their respective provisions by the Company will
not (a) conflict with or violate any provision of the Certificate of
Incorporation or By-laws of the Company, (b) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party the right to
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<PAGE> 4
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to which
the Company is a party or by which the Company is bound or to which its assets
are subject and which are filed as an exhibit to the Company's Registration
Statement on Form S-1 as filed with the Securities and Exchange Commission, (c)
result in the imposition of any Security Interest upon any assets of the Company
or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets, other than any of
the foregoing events listed in clause (b), (c) or (d) of this Section 3.6 that
would not have a Company Material Adverse Effect. For purposes of this
Agreement, "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien (whether arising by contract or by operation
of law) other than (i) mechanic's, materialmen's, and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation, (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, and (iv) statutory liens with respect
to current taxes not yet due and payable.
3.7 Governmental Consents. Except as may be required by the
Hart-Scott Rodino Antitrust Improvements Act (the "HSR Act"), no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (each of the foregoing is hereafter referred to as a
"Governmental Entity") is required on the part of the Company in connection with
the execution and delivery by the Company of this Agreement or the Ancillary
Agreements, the offer, issuance, sale and delivery of the Shares or the other
transactions to be consummated at the Closing, as contemplated by this Agreement
and the Ancillary Agreements, except such filings as shall have been made prior
to and shall be effective on and as of the Closing and such filings required to
be made after the Closing under applicable federal and state securities laws,
and except any filings that, if not made as required, would not have a Company
Material Adverse Effect. Based on the representations made by the Purchaser in
Section 4 of this Agreement, the offer and sale of the Shares to the Purchaser
will be in compliance with applicable federal and state securities laws.
3.8 Litigation. There is no action, suit or legal proceeding,
or governmental inquiry or investigation, pending against the Company. To the
Company's knowledge, there is no action, suit or legal proceedings, or
governmental inquiry or investigation, threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into this Agreement, or which would, individually or in the aggregate, have a
Company Material Adverse Effect.
3.9 Financial Statements. The Company has furnished to the
Purchaser a complete and correct copy of (1) the audited balance sheet of the
Company at December 31, 1998 and the related statements of income and cash flows
for the year then ended and (2) the unaudited balance sheet of the Company (the
"Interim Balance Sheet") at March 31, 1999 (the "Balance Sheet Date") and the
related statements of operations and cash flow for the three months then ended,
(the financial statements referred to in clauses (1) and (2) are collectively
referred to herein as the "Financial Statements"). The Financial Statements
fairly present, in all material respects, the financial condition and results of
operations of the Company, at the dates
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<PAGE> 5
and for the periods indicated, and have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") consistently applied, except
that the Interim Balance Sheet is not in accordance with GAAP because of the
absence of footnotes normally contained therein and is subject to normal
year-end audit adjustments.
3.10 Undisclosed Liabilities. The Company has no liability
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be shown on a balance sheet which is material to the Company, except for
(i) liabilities shown on the Interim Balance Sheet, (ii) liabilities which have
arisen since the Balance Sheet Date in the ordinary course of business and (iii)
contractual liabilities incurred in the ordinary course of business.
3.11 Taxes.
(1) For purposes of this Agreement:
"Tax" means (i) any tax, including without
limitation, any tax imposed under Subtitle A of the Code and any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding tax on
amounts paid, payroll, employment, excise, severance, stamp, capital stock,
occupation, property, environmental or windfall profit tax, premium, customs,
duty or other tax, together with any interest, penalty, addition to tax or other
additional amount, imposed by any Governmental Entity (domestic or foreign)
responsible for the imposition of any such tax, (ii) any liability for the
payment of any amount of the type described in clause (i) above as a result of a
party to this Agreement being a member of an affiliated, consolidated or
combined group with any other corporation at any time on or prior to the date
hereof and (iii) any liability of any person with respect to the payment of any
amounts of the type described in clause (i) or (ii) above as a result of any
express or implied obligation of such person to indemnify any other person.
"Code" means the Internal Revenue Code of 1986, as
amended.
(2) The Company, and any affiliated group, within the
meaning of Section 1504 of the Code, of which the Company is or has been a
member, has filed or caused to be filed in a timely manner (within any
applicable extension periods) all material Tax returns, reports and forms
required to be filed by the Code or by applicable state, local or foreign Tax
laws. All Taxes shown to be due on such returns, reports and forms have been
timely paid in full or will be timely paid in full by the due date thereof. No
Tax Liens have been filed and no claims are being asserted in writing with
respect to any Taxes.
(3) Neither the Company nor any of its affiliates has
made with respect to the Company, or any of its assets, any consent under
Section 341 of the Code. None of the Company Assets is "tax exempt use property"
within the meaning of Section 168(h) of the Code. None of the Company assets is
a lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954.
(4) The Company is not a "foreign person" within the
meaning of Section 1445 of the Code.
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<PAGE> 6
3.12 Proprietary Rights.
(1) The Company owns or has sufficient legal right to
use all patents, patent applications, trademarks, trademark applications, trade
secrets, service marks, service mark applications, logos, trade names, domain
names, corporate names, copyrights, inventions, drawings, designs, customer
lists, computer software, and proprietary know-how or information that are
currently used in the business or operations of the Company and that are
material to the business or operations of the Company (collectively, the
"Proprietary Rights").
(2) The Company has not received written notice of,
or been named in, any pending suit, action or legal proceedings with respect to
any Proprietary Rights which involve a claim of infringement of any intellectual
property rights of any third party. To the Company's knowledge, the operation of
the Company's business as now conducted does not infringe any valid intellectual
property rights of any third party.
(3) To the knowledge of the Company, the Proprietary
Rights are not being infringed by others.
3.13 Tangible Personal Property. The Company has good and
valid title to or, in the case of leased properties or properties held under
license, good and valid leasehold or license interests in, all of the material
tangible personal property of the Company, including all such property reflected
on the Interim Balance Sheet (other than property sold, consumed or otherwise
disposed of in the ordinary course of business since the Balance Sheet Date),
free and clear of all Security Interests, except for (i) liens for taxes not yet
due and payable or due but not delinquent or being contested in good faith by
appropriate proceedings and, (ii) Security Interests not included in clause (i)
above and relating to capitalized lease financing or indebtedness for borrowed
money in an aggregate amount of less than $150,000. Such items of tangible
personal property, taken as a whole (w) have been maintained in accordance with
normal industry practice, (x) are in good operating condition and repair (normal
wear and tear excepted), (y) are suitable for the purposes for which they are
presently used and (z) are sufficient for the continued conduct of the business
of the Company in substantially the same manner as the business of the Company
is conducted as of the date of this Agreement, except where such failures to
maintain, failures to be in good operating condition and repair, failures to be
suitable and failures to be sufficient would not have a Company Material Adverse
Effect.
3.14 Real Property Owned and Leased.
(1) The Company does not own any real property.
(2) Each material real property lease or sublease to
which the Company is party is a legal, valid and binding contract and is in full
force and effect, subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws affecting generally the
enforcement of creditors' rights and general equitable principles and subject to
a court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies. Neither the Company
nor, to the knowledge of the Company, any other party to such lease or sublease
is in breach or violation of, or default under, any such lease or sublease.
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<PAGE> 7
3.15 Contracts.
(1) Exhibit A lists each of the following contracts
to which the Company is a party or is bound (the "Company Contracts"):
(i) an employment agreement with any
employee whose annual base salary
exceeds $150,000 or collective
bargaining agreement;
(ii) a covenant not to compete;
(iii) a contract with (A) any shareholder
of the Company, (B) any current or
former executive officer or director
of the Company or (c) current
employee of the Company whose annual
base salary exceeds $150,000;
(iv) a contract under which the Company
has borrowed any money from, or
issued any note, bond, debenture or
other evidence of indebtedness to,
any person or (B) any other note,
bond, debenture or other evidence of
indebtedness issued by the Company
to any person;
(v) a contract (including any so-called
take-or-pay or keepwell agreement)
under which (A) any person has
directly or indirectly guaranteed
indebtedness of the Company or (B)
the Company has directly or
indirectly guaranteed indebtedness
of any other person (in each case
other than endorsements for the
purpose of collection in the
ordinary course of business);
(vi) a contract for the acquisition by
the Company of any operating
business or the capital stock of any
other person;
(vii) any contract for the disposition of
a material portion of the Company's
assets (other than in the ordinary
course of business);
(viii) a contract for any joint venture,
partnership, limited liability
company or similar arrangement;
(ix) a contract not made in the ordinary
course of business, under which the
consequence of a default or
termination would reasonably be
expected to have a Company Material
Adverse Effect;
(x) a contract involving payments to be
made by the Company after the date
of this Agreement in excess of
$200,000
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<PAGE> 8
which is not terminable by the
Company by notice of not more than
60 days; and
(xi) a contract providing for
indemnification of any person with
respect to liabilities relating to
any business sold by the Company or
any sale by the Company of a
substantial amount of assets outside
the ordinary course of business;
provided, however, that no contract referred to above need be disclosed unless
the Company currently has, or may in the future have, any rights or obligations
thereunder.
(2) Each Company Contract is a valid, binding and
enforceable obligation of the Company and, to the Company's knowledge, of each
other party thereto, except as the foregoing may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors' rights and general equitable
principles and subject to a court's discretionary authority with respect to the
granting of a decree ordering specific performance or other equitable remedies.
The Company has performed all material obligations required to be performed by
it to date under the Company Contracts and the Company is not (with or without
the lapse of time or the giving of notice, or both) in material breach or
default thereunder and, to the knowledge of the Company, no other party to any
of the Company Contracts is (with or without the lapse of time or the giving of
notice, or both) in material breach or default thereunder. As of the date of
this Agreement, the Company has not received notice of the intention of any
party to terminate any Company Contract. Complete and correct copies of the
Company Contracts, together with all modifications and amendments thereto, have
been delivered to or made available for inspection by Purchaser.
3.16 Compliance. The Company has, in all material respects,
complied with all laws, regulations and orders applicable to its business as
currently conducted and has all material permits and licenses ("Permits")
required thereby. The Company has not received any written notice from a
Governmental Entity that (1) alleges that the Company is not in compliance in
any material respect with any applicable laws or (2) any investigation or review
by any Governmental Entity with respect to any of the Company's assets or
business is pending or that any such investigation or review is contemplated.
The Permits are validly held by the Company and the Company has complied in all
material respects with all terms and conditions thereof. The Company has not
received notice of any proceedings relating to the revocation or modification of
any Permit. To the Company's knowledge, none of the Permits will be subject to
suspension, modification, revocation or nonrenewal as a result of the execution
and delivery of this Agreement.
3.17 Absence of Changes. Since the Balance Sheet Date, there
has been no material adverse change in the business, assets or financial
condition of the Company, other than changes occurring in the ordinary course of
business.
3.18 Insurance. The Company currently maintains the policies
of insurance with respect to its business which are set forth on Exhibit A. All
such policies are in full force and effect, all premiums due and payable thereon
have been paid, and no notice of cancellation
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or termination has been received with respect to any such policy which has not
been replaced on substantially similar terms prior to the date of such
cancellation.
3.19 Benefit Plans.
(1) Exhibit A lists each "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), maintained or contributed to by the Company for
the benefit of any officers or employees of the business or "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), bonus, stock option, stock
purchase, deferred compensation plans or arrangements and other employee fringe
benefit plans maintained, or contributed to, by the Company or any of its
affiliates for the benefit of any officers or employees of the business.
(2) Each "employee pension benefit plan" has been
operated in accordance with applicable law (including ERISA and the Code), the
plan documents and collective bargaining agreements, if any, except as would not
have a Company Material Adverse Effect. There are no material undisclosed
liabilities in respect of any "employee pension benefit plans."
(3) No employee or former employee of the business
will become entitled to any bonus, retirement, severance, job security or
similar benefit or any enhanced benefit solely as a result of the transactions
contemplated by this Agreement.
3.20 Labor Matters. The Company is not the subject of any
suit, action or proceeding which is pending or, to the knowledge of the Company,
threatened with respect to the business or operations of the Company, asserting
that the Company has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or applicable state statutes) or seeking to
compel the Company to bargain with any labor organization as to terms and
conditions of employment. No strike, lockout or other work stoppage or material
labor dispute involving the Company is pending or, to the knowledge of the
Company, threatened, and there is no current petition, proceeding or other
similar activity involving any employees of the Company seeking to certify a
collective bargaining unit or engaging in any other organizational activity. The
Company is not a party to, or bound by, any collective bargaining agreement or
other contract with labor union or labor organization relating to employees of
the Company. The Company has complied in all material respects with all laws
relating to wages, hours, collective bargaining and the payment of social
security and similar Taxes, and no person has asserted that the Company is
liable in any material amount for any arrears of wages or any Taxes or penalties
for failure to comply with any of the foregoing.
3.21 Books and Records. The books of account, stock record
books and minute books and other corporate records of the Company, copies of
which have been made available to the Purchaser, are in all material respects
complete and correct and have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected, to the
extent appropriate, on the Financial Statements.
3.22 Year 2000. Exhibit A-1 attached hereto sets forth a true
and accurate description of the Company's Year 2000 compliance.
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<PAGE> 10
3.23 Accounts Receivable. The accounts receivable reflected on
the Company's Interim Balance Sheet have arisen from bona fide transactions and
except for reserves reflected on the such Interim Balance Sheet or taken in the
future in the ordinary course consistent with past practice, to the Company's
knowledge, such accounts receivable constitute or will constitute valid claims
of the Company. The Company is not aware of any events, facts or other
circumstances that could reasonably result in a material adverse change in the
amount of accounts receivable reflected on the Company's Interim Balance Sheet.
3.24 Disclosure. No representation or warranty of the Company
contained in this Agreement, in any Ancillary Agreement or in the certificate to
be delivered at the Closing pursuant to Section 6.2 of this Agreement contains
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
4. Representations of the Purchaser. Except as disclosed by the
Purchaser in Exhibit B hereto, the Purchaser hereby represents and warrants to
the Company that the statements contained in this Section 4 are true, complete
and correct as of the date of this Agreement.
4.1 Investment. The Purchaser is acquiring the Shares for its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and, except as contemplated by this Agreement and the
Ancillary Agreements hereto, the Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof. The Purchaser is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
4.2 Experience. The Purchaser is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares. Purchaser has been furnished
with and has had access to such information as the Purchaser considered
necessary to make a determination as to the purchase of the Shares.
4.3 Organization and Standing. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power and authority to
conduct its business as presently conducted by it and to enter into and perform
this Agreement and the Ancillary Agreements and to carry out the transactions
contemplated by this Agreement and the Ancillary Agreements.
4.4 Authority for Agreement; No Conflict. The execution,
delivery and performance by the Purchaser of this Agreement and the Ancillary
Agreements, and the consummation by the Purchaser of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements, when executed at
the Closing, will be duly executed and delivered by the Purchaser and will
constitute valid and binding obligations of the Purchaser enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors'
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<PAGE> 11
rights and general equitable principles and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific performance
or other equitable remedies. The execution of and performance of the
transactions contemplated by this Agreement and the Ancillary Agreements and
compliance with their respective provisions by the Purchaser will not (a)
conflict with or violate any provision of the Articles of Incorporation or
By-laws of the Purchaser, (b) other than as may be required by the HSR Act,
require on the part of the Purchaser any filing with, or any permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Purchaser is a party or by which the Purchaser is bound or to which
its assets are subject, (d) result in the imposition of any Security Interest
upon any assets of the Purchaser or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Purchaser or any of its
properties or assets, other than any of the foregoing events listed in clause
(c), (d) or (e) of this Section 4.4 that would not have a material adverse
effect on the ability of the Purchaser to perform its obligations under this
Agreement and the Ancillary Agreements (a "Purchaser Material Adverse Effect").
4.5 Governmental Consents. Except as may be required by the
HSR Act, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental Entity
is required on the part of the Purchaser in connection with the execution and
delivery by the Purchaser of this Agreement or the Ancillary Agreements, except
such filings as shall have been made prior to and shall be effective on and as
of the Closing, and except any filings that, if not made as required, would not
have a Purchaser Material Adverse Effect.
4.6 Litigation. There is no action, suit or legal proceeding,
or governmental inquiry or investigation, pending against the Purchaser or, to
the Purchaser's knowledge, threatened against the Purchaser which questions the
validity of this Agreement or the Ancillary Agreements or the right of the
Purchaser to enter into this Agreement or the Ancillary Agreements, or which
would have a Purchaser Material Adverse Effect.
4.7 Year 2000. Exhibit B-1 attached hereto sets forth a true
and accurate description of CBS' Year 2000 compliance.
4.8 Legends. It is understood that the certificates evidencing
the Shares will bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
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<PAGE> 12
5. Affirmative Covenants of the Company.
5.1 Financial Statements. The Company shall deliver to the
Purchaser:
(1) within 75 days after the end of each fiscal year
of the Company, a balance sheet of the Company as at the end of such year and
statements of income and of cash flows of the Company for such year, including
draft notes to such financial statements, reviewed by certified public
accountants of established national reputation selected by the Company;
(2) within 90 days after the end of each fiscal year
of the Company, an audited balance sheet of the Company as at the end of such
year and audited statements of income and of cash flows of the Company for such
year and the notes to such financial statements, certified by certified public
accountants of established national reputation selected by the Company;
(3) within 30 days after the end of each month, an
unaudited balance sheet of the Company as at the end of such month and an
unaudited statement of income of the Company as at the end of such month; and
(4) within 40 days after the end of each fiscal
quarter of the Company (other than the fourth quarter), an unaudited balance
sheet of the Company as at the end of such quarter and the notes thereto (as
required by Form 10-Q), and unaudited statements of income and of cash flows of
the Company for such fiscal quarter and the notes thereto (as required by Form
10-Q) and for the current fiscal year to the end of such fiscal quarter,
reviewed by certified public accountants of established national reputation
selected by the Company.
5.2 Directors. The Company shall reimburse each director of
the Company who is not an employee of the Company and who was elected as a
director of the Company (a "CBS Director") at the designation of the Purchaser
pursuant to the Stockholders' Agreement attached as Exhibit C ("Stockholders'
Agreement") for all of his or her reasonable out-of-pocket expenses incurred in
attending each meeting of the Board of Directors of the Company or any committee
thereof in accordance with the Company's policies governing such matters. Except
as otherwise set forth in this Section 5.2, a CBS Director shall not receive any
compensation for serving on the Company's Board of Directors.
5.3 Pre-Closing Covenants. Except as expressly contemplated by
this Agreement, during the period between the date of this Agreement and ending
on the Closing Date or the earlier termination of this Agreement, without the
prior written consent of the Purchaser, which consent will not be unreasonably
withheld, the Company shall not:
(i) amend the certificate of
incorporation or by-laws of the
Company other than in connection
with the transactions contemplated
in Sections 5.3(ix)(x), 5.3(ix)(y)
and 5.3(ix)(z);
(ii) incur or assume any liabilities,
obligations, or indebtedness for
borrowed money other than in the
ordinary course of business.
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(iii) acquire by merging or consolidating
with, or by purchasing a material
portion of the assets of, or by any
other manner, any business or any
corporation, partnership, joint
stock company, limited liability
company, association or other
business organization or division
thereof;
(iv) sell, lease or mortgage, pledge or
otherwise dispose of, or grant
preferential rights to, any of its
assets (other than Proprietary
Rights) in any single transaction
for payment in excess of $250,000 or
in the aggregate, for payment in
excess of $500,000, which are
material, individually or in the
aggregate, to the business taken as
a whole;
(v) sell, assign, license or transfer
any Proprietary Rights, other than
in the ordinary course of business
in connection with the sale,
license, or other distribution of
products or services of the
business;
(vi) enter into any equity joint venture
or partnership;
(vii) permit any material Proprietary
Rights to lapse;
(viii) declare or pay any dividends or make
any distributions on the Company's
capital stock other than in
connection with the Company's
initial public offering;
(ix) issue any stock, bonds or other
corporate securities or grant any
option or issue any warrant to
purchase or subscribe for any such
securities or issue any securities
other than (x) in connection with
the Company's initial public
offering, (y) pursuant to an option
plan approved by the Board of
Directors or (z) in connection with
the issuance of no more than ten
percent (10%) of the issued and
outstanding capital stock of the
Company (assuming the conversion and
exercise of all outstanding options,
warrants and convertible securities
of the Company and as adjusted for
any stock splits, subdivisions,
combinations, stock dividends or
other recapitalization of the Common
Stock) as of the date of such
issuance pursuant to no more than
two (2) strategic or partnering
transactions; or
(x) agree, whether in writing or
otherwise, to do any of the
foregoing.
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6. Conditions to Closing.
6.1 Conditions to Each Party's Obligation. The obligation of
Purchaser to purchase the Shares and the obligation of Company to sell and issue
the Shares, shall be subject to the satisfaction prior to the Closing of the
following conditions:
(1) HSR Act Waiting Period. Any waiting period (and
any extension thereof) under the HSR Act applicable to any of the transactions
contemplated hereby shall have expired or been earlier terminated.
(2) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other legal restraint
or prohibition preventing or materially restricting or altering the consummation
of the transactions contemplated by this Agreement shall be in effect; provided,
however, that the provisions of this Section 6.1(2) shall not be available to
any party that has directly or indirectly solicited or encouraged any such
order, injunction or other restraint or prohibition.
(3) Government Action. There shall not be any pending
action by or before any governmental authority challenging or seeking to
restrain or prohibit or materially alter the consummation of the transactions
contemplated by this Agreement in any material respect or seeking to obtain any
damages from Purchaser or the Company in connection with the transactions
contemplated by this Agreement; provided, however, that the provisions of this
Section 6.1(3) shall not be available to any party that has directly or
indirectly solicited or encouraged any such action.
6.2 Additional Conditions to Purchaser's Obligations. The
obligations of Purchaser to purchase the Shares at the Closing are subject to
the fulfillment to its satisfaction, on or prior to the Closing Date, of the
following conditions, any of which may be waived by Purchaser in its sole
discretion:
(1) Representations and Warranties Correct;
Performance of Obligations.
(i) The representations and warranties
of the Company set forth in Section
3 shall be true and correct in all
respects as of the Closing Date as
though made as of the Closing Date
(other than those made as of a
particular date, which shall be true
and correct in all respects as of
such date), except in each case for
such failures of representations and
warranties to be true and correct
(i) as the result of changes
expressly contemplated by this
Agreement, and (ii) that would not
have a Company Material Adverse
Effect (it being agreed that the
clause (ii) shall be inapplicable to
any portion of a representation and
warranty which already contains a
Company Material Adverse Effect or
other materiality qualification or,
if an entire representation and
warranty is so qualified, to all of
such representation and warranty),
and the Purchaser shall have
received a
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certificate signed by an authorized
officer of the Company attesting to
the foregoing. The Company shall
have performed or complied in all
material respects with all
obligations and conditions herein
required to be performed or observed
by it.
(ii) Consents and Waivers. The Company
shall have obtained in a timely
fashion any and all consents,
permits and waivers necessary for
consummation of the transactions
contemplated by this Agreement,
other than any which if not obtained
or effected would not have a Company
Material Adverse Effect.
(iii) Ancillary Agreements
(a) The Stockholders' Agreement
shall have been executed and
delivered by each of the parties
thereto other than the
Purchaser.
(b) The Advertising and Promotion
Agreement attached hereto as
Exhibit D shall have been
executed and delivered by each
of the parties thereto other
than the Purchaser (the
"Advertising and Promotion
Agreement").
(c) The Trademark and Content
Agreement attached hereto as
Exhibit E shall have been
executed and delivered by each
of the parties thereto other
than the Purchaser (the
"Trademark and Content
Agreement").
(d) The Registration Rights
Agreement attached hereto as
Exhibit F shall have been
executed and delivered by each
of the parties thereto other
than the Purchaser.
(iv) Certificates and Documents. The
Company shall have delivered to the
Purchaser:
(a) the Certificate of Incorporation
of the Company, as amended and
in effect as of the Closing
Date, certified as of a recent
date by the Secretary of State
of the State of Delaware;
(b) certificates, as of a recent
date, as to the corporate good
standing of the Company issued
by the Secretary of State of the
State of Delaware;
(c) by-laws of the Company,
certified by its Secretary or
Assistant Secretary as of the
Closing Date; and
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(d) copies of the resolutions of the
Company's Board of Directors
authorizing the transactions
contemplated by this Agreement,
certified by its Secretary or
Assistant Secretary as of the
Closing Date.
(v) Opinion of Counsel. Purchaser shall
have received an opinion from the
Company's counsel in form and
substance acceptable to Purchaser.
(vi) Stockholders' Agreement. Each of the
stockholders identified on Exhibit G
attached hereto shall have agreed in
writing to be bound by the
applicable terms and conditions of
the Stockholders' Agreement.
6.3 Additional Conditions to the Company's Obligations. The
obligations of the Company to sell and issue the Shares at the Closing are
subject to the fulfillment to its satisfaction on or prior to the Closing Date,
of the following conditions, any of which may be waived by the Company in its
sole discretion:
(1) Representations and Warranties Correct. The
representations and warranties of Purchaser set forth in Section 4 shall be true
and correct in all respects as of the Closing Date as though made as of the
Closing Date (other than those made as of a particular date, which shall be true
and correct in all respects as of such date), except in each case for such
failures of representations and warranties to be true and correct (i) as the
result of changes expressly contemplated by this Agreement, and (ii) that would
not have a Purchaser Material Adverse Effect (it being agreed that the clause
(ii) shall be inapplicable to any portion of a representation and warranty which
already contains a Purchaser Material Adverse Effect or other materiality
qualification or, if an entire representation and warranty is so qualified, to
all of such representation and warranty), and the Company shall have received a
certificate signed by an authorized officer of the Purchaser attesting to the
foregoing. The Purchaser shall have performed or complied in all material
respects with all obligations and conditions herein required to be performed or
observed by it.
(2) Ancillary Agreements.
(i) The Stockholders' Agreement shall
have been executed and delivered by
the Purchaser.
(ii) The Advertising and Promotion
Agreement shall have been executed
and delivered by the Purchaser.
(iii) The Trademark and Content Agreement
shall have been executed and
delivered by the Purchaser.
(3) Opinion of Counsel. The Company shall have
received an opinion from Purchaser's counsel in form and substance acceptable to
Company.
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(4) Lock-up Agreement. The Purchaser shall have
executed and delivered a lock-up agreement in substantially the form attached
hereto as Exhibit H.
7. Indemnification.
7.1 Indemnification by Company. The Company shall indemnify
Purchaser and its affiliates and their respective officers, directors,
employees, agents and representatives against, and hold them harmless from, any
loss, liability, claim, damage or expense (including reasonable legal fees and
expenses) ("Losses"), actually incurred by them, as incurred (payable promptly
upon written request), arising from, in connection with or otherwise with
respect to:
(1) any breach of any representation or warranty of
the Company contained in this Agreement, in any Ancillary Agreement (other than
the Advertising and Promotion Agreement and the Trademark and Content Agreement)
or in the closing certificate delivered at the Closing pursuant to Section
6.2(1); and
(2) any breach of any covenant of the Company
contained in this Agreement or in any Ancillary Agreement (other than the
Advertising and Promotion Agreement and the Trademark and Content Agreement).
7.2 Indemnification by Purchaser. Purchaser shall indemnify
the Company and its officers, directors, employees, agents and representatives
against, and hold them harmless from, any Losses, actually incurred by them, as
incurred (payable promptly upon written request), arising from, in connection
with or otherwise with respect to:
(1) any breach of any representation or warranty of
Purchaser contained in this Agreement, in any Ancillary Agreement (other than
the Advertising and Promotion Agreement and the License Agreement) or in the
closing certificate delivered at the Closing pursuant to Section 6.3; and
(2) any breach of any covenant of Purchaser contained
in this Agreement or in any Ancillary Agreement (other than the Advertising and
Promotion Agreement and the Trademark and Content Agreement).
7.3 Calculation of Losses. The amount of any Loss for which
indemnification is provided under this Section 7 shall be calculated net of any
amounts actually recovered by the indemnified party under insurance policies
with respect to such Loss and shall be (i) increased to take account of any net
tax cost incurred by the indemnified party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net tax benefit realized by the indemnified party arising from
the incurrence or payment of any such Loss. In computing the amount of any such
tax cost or tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Loss.
7.4 Termination of Indemnification. The obligations to
indemnify and hold harmless any party, pursuant to Sections 7.1(1) or 7.2(1),
shall terminate nine months after the Closing Date; provided, however, that such
obligations to indemnify and hold harmless shall not
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terminate with respect to any item as to which the person to be indemnified
shall have, before such date, previously made a claim by delivering a notice of
such claim (stating in reasonable detail the basis of such claim) pursuant to
Section 7.5 to the party to be providing the indemnification.
7.5 Procedures.
(1) In order for a party (the "indemnified party"),
to be entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a claim made by any person against the
indemnified party (a "Third Party Claim"), such indemnified party must notify
the indemnifying party in writing of the Third Party Claim promptly following
receipt by such indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, promptly following
the indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim and not also addressed to the indemnifying party.
(2) If a Third Party Claim is made against an
indemnified party, the indemnifying party shall be entitled to participate in
the defense thereof and, if it so chooses, to assume the defense thereof with
counsel selected by the indemnifying party; provided, however, that such counsel
is not reasonably objected to by the indemnified party. Should the indemnifying
party so elect to assume the defense of a Third Party Claim, the indemnifying
party shall not be liable to the indemnified party for any legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof. If the indemnifying party assumes such defense, the indemnified party
shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the reasonable
fees and expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all the
indemnified parties shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information that
are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party assumes the defense of a Third Party Claim, the indemnified party shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld). If the indemnifying party
assumes the defense of a Third Party Claim, the indemnified party shall agree to
any settlement, compromise or discharge of a Third Party Claim that the
indemnifying party may recommend and that by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and that would not otherwise adversely
affect the indemnified party. Notwithstanding the foregoing, the indemnifying
party shall not be entitled to assume the defense of any Third Party Claim (and
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shall be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks an order, injunction or other equitable relief or relief for other than
money damages against the indemnified party that the indemnified party
reasonably determines, after conferring with its outside counsel, would
reasonably be expected to have a material adverse effect on the assets,
business, financial condition or results of operations of the indemnified party
and cannot be separated from any related claim for money damages; provided,
however, that the indemnifying party will not be bound by any determination in
such Third Party Claim so defended by the indemnified party, or any compromise
or settlement effected without its consent. If such equitable relief or other
relief portion of the Third Party Claim can be so separated from that for money
damages, the indemnifying party shall be entitled to assume the defense of the
portion relating to money damages. It is understood that the indemnifying party
shall not be liable for the reasonable fees and expenses of more than one
separate firm for all indemnified parties.
(3) Other Claims. In the event any indemnified party
has a claim against any indemnifying party under Section 7.1 or 7.2 that does
not involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party. The failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability that it may have to such indemnified party
under Section 7.1 or 7.2, except to the extent the indemnifying party shall have
been actually prejudiced as a result of such failure. If the indemnifying party
does not notify the indemnified party within 30 calendar days following its
receipt of such notice that the indemnifying party disputes its liability to the
indemnified party under Section 7.1 or 7.2, such claim specified by the
indemnified party in such notice shall be conclusively deemed a liability of the
indemnifying party under Section 7.1 or 7.2 and the indemnifying party shall pay
the amount of such liability to the indemnified party on demand or, in the case
of any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as provided above, the
indemnifying party and the indemnified party shall proceed in good faith to
negotiate a resolution of such dispute.
(4) Payment of Amounts Due. Notwithstanding any other
provision in this Agreement to the contrary, all or part of any claim by an
indemnified party to recover Losses under Section 7.1 against the Company may be
settled by the Company by the issuance or transfer by an indemnified party of
securities of the Company having a fair market value (as agreed to in good faith
by the parties involved) equal to the portion of such claim to be so satisfied.
7.6 Survival of Representations. The representations and
warranties contained in this Agreement, in any Ancillary Agreement (other than
the Advertising and Promotion Agreement and the Trademark and Content Agreement,
which shall survive in accordance with their terms) and in the closing
certificates delivered at the closing pursuant to Sections 6.2 and 6.3 shall
survive the Closing and shall terminate at the close of business nine months
following the Closing Date.
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<PAGE> 20
7.7 Limitations.
(1) Except with respect to claims based on actual
fraud, from and after the Closing, the rights of the indemnified parties under
this Section 7 shall be the sole and exclusive remedies of the indemnified
parties and their respective affiliates with respect to claims resulting from or
relating to any actual or alleged breach of representation or warranty or
failure to perform any covenant contained in this Agreement or otherwise
relating to the transactions that are the subject of this Agreement. Without
limiting the generality of the foregoing, in no event shall the Company or the
Purchaser, their successors or permitted assigns, be entitled to claim or seek
rescission of the transactions consummated under this Agreement.
(2) IN NO EVENT SHALL ANY INDEMNIFYING PARTY BE
RESPONSIBLE AND LIABLE FOR ANY LOSSES OR OTHER AMOUNTS THAT ARE CONSEQUENTIAL,
INCIDENTAL, IN THE NATURE OF LOST PROFITS, DIMINUTION IN VALUE, DAMAGE TO
REPUTATION OR THE LIKE, SPECIAL OR PUNITIVE OR OTHERWISE NOT ACTUAL LOSSES.
(3) Notwithstanding anything to the contrary set
forth herein, the Company shall not be obligated to provide any indemnification
for Losses hereunder to the extent that the cumulative amounts paid by the
Company in respect of any such Losses exceeds $150,000,000.
8. Termination.
8.1 Termination of Agreement. The parties may terminate this
Agreement prior to the Closing as provided below:
(1) the parties may terminate this Agreement by
mutual written consent;
(2) the Purchaser may terminate this Agreement by
giving written notice to the Company if the Closing shall not have occurred on
or before the 60th day after the date of this Agreement by reason of the failure
of any condition precedent under Sections 6.1 or 6.2 hereof (unless the failure
results primarily from a breach by the Purchaser of any representation, warranty
or covenant contained in this Agreement); and
(3) the Company may terminate this Agreement by
giving written notice to the Purchaser if the Closing shall not have occurred on
or before the 60th day after the date of this Agreement by reason of the failure
of any condition precedent under Sections 6.1 or 6.3 hereof (unless the failure
results primarily from a breach by the Company of any representation, warranty
or covenant contained in this Agreement).
8.2 Effect of Termination.
(1) If any party terminates this Agreement pursuant
to Section 8.1, all obligations of the parties hereunder shall terminate without
any liability of any party to the other parties.
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<PAGE> 21
9. Miscellaneous.
9.1 HSR Act Filings. Each of the parties shall promptly file
(or cause to be filed) any Notification and Report Forms and related material
that it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the HSR Act,
shall use commercially reasonable efforts to obtain an early termination of the
applicable waiting period, and shall make any further filings or information
submissions pursuant thereto that may be necessary, proper or advisable;
provided, however, that no party shall be required to divest any of their
respective businesses or assets, or to take or agree to take any other action or
agree to any limitation that would reasonably be expected to have a material
adverse effect on such party's business, assets or financial condition.
9.2 Confidentiality. The Purchaser agrees that it will keep
confidential and will not disclose, divulge or use for any purpose other than to
monitor its investment in the Company any confidential, proprietary or secret
information which the Purchaser obtained pursuant to the Nondisclosure
Agreement, may obtain from the Company pursuant to financial statements and
other materials submitted by the Company to the Purchaser pursuant to this
Agreement, or pursuant to any rights granted hereunder or under the Ancillary
Agreements ("Confidential Information"), unless such Confidential Information
(I) is already known or becomes known to the Purchaser by means of a source
other than the Company, which source, to the knowledge of the Purchaser, is not
subject to a confidentiality obligation; or (II) is or becomes publicly known
through no wrongful act of the Purchaser, including, without limitation, a
breach of this Section 9.2; or (III) is rightfully received from a third party
without restriction and without breach of this Agreement; or (IV) is
independently developed by the Purchaser; or (V) is approved for release by
prior written authorization of the Company; or (VI) is disclosed pursuant to a
court order or the order of a Government Entity, provided that prior written
notice of such disclosure is delivered to the Company and reasonable measures
are taken to avoid and/or minimize the extent of such disclosure; provided,
however, that the Purchaser may disclose Confidential Information (i) to its
attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with monitoring its investment
in the Company, or (ii) as may otherwise be required by law, provided that the
Purchaser takes reasonable steps to minimize the extent of any such required
disclosure.
9.3 Expenses. Each party shall pay its own fees and expenses
in connection with the preparation and evaluation of this Agreement and the
other agreements contemplated hereby and the closing of the transactions
contemplated hereby and thereby.
9.4 Brokers. The Company and the Purchaser will indemnify and
save each other harmless from and against any and all claims, liabilities or
obligations with respect to brokerage or finders' fees or commissions, or
consulting fees in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party.
9.5 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
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<PAGE> 22
9.6 Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each party shall be entitled to specific performance of the
agreements and obligations hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York (without
reference to the conflicts of law provisions thereof).
9.8 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at Medscape, Inc., 134 West 29th Street, New York,
NY 10001, Attention: President, or at such other address or addresses as may
have been furnished in writing by the Company to the other party, with a copy to
Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York, NY 10019,
Attention: Alexander D. Lynch and Patterson, Belknap, Webb & Tyler LLP, 1133
Avenue of the Americas, New York, NY 10036-6710, Attention: John P. Schmitt,
Esq.
If to the Purchaser, at CBS Corporation, 51 West 52nd Street, New York,
NY 10019, Attention: Chief Financial Officer, or at such other address or
addresses as may have been furnished in writing by the Purchaser to the other
parties, with a copy to CBS Corporation, 51 West 52nd Street, New York, NY
10019, Attention: General Counsel.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
9.9 Complete Agreement. This Agreement (including its
Exhibits) and the Ancillary Agreements constitute the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings relating to such subject
matter.
9.10 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended or terminated
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of each of the parties to this Agreement. No waivers of or
exceptions to any term, condition or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
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<PAGE> 23
9.11 Pronouns. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
9.12 Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
9.13 Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
9.14 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. No party may assign its respective rights or obligations, in
whole or in part, under this Agreement without the prior written consent of the
other party hereto. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, a party hereto
may assign this Agreement or any of its rights and obligations hereunder to any
entity controlling, controlled by or under common control with such party, or to
any entity that acquires such party by purchase of stock or by merger or
otherwise, or by obtaining substantially all of such party's assets (a
"Permitted Assignee"), provided that (i) no such assignment will relieve the
assigning party of its obligations under this Agreement, (ii) with respect to
assignments effected by the Company, no such Permitted Assignee (or any division
thereof) is a CBS Competitor (as defined in the Advertising and Promotion
Agreement) and (iii) such Permitted Assignee shall agree in writing to be bound
by the terms and conditions hereof.
9.15Non-Forfeiture. The Company agrees that under no
circumstances are the Shares issued to the Purchaser hereunder returnable to the
Company or subject to forfeiture. The Company covenants not to seek the return
of the Shares in any proceeding between the Purchaser, its successors and
assigns and the Company, its successors and assigns.
[signatures on following page]
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<PAGE> 24
Executed as of the date first written above.
MEDSCAPE, INC.
By: /s/ Paul T. Sheils
Name: Paul T. Sheils
Title: President & CEO
CBS CORPORATION
By: /s/ Frederic Reynolds
Name: Frederic Reynolds
Title: Executive Vice
President
(signature page to common stock purchase agreement)
24
<PAGE> 1
Exhibit 10.32
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (the "Agreement") dated as of July 4, 1999 is
entered into by and among CBS Corporation, a Pennsylvania corporation ("CBS")
and Medscape, Inc., a Delaware corporation (the "Company").
RECITALS:
1. CBS is purchasing, concurrently herewith, _________ shares of Common
Stock (as defined below), pursuant to the Common Stock Purchase
Agreement dated ______, 1999 between CBS and the Company (the "Purchase
Agreement") attached on Exhibit A hereto;
2. CBS and the Company have entered into the Ancillary Agreements (as
defined in the Purchase Agreement) dated as of even date herewith; and
3. CBS wishes to provide for its continuing representation on the Board of
Directors of the Company and certain other matters in the manner set
forth below.
In consideration of the mutual covenants contained herein and the consummation
of the sale and purchase of the shares of Common Stock, pursuant to the Purchase
Agreement, and for other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions.
BUSINESS DAY. The term "BUSINESS DAY" means a day that is not
a Saturday, Sunday or other day on which banking institutions in the State of
New York are authorized or required by law, regulation or executive order to be
closed.
COMMON STOCK. The term "COMMON STOCK" means the Class A and
Class B Common Stock, $0.01 par value per share, of the Company.
CONVERTIBLE SECURITIES. The term "CONVERTIBLE SECURITIES"
means any securities convertible into or exchangeable for Voting Securities or
any options, warrants or other rights exercisable to acquire Voting Securities.
INITIAL PERCENTAGE. The term "INITIAL PERCENTAGE" means the
lesser of (i) the percentage of then Total Voting Power of the Company
represented by the Voting Securities held by CBS upon the closing of the
Company's initial public offering (assuming the exercise of all of the issued
and outstanding options and/or warrants or rights to subscribe for Common Stock)
or (ii) 35%.
PERSON. The term "PERSON" means any natural person, legal
entity, or other organized group of persons or entities. (All pronouns, whether
personal or impersonal, which refer to Person include natural persons or other
Persons.)
<PAGE> 2
OUTSTANDING CAPITAL STOCK. The term "OUTSTANDING CAPITAL
STOCK" means the issued and outstanding Common Stock of the Company (assuming
the conversion and exercise of all outstanding options, warrants and convertible
securities of the Company and as adjusted for any stock splits, subdivisions,
combinations, stock dividends or other recapitalization of the Common Stock) as
of (i) January 1 in each calendar year commencing with the year 2000 and (ii)
the date of the closing of the Company's initial public offering for the year
1999.
TOTAL VOTING POWER. The term "TOTAL VOTING POWER" means, at
any time, the total number of votes that may be cast in the election of
directors of the Company at any meeting of the holders of Voting Securities held
at such time for such purpose.
VOTING POWER. The term "VOTING POWER" means, as to any Voting
Security at any time, the number of votes such Voting Security is entitled to
cast for directors of the Company at any meeting of the holders of Voting
Securities held at such time for such purpose.
VOTING SECURITIES. The term "VOTING SECURITIES" means the
Common Stock and any other securities issued by the Company having the power to
vote in the election of directors of the Company, including without limitation
any securities having such power only upon the occurrence of a default or any
other extraordinary contingency.
2. Director Nomination Rights.
2.1 Board Size. The Company shall maintain a Board of Directors of not
more than 10 members.
2.2 Designee. For so long as CBS continues to hold twelve and one-half
percent (12.5%) or more of the Company's outstanding Voting Securities, the
Company shall provide CBS thirty (30) days' prior written notice of any
stockholder solicitation or action relating to the election of directors. After
receipt of such initial notice by CBS, CBS may, by written notice sent to the
Company within ten (10) days of receipt of such notice, request that the Company
nominate, and the Company shall nominate, for election to the Company's Board of
Directors (the "Board of Directors"), in connection with such stockholder
solicitation or action:
a. Three (3) individuals if CBS holds 30% or more of the
Company's outstanding Voting Securities; two (2) individuals if CBS holds less
than 30% but 20% or more of the Company's outstanding Voting Securities; and one
(1) individual if CBS holds less than 20% but 12.5% or more of the Company's
outstanding Voting Securities (collectively, the "CBS Designees"). If CBS holds
less than 12.5% of the Company's outstanding Voting Securities, then CBS shall
have no right to designate any members of the Board of Directors hereunder.
Notwithstanding the foregoing, if CBS holds less than 12.5% of the Company's
outstanding Voting Securities and such reduction in the percentage of Voting
Securities held by CBS is not caused by the sale of any such stock by CBS, CBS
shall continue to have the right to nominate one (1) individual to the Company's
Board of Directors. For purposes hereof, the Company's outstanding Voting
Securities shall include issued and outstanding Convertible Securities.
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<PAGE> 3
b. In the event that CBS desires to appoint CBS Designees
otherwise than in connection with a stockholder solicitation or action relating
to the election of directors, then as soon as practicable upon written notice
from CBS, the Company shall take all reasonable measures to appoint the CBS
Designees to the Board of Directors in accordance with the terms hereof.
c. Upon the closing of transactions contemplated by the
Purchase Agreement, the CBS Designees shall consist of Fredric Reynolds, Andrew
Heyward and a current member of the Company's Board of Directors to be mutually
selected by the Company and CBS.
d. Notwithstanding Section 2.1 above, in the event that the
size of the Company's Board of Directors is increased to a number greater than
ten (10), the number of CBS Designees shall be appropriately adjusted so as to
ensure that the number of CBS Designees on the Company's Board of Directors
reflects CBS' percentage ownership of the Company's Voting Securities in
accordance with Section 2.2(a) above as rounded up or down to the closest whole
board seat.
2.3 Voting of Shares. The Company shall use its best efforts (i) to
cause to be voted the shares of Voting Securities for which the Company's
management or the Board of Directors holds proxies or is otherwise entitled to
vote in favor of the election of the CBS Designees nominated pursuant to this
Agreement; and (ii) to cause the Board of Directors to unanimously recommend to
its stockholders to vote in favor of the CBS Designees.
2.4 Vacancies. In the event that any CBS Designee shall cease to serve
as a director of the Company for any reason, the vacancy resulting therefrom
shall be filled by another person designated by the other CBS Designees, which
person shall be reasonably acceptable to the Company.
2.5 Compensation. The Company shall reimburse each of the CBS Designees
for all of his or her reasonable out-of-pocket expenses incurred in attending
each meeting of the Board of Directors of the Company or any committee thereof
in accordance with the Company's policies governing such matters. Except as
otherwise set forth in this Section 2.5, a CBS Designee shall not receive any
compensation for serving on the Company's Board of Directors.
2.6 Termination of Board Rights. Notwithstanding anything to the
contrary set forth herein, the terms and provisions of this Section 2 shall
terminate and be of no further force and effect upon the acquisition by CBS (or
any of its affiliates or its assignees hereunder), directly or indirectly, of an
equity interest in excess of 15% in a Competitive Site (as defined in the
Trademark and Content Agreement of even date herewith between CBS and the
Company).
3. Participation Rights.
3.1 New Securities. If from time to time the percentage of the Total
Voting Power represented by the Voting Power of all Voting Securities then
owned, directly or indirectly, by CBS (the "Applicable Percentage") would be
reduced as a result of any issuance of Voting Securities by the Company or could
be reduced as a result of any issuance of Convertible Securities by the Company
(in either case, whether for cash, property or otherwise and, such
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<PAGE> 4
securities are referred to herein as "New Securities"), the Company shall so
notify CBS in writing as soon as practicable but in no event less than twenty
(20) Business Days prior to the proposed date of any such issuance and shall
offer to sell to CBS, and if such offer is accepted in writing by CBS within ten
(10) Business Days after the date of such notice, shall sell to CBS, that
portion of the Voting Securities or Convertible Securities to be issued which
would result in CBS' Applicable Percentage immediately after such issuance to
equal CBS's Applicable Percentage in effect immediately prior to such issuance
(assuming, in the case of Convertible Securities, the conversion, exchange or
exercise at such time of all Convertible Securities), or any lesser portion of
the Voting Securities or Convertible Securities to be issued in such issuance as
may be designated by CBS, in either case at a price per share or other trading
unit of such Voting Securities or Convertible Securities, as the case may be,
equal to the price per share or other trading unit of such Voting Securities or
Convertible Securities, as the case may be, to be received by the Company in
such issuance (the "Purchase Price"), and otherwise on the same terms as may be
applicable to such issuance; provided, however, that CBS shall not be entitled
to purchase such Voting Securities or Convertible Securities from the Company
pursuant to this Section 3.1 to the extent that such purchase would cause CBS to
own, directly or indirectly, Voting Securities representing an aggregate Voting
Power in excess of a percentage of the Total Voting Power of the Company equal
to the Initial Percentage after giving effect to the proposed issuance.
Notwithstanding anything to the contrary set forth herein, the provisions of
this Section 3.1 shall not apply to issuances of the Company's capital stock
(subject to proportional adjustment to reflect subdivisions, combinations and
stock dividends or other recapitalization affecting the number of outstanding
shares of the Company's capital stock):
a. In any calendar year, up to an aggregate of 7.5% of the
Company's Outstanding Capital Stock pursuant to option plans approved by the
Board of Directors of the Company, which shall specifically include an aggregate
of 1,357,500 shares reserved for issuance for options not yet granted as of the
date hereof.
b. In any calendar year, up to an aggregate of 7.5% of the
Company's Outstanding Capital Stock in follow-on public offerings, the proceeds
of which are to be used for general corporate purposes.
c. In any calendar year, issuances by the Company of up to 5%
per acquisition of the Company's Outstanding Capital Stock in connection with
acquisitions approved by the Company's Board of Directors (each, a "DeMinimus
Acquisition") provided that in no event shall the Company issue, in the
aggregate, more than 10% of the Company's Outstanding Capital Stock in any
calendar year in connection with DeMinimus Acquisitions.
In addition to the above, if the Company consummates an
acquisition other than a DeMinimus Acquisition by issuing Common Stock (or other
securities convertible, including warrants and/or options, or exercisable into
such Common Stock) for such acquisition and the price for the Company's Common
Stock is less than 65% of the highest closing price of the Common Stock in the
52-week period immediately preceding such issuance and the ISDEX index is also
less than 65% of the high of such index in the 52-week period immediately
preceding such issuance, then the Company shall issue to CBS a warrant in the
form attached as Exhibit B to purchase the number of shares of the Company's
Common Stock such that CBS' Applicable Percentage (assuming the exercise of such
warrant) immediately after the
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<PAGE> 5
consummation of the acquisition shall equal CBS' Applicable Percentage in effect
immediately prior to the consummation of the acquisition. The warrant must be
exercised on or before the third anniversary of the acquisition and the exercise
price shall be equal to 65% of the 52-week high of the closing price for the
Common Stock.
3.2 Notwithstanding the foregoing provisions, in the event the Company
proposes to issue Voting Securities or Convertible Securities for consideration
other than cash, then CBS shall be entitled to require the Company to issue the
additional Voting Securities or Convertible Securities to CBS at a per share
price determined by dividing (i) the fair market value of such non-cash
consideration by (ii) the aggregate number of Voting Securities or Convertible
Securities being issued.
For purposes hereof, the fair market value of securities shall
be determined as follows:
a. Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through
NASDAQ-NNM, the value shall be deemed to be the
average of the closing prices of the securities on
such exchange over the thirty-day period ending three
(3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the
thirty-day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually
determined by the Company and CBS.
For purposes hereof, the fair market value of non-cash
consideration (other than consideration in the form of securities) shall be the
value of such non-cash consideration as reflected on the Company's accounting
records in accordance with United States generally acceptable accounting
practices.
b. The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a shareholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in a. (1), (2) or (3) to reflect the approximate fair market
value thereof, as mutually determined by the Company and CBS.
3.3 During the sixty (60) day period after the date hereof, the Company
shall not, without the prior written consent of a CBS Designee, issue, in the
aggregate, options or warrants to purchase more than 300,000 shares of the
Company's Common Stock pursuant to option plans approved by the Board of
Directors of the Company.
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<PAGE> 6
4. No Revocation. The voting agreements contained herein are coupled with an
interest and may not be revoked, except by an amendment, modification or
termination effected in accordance with Section 7.5 hereof.
5. Restrictive Legend.
5.1 All certificates representing shares of Common Stock owned or
hereafter acquired by CBS or any transferee of CBS bound by this Agreement shall
have affixed thereto a legend substantially in the following form:
"The shares represented by this certificate are subject to a
Stockholders' Agreement, as amended from time to time, by and
among the registered owner of this certificate, the Company
and certain other stockholders of the Company, a copy of which
is available for inspection at the offices of the Secretary of
the Company and by accepting any interest in such shares the
person accepting such interest shall be deemed to agree to and
shall become bound by all of the provisions of said
Stockholders' Agreement."
5.2 The Company will cause such legend to be removed upon the
termination of this Agreement.
6. Transfers of Rights. Any transferee to whom shares of Common Stock are
transferred by CBS, whether voluntarily or by operation of law, shall be bound
by the terms and conditions of this Agreement, to the same extent as if such
transferee were CBS hereunder and CBS shall not transfer any such shares unless
the transferee agrees in writing to be bound by the terms and conditions of this
Agreement.
7. General.
7.1 Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
7.2 Specific Performance. In addition to any and all other remedies
that may be available at law in the event of any breach of this Agreement, each
party shall be entitled to specific performance of the agreements and
obligations of the other party hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
7.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York (without reference to
the conflicts of law provisions thereof).
7.4 Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed delivered (i) two
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid or (ii) one business
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<PAGE> 7
day after being sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery, in each case to the intended recipient
as set forth below:
If to CBS, at CBS Corporation, 51 West 52nd Street, New York,
NY 10019, Attention: Chief Financial Officer, or at such other address or
addresses as may have been furnished to Company in writing by CBS, with a copy
to CBS Corporation, 51 West 52nd Street, New York, NY 10019, Attention: General
Counsel; or
If to the Company, at 134 West 29th Street, New York, NY
10001, Attention: President, or at such other address as may have been furnished
in writing by the Company to Purchaser, with a copy to Brobeck, Phleger &
Harrison LLP, 1633 Broadway, 47th Floor, New York, NY 10019, Attention:
Alexander D. Lynch and Patterson, Belknap, Webb & Tyler LLP, 1133 Avenue of the
Americas, New York, NY 10036-6710, Attention: John P. Schmitt, Esq.
Any party may give any notice, request, consent or other
communication under this Agreement using any other means (including, without
limitation, personal delivery, messenger service, telecopy, first class mail or
electronic mail), but no such notice, request, consent or other communication
shall be deemed to have been duly given unless and until it is actually received
by the party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
7.5 Complete Agreement; Amendments. This Agreement constitutes the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
relating to such subject matter. No amendment, modification or termination of,
or waiver under, any provision of this Agreement shall be valid unless in
writing and signed by the parties.
7.6 Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
7.7 Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
and all of which together shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
7.8 Section Headings. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit or restrict the
contractual obligations of the parties.
7.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. No party may assign its respective rights or obligations, in
whole or in part, under this Agreement without the prior written consent of the
other party hereto. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, a party hereto
may assign this Agreement or any of its rights and obligations hereunder to any
entity controlling, controlled by or under common control with such party, or to
any entity that acquires such party by purchase of stock or by merger or
otherwise, or by obtaining all or substantially all of such
7
<PAGE> 8
party's assets (a "Permitted Assignee"), provided that (i) no such assignment
will relieve the assigning party of its obligations under this Agreement, (ii)
with respect to assignments effected by the Company, no such Permitted Assignee
(or any division thereof) is a CBS Competitor (as defined in the Ancillary
Agreements) and (iii) such Permitted Assignee shall agree in writing to be bound
by the terms and conditions hereof.
7.10 Termination. This Agreement shall terminate and be of no further
force and effect upon a breach by CBS of Section 6.4 of the Advertising and
Promotion Agreement of even date herewith by and between the Company and CBS.
7.11 Non-forfeiture. The Company agrees that under no circumstances are
the shares of Common Stock issued to CBS pursuant to the Purchase Agreement
returnable to the Company or subject to forfeiture. The Company covenants not to
seek the return of such shares in any proceeding between CBS, its successors and
assigns and the Company, its successors and assigns.
8
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first above written.
CBS CORPORATION
By:
Name:
Title:
MEDSCAPE, INC.
By:
Name:
Title:
(signature page to stockholders' agreement)
9
<PAGE> 10
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE (THE "WARRANT
SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE WARRANT SHARES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT, OR (II) IN COMPLIANCE WITH THE
LIMITATIONS OF RULE 144 UNDER THE ACT, OR (III) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION OR COMPLIANCE IS
NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE ALSO
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT.
Warrant No. #____ Number of Shares: _______
(subject to adjustment)
Date of Issuance: _______
MEDSCAPE, INC.
Common Stock Purchase Warrant
Medscape, Inc., a Delaware corporation (the "Company"), for value received,
hereby certifies that CBS Corporation, a Pennsylvania corporation (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time on or after the date
of issuance and on or before ______, [insert closing month and day] at not later
than 5:00 p.m. (New York, NY time), _______ shares of Common Stock, $.01 par
value per share, of the Company, at a per share purchase price of $_____. The
shares purchasable upon exercise of this Warrant, and the purchase price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase
Price," respectively.
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole or
in part, by surrendering this Warrant, with the purchase form appended
hereto as Exhibit I duly executed by the Registered Holder or by the
Registered Holder's duly authorized attorney, at the principal office
of the Company, or at such other office or agency as the Company may
designate, accompanied by payment (by wire transfer) in full, in lawful
money of the United States, of the Purchase Price payable in respect of
the number of Warrant Shares purchased upon such exercise.
<PAGE> 11
(b) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day (the "Exercise
Date") on which this Warrant shall have been surrendered to the Company
as provided in subsection 1(a) above. At such time, the Registered
Holder shall be deemed to have become the holder or holders of record
of the Warrant Shares.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 15 days thereafter, the Company, at
its expense, will cause to be issued in the name of, and delivered to,
the Registered Holder (upon payment by the Registered Holder of any
applicable transfer taxes):
(i) a certificate or certificates for the whole number of duly
authorized, validly issued, fully paid and non-assessable
Warrant Shares to which the Registered Holder shall be
entitled upon such exercise plus, in lieu of any fractional
share to which the Registered Holder would otherwise be
entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the
aggregate on the face or faces thereof for the number of
Warrant Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the number of such shares purchased by
the Registered Holder upon such exercise.
2. ADJUSTMENTS.
(a) GENERAL. The Purchase Price shall be subject to adjustment from
time to time pursuant to the terms of this Section 2.
(b) RECAPITALIZATIONS. If outstanding shares of the Company's Common
Stock shall be subdivided into a greater number of shares or a dividend
in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness of
such subdivision or immediately after the record date of such dividend
be proportionately reduced. If outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Purchase Price in
effect immediately prior to such combination shall, simultaneously with
the effectiveness of such combination, be proportionately increased.
2
<PAGE> 12
(c) MERGERS, ETC. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in
par value or a subdivision or combination as provided for in subsection
2(b) above), or any consolidation or merger of the Company with or into
another corporation, or a transfer of all or substantially all of the
assets of the Company, then, as part of any such reorganization,
reclassification, consolidation, merger or sale, as the case may be,
lawful provision shall be made so that the Registered Holder shall have
the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if, immediately
prior to any such reorganization, reclassification, consolidation,
merger or sale, as the case may be, such Registered Holder had held the
number of shares of Common Stock which were then purchasable upon the
exercise of this Warrant. In any such case, appropriate adjustment (as
reasonably determined in good faith by the Board of Directors of the
Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the
Registered Holder, such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Purchase Price)
shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of this Warrant.
(d) ADJUSTMENT IN NUMBER OF WARRANT SHARES. When any adjustment is
required to be made in the Purchase Price pursuant to Section 2(c), the
number of Warrant Shares purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the
Purchase Price in effect immediately prior to such adjustment, by (ii)
the Purchase Price in effect immediately after such adjustment.
(e) CERTIFICATE OF ADJUSTMENT. When any adjustment is required to be
made pursuant to this Section 2, the Company shall promptly mail to the
Registered Holder a certificate setting forth the Purchase Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such certificate shall also set forth the
kind and amount of stock or other securities or property into which
this Warrant shall be exercisable following such adjustment.
3
<PAGE> 13
3. FRACTIONAL SHARES. The company shall not be required upon the exercise of
this warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the fair market value per share of common
stock, based on the last sale price on the exercise date.
4. REQUIREMENTS FOR TRANSFER. Neither this Warrant nor any interest herein is
transferrable in any respect.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate, including such action as may be necessary or
appropriate in order that the Company may validly and legally issue or sell
fully paid and non-assessable Warrant Shares upon exercise of this Warrant, in
order to protect the rights of the holder of this Warrant against impairment.
6. NOTICES OF RECORD DATE, ETC. IN CASE:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise
of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, any consolidation or merger of the
Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving entity), or any transfer
of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
4
<PAGE> 14
7. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant. All Warrant
Shares shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and non-assessable and free and clear of all
preemptive rights, and free from all taxes, liens and other charges with respect
to the issue thereof by the Company. The Company will take all actions as may be
necessary to assure that the Warrant Shares issued upon a valid exercise hereof
may be issued by the Company without violation of any law or regulation, or of
any requirement of any domestic securities exchange upon which any capital stock
of the Company may be listed.
8. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
9. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder shall be mailed by first-class certified or
registered mail, postage prepaid, to the address last furnished to the Company
in writing by the Registered Holder. All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
134 West 29th Street, New York, NY 10001, Attn: President. If the Company should
at any time change the location of its principal office to a place other than as
set forth below, it shall give prompt written notice to the Registered Holder
and thereafter all references in this Warrant to the location of its principal
office at the particular time shall be as so specified in such notice.
10. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the Registered
Holder shall not have or exercise any rights by virtue hereof as a stockholder
of the Company.
11. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
12. REMEDIES. In case any one or more of the covenants and agreements contained
in this Warrant shall have been breached, the Registered Holder hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by the
Registered Holder), may proceed to protect and enforce its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
13. HEADINGS. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
5
<PAGE> 15
14. GOVERNING LAW. This Warrant will be governed by and construed in accordance
with the laws of the State of New York (without reference to the conflicts of
law provisions thereof).
15. WAIVER OF JURY TRIAL. THE COMPANY AND THE REGISTERED HOLDER WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON.
[signatures on following page]
MEDSCAPE, INC.
By:________________________________
Name:
Title:
ATTEST:
___________________________________
(signature page to Medscape warrant)
6
<PAGE> 16
EXHIBIT I
PURCHASE FORM
To: Medscape, Inc. Dated:____________
134 West 29th Street
New York, NY 10001
Attn: President
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No. ___), hereby irrevocably elects to purchase _____ shares of the Common
Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of $______
in lawful money of the United States.
Signature:_________________________
Address:___________________________
__________________________
7
<PAGE> 1
EXHIBIT 10.33
JOINDER AGREEMENT
The undersigned with the addresses as set forth on Schedule A
hereby agree, effective as of the date of that certain Stockholders' Agreement
(the "Agreement") by and between Medscape, Inc. (the "Company") and CBS
Corporation, to become parties to the Agreement for the sole purpose of being
bound by the terms and conditions of Section 2 and Section 7 of the Agreement.
CSK VENTURE CAPITAL CO., LTD.,
________________________________ as investment manager for CSK-1(B)
TIMOTHY FALLON Investment Fund
________________________________ By:
JEFFREY L. DREZNER, M.D., Ph.D. _____________________________
Name:
Title:
CSK VENTURE CAPITAL CO., LTD.,
________________________________ as investment manager for CSK-2
PAUL T. SHEILS Investment Fund
By:
________________________________ _____________________________
PETER M. FRISHAUF Name:
Title:
MEDIA TECHNOLOGY VENTURES CSK VENTURE CAPITAL CO., LTD.,
ENTREPRENEURS FUND, L.P. as investment manager for
CSK-1(A) Investment Fund
By: By:
_____________________________ _____________________________
Name: Name:
Title: Title:
MEDIA TECHNOLOGY VENTURES, L.P. TBG INFORMATION INVESTORS, L.L.C.
By: By:
_______________________________ _____________________________
Name: Name:
Title: Title:
<PAGE> 2
<TABLE>
<S> <C>
APA EXCELSIOR IV, L.P. WESTON PRESIDIO CAPITAL II, L.P.
By: APA EXCELSIOR IV PARTNERS, By: Weston Presidio Capital
L.P., its General Partner Management II, LP, its General
Partner
By: PATRICOF & CO. MANAGERS, By:_____________________________
INC., its General Partner Name:
Title:
By:_______________________________
Name:
Title:
COUTTS & CO. (CAYMAN) LTD., c/o WESTON PRESIDIO CAPITAL III, L.P.
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC., By: Weston Presidio Capital
its Investment Advisor Management III, LLC, its General
Manager
By:______________________________ By:_____________________________
Name: Name:
Title: Title:
PATRICOF PRIVATE INVESTMENT WPC ENTREPRENEUR FUND, L.P
CLUB, L.P.
By: Weston Presidio Capital
By: APA EXCELSIOR IV PARTNERS Management III, LLC, its General
L.P., its General Partner Manager
By: PATRICOF & CO. MANAGERS,
LLC, its General Partner By:_____________________________
Name:
Title:
By:______________________________
Name:
Title:
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
APA EXCELSIOR FUND I HIGHLAND CAPITAL PARTNERS IV
LIMITED PARTNERSHIP
By: By: Highland Management Partners
__________________________ IV LLC, its General Partner
Name:
Title:
_____________________________ By:
Alan Patricof __________________________
Name:
Title:
PATRICOF & CO. VENTURES, INC. HIGHLAND ENTREPRENEURS'
FUND IV, LIMITED PARTNERSHIP
By:
__________________________ By: Highland Entrepreneurs' Fund IV
Name: LLC, its General Partner
Title:
By:
___________________________
Name:
Title:
</TABLE>
<PAGE> 4
SCHEDULE A
(ADDRESSES OF PARTIES TO JOINDER AGREEMENT)
Mr. Timothy Fallon
Medscape, Inc.
134 West 29th Street, 3rd Floor
New York, NY 10001-5399
Dr. Jeffrey L. Drezner
10819 Pleasant Hill
Potomac, MD 20854
Mr. Paul T. Sheils
Medscape, Inc.
134 West 29th Street, 3rd Floor
New York, NY 10001-5399
Mr. Peter M. Frishauf
Medscape, Inc.
134 West 29th Street, 3rd Floor
New York, NY 10001-5399
Media Technology Ventures, L.P.
One First Street, Suite 2
Los Altos, CA 94022
Attn: Mr. Barry Weinman
Media Technology Ventures Entrepreneurs Fund, L.P.
One First Street, Suite 2
Los Altos, CA 94022
Attn: Mr. Barry Weinman
CSK Venture Capital Co., Ltd.
as Investment Manager for CSK-1(A)
Investment Fund
Kenchikukaikan, 7F
5-26-20 Shiba, Minato-Ku
Tokyo 108-0014 JAPAN
Attn: Mr. Kenji Suzuki
<PAGE> 5
5
CSK Venture Capital Co., Ltd.
as Investment Manager for CSK-1(B)
Investment Fund
Kenchikukaikan, 7F
5-26-20 Shiba, Minato-Ku
Tokyo 108-0014 JAPAN
Attn: Mr. Kenji Suzuki
CSK Venture Capital Co., Ltd.
as Investment Manager for CSK-2
Investment Fund
Kenchikukaikan, 7F
5-26-20 Shiba, Minato-Ku
Tokyo 108-0014 JAPAN
Attn: Mr. Kenji Suzuki
TBG Information Investors, L.L.C.
270 East Westminster -- 2nd Floor
Lake Forest, IL 60045
Attn: Mr. Oakleigh Thorne
APA Excelsior IV, L.P.
c/o Patricof & Co. Ventures, Inc.
445 Park Avenue
New York, NY 10022
Attn: Mr. Alan J. Patricof
Coutts & Co. (Cayman) Ltd., c/o
APA Excelsior IV Offshore, L.P.
Patricof & Co. Ventures, Inc.
445 Park Avenue
New York, NY 10022
Attn: Mr. Alan J. Patricof
Patricof Private Investment Club, L.P.
c/o Patricof & Co. Ventures, Inc.
445 Park Avenue
New York, NY 10022
Attn: Mr. Alan J. Patricof
<PAGE> 6
6
APA Excelsior Fund I
c/o Patricof & Co. Ventures, Inc.
445 Park Avenue
New York, NY 10022
Attn: Mr. Alan J. Patricof
Patricof & Co. Ventures, Inc.
445 Park Avenue
New York, NY 10022
Attn: Mr. Alan J. Patricof
Mr. Alan J. Patricof
Patricof & Co. Ventures, Inc.
445 Park Avenue
New York, NY 10022
Weston Presidio Capital II, L.P.
One Federal Street, 21st Floor
Boston, MA 02110-2004
Attn: Mr. Carlo A. von Schroeter
Weston Presidio Capital III, L.P.
One Federal Street, 21st Floor
Boston, MA 02110-2004
Attn: Mr. Carlo A. von Schroeter
WPC Entrepreneur Fund, L.P.
One Federal Street, 21st Floor
Boston, MA 02110-2004
Attn: Mr. Carlo A. von Schroeter
Highland Capital Partners IV Limited Partnership
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Mr. Wycliffe K. Grousbeck
Highland Entrepreneurs Fund IV Limited Partnership
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Mr. Wycliffe K. Grousbeck
<PAGE> 1
Exhibit 10.34
ADVERTISING AND PROMOTION AGREEMENT
AGREEMENT made as of the 4th day of July, 1999 (the "Effective
Date"), by and among CBS Corporation, 51 West 52nd Street, New York, New York
10019 (herein called "CBS") and Medscape, Inc., 134 West 29th Street, New York,
New York 10001 (herein called "Medscape"). The term "CBS" shall not include
Westwood One, Inc.
1. GENERAL DEFINITIONS
1.1 "Affiliate" of the Person concerned shall mean a Person that
directly or indirectly (through one or more intermediaries) controls, is
controlled by, or is under common control with such Person concerned.
1.2 "Billboard Ad" shall mean advertising placed on various vehicles or
facilities, including, without limitation, advertising space: (i) on traditional
billboards or electronic signs of various ranging sizes, and (ii) on or in
busses, commuter rails, subways, stations and terminals, transport shelters and
telephone kiosks, so long as such advertising space is owned or controlled by
CBS.
1.3 "CBS Competitor" shall mean any Person, other than CBS, who/which
is engaged either directly, or indirectly through an Affiliate, in radio or
television programming or radio or television program distribution (whether free
over-the-air, cable, telephone, local, microwave, direct broadcast satellite,
via Internet or otherwise) or billboard advertising in North America. A CBS
Competitor shall not include any Person engaged, via an Internet Web Site, in
television or radio program transmission or streaming, (the "Internet Concern"),
unless such Internet Concern: (i) owns or controls, is owned or controlled by,
or is under common control with, a CBS Competitor; or (ii) prominently features,
transmits or promotes Content of a CBS Competitor.
1.4 "Collaboration Agreement" shall mean any one of the following
agreements between CBS and Medscape: (a) this Agreement; (b) the Trademark and
Content Agreement dated as of the Effective Date (the "Trademark and Content
Agreement"); (c) the Stockholders Agreement dated as of the Effective Date; (d)
the Common Stock Purchase Agreement dated as of the Effective Date; and (e) the
Registration Rights Agreement dated as of the Effective Date.
1.5 "Common Stock" shall mean the common stock, $.01 par value per
share, of Medscape.
1.6 "Consumer Health Site" shall mean the Internet Web Site owned by
Medscape that provides healthcare news and healthcare information for consumers.
1.7 "Content" shall mean text, graphics, photographs, video, audio
and/or other data or information (including, without limitation, any of the
foregoing broadcast on television) relating to any subject and/or
advertisements.
- 1 -
<PAGE> 2
1.8 "Contract Year" shall mean the annual period beginning on the
Effective Date, and each subsequent annual period during the Term beginning on
the anniversary of the Effective Date (as such annual period may be suspended or
extended, and those dates postponed, upon mutual agreement of the parties).
1.10 "Internet" shall mean a global network of interconnected computer
networks, each using the Transmission Control Protocol/Internet Protocol and/or
such other standard network interconnection protocols as may be adopted from
time to time, which is used to transmit Content that is directly of indirectly
delivered to a computer or other digital electronic device for display to an
end-user, whether such Content is delivered through on-line browsers, off-line
browsers, or through "push" technology, electronic mail, broadband distribution,
satellite, wireless or otherwise.
1.11 "Internet Site" or "Web Site" shall mean any site or service
delivering Content on or through the Internet, including, without limitation,
any on-line service such as America Online and Compuserve.
1.12 "New Mark" shall mean a word or words designated by the parties
for use as a new trademark and as part of a URL for the Consumer Health Site
which shall be subject to the mutual agreement of the parties.
1.13 "New Mark Brand(s)" shall mean collectively, the New Mark, the New
Mark URL and any other URL that includes the New Mark and is used for
identifying the Consumer Health Site.
1.14 "New Mark URL" shall mean the New Mark followed by the extension
".com".
1.15 "Person" shall mean individual, partnership, corporation or
organized group of persons, including agencies and other instrumentalities of
governments and states.
1.16 "Professional Health Site" shall mean the Internet Web Site owned
by Medscape that provides healthcare news and healthcare information primarily
for physicians and allied healthcare professionals that is currently located at
the URL www.medscape.com.
1.17 "Term" shall mean the term specified in Section 3.1 below and any
extensions agreed to by the parties hereto.
1.18 "URL Scroll" shall mean the exhibition of a written representation
of a URL in or during (i.e., at any time from the opening frame through end of
the closing credits) a television program (the "Television URL Scroll") or in/on
an Internet Web Site page (the "Internet URL Scroll"). For avoidance of doubt,
the Television URL Scroll and the Internet URL Scroll are hereinafter
collectively referred to as the "URL Scroll".
2. CBS ADVERTISING AND PROMOTION
2.1 (a) CBS shall arrange for the placement of advertising and
promotion in the United States of the Consumer Health Site, the Professional
Health Site and Medscape's other
- 2 -
<PAGE> 3
products and services in the media category or type set forth in the Advertising
and Promotion placement roster set forth on Exhibit A attached hereto, with an
aggregate value of $150 million. During the first Contract Year, CBS shall
arrange for the placement of advertising in accordance with the advertising plan
in Exhibit B attached hereto. CBS will consult with Medscape with respect to the
media category and type of placement. CBS and Medscape will cooperate to
endeavor to implement the advertising and promotional goals set forth in the
annual media plan presented to CBS by Medscape. The media plan for each Contract
Year shall be consistent with the media plans of prior Contract Years, except
that the advertising dollar amounts for the Contract Year concerned and the
allocation of advertisements during the contract year concerned shall be
mutually agreed upon by the parties. All advertising and promotional materials
shall be subject to the applicable CBS Network Advertising Guidelines and
standard CBS preemption policies. CBS shall not have to make any ad placements
if the exigencies of time or current or future contractual obligations entered
into prior to the time Medscape requests such advertising, prevent or restrict
CBS from doing so.
(b) The value of all broadcast advertising and promotion
provided hereunder shall be based upon the average unit price paid by any
unaffiliated third party, excluding barter, for spots (other than political
spots) purchased during the specific CBS Television Network, CBS Radio Network,
CBS Owned and Operated Television Station, CBS Owned and Operated Radio Station,
or CBS Cable broadcast in which the advertising or promotion occurs. The value
of banner advertising on CBS Internet sites shall be based upon the average
price paid (excluding barter) by unaffiliated third parties for banner
advertising of similar size and placement during a similar period. The value of
the Billboard Ad concerned shall be based upon the average price paid or
payable, excluding barter, for any similar Billboard Ad(s) during the month
prior to the month in which such Billboard Ad is delivered. Medscape will be
treated as a cash-paying customer in a like manner to other cash customers of
similar volume. The following advertisements shall not be offset against the
$150 million of advertising hereunder: any on-air mention or URL Scroll by a
CBS-affiliated (television or radio) station of the URL for the Consumer Health
Site, the New Mark URL or the Identifying URL (as such term is defined in the
Trademark and Content Agreement) on Medscape Programming (as such term is
defined in the Trademark and Content Agreement) obtained by such CBS-affiliated
station from the CBS Newspath feed or equivalent radio feed (other than a
broadcast of the CBS Radio Network). (For avoidance of doubt, "CBS-affiliated
station" is a television or radio station which is not owned and operated by
CBS.)
(c) CBS will provide to Medscape calendar quarterly
statements, or, if available, monthly statements showing the (i) value
attributable to each of the media categories and types with respect to the
advertising and promotions purchased by Medscape during the statement period and
(ii) the calculation of the aggregate value of advertising purchased.
2.2 (a) CBS will maintain accurate books and records which report the
expenditure of the advertising and promotional value by Medscape and information
from which the calculation can be derived. Medscape may, at its own expense,
examine those books and records, as provided in this Section 2.2. Medscape may
make such an examination for a particular statement provided pursuant to Section
2.1(c) only once and such examination must occur within three (3) years after
the date such statement is sent by CBS to Medscape. (CBS will be deemed
conclusively to have sent Medscape the statement concerned at the time
prescribed in
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<PAGE> 4
Section 2.1(c), unless Medscape notifies CBS otherwise with respect to any
statement within thirty (30) days after that designated time.) Medscape may make
those examinations only during CBS's usual business hours, and at the address
set forth herein for the provision of notices to CBS, unless otherwise notified.
Medscape will be required to notify CBS at least ten (10) days before the date
of planned examination. If Medscape's examination has not been completed within
two (2) months from the time Medscape begins it, CBS may require Medscape to
terminate it on seven (7) days notice to Medscape at any time.
(b) If any examination of CBS's books and records discloses
that:
(i) CBS has failed to properly account for
advertising and promotions purchased by Medscape hereunder, then CBS
will make appropriate adjustment(s) to the cumulative total purchased
by Medscape.
(ii) CBS has overstated the value of advertising
purchased by more than 7.5%, then CBS shall reimburse Medscape for its
direct out-of-pocket expenses incurred in identifying such material
overstatement.
2.3 CBS shall have the right:
(a) to suspend and/or withdraw placement of all advertising
and promotion that includes the MEDSCAPE trademark: (i) pending resolution of
any third party claim covering infringement of such third party's rights because
of use by Medscape in the United States of the tradename or trademark "Medscape"
either alone or in combination with any other mark and/or (ii) during such time
as Medscape is enjoined from using the tradename or trademark "Medscape" in the
United States on or in connection with the Consumer Health Site and has not
renamed the Consumer Health Site. Medscape shall rename the Consumer Health Site
within thirty (30) days following the issuance of any injunction or the
resolution of any claim which requires Medscape to cease using the tradename or
trademark "Medscape" in the United States on or in connection with the Consumer
Health Site, it being understood, however, that CBS shall have the sole right
and power to approve the substitute tradename and/or trademark to be used. In
the event that CBS fails to approve the substitute tradename and/or trademark
within the thirty-day period, CBS shall submit a tradename proposal with three
(3) alternate tradenames which appear to be available for Medscape's use on the
Consumer Health Site in the United States based on trademark searches conducted
by CBS, for Medscape's approval, which approval is to be given within ten (10)
days of such submission. For avoidance of doubt, CBS does not and will not make
any representation or warranty with respect to the availability of any alternate
name provided to Medscape by CBS for use on the Consumer Health Site.
Medscape shall thereafter promptly apply for registration of such trademark.
(b) if the New Mark is being used as the principal name or
part of the principal name of the Consumer Health Site, to suspend and/or
withdraw placement of all the advertising and promotion of the Consumer Health
Site: (i) upon CBS's decision to cease use of the New Mark in connection with
any third party claim covering infringement of such third party's rights because
of use by Medscape in the United States of the New Mark either alone or in
combination with any other mark and/or (ii) during such time as Medscape is
enjoined from using the New Mark in the United States on or in connection with
the Consumer Health Site and has not renamed the Consumer Health Site. Medscape
shall rename the Consumer Health Site
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<PAGE> 5
CBS Medscape within ten (10) days following CBS's notice of its decision to
cease use of the New Mark, the issuance of any injunction or the resolution of
any claim which requires Medscape to cease using the New Mark in the United
States on or in connection with the Consumer Health Site. Upon Medscape's
renaming the Consumer Health Site, the placement of advertising for the Consumer
Health Site shall resume using the new name. Medscape will not seek (i)
reimbursement or payment for advertising and promotion time used or (ii) payment
of any of Medscape's conversion costs, in the event that CBS suspends and/or
withdraws placement of advertising and promotion of the Consumer Health Site
hereunder.
2.4 CBS and Medscape shall mutually agree on (i) procedures to maximize
joint selling opportunities between Medscape's and CBS's respective ad sales
forces, and (ii) commissions payable with respect to such selling.
3. TERM
3.1 The term of this Agreement shall begin as of the date hereof and
shall continue in full force and effect for a period of seven (7) consecutive
years from the Effective Date unless it is terminated earlier in accordance with
the terms and conditions stated herein.
3.2 The parties shall negotiate exclusively with each other in good
faith for a period of twelve (12) consecutive months (the "Negotiation Period")
with respect to any extension(s) of the term of this Agreement commencing on the
fifth anniversary of the Effective Date (i.e., July 4, 2004).
4. WARRANTIES, REPRESENTATIONS AND COVENANTS
4.1 (a) CBS REPRESENTS AND WARRANTS THAT:
(i) it has full power and authority to enter into and
fully perform this Agreement; and
(ii) this Agreement has been duly authorized and is
enforceable in accordance with its terms.
(b) MEDSCAPE REPRESENTS AND WARRANTS THAT:
(i) it has full power and authority to enter into and
fully perform its obligations under this Agreement; and
(ii) this Agreement has been duly authorized and is
enforceable in accordance with its terms.
(c) MEDSCAPE COVENANTS THAT:
(i) at all times during the Term, it will comply with
all applicable federal, state, local and foreign laws; and
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<PAGE> 6
(ii) at all times during the Term, the Consumer
Health Site will be maintained in a professional manner consistent with
industry standards.
(iii) advertising and promotion material and any
portion thereof created by or on behalf of Medscape and furnished by
Medscape to CBS and the use thereof shall not violate any law or
infringe upon or violate the rights of any Person.
5. INDEMNIFICATION
5.1 Each party (the "Indemnifying Party") shall at all times indemnify,
hold harmless and defend the other party (collectively, the "Indemnified Party")
from and against any loss, cost, liability or expense (including court costs and
reasonable attorneys' fees) arising out of or resulting from any breach by the
Indemnifying Party of any representation, warranty, covenant or agreement
contained herein. In the event of any such claim, the Indemnified Party shall:
(i) promptly notify the Indemnifying Party of the claim; (ii) allow the
Indemnifying Party to direct the defense and settlement of such claim with
counsel of the Indemnifying Party's choosing; and (iii) provide the Indemnifying
Party, at the Indemnifying Party's expense, with information and assistance that
is reasonably necessary for the defense and settlement of the claim. The
Indemnified Party reserves the right to retain counsel, at the Indemnified
Party's sole expense, to participate in the defense of any such claim. The
Indemnifying Party shall not settle any such claim or alleged claim without
first obtaining the Indemnified Party's prior written consent, which consent
shall not be unreasonably withheld, if the terms of such settlement would
adversely affect the Indemnified Party's rights under this Agreement or
otherwise. If the Indemnifying Party assumes the defense and settlement of the
claim as set forth above, then the Indemnifying Party's only obligation is to
satisfy the claim, judgment or approved settlement.
6. REMEDIES
6.1 CBS shall have the right to terminate this Agreement if (any of the
following occurs):
(a) (i) Medscape materially breaches any material term or
condition of this Agreement and has failed to cure such breach within
thirty (30) days following notice of default. The foregoing cure period
will not apply to: (i) a term or condition for which a specific cure
period is provided, or (ii) a breach incapable of being cured.
(ii) Notwithstanding anything to the contrary
contained in Section 6.1(a)(i) above, Medscape's material breach of the
covenant set forth in Section 4.1(c)(iii) above shall not be cause for
termination of this Agreement, if all the following conditions are met:
(A) Medscape has used its reasonable best
efforts to satisfy the covenant concerned with respect to the
material concerned;
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<PAGE> 7
(B) Medscape promptly withdraws or promptly
notifies CBS to withdraw any material on which there is a
claim by any Person of violation of the law or violation or
infringement of such Person's rights;
(C) Medscape pays damages directly sustained
by CBS in connection with Medscape's breach of such covenant;
and
(D) Medscape indemnifies and holds CBS
harmless (in accordance with Section 5 hereof) from any third
party claim arising out of a breach or alleged breach of such
covenant.
(b) Medscape materially breaches any material term or
condition of any Collaboration Agreement and has failed to cure such breach: (i)
within thirty (30) days following notice of default, except as otherwise set
forth in Section 6.1(b)(ii); (ii) under the Trademark and Content Agreement as
such breach relates to the CBS Mark(s) (as such term is defined in the Trademark
and Content Agreement), within twenty (20) days following notice of default. The
foregoing cure period will not apply to breaches incapable of being cured.
(c) Medscape: (i) becomes insolvent or unable to pay its debts
as they mature or makes an assignment for the benefit of its creditors; (ii) is
the subject of a voluntary petition in bankruptcy or any voluntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; (iii) becomes the subject of any involuntary petition
in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing; or
(iv) is liquidated or dissolved.
(d) Medscape issues to a CBS Competitor in any one transaction
or series of related transactions, a number of voting securities of Medscape
such that after such issuance or series of issuances, such CBS Competitor
beneficially owns or controls, directly or indirectly, nine percent (9%) or more
of the outstanding shares of Common Stock (the "threshold"), and has failed to
reduce such ownership of Common Stock below the threshold within twenty (20)
days following CBS's notice set forth in 6.1 (d) (ii) below.
(i) Notwithstanding the foregoing however, the
provisions of this subparagraph 6.1(d) shall not apply to a stockholder
of Medscape who beneficially owns or controls, directly or indirectly,
nine percent (9%) or more of the outstanding shares of Common Stock on
the day prior to the date of this Agreement.
(ii) The parties hereby agree that Medscape will give
CBS confidential written notice of its intent to enter into an
agreement for issuance of securities that would result in a stockholder
beneficially owning or controlling, directly or indirectly, nine
percent (9%) or more of the outstanding shares of Common Stock,
together with a description of the party with whom Medscape intends to
effect such a transaction, for the purpose of ascertaining CBS's
opinion whether, as of the date of the notice, such party is a CBS
Competitor. CBS shall have five (5) days from the receipt of such
notice to respond to Medscape. CBS's opinion shall be based solely on
the information provided to CBS in the notice and CBS shall have no
independent duty whatsoever to investigate
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<PAGE> 8
or inquire further. If CBS confirms that the party is not a CBS
Competitor, CBS shall be deemed to have waived any right of CBS
pursuant to this Article 6 in respect of such party and transaction,
unless there were material misstatements or omissions in the
disclosures made by Medscape to CBS in connection with the
transaction..
(e) The Consumer Health Site ceases to operate:
(i) due to circumstances beyond Medscape's control:
(A) for a period of twenty (20) consecutive
days, or
(B) more than two (2) consecutive hours per
week over a sixty (60) day period.
(ii) due to any circumstances other than as described
in Section 6.1(e)(i) above:
(A) for a period of ten (10) consecutive
days; or
(B) more than two (2) consecutive hours per
week over a sixty (60) day period.
(f) For purposes of this Section 6.1: (i) the term "beneficial
ownership" shall have the meaning set forth in Section 13(d) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
6.2 Medscape shall have the right to terminate this Agreement if:
(a) CBS breaches any material term or condition of this
Agreement and has failed to cure such breach within thirty (30) days following
notice of default. The foregoing cure period will not apply to: (i) a term or
condition for which a specific cure period is provided, or (ii) a breach
incapable of being cured.
(b) CBS breaches any material term or condition of any
Collaboration Agreement and has failed to cure such breach within twenty (20)
days following notice of default. The foregoing cure period will not apply to
breaches incapable of being cured.
6.3 Each party may exercise its right to terminate pursuant to this
Section 6 by sending the other party hereto appropriate notice.
6.4 In the event of termination of this Agreement:
(a) pursuant to Section 6.1, all rights and obligations of the
parties hereto shall terminate except those set forth in Section 5
(Indemnification), Section 7 (Confidentiality), Section 8.1 (Permitted
Assignments), Section 8.2 (Jurisdiction). Section 8.5 (Notice) and Section 8.8
(Governing Law);
(b) (i) pursuant to Section 6.2 and subject to the provisions
of Section 6.5(a) below, Medscape's obligations and CBS's rights and
obligations shall terminate,
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<PAGE> 9
except that CBS's obligation to provide advertising and promotion in
accordance with Section 2 and such other related provisions shall
continue, unless Section 6.4(b)(ii) below applies. (Notwithstanding the
foregoing, the rights and obligations of the parties with respect to
the following Sections shall not terminate: Section 5
(Indemnification), Section 7 (Confidentiality), Section 8.1 (Permitted
Assignments), Section 8.2 (Jurisdiction), Section 8.5 (Notice) and
Section 8.8 (Governing Law)).
(ii) CBS's obligation to provide advertising and
promotion to Medscape shall cease if:
(A) CBS elects to pay Medscape the cash
equivalent of the difference, if any, between (x) One Hundred
and Fifty Million Dollars ($150,000,000) and (y) the amount of
promotional value provided to Medscape during the Term (the
"Shortfall"), subject to Section 6.4(b)(ii)(B) below.
(B) provided CBS has not elected to pay
Medscape the Shortfall, then Medscape shall have the option,
exercisable on any anniversary of the Effective Date, to
require CBS to pay Medscape the applicable Shortfall, in lieu
of CBS's performing its advertising and promotion obligations,
if Medscape can show that CBS is unable to reasonably carry
out its obligation to provide advertising and promotion. CBS
will be deemed unable to carry out its obligation to provide
advertising and promotion if, at any time after termination of
this Agreement, CBS and Medscape fail to reach agreement on a
media plan for the Contract Year concerned (i.e., the period
which, but for termination, would have been the Contract Year
concerned) after good faith efforts by the parties to do so
(I) consistent with media plans executed or applicable in
prior Contract Years or (II) with respect to the first
Contract Year, consistent with the media plan agreed on or
executed by the parties and attached hereto as Exhibit B.
(C) CBS shall pay the Shortfall as follows.
(I) within thirty (30) days after
the end of each Contract Year remaining for (what
would have been) the balance of the Term, CBS shall
pay Medscape a cash payment, calculated on a pro-rata
basis for (what would have been) the balance of the
Term, equal to the difference between (x) the
promotional value which CBS would be, but for the
termination of this Agreement, obligated to provide
to Medscape pursuant to this Agreement for such
Contract Year; and (y) the amount of promotional
value actually provided to Medscape during such
Contract Year, if any; or
(II) CBS may elect, at any time, to
pay the entire Shortfall amount to Medscape in a
lump-sum cash payment equal to the net present value
of the Shortfall, as follows:
(x) any Shortfall paid (at
any time) during the first three years of
the Term shall be calculated at the lower of
(1)
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<PAGE> 10
CBS's short-term debt financing rate or (2)
CBS's average debt financing rate, during
the prior twelve-month period;
(y) any Shortfall paid at
any time after expiration of the third
Contract Year shall be calculated at CBS's
average debt financing rate during the prior
twelve-month period.
(III) All payments made pursuant to
this Section 6.4(b)(ii) shall be made in immediately
available, non-refundable funds wired to Medscape's
account in accordance with instructions to be
provided in writing by Medscape.
6.5 (a) In the event of a material breach by CBS of this Agreement
(which gives rise to Medscape's right to terminate this Agreement), Medscape's
sole and exclusive remedy for such breach shall be the following: (i)
termination under Section 6.2; (ii) acceptance of CBS' payment, or promotion and
advertising, as applicable under Section 6.4; and (iii) termination of the
Trademark and Content Agreement and acceptance of payment of the sum of
$10,000,000 from CBS to Medscape, as liquidated damages and not as a penalty,
for loss by Medscape of the license under the Trademark and Content Agreement,
which shall be Medscape's sole and exclusive remedy under the Trademark and
Content Agreement. None of the foregoing remedies in this Section 6.5(a) may be
exercised by Medscape unless all are exercised by Medscape.
(b) Except as otherwise specified in Section 6.1(a)(ii) above,
in the event of a material breach by Medscape of this Agreement (which gives
rise to CBS's right to terminate this Agreement), CBS' sole and exclusive remedy
for such breach shall be: (i) termination of this Agreement under Section 6.1;
and (ii) to the extent that CBS so elects, termination of any Collaboration
Agreement.
6.6 As between CBS and Medscape, Medscape agrees that under no
circumstances are the shares issued by CBS, under the Common Stock Purchase
Agreement, returnable to Medscape or subject to forfeiture. Medscape covenants
not to seek the return of the shares in any proceeding, between CBS, its
successors and assigns and Medscape, its successors and assigns.
6.7 Except with respect to third party claims for which each partly
shall fully indemnify the other in accordance with the procedures set forth in
paragraph 5.1 above, neither party shall be liable to the other party for any
indirect, incidental, special, consequential, "business interruption" or any
loss of profits hereunder.
7. CONFIDENTIALITY
7.1 Medscape and CBS agree and acknowledge that they may be required to
disclose to each other certain confidential information, including but not
limited to information concerning the other party's online services and web
sites, technology, software, tools, business, or plans for the future in
connection with any of the foregoing, information concerning customers,
suppliers, personnel and other business relationships, sales and marketing
plans, financial information and other confidential information, all of which
shall be deemed
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<PAGE> 11
"Confidential Information" for the purposes of this Section if, with respect to
such information disclosed in tangible form, it is marked "Confidential" or its
equivalent, and if disclosed orally or visually, it is identified as
confidential at the time of disclosure.
7.2 For a period of three (3) years from the date of receipt of any
Confidential Information hereunder, or in perpetuity with respect to source code
or related documentation, the receiving party agrees to protect the
confidentiality of the disclosing party's Confidential Information with at least
the same degree of care that it utilizes with respect to its own similar
proprietary information, but in no event less than a reasonable standard of
care, including without limitation agreeing:
(a) Not to disclose or otherwise permit any other person or
entity access to, in any manner, the Confidential Information, or any part
thereof in any form whatsoever, except that such disclosure or access shall be
permitted to (i) an employee or consultant of the receiving party requiring
access to the Confidential Information in the course of his or her employment or
consulting services in connection with this Agreement and who has agreed in
writing to maintain the confidentiality of the confidential information of third
parties in the receiving party's possession; or (ii) a director, legal advisor,
or financial advisor of the recipient party hereunder, provided that such
parties are bound to maintain the confidentiality of such information and
provided further that they are permitted to use such Confidential Information
only for the purposes of carrying out their fiduciary or other advisory
responsibilities on behalf of the party hereto from which it received such
Confidential Information; and
(b) Not to use the Confidential Information for any purpose
other than to carry out the purposes of this Agreement.
7.3 Nothing in this Section 7 shall restrict the receiving party with
respect to information or data, whether or not identical or similar to that
contained in the Confidential Information, if such information or data: (i) was
rightfully possessed by the receiving party before it was received from the
disclosing party; (ii) is independently developed by the receiving party without
reference to the disclosing party's information or data; (iii) is subsequently
furnished to the receiving party by a third party not under any obligation of
confidentiality with respect to such information nor data, and without
restrictions on use or disclosure; or (iv) is or becomes public or available to
the general public otherwise than through any act or default of the receiving
party.
8. GENERAL
8.1 This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns. No party may
assign its respective rights and obligations, in whole or in part, under this
Agreement without prior written consent of the other party hereto. Any attempt
to assign this Agreement without such consent shall be void and of no effect ab
initio. Notwithstanding the foregoing, a party hereto may assign this Agreement
or any of its rights and obligations hereunder to any entity controlling,
controlled by or under common control with, such party, or to any entity that
acquires such party by purchase of stock or by merger or otherwise, or by
obtaining substantially all of such party's assets (the "Permitted Assignee"),
provided that (i) no such assignment shall relieve the assigning party of any of
its
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<PAGE> 12
obligations under this Agreement; (ii) with respect to any assignments effected
by Medscape, no such Assignee (or any division thereof) is a CBS Competitor and
(iii) such Permitted Assignee shall agree in writing to be bound by the terms
and conditions hereof.
8.2 Each party hereto irrevocably submits to the exclusive jurisdiction
of (a) the Supreme Court of the State of New York, New York County; and (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby or thereby. Each party hereto shall
commence any such action, suit or proceeding either in the United States
District Court for the Southern District of New York or if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons, in
the Supreme Court of the State of New York, New York County. Service of any
process, summons, notice or document by U.S. registered mail to a party's
address set forth below shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 8.2. Each party hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of the State of New York, New York County; or
(ii) the United States District Court for the Southern District of New York, and
hereby and thereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in any inconvenient forum.
8.3 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances, and
such provision will be limited or eliminated to the minimum extent necessary so
that this Agreement shall otherwise remain in full force and effect.
8.4 All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(a) if to Medscape,
Medscape, Inc.
134 West 29th Street
New York, N.Y. 10001
Fax: (212) 760-3140
Attention: Chief Executive Officer
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<PAGE> 13
with a copy to:
Brobeck, Phleger & Harrison, LLP
1633 Broadway
New York, N.Y. 10019
Fax: (212) 586-7878
Attention: Alexander D. Lynch, Esq.
and:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
Fax: (212) 336-2222
Attention: John P. Schmitt
(b) if to CBS Corporation,
CBS Corporation
51 West 52nd Street
New York, New York 10019
Fax: (212) 975-9191
Attention: Chief Financial Officer
with a copy to:
CBS Corporation
51 West 52nd Street
New York, New York 10019
Fax: (212) 597-4031
Attention: General Counsel
8.5 The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment, franchise, or agency
between the parties. No party shall have the power to bind any other party or
incur obligations on any other party's behalf without such other party's prior
written consent.
8.6 The waiver by any party of a breach or default of any provision of
this Agreement by any other party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of any party to exercise or avail itself of any right,
power or privilege that it has, or may have hereunder, operate as a waiver of
any right, power or privilege by such party.
8.7 This Agreement, including any agreement incorporated herein by
reference, and any Exhibits hereto or thereto, contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. No party shall be liable or bound to any other
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<PAGE> 14
party in any manner by any representations, warranties or covenants relating to
such subject matter except as specifically set forth herein.
8.8 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State.
8.9 This Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
8.10 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each party and delivered
to each other party.
8.11 This Agreement may not be amended except by an instrument in
writing signed on behalf of each party hereto. By an instrument in writing CBS
or Medscape, as the case may be, may waive compliance by the other party with
any term or provision of this Agreement that CBS or Medscape, as the case may
be, was or is obligated to comply with or perform.
8.12 The headings contained in this Agreement hereto are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Any capitalized terms used in any Exhibit but not otherwise
defined therein, shall have the meaning as defined in this Agreement. When a
reference is made in this Agreement to a Section or Exhibit, such reference
shall be to a Section of, or an Exhibit to, this Agreement unless otherwise
indicated.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
CBS CORPORATION
By:
Name:
Title:
MEDSCAPE, INC.
By:
Name:
Title:
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<PAGE> 15
EXHIBIT A
Attached to and forming a part of the Agreement made as
of July 4, 1999 by and among CBS Corporation
and Medscape, Inc.
-------------------------------------------------------------
PLACEMENT POSSIBILITIES:
1. CBS Television Network programming
2. CBS Owned and Operated (a) Television and (b) Radio Stations
programming
3. CBS outdoor billboards
4. CBS Internet Sites
5. CBS Cable
6. Other placements that become available after the Effective Date.
AVAILABLE PLACEMENT TYPES:
- -- 30 second units, where available
- -- 15 second units, where available
- -- 10 second units, where available
- -- URL Scrolls Both (5 seconds)
- -- On-air mention (15 or 30 seconds, which are priced differently)
- -- Banner ads, buttons and sponsorships (measured on a daily, weekly or
monthly basis or as is otherwise appropriate)
- -- Credit rolls/sign-offs (5 seconds)
- -- Billboard Ads
- -- Other placements that become available after the Effective Date.
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<PAGE> 16
EXHIBIT B
Attached to and forming a part of the Agreement made as
of July 4, 1999 by and among CBS Corporation
and Medscape, Inc.
-------------------------------------------------------------
(Section 2.1(a))
CBS shall use commercially reasonable efforts to place $20 million of
advertising for Medscape during the first Contract Year. To the extent of any
shortfalls, such shortfalls will be placed by CBS during the following Contract
Year. CBS will make all commercially reasonable efforts to avoid a material
shortfall.
CBS shall use commercially reasonable efforts to allocate the media
placement to allow for approximately sixty percent (60%) of the placements to
appear on network television; and the parties will mutually agree upon the
balance of the allocation. There may also be variances in the relative
allocations of up to ten percent (10%) for each category. All placements shall
be subject to the following:
1. The final decision on timing and placement will be at the sole
discretion of CBS;
2. CBS shall not be obligated to place any advertising on
Westwood One, Inc. media properties;
3. CBS shall not be obligated to place any advertising on the CBS
Radio Network, unless CBS either owns or controls the CBS
Radio Network.
4. In the event CBS divests itself of any of its media property
segments, CBS will use its commercially reasonable efforts to
have the acquirer of the media property segment concerned
honor the advertising placements or CBS will provide other
placements on other CBS media property segments of similar
value.
5. In the event CBS acquires new media property segments, CBS
will use its commercially reasonable efforts to have
Medscape's advertising placements extend to such new segments.
6. Except as set forth in Section 2.1 (b), all branding
references to the Consumer Health Site or mark during any CBS
News program, whether or not reference is made to the Consumer
Health Site URL, will count as advertising/promotion time,
consistent with CBS's treatment of its other Web Site
transactions.
7. In the event of any disputes, respecting the placement,
allocation or application of advertising under this Media
Plan, the parties' senior executives will first meet and work
in good faith to resolve such dispute, and if such dispute is
not resolved submit such dispute to a non-binding Alternative
Dispute Resolution ("ADR")
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<PAGE> 17
proceeding, with a nationally recognized ADR group such as
JAMS.
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<PAGE> 1
Exhibit 10.35
TRADEMARK AND CONTENT AGREEMENT
AGREEMENT made as of the 4th day of July, 1999 (the "Effective
Date"), by and between CBS Corporation, 51 West 52nd Street, New York, New York
10019 (herein called "CBS"), CBS Worldwide Inc., 51 West 52nd Street, New York,
New York 10019 (herein called "CBS Worldwide") and Medscape, Inc., 134 West 29th
Street, New York, New York 10001, (herein called "Medscape"). The term "CBS"
shall not include Westwood One, Inc. To the extent that CBS Worldwide is the
owner of any of the CBS Health Content (as defined below), CBS Worldwide grants
the same licenses as CBS set forth herein in favor of Medscape and for every
provision of this Agreement that relates to such CBS Health Content the
references to CBS shall be read as CBS and CBS Worldwide.
1. DEFINITIONS
1.1 "Above the Fold" means that portion of any web page that is designed
to be visible by Internet Web Site users upon first accessing such page, without
requiring users with standard configurations to scroll vertically or
horizontally on the page.
1.2 "Affiliate" of the Person concerned, means a Person that directly or
indirectly (through one or more intermediaries) controls, is controlled by, or
is under common control with such Person concerned.
1.3 "CBS Competitor" means any Person, other than CBS, who/which is
engaged either directly, or indirectly through an Affiliate, in radio or
television programming or radio or television program distribution (whether free
over-the-air, cable, telephone, local, microwave, direct broadcast satellite,
via Internet or otherwise) or billboard advertising in North America. A CBS
Competitor shall not include any Person engaged, via an Internet Web Site, in
television or radio program transmission or streaming (the "Internet Concern"),
unless such Internet Concern: (i) owns or controls, is owned or controlled by,
or is under common control with, a CBS Competitor; or (ii) prominently features,
transmits or promotes Content of a CBS Competitor.
1.4 "CBS Health Content Pages" means pages of the Consumer Health Site
that include any CBS Health Content.
1.5 "CBS License Guidelines and Restrictions" or "CBS License
Guidelines" means the clearance, form, format and use restrictions and
procedures set forth in Exhibit "A" attached hereto which Medscape shall adhere
to in its use of CBS Health Content, CBS Marks, Consumer Health Site Content on
the Consumer Health Site and on any other Internet Site linked from the Consumer
Health Site.
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<PAGE> 2
1.6 "CBS Health Content" means any Content (excluding, for avoidance of
doubt, television/radio program outtakes) related to health, healthcare,
medicine or scientific issues in the life sciences and contained in CBS News's
regularly scheduled hard news broadcasts, scheduled special events coverage and
unscheduled live breaking news coverage which CBS has the right to license for
use on the Internet, including archival Content.
1.7 "CBS Marks" means the following CBS registered trademarks, as shown
in Exhibit B attached hereto: CBS(R) and the CBS "Eye" design.
1.8 "CBS Programming Properties" means the CBS Television Network, CBS
Radio Network (to the extent such Radio Network is owned or controlled by CBS),
CBS News Division, the Internet Web Site CBS.com and other television, radio,
cable and Internet Web Sites wholly-owned or controlled by CBS during the Term
of this Agreement.
1.9 "Collaboration Agreement" means any one of the following agreements
between CBS and Medscape: (a) this Agreement; (b) the Advertising and Promotion
Agreement dated as of the Effective Date (the "Ad and Promotion Agreement"); (c)
the Stockholders Agreement dated as of the Effective Date; (d) the Common Stock
Purchase Agreement dated as of the Effective Date; and (e) the Registration
Rights Agreement dated as of the Effective Date.
1.10 "Common Stock" means the common stock, $.01 par value per share, of
Medscape.
1.11 "Consumer Health Site" means the Internet Web Site owned by
Medscape that provides healthcare news and healthcare information for consumers.
1.12 "Content" means text, graphics, photographs, video, audio and/or
other data or information (including, without limitation, any of the foregoing
broadcast on television) relating to any subject, and/or advertisements.
1.13 "Date and Time Network Guidelines" means the guidelines issued by
CBS which restrict any advertisement from disclosing the date and time of the
program or event advertised.
1.14 "Intellectual Property Rights" means all inventions, discoveries,
trademarks, patents, trade names, copyrights, jingles, know-how, intellectual
property, software, shop rights, licenses, developments, research data, designs,
technology, trade secrets, test procedures, processes, route lists, computer
programs, computer discs, computer tapes, literature, reports and other
confidential information, intellectual and similar intangible property rights,
whether or not patentable or copyrightable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized third party usage),
and any and all applications for, registrations of and extensions, divisions,
renewals and reissuance of, any of the foregoing, and rights therein, including
without limitation (a) rights under any royalty or licensing agreements, and (b)
programming and programming rights, whether on film, tape or any other medium.
1.15 "Internet" means a global network of interconnected computer
networks, each using the Transmission Control Protocol/Internet Protocol and/or
such other standard network interconnection protocols as may be adopted from
time to time, which is used to transmit Content
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<PAGE> 3
that is directly or indirectly delivered to a computer or other digital
electronic device for display to an end-user, whether such Content is delivered
through on-line browsers, off-line browsers, or through "push" technology,
electronic mail, broadband distribution, satellite, wireless or otherwise.
1.16 "Internet Site" or "Web Site" means any site or service delivering
Content on or through the Internet, including, without limitation, any on-line
service such as America Online and Compuserve.
1.17 "Medscape Content" means any Content owned or controlled by
Medscape other than CBS Property (as defined in subparagraph 5.1).
1.18 "New Mark" means a word or words designated by the parties hereto
for use as a new trademark and as part of a URL for the Consumer Health Site
which shall be subject to the mutual agreement of the parties.
1.19 "New Mark Brand(s)" means collectively, the New Mark, the New Mark
URL (defined below) and any other URL that includes the New Mark and is used for
identifying the Consumer Health Site.
1.20 "New Mark URL" means the New Mark followed by the extension ".com"
1.21 "Person" means any natural person, legal entity, or other organized
group of persons or entities. (All pronouns whether personal or impersonal,
which refer to Persons include natural persons and other Persons.)
1.22 "Professional Health Site" means an Internet Web Site owned by
Medscape that provides healthcare news and healthcare information primarily for
physicians and allied healthcare professionals that is currently located at the
URL www.medscape.com.
1.23 "Term" means the term specified in paragraph 3.1 below and any
extensions agreed to by the parties hereto.
1.24 "URL Scroll" means the exhibition of a written representation of a
URL in or during (i.e., at any time from the opening frame through end of the
closing credits) a television program (the "Television URL Scroll") or in/on an
Internet Web Site page (the "Internet URL Scroll"). For avoidance of doubt, the
Television URL Scroll and the Internet URL Scroll are hereinafter collectively
referred to as the "URL Scroll".
2. SCOPE
2.1 CBS grants to Medscape, during the Term of this Agreement and
subject to the terms and conditions contained herein, the non-exclusive right
and license:
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<PAGE> 4
(a) to use, copy, publicly display, publicly perform, transmit,
distribute or otherwise make available on or through the Consumer Health Site,
the CBS Health Content, to the extent CBS has the right to so license such
Content. CBS agrees that users of the Consumer Health Site may view, access,
retrieve, copy and print only for noncommercial private use any CBS Health
Content distributed hereunder on the Consumer Health Site. In that connection:
Medscape's obligations will be limited to: (i) presenting all video CBS Health
Content in a mutually agreed-on format which may include a format designed to
prevent redistribution; and (ii) including a notice to users of the Consumer
Health Site that they may view, access, retrieve, etc. the Web Site Content only
for noncommercial private use.
(b) to use the CBS Marks together with the MEDSCAPE mark or, if
the parties mutually agree, the New Mark (or such other mark mutually agreed to
by the parties hereto), in connection with Medscape's operation of the Consumer
Health Site, but only to the extent that CBS has the right to use the CBS Marks
or New Mark, as applicable. If the parties agree to use the New Mark as the name
of the Consumer Health Site, then CBS shall use commercially reasonable efforts
to acquire rights in the New Mark URL. If the parties are unable to use the New
Mark in combination with the CBS Mark to brand the Consumer Health Site, then
the brand for the Consumer Health Site shall remain "CBS Medscape".
Nothing in this Agreement grants Medscape ownership or other rights in or to the
CBS Health Content or the CBS Marks, except in accordance and to the extent of
this license.
2.2 Medscape's exercise of the rights granted herein shall conform to
the restrictions or requirements set forth in the CBS License Guidelines
(attached hereto as Exhibit "A"), as such License Guidelines may be amended or
revised by from time to time by CBS, to reflect any changes in the business,
practice, procedures or policies of CBS or Medscape. CBS will endeavor to notify
Medscape of relevant changes to the CBS License Guidelines. For avoidance of
doubt, the CBS License Guidelines shall be no more restrictive than the
standards and practices applicable to the CBS Television Network.
2.3 (a) Medscape shall have access to all CBS Health Content, and,
subject to the conditions stated in the next sentence, CBS shall deliver, at
times reasonably requested by Medscape, CBS Health Content in a mutually agreed
form and format. Notwithstanding anything to the contrary contained in this
paragraph (e.g., CBS's prior agreement on the CBS Health Content concerned), CBS
shall have the right to refuse to deliver to Medscape any CBS Health Content if,
in CBS's sole discretion, the CBS Health Content or the use contemplated,
conflicts with, interferes with or is detrimental to CBS's interests, reputation
or business or might subject CBS to unfavorable regulatory action, violate any
law, infringe the rights of any person, or subject CBS to liability for any
reason.
(b) Medscape shall be responsible for and shall reimburse CBS for
all actual costs and expenses, above and beyond those expenses normally incurred
by CBS in the ordinary course of business, which are incurred by CBS in
preparing and/or delivering the CBS Health Content in the desired form and
format. Any amounts to be paid under this subparagraph 2.3(b) shall be due and
payable within 30 days of receipt of an invoice relating to such amounts. Those
amounts will also be recoupable from all monies becoming payable to Medscape
under this or any other
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<PAGE> 5
Agreement or otherwise to the extent to which they have not actually been paid
or reimbursed as provided for in the preceding sentence.
2.4 During the Term of this Agreement, any Content displayed on the
Consumer Health Site shall be subject to any restrictions or requirements set
forth in the CBS License Guidelines. CBS shall have the right to demand the
withdrawal from the Consumer Health Site of any CBS Health Content which in
CBS's sole opinion conflicts with, interferes with or is detrimental to CBS's
interests, reputation or business or which might subject CBS to unfavorable
regulatory action, violate any law, infringe the rights of any Person, or
subject CBS to liability for any reason. Upon notice from CBS to withdraw the
CBS Health Content concerned, Medscape shall cease using any such CBS Health
Content on the CBS Consumer Health Site as soon as commercially and technically
feasible, but in any event within forty-eight (48) hours after CBS's notice,
unless such withdrawal is required sooner by law. For purposes of this paragraph
2.4 (and in addition to the terms and conditions set forth in paragraph 9.5
below), notice shall be deemed given when sent by confirmed facsimile
transmission to the fax number set forth in paragraph 9.5 below.
2.5 (a) During the Term of this Agreement, Medscape shall, in all
instances, consult with CBS regarding (visual and editorial) presentation of the
CBS Health Content on the Consumer Health Site. In no event shall Medscape
distort or misrepresent any material contained in the CBS Health Content. No CBS
Health Content shall be used/displayed out of context. Medscape shall have the
right to edit and revise the CBS Health Content subject to CBS's prior approval
in each instance.
(b) Medscape shall be solely responsible for the engineering,
production, maintenance and monitoring of all CBS Health Content which Medscape
makes available on the Consumer Health Site.
(c) Subject to any restrictions or requirements in the CBS License
Guidelines, Medscape shall have the right, but not the obligation, to correct
any errors, omissions and/or inaccuracies in the transmission or transcription
of the CBS Health Content identified by Medscape or reported to Medscape by
Consumer Health Site users.
2.6 Except as otherwise specified in this Agreement, during the Term of
this Agreement, Medscape shall not, without CBS's prior written approval,
advertise, promote or market in any media now known or hereafter developed,
including the Internet, any CBS Competitor, except that Medscape may promote any
CBS Competitor: (i) on the Consumer Health Site on an occasional basis; or (ii)
on/in any of its venues other than the Consumer Health Site, to the extent that
CBS would permit such advertising, promotion or marketing on the CBS Television
Network, pursuant to its Date & Time Network Guidelines. Solely for purposes of
this paragraph, "CBS Competitor" shall mean any Person who/which is engaged in
North America in: (A) cable television programming or program distribution that
is competitive with the TNN or CMT cable service; or (B) radio or over-the-air
television programming, broadcasting or distribution.
2.7 If the New Mark is used for the Consumer Health Site:
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<PAGE> 6
(a) Use of the name "CBS" in combination with the New Mark (i.e.
"CBS New Mark") to brand the Consumer Health Site shall be accompanied by the
phrase "powered by Medscape" or "part of the Medscape Network" (or a similar
phrase which reflects an association with Medscape.com, as determined by
Medscape). The Medscape brand will be prominently displayed throughout the
Consumer Health Site to reinforce the association with the Professional Health
Site.
(b) CBS News shall brand substantially all of the CBS News (i.e.,
television and radio) healthcare segments broadcast on the CBS Television
Network and the CBS Radio Network, to the extent that CBS owns or controls the
CBS Radio Network (the "CBS News Health Programming") as "CBS New Mark", and
will endeavor to include an on-air mention of, or Television URL Scrolls
featuring the URL which combines the CBS Mark and the New Mark and identifies
the Consumer Health Site (e.g., cbsnewmark.com).
(c) Following the expiration of the Term of this Agreement:
(i) For the twelve (12) month period following expiration, (the
"Transition Period") Internet users inputting the URL which identified
the Consumer Health Site during the Term (and provided such URL includes
the New Mark) (the "Identifying URL") will be routed (by Medscape) to
the Consumer Health Site. Except as set forth in the preceding clause,
neither party shall have the right to use or promote the New Mark URL or
any Identifying URL. (For avoidance of doubt, nothing contained in this
paragraph will prevent CBS from using the New Mark to brand its news
segments.)
(ii) Upon expiration of the Transition Period: (A) CBS shall
have the right to use the Identifying URL (e.g., the New Mark URL
preceded by "CBS") or a variation thereof for CBS's designated purpose;
and (B) Internet users who input the New Mark URL will be automatically
forwarded (by Medscape) to a screen (the "Splash Screen") that notifies
the viewer that: (I) CBS and Medscape are no longer offering health
information on a single Web Site; and (II) consumer health information
is available on a Medscape-identified Internet Web Site and a
CBS-identified Internet Web Site. For a period of ninety (90) days
following expiration of the Transition Period, Medscape may include in
its notice the following phrase: "the Web Site formerly known as [insert
the Identifying URL]." The parties shall mutually agree upon the copy,
look and feel of the Splash Screen.
(d) Upon termination of this Agreement solely by reason of a
material breach by either party of one of the Collaboration Agreements:
(i) The non-breaching party shall have the exclusive right to
use the New Mark Brand(s) (excluding, for avoidance of doubt, the CBS
Mark(s)) and the breaching party shall assign to the non-breaching party
any right it has in such Brand(s).
(ii) If CBS is the breaching party:
(A) CBS shall cease using or promoting the New Mark Brand(s)
and the Identifying URL; and
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<PAGE> 7
(B) Internet users inputting the Identifying URL shall be
routed (by Medscape) to the Consumer Health Site, which shall be
renamed with a name of Medscape's choice (which name shall not
include any CBS Mark(s));
(iii) If Medscape is the breaching party:
(A) Medscape shall cease using or promoting the New Mark
URL; and
(B) Internet users inputting the Identifying URL shall be
routed (by Medscape) to a CBS Web Site (identified by CBS).
2.8 If CBSMedscape.com (or a variation thereof) is the URL for the
Consumer Health Site (the "CBS/Medscape URL") at the time of expiration or
termination of this Agreement, then for a period of twelve (12) months following
expiration of this Agreement, Internet users who input the CBS/Medscape URL will
be automatically forwarded (by Medscape) to a Splash Screen that notifies the
viewer that: (a) CBS and Medscape are no longer offering consumer health
information on a single Web Site; and (b) consumer health information is
available on a Medscape-identified Internet Web Site and a CBS-identified
Internet Web Site.
2.9 (a) (i) Medscape, in close cooperation with CBS News, will produce
and provide on a mutually agreeable basis, timely, creative and compelling
health-related news and feature ideas and programming to the CBS Programming
Properties (the "Medscape Programming"). CBS and Medscape will work together to
develop the Medscape Programming and mutually agree on the allocation of
resources for this Programming. The parties will mutually agree to the scope and
frequency of the Medscape Programming. Medscape Programming will conform in all
respects to the CBS News Standards as they may be amended from time to time.
(ii) CBS and Medscape jointly shall own all copyrights and
rights of copyrights throughout the world in and to the Medscape
Programming or any portion thereof, subject to the next two sentences.
Medscape hereby grants to CBS the exclusive worldwide perpetual right
to: (A) archive the Medscape Programming and (B) to distribute and to
authorize the distribution of Medscape Programming in all media,
including over-the-air, cable and DBS television; provided that CBS has
broadcast or exhibited the Medscape Programming within a reasonable time
after Medscape makes such Programming available to CBS. In the event
that CBS rejects the Medscape Programming or does not broadcast or
exhibit the Medscape Programming to the public within a reasonable
period of time after Medscape has made such Programming available to
CBS, then, at the end of such reasonable period, Medscape shall own all
copyrights and rights of copyrights therein, provided that the cost of
producing and providing such Programming was borne solely by Medscape.
(b) Where appropriate, Medscape will create special online reports
and features ("Special Online Reports") on the Consumer Health Site that
complement the CBS News Health
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<PAGE> 8
Programming and the Medscape Programming, by providing expanded online coverage
of the story, links to related articles, expanded online video and audio clips,
and subject-specific interactive features. CBS will endeavor to give on-air
mention to, and/or Television URL Scrolls of the Identifying URL, in connection
with Medscape Programming and Special Online Reports.
2.10 Where appropriate and at CBS News' sole discretion, CBS News shall
make on-air reference to and a URL Scroll of the Consumer Health Site, with
respect to healthcare segments broadcast or distributed on any CBS News program,
provided that the Consumer Health Site is at such time featuring Content that
relates to the particular health care segments.
2.11 In the event that Medscape desires to use any music contained in
any CBS Health Content on the Medscape Site, prior to such use, Medscape shall
(i) report to the applicable music rights society on behalf of CBS, all titles
and publishers of all such music and (ii) secure, at its sole cost and expense,
and pay for all performing, duplication and/or recording rights licenses, if
any, necessary for the use of musical compositions and sound recordings on the
Internet. CBS shall endeavor to deliver to Medscape accurate music cue sheets
for all such music.
2.12 During the Term of this Agreement, CBS shall maintain prominent,
Above the Fold hypertext links from the Internet Web Site CBS.com to the
Consumer Health Site. In addition, during the Term of this Agreement, each party
shall use commercially reasonable efforts to place hypertext links on all of the
Web Sites operated by or on behalf of such party or its Affiliates, or bear the
trademarks of such party, including, without limitation, CBS.Sportsline.com,
CBS.Marketwatch.com, CBS.Medscape.com, CBS.StoreRunner.com and Office.com for
CBS, and the Consumer Health Site and the existing Professional Health Site for
Medscape.
2.13 Medscape grants to CBS, during the Term of this Agreement and
subject to the terms and conditions contained herein, the non-exclusive right
and license to use, copy, publicly display, publicly perform, transmit,
distribute or otherwise make available, the Medscape Content and MEDSCAPE
trademark(s) to the extent contemplated in this Agreement and to the extent that
Medscape has the right to so license such trademark(s) and Content. Such use of
the Medscape Content and Medscape trademark(s) shall also be in accordance with
the correct use guidelines made available form Medscape from time to time.
2.14 Except as otherwise set forth in paragraphs 2.7 above or elsewhere
in this Agreement, upon expiration or termination of this Agreement: (i) each
party shall immediately cease all use of the other party's trademarks, and (ii)
Medscape shall cease using any CBS Health Content or Content derived therefrom
in connection with the name and operation of the Consumer Health Site or
otherwise. In connection with the above, Medscape shall immediately remove or
erase the CBS Health Content (and any Content derived therefrom) and CBS Marks
from the Consumer Health Site, and from any advertising and promotional
materials, as soon as commercially and technically practicable, given customary
Internet business practices, but in no event shall any such material remain on
the Consumer Health Site more than ten (10) days after expiration of CBS's
notice of termination, as applicable, unless sooner required by law, and at
CBS's request, Medscape shall furnish CBS with a certificate from an officer of
Medscape of such removal or erasure satisfactory to CBS.
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<PAGE> 9
3. TERM
3.1 The Term of this Agreement shall begin as of the date hereof and
shall continue in full force and effect for a period of seven (7) consecutive
years from the Effective Date, unless it is terminated earlier in accordance
with the terms and conditions stated herein.
3.2 The parties shall negotiate exclusively with each other in good
faith for a period of twelve (12) consecutive months (the "Negotiation Period")
with respect to any extension(s) of the Term of this Agreement commencing on the
fifth anniversary of the Effective Date (i.e., July 4, 2004).
4. PROCEDURES
4.1 (a) CBS shall deliver to Medscape a copy of each CBS Mark in the
form in which such Mark may be used by Medscape on the Consumer Health Site.
Medscape acknowledges that the CBS Marks are trademarks owned or controlled by
CBS Corporation or an Affiliate thereof and that all uses by Medscape of such
CBS Marks shall inure to CBS's benefit. Medscape shall maintain CBS quality
standards with respect to its use of the CBS Marks, and otherwise use the CBS
Marks subject to any restrictions or requirements disclosed by CBS (including
any requirements/restrictions delineated in the CBS License Guidelines). All
materials bearing the CBS Marks shall be subject to CBS's prior written approval
as described in subparagraph 4.2(b) below.
(b) In the event that during the Term of this Agreement Medscape
shall create any proprietary right in any CBS Marks, as a result of the exercise
by Medscape of any right granted to it hereunder, such proprietary right shall
immediately vest in CBS and Medscape shall be authorized to use such new
proprietary right as though same had specifically been included in this
Agreement.
4.2 (a) Medscape shall not file any application in any country to
register a trademark which contains any CBS Marks, or is the same as, similar
to, or deceptive or misleading with respect to the CBS Marks or any other CBS
trademark. If any application for registration is filed in any country by
Medscape in contravention of this paragraph 4.2, CBS shall have the right to
take appropriate action against Medscape, including seeking injunctive relief,
to prohibit or otherwise restrain Medscape's use of the infringing party's use
of the infringing mark.
(b) Medscape shall furnish CBS proofs of all materials bearing
any CBS Mark(s) (including, without limitation, advertising and publicity
materials). Solely with respect to use of the CBS Mark(s) on the Consumer Health
Site, Medscape shall submit a prototype of each (Internet) graphical
representation(s) of the CBS Mark(s) to be used on such Site, for CBS's
approval. Medscape will not authorize full scale production of any material
until after obtaining CBS's written approval in each instance. Any changes in
such material shall also be subject to CBS's prior written approval. The
preceding sentence will not apply to: (i) any Web Site Content that features the
CBS Mark(s) where the graphical representation of the CBS Mark(s) has been
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<PAGE> 10
pre-approved in writing; or (ii) any press releases and/or promotional
literature the graphic and format of which have been previously approved.
(Notwithstanding the preceding sentence, any copy or Web Site Content which
identifies CBS and describes the relationship between Medscape and CBS, other
than mutually agreed-on tag language appearing at the end of each press release
or the like, or the Web Site equivalent thereof, which language is
non-contextual, shall be subject to CBS's prior approval.) Approval by CBS shall
not relieve Medscape of any of its warranties or obligations under this
Agreement and all materials that bear any CBS Marks shall strictly conform with
the samples and proofs approved by CBS. Materials to be approved by CBS shall be
submitted to the Associate General Counsel, Contracts, Rights and Development,
CBS Law Department, 51 West 52nd Street, 36th Floor, New York, New York 10019,
and/or such other person that may be designated in writing by CBS. In each
instance, CBS shall respond promptly to Medscape's requests for approval.
4.3 (a) Medscape shall use reasonable efforts to require any merchant
included in the Consumer Health Site or with whom Medscape establishes a link
pursuant to a contract with Medscape, to represent and warrant that such
merchant will abide/abides with all applicable federal, state, local and foreign
laws and regulations. Medscape, at its own expense, shall indemnify, defend and
hold harmless CBS, its Affiliates, directors, officers, employees and agents
(including their respective successors and assigns) against any and all costs
and damages (including reasonable attorneys' fees) incurred by CBS as a result
of Medscape's failure to include the foregoing merchant warranty in Medscape's
agreements with any such merchant. The foregoing indemnity shall be subject to
the procedural requirements set forth in paragraph 7.3 below.
(b) If Medscape becomes aware of any unauthorized or unlawful
activity by any merchant or advertiser linked to or exhibited on the Consumer
Health Site, Medscape will take appropriate action (including, without
limitation, removing from the Consumer Health Site, any Content related to such
activity as expeditiously as possible, in accordance with paragraph 2.4 hereof),
and with respect to any unauthorized or unlawful activity of a material nature,
Medscape will use its reasonable best efforts to notify CBS of such activity.
4.4 In the event that Medscape learns of any infringement, threatened
infringement, or passing off of the CBS Mark(s), or that any Person claims or
alleges that the such trademarks or logos are liable to cause deception or
confusion to the public, then Medscape shall notify CBS of the particulars
thereof.
4.5 CBS shall be solely responsible for all costs associated with the
acquisition or transfer of (i) any applicable federal or state trademark
registrations for the New Mark or, if applicable, marks which are derivatives
thereof or substantially similar thereto, (ii) the New Mark URL and derivative
or related URLs (such as New Mark URLs with the ".org" or ".edu" extensions)
that, in CBS's judgement, should be obtained to protect the CBS New Mark Brands
and (iii) any other rights related to use of the New Mark in relation to
operation of the Consumer Health Site, as mutually agreed-on by the parties.
Medscape will not seek reimbursement for advertising expenditures or payment of
any of Medscape's conversion costs in the event that: (i) CBS does not acquire
or use the New Mark to name the Consumer Health Site, or (ii) the name of the
Consumer Health Site is changed from the New Mark to another name.
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<PAGE> 11
5. RIGHTS
5.1 (a) As between CBS and Medscape, CBS is or shall be the exclusive
owner of and shall retain all right, title and interest to the CBS Mark(s) and
the CBS Health Content and any derivative work(s) (as such term is defined in
the U.S. Copyright Act, 17 U.S.C.) thereof, including all Intellectual Property
Rights therein (the "CBS Property").
(b) Medscape shall place a notice of copyright on each CBS Health
Content Page in accordance with the CBS License Guidelines. Medscape shall
cooperate fully with CBS in connection with CBS's obtaining appropriate
copyright registration in the name of CBS for any CBS Health Content Page.
(c) Medscape is the exclusive owner of and shall retain all right,
title and interest to the Medscape Content, the Consumer Health Site, the
Professional Health Site, any other Medscape-owned Internet Site(s) and
Medscape-owned trademarks and all Intellectual Property Rights therein,
excluding the CBS Property.
(d) Except as otherwise set forth in paragraph 2.7 above:
(i) The New Mark URL shall be jointly owned by CBS and Medscape;
and
(ii) During the Term: (A) the Identifying URL shall be jointly
owned by CBS and Medscape; and (B) as between CBS and Medscape, the New
Mark URL and the Identifying URL shall be used exclusively by Medscape
to operate the Consumer Health Site.
Any registration or registration transfer covering the HealthWatch URL or the
Identifying URL shall be effected accordingly.
5.2 Each party agrees to take all action and cooperate as is reasonably
necessary, at the other party's request, to protect the requesting party's
rights, titles, and interests specified in this Article 5, and further agrees to
execute any documents that might be necessary to perfect such party's ownership
of such rights, titles and interests. Any costs incident thereto shall be borne
by the requesting party, provided such costs are reasonable.
6. EXCLUSIVITY; NONCOMPETE
6.1 (a) During the Term of this Agreement:
(i) the Consumer Health Site shall be the exclusive healthcare
Internet Site:
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<PAGE> 12
(A) integrated into CBS News programs (including the CBS
Radio Network to the extent such Radio Network is owned or
controlled by CBS); and
(B) featured on a regular basis on the Internet Site
CBS.com.
(ii) where appropriate, in CBS's sole discretion, the
Consumer Health Site shall be the exclusive healthcare Internet Site
integrated into general interest programs on the CBS Television
Network.
(iii) CBS shall not integrate the Internet Site Rx.com into
CBS News programs, it being understood however, that, solely for
purposes of clause 6.1(a)(iii), the term "integrated" shall exclude
any URL Scroll.
(b) For purposes of this paragraph 6.1, the term "integrated" shall
mean in-program or post program on-air mention and a URL Scroll; it being
understood, however, that the terms "integrated" and "featured" do not include
and nothing herein shall restrict CBS from: (i) the placement of any public
service announcement or commercial in any medium, which may include the
reference to a URL or a URL Scroll; (ii) attribution (in any form) of an
Internet Site, including a Competitive Site, solely in the context of
covering/reporting any newsworthy event(s) in the ordinary course of news
coverage and only on an occasional basis; and (iii) the display or feature in a
search engine or portal, such as AOL or Excite, of a URL or a hypertext link (or
similar access) to an Internet Site; and (iv) any acknowledgement of the
sponsorship of a program or program segment, which may include the reference to
a URL or a URL Scroll;
6.2 (a) During the Term of this Agreement, without Medscape's prior
written approval, CBS shall not:
(i) license the right to use the CBS Marks in connection with
branding any Competitive Site.
(ii) display, perform, distribute, transmit or otherwise make
available any CBS Health Content on any Competitive Site. The preceding
sentence shall not:
(A) for avoidance of doubt, prohibit CBS.com (or any
successor thereto) or any CBS Affiliate from including CBS Health
Content on their respective Web Site(s).
(B) prohibit CBS from supplying CBS Health Content to
television or radio program producers or distributors, which may, in
turn, use the material on their Web Sites.
(C) prohibit CBS from supplying (licensing or authorizing
the use of) audio or video footage or text or graphics to any other
Internet Web Site (including a Competitive Site) consistent with
current and past practices in the normal course of CBS's news
business.
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<PAGE> 13
(D) prevent CBS from honoring any pre-existing commitments
regarding the exploitation of CBS Health Content on any Competitive
Site. For purposes of clarification and exclusive of any
transactions between any individual CBS-owned or CBS-controlled
television or radio station and any Competitive Site(s), to the best
of CBS's knowledge, there are no pre-existing commitments between
CBS Corporation and any such Competitive Site(s).
(iii) enter into any transaction similar to this transaction for
the provision by CBS of healthcare programming, online marketing and
promotion of any Competitive Site. (For avoidance of any doubt, nothing
in this Agreement shall prevent CBS-owned or CBS-controlled television
or radio stations from accepting or placing any advertisement(s) or
commercial(s) involving a Competitive Site or entering into any
advertising relationship with any advertiser or its Web Site.)
(b) For avoidance of doubt, this paragraph 6.2 will not preclude any
CBS-affiliated television or radio station from maintaining a Competitive Site.
6.3 (a) For purposes of this Article 6, "Competitive Site" shall mean an
Internet Site that has as its primary function and its principal theme the
delivery of healthcare news and healthcare information geared to the consumer.
(b) The parties agree and confirm that Rx.com is not a Competitive
Site as of the Effective Date.
7. WARRANTIES; REPRESENTATIONS; INDEMNITIES
7.1 (a) CBS REPRESENTS AND WARRANTS THAT:
(i) it has full power and authority to enter into this
Agreement.
(ii) to the best of its knowledge, the CBS Marks and the use
thereof in accordance with this Agreement shall not violate any law or
infringe upon or violate any rights of any Person.
(b) MEDSCAPE REPRESENTS AND WARRANTS THAT:
(i) exclusive of the Identifying URL, the New Mark URL and the
CBS Property, it owns or controls all right, title, and interest in and
to the Consumer Health Site, and owns or licenses all Intellectual
Property Rights therein, necessary to carry out its obligations
hereunder and to grant and assign the rights and licenses granted to CBS
herein.
(ii) it is has the full power and authority to enter into and
fully perform this Agreement.
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<PAGE> 14
(iii) exclusive of the Identifying URL, the New Mark URL and the
CBS Property, the Medscape Content or any Content developed or furnished
by Medscape hereunder (including the Medscape Programming and Special
Online Reports), the Consumer Health Site and the use thereof shall not
violate any law or infringe upon or violate any rights of any Person.
(iv) at all times, it will maintain the Consumer Health Site in
a professional manner consistent with industry standards.
(v) to the best of its knowledge, the MEDSCAPE trademark and the
use thereof shall not violate any law or infringe upon any rights of any
Person.
(c) Medscape covenants that it will use its reasonable best efforts
to adhere to the following performance standards:
(i) to maintain the availability of the Consumer Health Site
seven (7) days a week, twenty-four (24) hours a day, except during
periods of scheduled maintenance;
(ii) the Consumer Health Site as displayed to users shall have
at least 97% uptime over a twelve (12) month period, excluding events of
an extraordinary nature which are beyond the control of Medscape; and
(iii) Medscape shall provide CBS with a contact person for
support of issues related to the Consumer Health Site. Such contact
person or his/her substitute(s) shall be available to CBS seven (7) days
a week, twenty-four (24) hours a day for emergency support.
7.2 EXCEPT FOR THE FOREGOING WARRANTIES, NEITHER PARTY MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO THEIR CONTENT, INTERNET SITES OR ANY OTHER
SUBJECT MATTER OF THIS AGREEMENT.
7.3 (a) Each party (the "Indemnifying Party") shall at all times
indemnify, hold harmless and defend the other party (collectively, the
"Indemnified Party") from and against any loss, cost, liability or expense
(including court costs and reasonable attorneys' fees) arising out of or
resulting from any breach by the Indemnifying Party of any representation,
warranty, covenant or agreement contained herein. In the event of any such
claim, the Indemnified Party shall: (i) promptly notify the Indemnifying Party
of the claim; (ii) allow the Indemnifying Party to direct the defense and
settlement of such claim with counsel of the Indemnifying Party's choosing; and
(iii) provide the Indemnifying Party, at the Indemnifying Party's expense, with
information and assistance that is reasonably necessary for the defense and
settlement of the claim. The Indemnified Party reserves the right to retain
counsel, at the Indemnified Party's sole expense, to participate in the defense
of any such claim. The Indemnifying Party shall not settle any such claim or
alleged claim without first obtaining the Indemnified Party's prior written
consent in all instances where the settlement concerned might adversely affect
the Indemnified Party's rights (under this Agreement or otherwise); and such
consent shall not be unreasonably withheld. If the
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<PAGE> 15
Indemnifying Party assumes the defense and settlement of the claim as set forth
above, then the Indemnifying Party's only obligation is to satisfy the claim,
judgment or approved settlement.
(b) CBS, at its own expense shall indemnify, defend and hold
harmless Medscape, its directors, officers, employees and agents (including
their respective successors and assigns), against any third party claims based
on an allegation that (i) the use of the CBS Mark(s) in accordance with the
terms of this Agreement infringes the trademark or other Intellectual Property
Rights of any third party, (ii) the use of the New Mark, in accordance with the
terms of this Agreement, whether used as a brand, trademark, URL or any of the
foregoing in conjunction with the CBS Mark(s) infringes upon or violates the
rights of any third party, or (iii) the use of the CBS Health Content in
accordance with the terms of this Agreement violates any law or infringes upon
or violates the rights of any third party; and CBS shall pay any royalties and
other costs related to the settlement of such claims, and the costs and damages,
including reasonable attorneys' fees, awarded as a result of any suit based on
such claim, provided Medscape promptly notifies CBS in writing of any such claim
and gives CBS authority and control of the defense of such claim, such
assistance and information as is available to Medscape for the defense of such
claim. Any such assistance or information which is furnished by Medscape at the
written request of CBS shall be at CBS's expense. For the avoidance of any
doubt, this indemnity shall apply to Medscape's use of any CBS Mark(s) or CBS
Health Content in accordance with the licenses granted by CBS if CBS did not
notify Medscape of any restrictions on such Mark(s) or Content and it is later
found that CBS had insufficient or no rights to license such Marks/Content to
Medscape under this Agreement.
(c) Medscape, at its own expense shall indemnify, defend and hold
harmless CBS, its directors, officers, employees and agents (including their
respective successors and assigns), against any third party claims based on an
allegation that: (i) the use of the MEDSCAPE trademark, in accordance with the
terms of this Agreement infringes the trademark or other Intellectual Property
Rights of any third party; and (ii) Medscape Content or Content on the Consumer
Health Site or any Content developed or furnished by Medscape thereunder or the
Medscape Programming or any Special Online Report violates any law or infringes
upon or violates the rights of any third party; and Medscape shall pay any
royalties and other costs related to the settlement of such claim, and the costs
and damages, including reasonable attorneys' fees, awarded as a result of any
suit based on such claim, provided CBS promptly notifies Medscape in writing of
any such claim and gives Medscape authority and control of the defense of such
claim, such assistance and information as is available to CBS for the defense of
such claim. Any such assistance or information which is furnished by CBS at the
written request of Medscape shall be at Medscape's expense. For avoidance of
doubt, this indemnity shall apply to Medscape's use of any Medscape mark(s) or
Medscape Health Content in accordance with the licenses granted by Medscape if
Medscape did not notify CBS of any restrictions on such mark(s) or Content and
it is later found that Medscape had insufficient or no rights to license such
marks / Content to CBS under this Agreement.
8. REMEDIES
8.1 CBS shall have the right to terminate this Agreement if (any of the
following occurs):
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<PAGE> 16
(a) Medscape breaches any material term or condition of this
Agreement and has failed to cure such breach within twenty (20) days following
notice of default. The foregoing cure period will not apply to: (i) a term or
condition for which a specific cure period is provided or (ii) a breach
incapable of being cured.
(b) Medscape breaches any material term or condition of any
Collaboration Agreement and has failed to cure such breach within the time
prescribed for cure in the Collaboration Agreement concerned. The foregoing cure
period will not apply to breaches incapable of being cured.
(c) Medscape: (i) becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its creditors; (ii) is the
subject of a voluntary petition in bankruptcy or any voluntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; (iii) becomes the subject of any involuntary petition
in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing; (iv)
is liquidated or dissolved.
(d) Medscape issues to a CBS Competitor in any one transaction or
series of related transactions, a number of voting securities of Medscape such
that after such issuance or series of issuances, such CBS Competitor
beneficially owns or controls, directly or indirectly, nine percent (9%) or more
of the outstanding shares of Common Stock (as such term is defined in the Ad and
Promotion Agreement)(the "threshold"), and has failed to reduce such ownership
of Common Stock below the threshold within twenty (20) days following CBS's
notice set forth in 8.1(d)(ii) below.
(i) Notwithstanding the foregoing however, the provisions of
this subparagraph 8.1(d) shall not apply to a stockholder of Medscape
who beneficially owns or controls, directly or indirectly, nine percent
(9%) or more of the outstanding shares of Common Stock on the day prior
to the date of this Agreement.
(ii) The parties hereby agree that Medscape will give CBS
confidential written notice of its intent to enter into an agreement for
issuance of securities that would result in a stockholder beneficially
owning or controlling, directly or indirectly, nine percent (9%) or more
of the outstanding shares of Common Stock, together with a description
of the party with whom Medscape intends to effect such a transaction,
for the purpose of ascertaining CBS's opinion whether, as of the date of
the notice, such party is a CBS Competitor. CBS shall have five (5) days
from the receipt of such notice to respond to Medscape. CBS's opinion
shall be based solely on the information provided to CBS in the notice
and CBS shall have no independent duty whatsoever to investigate or
inquire further. If CBS confirms that the party is not a CBS Competitor,
CBS shall be deemed to have waived any right of CBS pursuant to this
Article 8 in respect of such party and transaction, unless there were
material misstatements or omissions in the disclosures made by Medscape
to CBS in connection with the transaction.
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<PAGE> 17
(iii) For purposes of this subparagraph 8.1(d), the term
"beneficial ownership" shall have the meaning set forth in Section 13(d)
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
CBS may exercise its right to terminate pursuant to this paragraph 8.1 by
sending Medscape the appropriate notice. No exercise by CBS of its rights under
this paragraph 8.1 will limit CBS's remedies by reason of Medscape's default,
CBS's rights to exercise any other rights under this paragraph 8.1, or any of
CBS's other rights.
8.2 Medscape shall have the right to terminate this Agreement if (any
of the following occurs):
(a) CBS breaches any material term or condition of this Agreement
and has failed to cure such breach within twenty (20) days following notice of
default. The foregoing cure period will not apply to: (i) a term or condition
for which a specific cure period is provided or (ii) a breach incapable of being
cured.
(b) CBS breaches any material term or condition of any Collaboration
Agreement and has failed to cure such breach within the time prescribed for cure
in the Collaboration Agreement concerned. The foregoing cure period will not
apply to breaches incapable of being cured.
(c) CBS: (i) becomes insolvent or unable to pay its debts as they
mature or makes an assignment for the benefit of its creditors; (ii) is the
subject of a voluntary petition in bankruptcy or any voluntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; (iii) becomes the subject of any involuntary petition
in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing; (iv)
is liquidated or dissolved.
8.3 EXCEPT WITH RESPECT TO THIRD PARTY CLAIMS FOR WHICH EACH PARTY SHALL
FULLY INDEMNIFY THE OTHER AS REQUIRED IN THIS AGREEMENT, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL,
"BUSINESS INTERRUPTION" OR ANY LOSS OF PROFITS.
8.4 In the event of a material breach by CBS of this Agreement (which
gives rise to Medscape's right to terminate this Agreement), Medscape's sole and
exclusive remedy (other than for any injunctive relief to prevent CBS as a
licensee under this Agreement from continuing to violate such license) shall be
payment by CBS of the sum of $10,000,000 to Medscape, as liquidated damages and
not as a penalty, for loss of the license hereunder, provided however, that
Medscape terminates the Ad and Promotion Agreement and it terminates this
Agreement.
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<PAGE> 18
8.5 In the event of termination pursuant to paragraph 8.1 or 8.2 of this
Agreement, the rights and obligations of the parties hereto with respect to the
following paragraphs shall not terminate: subparagraphs 2.7(c) and 2.7(d)
(post-expiration use of the Identifying URL), paragraph 2.8 (post-Term use of
the CBS/Medscape URL), paragraph 2.13 (Content and trademark removals),
subparagraph 4.3(a) (indemnification), paragraph 4.5 (New Mark costs), paragraph
7.3 (indemnification), paragraph 9.1 (permitted assignments), paragraph 9.2
(jurisdiction), paragraph 9.5 (notice) and paragraph 9.8 (governing law).
9. GENERAL
9.1 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. No party may
assign its respective rights and obligations, in whole or in part, under this
Agreement without prior written consent of the other party hereto. Any attempt
to assign this Agreement without such consent shall be void and of no effect ab
initio. Notwithstanding the foregoing, a party hereto may assign this Agreement
or any of its rights and obligations hereunder to any entity controlling,
controlled by or under common control with, such party, or to any entity that
acquires such party by purchase of stock or by merger or otherwise, or by
obtaining substantially all of such party's assets (the "Permitted Assignee"),
provided that (i) no such assignment shall relieve the assigning party of any of
its obligations under this Agreement; (ii) with respect to any assignments
effected by Medscape, no such Assignee (or any division thereof) is a CBS
Competitor and (iii) such Permitted Assignee shall agree in writing to be bound
by the terms and conditions hereof.
9.2 Each party hereto irrevocably submits to the exclusive jurisdiction
of (a) the Supreme Court of the State of New York, New York County, and (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby or thereby. Each of CBS and Medscape
agrees to commence any such action, suit or proceeding either in the United
States District Court for the Southern District of New York or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court of the State of New York, New York County. Each of
CBS and Medscape further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 9.2. Each of CBS and Medscape irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby and thereby in (i) the Supreme Court of the State of New York, New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby and thereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
9.3 Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
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<PAGE> 19
9.4 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances, and
such provision will be limited or eliminated to the minimum extent necessary so
that this Agreement shall otherwise remain in full force and effect.
9.5 Except as otherwise set forth in this Agreement (including paragraph
2.4 hereof), all notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to Medscape,
Medscape, Inc.
134 West 29th Street
New York, N.Y. 10001
Fax: (212) 760-3140
Attention: Chief Executive Officer
with copies to:
Brobeck, Phleger & Harrison, LLP
1633 Broadway
New York, N.Y. 10019
Fax: (212) 586-7878
Attention: Alexander D. Lynch, Esq.
and
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
Fax: (212) 336-2222
Attention: John P. Schmitt
(ii) if to CBS,
CBS Corporation
51 West 52nd Street
New York, New York 10019
Fax: (212) 975-9191
Attention: Chief Financial Officer
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<PAGE> 20
with a copy to:
CBS Corporation
51 West 52nd Street
New York, New York 10019
Fax: (212) 597-4031
Attention: General Counsel
9.6 The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment, franchise, or agency
between the parties. Neither party shall have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent.
9.7 No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
9.8 This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to any
other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein.
9.9 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
9.10 This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. By an instrument in
writing, either party hereto may waive compliance by the other party with any
term or provision of this Agreement.
9.11 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State.
9.12 This Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
9.13 The headings contained in this Agreement or in any Exhibit or
Schedule hereto are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning as defined in this Agreement. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
MEDSCAPE, INC. CBS CORPORATION
By: By:
---------------------------------- ----------------------------------
Name: Name:
-------------------------------- --------------------------------
Title: Title:
------------------------------- -------------------------------
CBS WORLDWIDE INC., to the extent specified on page 1.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 22
EXHIBIT A
(Attached to and forming a part of the Agreement, made as of July 4, 1999
between CBS Corporation and Medscape Inc.)
------------------------------------------------------------------
CBS LICENSE GUIDELINES AND RESTRICTIONS
I. GENERAL
Except as set forth in the next sentence, the Consumer Health Site shall not
include the following Content (nor establish links from the Site to the
following Content): (i) cigarettes, (ii) hard liquor, (iii) massage parlors,
(iv) abortion clinics, (v) firearms and ammunition, (vi) head shops, (vii)
lotteries, (viii) gambling, (ix) sexually explicit content, (x) Content that
contains profanity, (xi) Content that denigrates a particular group based on
gender, race, creed, religion, sexual preference or handicap. The Content
described in the preceding sentence, clauses (i), (ii), (iii), (iv), (v), (vi),
(vii), (viii) and (ix) may be included on the Consumer Health Site but only to
the extent they pertain directly to health, healthcare, medical or scientific
issues in the life sciences and do not constitute an advertisement of any goods
or services.
II. CBS HEALTH CONTENT
1. Each party shall notify the other of all errors, omissions, and/or
inaccuracies in transmission or transcription of the CBS Health Content
within twenty-four (24) hours after it becomes aware thereof.
2. If Medscape provides such notice, it shall specify to CBS what action,
if any, it has taken to correct the error, omission and/or inaccuracy.
3. If CBS provides such a notice, or receives such notice, it may specify
reasonable actions to be taken by Medscape to correct the error,
omission and/or inaccuracy or resubmit such content.
4. All CBS Health Content shall be subject to restrictions and instructions
disclosed by CBS at any time.
5. CBS shall have the right to refuse to deliver to Medscape any CBS Health
Content if, in CBS's sole discretion, the CBS Health Content or the use
contemplated, conflicts with, interferes with or is detrimental to CBS's
interests, reputation or business or which might subject CBS to
unfavorable regulatory action, violate any law, infringe the rights of
any person, or subject CBS to liability for any reason.
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<PAGE> 23
6. Medscape shall abide by responsible journalistic standards. No CBS
Health Content shall be used/displayed out of context. Medscape shall
not distort or misrepresent any events, opinions or statements contained
in the CBS Health Content received by Medscape.
III. CROSS-LINKS
1. Medscape shall not establish any links from the Consumer Health Site to
any pornography or obscenity Content.
2. Medscape shall not conduct any cross promotions between the Consumer
Health Site and any Internet Site which uses or exhibits gambling,
pornography or obscenity Content.
IV. OWNERSHIP
1. Medscape shall place the following copyright notice on all CBS Health
Content Pages of the Consumer Health Site:
"(C) [year] Medscape, Inc.
All Rights Reserved
Portions (C) [year] CBS Worldwide Inc.
All Rights Reserved"
2. Medscape and CBS shall mutually develop the procedures for placing any
third party copyright notice on any CBS Health Content Page, provided
however that third party copyright notices may appear on CBS Health
Content Pages if third party copyrighted works appear on such CBS Health
Content Pages.
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<PAGE> 24
EXHIBIT B
(Attached to and forming a part of the Agreement, made as of July 4, 1999
between CBS Corporation and Medscape Inc.)
------------------------------------------------------------------
CBS Marks
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<PAGE> 1
Exhibit 10.36
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
as of this 4th day of July 1999, by and between Medscape, Inc., a Delaware
corporation (the "Company"), and CBS Corporation, a Pennsylvania corporation
(the "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to a Common
Stock Purchase Agreement (the "Purchase Agreement") and certain Ancillary
Agreements (as defined therein) of even date herewith ; and
WHEREAS, in order to induce the Investor to enter into the
Purchase Agreement and the Ancillary Agreements, the Investor and the Company
hereby agree that this Agreement shall govern the rights of the Investor to
cause the Company to register shares of Common Stock held by the Investor and
certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1. Definitions. For purposes of this Agreement:
(a) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 1.9 hereof.
(b) The term "Initial Public Offering" means the first closing of
the sale of securities pursuant to an effective registration statement filed by
the Company under the Securities Act in connection with a firm commitment
underwritten offering of its securities to the general public.
(c) The term "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(d) The term "register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(e) The term "Registrable Securities" means the Common Stock sold
and issued to the Investor pursuant to the Purchase Agreement.
(f) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are Registrable Securities.
(g) The term "SEC" means the Securities and Exchange Commission.
<PAGE> 2
(h) The term "Securities Act" means the Securities Act of 1933, as
amended.
1.2. Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Securities Act in connection with the public offering
of such securities solely for cash (other than an Initial Public Offering or a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a Rule
145 transaction), the Company shall, at such time, promptly give each Holder at
least fifteen (15) days written notice of such registration. Upon the written
request of each Holder given within fifteen days (15) after mailing of such
notice by the Company in accordance with Section 1.16, the Company shall,
subject to the provisions of Section 1.6, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered.
1.3. Obligations of the Company. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
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<PAGE> 3
(f) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
1.4. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company in writing such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be requested by the Company in order to effect the
registration of such Holder's Registrable Securities.
1.5. Expenses of Registration. All reasonable expenses (other than
underwriting discounts and commissions and fees and disbursements of counsel for
the selling Holders) incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel for the Company shall be borne by the Company.
1.6. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.2 to include any of the Holders'
securities in such underwriting unless such Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company (or by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (in
which case, the securities so included shall first be allocated amongst the
existing stockholders of the Company which have exercised their registration
rights pursuant to that certain Amended and Restated Stockholders' Agreement
dated March 5, 1999 by and between the Company and the Stockholders (as defined
therein), as amended, and shall thereafter be apportioned pro rata among the
selling Holders according to the total amount of securities entitled to be
included therein owned by each selling Holder or in such other proportions as
shall mutually be agreed to by such selling Holders). For purposes of the
preceding parenthetical concerning apportionment, for any selling Holder which
is a holder of Registrable Securities and which is a partnership or corporation,
the partners, retired partners and stockholders of such holder, or the estates
and family members of any such partners and retired partners and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
"selling Holder", and any pro-rata reduction with respect to such "selling
Holder" shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such "selling Holder",
as defined in this sentence.
3
<PAGE> 4
1.7. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.8. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law, and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 1.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Section 1.8(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be
4
<PAGE> 5
unreasonably withheld; provided, that, in no event shall any indemnity under
this Section 1.8(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 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
therein, then 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
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section
1.8 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.9. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related
5
<PAGE> 6
obligations) by a Holder to a transferee or assignee of such securities,
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee acquires all of the Registrable
Securities held by the Holder; (c) such transferee or assignee agrees in writing
to be bound by and subject to the terms and conditions of this Agreement; and
(d) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act.
1.10. "Market Stand-Off" Agreement. The Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except common stock included in such
registration; provided, however, that such market stand-off time period shall
not exceed one hundred eighty (180) days.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.10 shall not apply to a registration relating solely to employee
benefit plans on Form S-8 or similar forms which may be promulgated in the
future, or a registration relating solely to a SEC Rule 145 transaction on Form
S-4 or similar forms which may be promulgated in the future.
1.11. Termination of Registration Rights. Notwithstanding anything to
the contrary set forth herein, the covenants set forth in Section 1 and the
Company's obligations thereunder shall terminate and be of no further force and
effect upon the closing of the first Company-initiated registered public
offering of Common Stock of the Company if all shares of Registrable Securities
held by such Holder may immediately be sold under Rule 144 during any 90-day
period, or on such date after the closing of the first Company-initiated
registered public offering of Common Stock of the Company as all shares of
Registrable Securities held by such Holder may immediately be sold under Rule
144 during any 90-day period.
1.12. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. No party may assign its respective rights or obligations, in
whole or in part, under this Agreement without the prior written consent of the
other party hereto. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, a party hereto
may assign this Agreement or any of its rights and obligations hereunder to any
entity controlling, controlled by or under common control with such party, or to
any entity that acquires such party by purchase of stock or by merger or
otherwise, or by obtaining all or substantially all of such party's assets (a
"Permitted Assignee"), provided that (i) no such assignment will relieve the
assigning party of its obligations under this Agreement, (ii) with respect to
assignments effected
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<PAGE> 7
by the Company, no such Permitted Assignee (or any division thereof) is a CBS
Competitor (as defined in the Ancillary Agreements) and (iii) such Permitted
Assignee shall agree in writing to be bound by the terms and conditions hereof.
1.13. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York.
1.14. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
1.15. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
1.16. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
1.17. Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
1.18. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder of any Registrable Securities then outstanding, each future Holder of all
such Registrable Securities, and the Company.
1.19. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
1.20. Aggregation of Stock. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
1.21. Entire Agreement. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
1.22. Termination. This Agreement shall terminate and be of no further
force and effect upon a breach by the Investor of Section 6.4 of the Advertising
and Promotion Agreement of even date herewith by and between the Company and the
Investor.
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<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MEDSCAPE, INC.
By:
-------------------------------------
Name:
Title:
CBS CORPORATION
By:
-------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.39
STANDARD FORM OF LOFT LEASE The Real
Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 26th day of May 1999, between 224 W
30 LLC, having an office at Pier 40, Suite 100 at West Houston and West Streets,
New York, New York 10014, party of the first part, hereinafter referred to as
OWNER, LANDLORD OR LESSOR, and MEDSCAPE, INC., party of the second part,
hereinafter referred to as TENANT or LESSEE,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner Room 400 approximately as described on the location plan annexed hereto
and made a part hereof (the "Demised Premises" or the "Premises") in the
building known as 224 West 30th Street (the "Building") in the Borough of
Manhattan 10001, City of New York, for the term of 4 1/2 months plus 4 month
option (or until such term shall sooner cease and expire as hereinafter
provided) to commence on the 15th day of June nineteen hundred and ninety-nine,
and to end on the 31st day of October, nineteen hundred and ninety-nine both
dates inclusive, at a monthly rental rate of $7,844 ("base rent" or "fixed
monthly rent") plus such other additional rents and charges as may be payable in
accordance with the terms of this Lease, which Tenant agrees to pay in lawful
money of the United States which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment, in equal monthly
installments in advance on the first day of each month during said term, at the
office of Owner or such other place as Owner may designate, without any set off
or deduction whatsoever, except that Tenant shall pay the first _____ monthly
installment(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Occupancy: 1. Tenant shall pay the rent as above and as
hereinafter provided.
Use: 2. Tenant shall use and occupy demised premises
for office.
provided such use is in accordance with the Certificate of Occupancy for the
building, if any, and for no other purpose. Tenant shall not permit the use of
the Demised Premises for residential purposes or overnight accommodations.
<PAGE> 2
2
Alterations: 3. Tenant shall make no changes in or to the
demised premises of any nature without
Owner's prior written consent. Subject to the prior written consent of Owner,
and to the provisions of this article, Tenant, at Tenant's expense, may make
alterations, installations, additions or improvements which are nonstructural
and which do not affect utility services or plumbing and electrical lines, in or
to the interior of the demised premises using contractors or mechanics first
approved by Owner, such approval not to be unreasonably withheld. Tenant shall,
at its expense, before making any alterations, additions, installations or
improvements obtain all permits, approval and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner. Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may reasonably require. If any mechanic's lien is filed against the demised
premises, or the building of which the same forms a part, for work claimed to
have been done for, or materials furnished to, Tenant, whether or not done
pursuant to this article, the same shall be discharged by Tenant within __ days
thereafter, at Tenant's expense, by filing the bond required by law or
otherwise. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Owner on Tenant's behalf, shall, upon installation, become the property of Owner
and shall remain upon and be surrendered with the demised premises unless Owner,
by notice to Tenant no later than twenty days prior to the date fixed as the
termination of this lease, elects to relinquish Owner's right thereto and to
have them removed by Tenant, in which event the same shall be removed from the
demised premises by Tenant prior to the expiration of the lease, at Tenant's
expense. Nothing in this Article shall be construed to give Owner title to or to
prevent Tenant's removal of trade fixtures, moveable office furniture and
equipment, but upon removal of any such from the premises or upon removal of
other installations as may be required by Owner, Tenant shall immediately and at
its expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or removed from the premises by Owner, at Tenant's expense.
Repairs: 4. Owner shall maintain and repair the exterior
of and the public portions of the building.
Tenant shall, throughout the term of this lease, take good care of the demised
premises including the bathrooms and lavatory facilities (if the demised
premises encompass the entire floor of the building) and the windows and window
frames and, the fixtures and appurtenances therein and at Tenant's sole cost and
expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees or licensees, and whether or not arising from such Tenant
conduct or omission, when required by other provisions of this lease, including
Article 6. Tenant shall also
<PAGE> 3
3
repair all damage to the building and the demised premises caused by the moving
of Tenant's fixtures, furniture or equipment. All the aforesaid repairs shall be
of quality or class equal to the original work or construction. If Tenant fails,
after ten days notice, to proceed with due diligence to make repairs required to
be made by Tenant, the same may be made by the Owner at the expense of Tenant,
and the expenses thereof incurred by Owner shall be collectible, as additional
rent, after rendition of a bill or statement therefor. If the demised premises
be or become infested with vermin, Tenant shall, at its expense, cause the same
to be exterminated. Tenant shall give Owner prompt notice of any defective
condition in any plumbing, heating system or electrical lines located in the
demised premises and following such notice, Owner shall remedy the condition
with due diligence, but at the expense of Tenant, if repairs are necessitated by
damage or injury attributable to Tenant, Tenant's servants, agents, employees,
invitees or licensees as aforesaid. Except as specifically provided in Article 9
or elsewhere in this lease, there shall be no allowance to the Tenant for a
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. The provisions of this
Article 4 with respect to the making of repairs shall not apply in the case of
fire or other casualty with regard to which Article 9 hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit,
suffer or allow any window in the demised
premises to be cleaned from the outside in violation of Section 202 of the New
York State Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of 6. Prior to the commencement of the lease
term, if Tenant is then in Law, Fire
Insurance, possession, and at all times thereafter Tenant shall, at Tenant's
sole Floor Loads: cost and expense, promptly comply with all present and future
laws, orders and regulations of all state, federal, municipal and local
governments, departments, commissions and boards and any direction of any public
officer pursuant to law, and all orders, rules and regulations of the New York
Board of Fire Underwriters, or the Insurance Services Office, or any similar
body which shall impose any violation, order or duty upon Owner or Tenant with
respect to the demised premises, whether or not arising out of Tenant's use or
manner of use thereof, or, with respect to the building, if arising out of
Tenant's use or manner of use of the demised premises of the building (including
the use permitted under the lease). Except as provided in Article 30 hereof,
nothing herein shall require Tenant to make structural repairs or alterations
unless Tenant has, by its manner of use of the demised premises or method of
operation therein, violated any such laws, ordinances, orders, rules,
regulations or requirements with respect thereto. Tenant shall not do or permit
any act or thing to be done in or to the demised premises which is contrary to
law, or which will invalidate or be in conflict with public liability, fire or
other policies of insurance at any time carried by or for the benefit of Owner.
Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by
<PAGE> 4
4
the Fire Department, Board of Fire Underwriters, Fire Insurance Rating
Organization and other authority having jurisdiction, and then only in such
manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. If by reason of failure
to comply with the foregoing the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" or rate for the building
or demised premises issued by a body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's judgement, to absorb and prevent
vibration, noise and annoyance.
Subordination: 7. This lease is subject and subordinate to all ground
or underlying leases and to all mortgages which may
now or hereafter affect such leases or the real property of which demised
premises are a part and to all renewals, modifications, consolidations,
replacements and extensions of any such underlying leases and mortgages. This
clause shall be self-operative and no further instrument or subordination shall
be required by any ground or underlying lessor or by any mortgagee, affecting
any lease or the real property of which the demised premises are a part. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Owner may request.
Property-Loss 8. Owner or its agents shall not be liable for any
Loss, Damage, damage to property of Tenant or of others entrusted
Reimbursement, to employees of the building, nor for loss of or
Indemnity: damage to any property of Tenant by theft or
otherwise, nor for any injury or damage to persons or
property resulting from any cause of whatsoever nature, unless caused by or due
to the negligence of Owner, its agents, servants or employees; Owner or its
agents shall not be liable for any damage caused by other tenants or persons in,
upon or about said building or caused by operations in connection of any
private, public or quasi public work. If at any time any windows of the demised
premises are temporarily closed, darkened or bricked up (or permanently closed,
darkened or bricked up, if required by law) for any reason whatsoever including,
but not limited to Owner's own acts, Owner shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
therefor nor abatement or diminution of rent nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction. Tenant shall
indemnify and save harmless Owner against and from all liabilities, obligations,
<PAGE> 5
5
damages, penalties, claims, costs and expenses for which Owner shall not be
reimbursed by insurance, including reasonable attorney's fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's agents, contractors,
employees or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees or licensees. Tenant's liability under this lease extends
to the acts and omissions of its sub-tenant, and any agent, contractor, employee
or licensee of its sub-tenant. In case any action or proceeding is brought
against Owner by reason of any such claim, Tenant, upon timely written notice
from Owner, will, at Tenant's expense, resist or defend such action or
proceeding by counsel approved by Owner in writing, such approval not to be
unreasonably withheld.
Destruction, Fire 9. (a) If the demised premises or any part
and Other Casualty: thereof shall be damaged by fire or other
casualty, Tenant shall give immediate notice
thereof to Owner and this lease shall continue in full force and effect except
as hereinafter set forth. (b) If the demised premises are partially damages or
rendered partially unusable by fire or other casualty, the damages thereto shall
be repaired by and at the expense of Owner and the rent, until such repair shall
be substantially completed, shall be apportioned from the day following the
casualty according to the part of the premises which is usable. (c) If the
demised premises are totally damaged or rendered wholly unusable by fire or
other casualty, then the rent shall be proportionately paid up to the time of
the casualty and thenceforth shall cease until the date when the premises shall
have been repaired and restored by Owner (or sooner reoccupied in part by Tenant
then rent shall be apportioned as provided in subsection (b) above), subject to
Owner's right to elect not to restore the same as hereinafter provided. (d) If
the demised premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within __ days after such fire or casualty, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Owner's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant. Unless Owner shall serve a termination
notice as provided for herein, Owner shall make the repairs and restorations
under the conditions of (b) and (c) hereof, with all reasonable expedition,
subject to delays due to adjustment of insurance claims, labor troubles and
causes beyond Owner's control. After any such casualty, tenant shall cooperate
with Owner's restoration by removing from the premises as promptly as reasonably
possible, all of Tenant's salvageable inventory and movable equipment,
furniture, and other property. Tenant's liability for rent shall resume five (5)
days after written notice from Owner that the premises are substantially ready
for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant
from liability that may exist as
<PAGE> 6
6
a result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectible and to the extent permitted by law, Owner and Tenant each hereby
releases and waives all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain: 10. If the whole or any part of the demised
premises shall be acquired or condemned by
Eminent Domain for any public or quasi public use or purpose, then and in that
event, the term of this lease shall cease and terminate from the date of title
vesting in such proceeding and Tenant shall have no claim for the value of any
unexpired term of said lease.
Assignment, 11. Tenant, for itself, its heirs, distributees,
Mortgage, Etc.: executors, administrators, legal
representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant shall be
deemed an assignment. If this lease be assigned, or if the demised premises or
any part thereof be underlet or occupied by anybody other than Tenant, Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collection shall be deemed a waiver
of this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
Electric Current: 12. Rates and conditions in respect to
submetering or rent inclusion, as the case
may be, to be added in RIDER attached hereto. Tenant covenants and agrees that
at all times its use of electric current shall not exceed the capacity of
<PAGE> 7
7
existing leaders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Owner's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character of
electric service shall in no wise make Owner liable or responsible to Tenant,
for any losses, damages or expenses which Tenant may sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the
demised premises in any emergency at any time, and, at other reasonable times,
to examine the same and to make such repairs, replacements and improvements as
Owner may deem necessary and reasonably desirable to any portion of the building
or which Owner may elect to perform in the premises after Tenant's failure to
make repairs or perform any work which Tenant is obligated to perform under this
lease, or for the purpose of complying with laws, regulations and other
directions of governmental authorities. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the demised premises and
to erect new pipes and conduits therein provided, wherever possible, they are
within walls or otherwise concealed. Owner may, during the progress of any work
in the demised premises, take all necessary materials and equipment into said
premises without the same constituting an eviction nor shall the Tenant be
entitled to any abatement of rent while such work is in progress nor to any
damages by reason of loss or interruption of business or otherwise. Throughout
the term hereof Owner shall have the right to enter the demised premises at
reasonable hours for the purpose of showing the same to prospective purchasers
or mortgagees of the building, and during the last six months of the term for
the purpose of showing the same to prospective tenants and may, during said six
months period, place upon the premises the usual notices "To Let" and "For Sale"
which notices Tenant shall permit to remain thereon without molestation. If
Tenant is not present to open and permit an entry into the premises, Owner or
Owner's agents may enter the same whenever such entry may be necessary or
permissible by master key or forcibly and provided reasonable care is exercised
to safeguard Tenant's property, such entry shall not render Owner or its agents
liable therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom. Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligation hereunder.
Vault, Vault Space, 14. No Vaults, vault space or area, whether or
Area: not enclosed or covered, not within the
property line of the building is leased
hereunder anything contained in or indicated on any sketch, blue print or plan,
or anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state
<PAGE> 8
8
or municipal authority or public utility, Owner shall not be subject to any
liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant, if used by Tenant,
whether or not specifically leased hereunder.
Occupancy: 15. Tenant will not at any time use or occupy
the demised premises in violation of the
certificate of occupancy issued for the building of which the demised premises
are a part. Tenant has inspected the premises and accepts them as is, subject to
the riders annexed hereto with respect to Owner's work, if any. In any event,
Owner makes no representation as to the condition of the premises and Tenant
agrees to accept the same subject to violations, whether or not of record. If
any governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business, Tenant shall be responsible for and shall procure
and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the
contrary notwithstanding, this lease may be
canceled by Owner by sending of a written notice to Tenant within a reasonable
time after the happening of any one or more of the following events: (1) the
commencement of a case in bankruptcy or under the laws of any state naming
Tenant as the debtor; or (2) the making by Tenant of an assignment or any other
arrangement for the benefit of creditors under any state statute. Neither Tenant
nor any person claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the premises
demised but shall forthwith quit and surrender the premises. If this lease shall
be assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.
(b) It is stipulated and agreed that in the
event of the termination of this lease pursuant to (a) hereof, Owner shall
forthwith, notwithstanding any other provisions of this lease to the contrary,
be entitled to recover from Tenant as and for liquidated damages an amount equal
to the difference between the rental reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental value of the
demised premises for the same period. In the computation of such damages the
difference between any installment of rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the demised premises
for the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such
<PAGE> 9
9
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of
the covenants of this lease other than the
covenants or if the demised premises becomes vacant or deserted "or if this
lease be rejected under Section235 of Title 11 of the U.S. Code (bankruptcy
code)"; or if any execution or attachment shall be issued against Tenant or any
of Tenant's property whereupon the demised premises shall be taken or occupied
by someone other than Tenant; or if Tenant shall make material default with
respect to any other lease between Owner and Tenant; or if Tenant shall have
failed, after 5 days written notice, to redeposit with Owner any portion of the
security deposited hereunder which Owner has applied to the payment of any rent
and additional rent due and payable hereunder or failed to move into or take
possession of the premises within five (5) days after the commencement of the
term of this lease, of which fact Owner shall be the sole judge; then in any one
or more of such events, upon Owner serving a written five (5) days notice upon
Tenant specifying the nature of said default and upon the expiration of said 5
days, if Tenant shall have failed to comply with or remedy such default, or if
the said default or omission complained of shall be of a nature that the same
cannot be completely cured or remedied within said 5-day period, and if Tenant
shall not have diligently commenced during such default within such ten (10) day
period, and shall not thereafter with reasonable diligence and in good faith,
proceed to remedy or cure such default, then Owner may serve a written three (3)
days' notice of cancellation of this lease upon Tenant, and upon the expiration
of said three (3) days this lease and the term thereunder shall end and expire
as fully and completely as if the expiration of such three (3) day period were
the day herein definitely fixed for the end and expiration of this lease and the
term thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant shall remain liable as hereinafter provided. Owner shall use
best efforts to relet the premises and shall be obligated to mitigate the
damages to the extent of rent collected upon reletting if when such rent is
collected, and after deducting all relative expenses incurred in such reletting.
(2) If the notice provided for in (1) hereof shall have been given, and the term
shall expire as aforesaid; or if Tenant shall make default in the payment of the
rent reserved herein or any item of additional rent herein mentioned or any part
of either or in making any other payment herein required; then and in any of
such events Owner may without notice, re-enter the demised premises either by
force or otherwise, and dispossess Tenant by summary proceedings or otherwise,
and the legal representative of Tenant or other occupant of demised premises and
remove their effects and hold the premises as if this lease had not been made,
and Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end. If Tenant shall make default hereunder
prior to the date fixed as the commencement of any renewal or extension of this
lease, Owner may cancel and terminate such renewal or extension agreement by
written notice.
Remedies of Owner 18. In case of any such default, re-entry,
and Waiver of expiration and/or dispossess by summary
proceedings or otherwise, (a) the rent, and
additional
<PAGE> 10
10
Redemption: rent, shall become due thereupon and be paid
up to the time of such re-entry, dispossess
and/or expiration, (b) Owner may relet the premises or any part or parts
thereof, either in the name of Owner or otherwise, for a term or terms, which
may at Owner's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this lease and may grant concessions
or free rent or charge a higher rental than that in this lease, (c) Tenant or
the legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
subsequent lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Owner to relet the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with reletting, such as legal expenses, reasonable
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for reletting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re-rental may, at
Owner's option, make such alterations, repairs, replacements, and/or decorations
in the demised premises as Owner, in Owner's sole judgment, considers advisable
and necessary for the purpose of reletting the demised premises, and the making
of such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid. Owner
shall in no event be liable in any way whatsoever for failure to relet the
demised premises, or in the event that the demised premises are relet, for
failure to collect the rent thereof under such reletting, and in no event shall
Tenant be entitled to receive any excess, if any, of such net rents collected
over the sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance or
performance of any material term or covenant
on Tenant's part to be observed or performed under or by virtue of any of the
terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, Owner may immediately or at any time
thereafter and after ten (10) days' notice perform the obligation of Tenant
thereunder. If Owner, in connection with the foregoing or in connection with any
default by Tenant in the covenant to pay rent hereunder, makes any expenditures
or incurs any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
<PAGE> 11
11
proceedings, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages.
Building 20. Owner shall have the right at any time
Alterations and without the same constituting an eviction
Management: and without incurring liability to Tenant
therefor to change the arrangement and or
location of public entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets or other public parts of the building and to change
the name, number or designation by which the building may be known. There shall
be no allowance to Tenant for diminution of rental value and no liability on the
part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner or other Tenant making any repairs in the building or any
such alterations, additions and improvements. Furthermore, Tenant shall not have
any claim against Owner by reason of Owner's imposition of any controls of the
manner of access to the building by Tenant's social or business visitors as the
Owner may deem necessary for the security of the building and its occupants.
No Representations 21. Neither Owner nor Owner's agents have made
by Owner: any representations or promises with respect
to the physical condition of the building,
the land upon which it is erected or the demised premises, the rents, leases,
expenses of operation or any other matter or thing affecting or related to the
demised premises or the building except as herein expressly set forth and no
rights, easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth in the provisions of this lease. Tenant has
inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same "as is" on the date possession
is tendered and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
End of Term: 22. Upon the expiration or other termination of
the term of this lease, Tenant shall quit
and surrender to Owner the demised premises, broom clean, in good order and
condition, ordinary wear and damages which Tenant is not required to repair as
provided elsewhere in this lease excepted, and Tenant shall remove all its
<PAGE> 12
12
property from the demised premises. Tenant's obligation to observe or perform
this covenant shall survive the expiration or other termination of this lease.
If the last day of the term of this Lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it be a
legal holiday in which case it shall expire at noon on the preceding business
day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that
upon Tenant paying the rent and additional
rent and observing and performing all the terms, covenants and conditions, on
Tenant's part to be observed and performed, Tenant may peaceably and quietly
enjoy the premises hereby demised, subject, nevertheless, to the terms and
conditions of this lease including, but not limited to, Article 34 hereof and to
the ground leases, underlying leases and mortgages hereinbefore mentioned.
Failure to Give 24. If Owner is unable to give possession of the
Possession: demised premises on the date of the
commencement of the term hereof, because of
the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or if Owner has not completed any work required
to be performed by Owner, or for any other reason, Owner shall not be subject to
any liability for failure to give possession on said date and the validity of
the lease shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the term of this lease, but the rent payable
hereunder shall be abated (provided Tenant is not responsible for Owner's
inability to obtain possession or complete any work required) until after Owner
shall have given Tenant notice that the premises are substantially ready for
Tenant's occupancy. If permission is given to Tenant to enter into the
possession of the demised premises or to occupy premises other than the demised
premises prior to the date specified as the commencement of the term of this
lease. Tenant covenants and agrees that such occupancy shall be deemed to be
under all the terms, covenants, conditions and provisions of this lease, except
as to the covenant to pay rent. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for
violation of, or to insist upon the strict
performance of any covenant or condition of this lease or of any of the Rules or
Regulations, set forth or hereafter adopted by Owner, shall not prevent a
subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
with knowledge of the breach of any covenant of this lease shall not be deemed a
waiver of such breach and no provision of this lease shall be deemed to have
been waived by Owner unless such waiver be in writing signed by Owner. No
payment by Tenant or receipt by Owner of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of the earliest
<PAGE> 13
13
stipulated rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy in
this lease provided. All checks tendered to Owner as and for the rent of the
demised premises shall be deemed payments for the account of Tenant. Acceptance
by Owner of rent from anyone other than Tenant shall not be deemed to operate as
an attornment to Owner by the payor of such rent or as a consent by Owner to an
assignment or subletting by Tenant of the demised premises to such payor, or as
a modification of the provisions of this lease. No act or thing done by Owner or
Owner's agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial 26. It is mutually agreed by and between Owner
by Jury: and Tenant that the respective parties
hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any summary proceeding
for possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding.
Inability to Perform: 27. This Lease and the obligation of Tenant to
pay rent hereunder and perform all of the
other covenants and agreements hereunder on part of Tenant to be performed shall
in no wise be affected, impaired or excused because Owner is unable to fulfill
any of its obligations under this lease or to supply or is delayed in supplying
any service expressly or impliedly to be supplied or is unable to make, or is
delayed in making any repair, additions, alterations or decorations or is unable
to supply or is delayed in supplying any equipment or fixtures if Owner is
prevented or delayed from so doing by reason of strike or labor troubles or any
cause whatsoever beyond Owner's sole control including, but not limited to,
government preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
Bills and Notices: 28. Except as otherwise in this lease provided,
a bill statement, notice or communication
which Owner may desire or be required to give to Tenant, shall be deemed
sufficiently given or rendered if, in writing, delivered to Tenant personally or
sent by registered or certified mail addressed to Tenant at the building of
which the
<PAGE> 14
14
demised premises form a part or at the last known residence address or business
address of Tenant or left at any of the aforesaid premises addressed to Tenant,
and the time of the rendition of such bill or statement and of the giving of
such notice or communication shall be deemed to be the time when the same is
delivered to Tenant, mailed, or left at the premises as herein provided. Any
notice by Tenant to Owner must be served by registered or certified mail
addressed to Owner at the address first hereinabove given or at such other
address as Owner shall designate by written notice.
Water Charges: 29. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary
lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge)
Owner may install a water meter and thereby measure Tenant's water consumption
for all purposes. Tenant shall pay Owner for the cost of the meter and the cost
of the installation, thereof and throughout the duration of Tenant's occupancy
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense in default of which Owner may cause
such meter and equipment to be replaced or repaired and collect the cost thereof
from Tenant, as additional rent. Tenant agrees to pay for water consumed, as
shown on said meter as and when bills are rendered, and on default in making
such payment Owner may pay such charges and collect the same from Tenant, as
additional rent. Tenant covenants and agrees to pay, as additional rent, the
sewer rent, charge or any other tax, rent, levy or charge which now or hereafter
is assessed, imposed or a lien upon the demised premises or the realty of which
they are part pursuant to law, order or regulation made or issued in connection
with the use, consumption, maintenance or supply of water, water system or
sewage or sewage connection or system. If the building or the demised premises
or any part thereof is supplied with water through a meter through which water
is also supplied to other premises Tenant shall pay to Owner, as additional
rent, on the first day of each month, * % ($ 00) of the total meter charges as
Tenant's portion. Independently of and in addition to any of the remedies
reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and
collect any monies to be paid by Tenant or paid by Owner for any of the reasons
or purposes hereinabove set forth.
* Owner's reasonable charges
Sprinklers: 30. Anything elsewhere in this lease to the
contrary notwithstanding, if the New York
Board of Fire Underwriters or the New York Fire Insurance Exchange or any
bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the fire insurance
rate set by any said Exchange or by any fire insurance
<PAGE> 15
15
company, Tenant shall, at Tenant's expenses, promptly make such sprinkler system
installations, changes, modifications, alterations, and supply additional
sprinkler heads or other equipment as required whether the work involved shall
be structural or non-structural in nature. Tenant shall pay to Owner as
additional rent the sum of $ * 00, on the first day of each month during the
term of this lease, as Tenant's portion of the contract price for sprinkler
supervisory service.
* Owner's reasonable charges
Elevators, Heat, 31. As long as Tenant is not in default under
Cleaning: any the covenants of this lease Owner shall:
(a) provide necessary passenger elevator
facilities **; (b) if freight elevator service is provided, same shall be
provided only on regular business days Monday through Friday inclusive, and on
those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5
p.m.; (c) furnish heat and other services supplied by Owner to the demised
premises, when and as required by law, on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public
portions of the building which are used in common by all tenants. Tenant shall,
at Tenant's expense, keep the demised premises, including the windows, clean and
in order, to the satisfaction of Owner, and for that purpose shall employ the
person or persons, or corporation approved by Owner. Tenant shall pay to Owner
the cost of removal of any of Tenant's refuse and rubbish from the building.
Bills for the same shall be rendered by Owner to Tenant at such time as Owner
may elect and shall be due and payable hereunder, and the amount of such bills
shall be deemed to be, and be paid as, additional rent. Tenant shall, however,
have the option of independently contracting for the removal of such rubbish and
refuse in the event that Tenant does not wish to have same done by employees of
Owner. Under such circumstances, however, the removal of such refuse and rubbish
by others shall be subject to such rules and regulations as, in the judgment of
Owner, are necessary for the proper operation of the building. Owner reserves
the right to stop service of the heating, elevator, plumbing and electric
systems, when necessary, by reason of accident, or emergency, or for repairs,
alterations, replacements or improvements, in the judgment of Owner desirable or
necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed. If the building of which the demised
premises are a part supplies manually operated elevator service, Owner may
proceed with alterations necessary to substitute automatic control elevator
service upon ten (10) days written notice to Tenant without in any way affecting
the obligations of Tenant hereunder, provided that the same shall be done with
the minimum amount of inconvenience to Tenant, and Owner pursues with due
diligence the completion of the alterations.
** twenty-four (24) hours per day
Security: 32. Tenant has deposited with Owner the sum of
$15,688 as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this lease; it is agreed that in the event Tenant defaults in respect of any of
the terms, provisions and conditions of this lease, including, but not limited
to, the payment
<PAGE> 16
16
of rent and additional rent, Owner may use, apply or retain the whole or any
part of the security so deposited to the extent required for the payment of any
rent and additional rent or any other sum as to which Tenant is in default or
for any sum which Owner may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms, covenants and conditions of
this lease, including but not limited to, any damages or deficiency in the
reletting of the premises, whether such damages or deficiency accrued before or
after summary proceedings or other re-entry by Owner. In the event that Tenant
shall fully and faithfully comply with all of the terms, provisions, covenants
and conditions of this lease, the security shall be returned to Tenant after the
date fixed as the end of the Lease and after delivery of entire possession of
the demised premises to Owner. In the event of a sale of the land and building
or leasing of the building, of which the demised premises form a part, Owner
shall have the right to transfer the security to the vendee or lessee and Owner
shall thereupon be released by Tenant from all liability for the return of such
security; and Tenant agrees to look to the new Owner solely for the return of
said security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Owner. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance. Such security deposit shall not
bear any interest.
Captions: 33. The Captions are inserted only as a matter
of convenience and for reference and in no
way define, limit or describe the scope of this lease nor the intent of any
provision thereof.
Definitions: 34. The term "Owner" as used in this lease means
only the owner of the fee or of the
leasehold of the building, or the mortgagee in possession, for the time being of
the land and building (or the owner of a lease of the building or of the land
and building) of which the demised premises form a part, so that in the event of
any sale or sales of said land and building or of said lease, or in the event of
a lease of said building, or of the land and building, the said Owner shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Owner hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties and
the purchaser, at any such sale, or the said lessee of the building, or of the
land and building, that the purchaser or the lessee of the building has assumed
and agreed to carry out any and all covenants and obligations of Owner
hereunder. The words "re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning. The term "rent" includes the annual
rental rate whether so expressed or expressed in monthly installments, and
"additional rent." "Additional rent" means all sums which shall be due to Owner
from Tenant under this lease, in addition to the annual rental rate. The term
"business days" as used in this lease, shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 31 hereof), Sundays
and all days observed by the State or Federal Government as legal holidays and
those
<PAGE> 17
17
designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with respect
to HVAC service.
Adjacent 35. If an excavation shall be made upon land
Excavation- adjacent to the demised premises, or shall
Shoring: be authorized to be made, Tenant shall
afford to the person causing or authorized
to cause such excavation, license to enter upon the demised premises for the
purpose of doing such work as said person shall deem necessary to preserve the
wall or the building of which demised premises form apart from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Owner, or diminution or abatement of rent.
Rules and 36. Tenant and Tenant's servants, employees,
Regulations: agents, visitors, and licensees shall
observe faithfully, and comply strictly
with, the Rules and Regulations annexed hereto and such other and further
reasonable Rules and Regulations as Owner or Owner's agents may from time to
time adopt. Notice of any additional rules or regulations shall be given in such
manner as Owner may elect. In case Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within ten (10)
days after the giving of notice thereof. Nothing in this lease contained shall
be construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as against
any other tenant and Owner shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees.
Glass: 37. Owner shall replace, at the expense of the
Tenant, any and all plate and other glass
damaged or broken from any cause whatsoever in and about the demised premises.
Owner may insure, and keep insured, at Tenant's expense, all plate and other
glass in the demised premises for and in the name of Owner. Bills for the
premiums therefor shall be rendered by Owner to Tenant at such times as Owner
may elect, and shall be due from, and payable by, Tenant when rendered, and the
amount thereof shall be deemed to be, and be paid, as additional rent.
Estoppel 38. Tenant, at any time, and from time to time,
Certificate: upon at least 10 days' prior notice by
Owner, shall execute, acknowledge and
deliver to Owner, and/or to any other person, firm or corporation specified by
Owner, a statement certifying that this Lease is unmodified in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), stating the dates to which
the rent and additional rent have been paid, and stating
<PAGE> 18
18
whether or not there exists any default by Owner under this Lease, and, if so,
specifying each such default.
Directory Board 39. If, at the request of and as accommodation
Listing: to Tenant, Owner shall place upon the
directory board in the lobby of the
building, one or more names of persons other than Tenant, such directory board
listing shall not be construed as the consent by Owner to an assignment or
subletting by Tenant to such person or persons.
Successors and 40. The covenants, conditions and agreements
Assigns: contained in this lease shall bind and inure
to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns.
SEE RIDER ANNEXED HERETO AND A MADE A PART HEREOF,
CONSISTING OF PAGES 1 THROUGH _____;
CONTAINING ARTICLES 41 THROUGH __ AND A LOCATION PLAN.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed
and sealed this lease as of the day and year first above written.
224 W 30 LLC
Witness for Owner: CORP.
By: /s/ SEAL
--------------------
[L.S.]
MEDSCAPE, INC.
Witness for Tenant: CORP.
By: /s/ Tony Plesner SEAL
--------------------
[L.S.]
<PAGE> 19
19
ACKNOWLEDGMENTS
CORPORATE TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came _______________________________ to me known, who being by me duly sworn,
did depose and say that he resides in ___________________________________ that
he is the _____________________ of _______________ the corporation described in
and which executed the foregoing instrument, as TENANT: that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
INDIVIDUAL TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ______________, 19__, before me personally
came ___________________________________ to me known and known to me to be the
individual described in and who, as TENANT, executed the foregoing instrument
and acknowledged to me that ___________ he executed the same.
<PAGE> 20
20
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A
PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any or the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building Smoking or carrying lighted cigars or cigarettes in the elevators of
the building on any fire escapes or open landings or in violation of any
applicable law is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any
<PAGE> 21
21
Tenant, Owner may remove same without any liability and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant by Owner at the expense of such Tenant, and shall be of a size,
color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof without the prior written consent of Owner, which
shall not be unreasonably withheld, and provided Tenant promptly delivers to
Owner copies of keys to all such locks or bolts. Each Tenant must, upon the
termination of his Tenancy, restore to Owner all keys of stores, offices and
toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in
the event of the loss of any keys, so furnished, such Tenant shall pay to Owner
the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice,
drinking water, towel and other similar services, or accept barbering or
bootblacking services in the demised premises, except from persons authorized by
Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting
and peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m. on business days, after 1 p.m. on Saturdays, and at
all hours on Sundays and legal holidays all persons who do not present a pass to
the building signed by Owner. Owner will furnish passes to persons for whom any
Tenant requests same in writing. Each Tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Owner for all acts
of such persons.
<PAGE> 22
22
11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a loft building, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. Tenant shall not use the demised premises in a manner which
disturbs or interferes with other Tenants in the beneficial use of their
premises.
14. Tenant shall not install in or about the Demised Premises or the
Building any public telephones or any vending machines including, but not
limited to, those dispensing food, drinks, or tobacco products. In the event
that Tenant violates the provisions hereof, all fees, commissions or other
compensation to Tenant in connection with the installation and maintenance of
the foregoing equipment shall be deemed to be the property of Owner and shall be
delivered to Owner upon demand.
15. Tenant shall not place a load upon any floor of the Demised
Premises in excess of the load per square foot which such floor was designed to
carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all equipment and machines within the Demised Premises.
All such equipment and machines shall be placed and maintained by Tenant, at its
sole expense, in such a manner and with sufficient foundations and mounts so as
to adequately support the weight and load of same and so as to prevent any
vibration or noise from emanating from the Demised remises which shall be a
violation of any governmental law, rule or regulation, or which shall be
objectionable to Owner or any other tenant or constitute a nuisance to any other
tenant or nearby building.
16. Tenant shall keep all doors from the public corridor to the Demised
Premises closed at all times except for use during ingress and egress from the
Demised Premises. Tenant acknowledges that a violation of the terms hereof may
also constitute a violation of codes, rules or regulations of governmental
authorities having or asserting jurisdiction over the Demised Premises, and
Tenant agrees to indemnify and hold Owner harmless from any fines, penalties,
claims, action or increase in fire insurance rates which might result from
Tenant's violation of the terms hereof.
17. The use in the Demised Premises of any auxiliary heating devices
including, but not limited to, portable electric heaters, heat lamps or other
devices whose principal function at the time of operation is to produce space
heating, is strictly prohibited.
<PAGE> 23
RIDER TO LEASE AGREEMENT BETWEEN 224 W 30 LLC
AS OWNER, AND MEDSCAPE, INC., AS TENANT
224 WEST 30TH STREET, ROOM 400
NEW YORK, NEW YORK 10018
ELECTRICITY
41. Tenant agrees that Owner may furnish redistributed electricity to Tenant on
a "submetering" basis or an a "rent inclusion basis". Electricity and electric
service, as used herein, shall mean any element affecting the generation,
transmission, and/or distribution or redistribution of electricity, including
but not limited to services which facilitate the distribution of service.
A. Rent Inclusion: If and so long as Owner provides electricity to the
demised premises on a rent inclusion basis, Tenant agrees that the fixed annual
rent shall be increased by the amount of the Electricity Rent Inclusion Factor
("ERIF"), as hereinafter defined. Tenant acknowledges and agrees (i) that the
fixed annual rent hereinabove set forth in this lease does not yet, but is to
include an ERIF of 2.50 per rentable square foot to compensate Owner for
electrical wiring and other installations necessary for, and for its obtaining
and making available to Tenant the redistribution of electric current as an
additional service; and (ii) that said ERIF, which shall be subject to periodic
adjustments as hereinafter provided, has been partially based upon an estimate
of the Tenant's connected electrical load, in whatever manner delivered to
Tenant which shall be deemed to be the demand (KW), and hours of use thereof,
which shall be deemed to be the energy (KWH), for ordinary lighting and light
office equipment and the operation of the usual small business machines,
including Xerox or other copying machines (such lighting and equipment are
hereinafter called "Ordinary Equipment") during ordinary business hours
("ordinary business hours" shall be deemed to mean 50 hours per week), with
Owner providing an average connected load of 4 1/2 watts of electricity for all
purposes per rentable square foot. Any installation and use of equipment other
than Ordinary Equipment and/or any connected load and/or energy usage by Tenant
in excess of the foregoing shall result in adjustment of the ERIF as hereinafter
provided. For purposes of this lease the rentable square foot area of the
presently demised premises shall be deemed to be 5537 square feet.
If the cost to Owner of electricity shall have been, or shall be
increased or decreased subsequent to May 1, 1996 (whether such change occurs
prior to or during the term of this Lease), by change in Owner's electric rates
or service classifications, or electricity charges, including changes in market
prices, or by an increase, subsequent to the last such electric rate or service
classification change or market price change, in fuel adjustments or charges of
any kind, or by taxes, imposed on Owner's electricity purchases or on Owner's
electricity redistribution, or for any other such reason, then the aforesaid
ERIF portion of the fixed annul rent shall be changed in the same percentage as
any such change in cost due to changes in electric rates, service
classifications or market prices, and, also Tenant's payment obligation, for
electricity redistribution, shall change from time to time so as to reflect any
such increase in fuel adjustments or charges, and such taxes. Any such
percentage change in Owner's cost due to change in
<PAGE> 24
2
Owner's electric rate or service classifications or market prices, shall be
computed on the basis of the average consumption of electricity for the Building
for the twelve full months immediately prior to the rate change or other such
changes in cost, energy and demand, and any changed methods of or rules on
billing for same, applied on a consistent basis to the new electric rate or
service classification or market price and to the immediately prior existing
electric rate or service classification or market price. If the average
consumption (energy and demand) for the entire Building for said prior (12)
months cannot reasonably be applied and used with respect to changed methods of
or rules on billing, then the percentage increase shall be computed by the use
of the average consumption (energy and demand) for the entire Building for the
first three (3) months after such change, projected to a full twelve (12)
months, so as to reflect the different seasons; and that same consumption, so
projected, shall be applied to the rate and/or service classification or market
price which existed immediately prior to the change. The parties agree that a
reputable, independent electrical consultant firm, selected by Owner, ("Owner's
electrical consultant"), shall determine the percentage change for the changes
in ERIF due to Owner's changed costs, and that Owner's electrical consultant may
from time to time make surveys in the demised premises of the electrical
equipment and fixtures and use of current (i) If such survey shall reflect a
connected electrical load in the demised premises in excess of 4 1/2 watts of
electricity for all purposes per rentable square foot and/or energy usage in
excess of ordinary business hours (each such excess hereinafter called "excess
electricity") then the connected electrical load and/or the hours of use
portion(s) of the then existing ERIF shall be increased by an amount which is
equal to a fraction of the then existing ERIF, the numerator of which is the
excess electricity (i.e. excess connected load and/or excess usage) and the
denominator of which is the connected load and/or the energy usage which was the
basis of the then existing ERIF. Such fractions shall be determined by Owner's
electrical consultant. The fixed annual rent shall then be appropriate adjusted,
effective as of the date of any such change in connected load and/or usage, as
disclosed by said survey (ii) If such survey shall disclose installation and use
of other than Ordinary Equipment, then effective as of the date of said survey,
there shall be added to the ERIF portion of fixed annual rent (computed and
fixed as hereinbefore described) an additional amount equal to what would be
paid under the SC-4 Rate I Service Classification in effect on May 1, 1996 (and
not the time-of-day rate schedule) for such load and usage of electricity, with
the connected electrical load deemed to be the demand (KW) and the hours of use
thereof deemed to be the energy (KWH), as hereinbefore provided, (which addition
to the ERIF shall be increased or decreased by all electricity cost changes of
Owner, as hereinabove provided, from May 1, 1996 through the date of billing).
In no event, whether because of surveys, rates or cost changes, or for
any reason, is the originally specified $2.50 per rentable square foot ERIF
portion of the fixed annual rent (plus any net increase thereof, but not
decrease, by virtue of all electricity rate, service classification or market
price changes of Owner subsequent to May 1, 1996) to be reduced.
B. General Conditions: The determinations by Owner's electrical
consultant shall be binding and conclusive on Owner and Tenant from and after
the delivery of copies of such
<PAGE> 25
3
determinations to Owner and Tenant, unless, within thirty (30) days after
delivery thereof, Tenant disputes such determination. If Tenant so disputes the
determination, it shall, at its own expense, obtain from a reputable,
independent electrical consultant its own determinations in accordance with the
provisions of this Article. Tenant's consultant and Owner's consultant then
shall seek to agree. If they cannot agree within thirty (30) days they shall
choose a third reputable electrical consultant, whose cost shall be shared
equally by the parties, to make similar determinations which shall be
controlling. (If they cannot agree on such third consultant within ten (10)
days, then either party may apply to the Supreme Court in the County of New York
for such appointment.) However, pending such controlling determinations Tenant
shall pay to Owner the amount of additional rent or ERIF in accordance with the
determinations of Owner's electrical consultant. If the controlling
determinations differ from Owner's electrical consultant, then the parties shall
promptly make adjustment for any deficiency owed by Tenant or overage paid by
Tenant.
If all or part of the submetering additional rent of ERIF payable in
accordance with Subdivision A or B of this Article becomes uncollectible or
reduced or refunded by virtue of any law, order or regulations, the parties
agree that, at Owner's option, in lieu of submetering additional rent or ERIF,
and in consideration of Tenant's use of the Building's electrical distribution
system and receipt of redistributed electricity and payment by Owner of
consultants fees and other redistribution costs, the fixed annual rental rate(s)
to be paid under this lease shall be increased by an "alternative charge" which
shall be a sum equal to $2.50 per year per rentable square foot of the demised
premises, changed in the same percentage as any increase in the cost to Owner
for electricity for the entire Building subsequent to May 1, 1996, because of
electric rate, service classification or market price changes, such percentage
change to be computed as in Subdivision B provided.
Owner shall not be liable to Tenant for any loss or damage or expense
which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available to suitable for Tenant's
requirements. Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of existing feeders to the Building or
wiring installation. Tenant agrees not to connect any additional electrical
equipment to the Building electric distribution system, other than lamps,
typewriters and other small office machines which consume comparable amounts of
electricity, without Owner's prior written consent, which consent shall not be
unreasonably withheld. Any riser or risers to supply Tenant's electrical
requirements, upon written request of Tenant, will be installed by Owner, at the
sole cost and expense of Tenant, if, in Owner's sole judgment, the same are
necessary and will not cause permanent damage or injury to the Building or
demised premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants or occupants. In addition to the installation of such
riser or risers, Owner will also at the sole cost and expense of Tenant, install
all other equipment proper and necessary in connection therewith subject to the
aforesaid terms and conditions. The parties acknowledge that they understand
that it is anticipated that electric rates, charges, etc., may be
<PAGE> 26
4
changed by virtue of time-of-day rates or changes in other methods of billing,
and/or electricity purchases and the redistribution thereof, and fluctuation in
the market price of electricity, and that the references in the foregoing
paragraphs to changes in methods of or rules on billing are intended to include
any such changes. Anything hereinabove to the contrary notwithstanding, in no
event is the submetering additional rent or ERIF, or any "alternative charge",
to be less than an amount equal to the total of Owner's payments to public
utilities and/or other providers for the electricity consumed by Tenant (and any
taxes thereon or on redistribution of same) plus 5% thereof for transmission
line loss, plus 15% thereof for other redistribution costs. Owner reserves the
right, at any time upon thirty (30) days' written upon written notice, to change
its furnishing of electricity to Tenant from a rent inclusion basis to a
submetering basis, or vice versa, or to change to the distribution of less than
all the components of the existing service to Tenant. Owner reserves the right
to terminate the furnishing of electricity on a rent inclusion, submetering, or
any other basis at any time, upon thirty (30) day's written notice to the
Tenant, in which event the Tenant may make application directly to the public
utility and/or other providers for the Tenant's entire separate supply of
electric current and Owner shall permit its wires and conduits, to the extent
available and safely capable, to be used for such purpose, but only to the
extent of Tenant's then authorized load. Any meters, risers, or other equipment
or connections necessary to furnish electricity on a submetering basis or to
enable Tenant to obtain electric current directly from such utility and/or other
providers shall be installed at Tenant's sole cost and expense. Only rigid
conduit or electricity metal tubing (EMT) will be allowed. Owner, upon
expiration of the aforesaid thirty (30) days' written notice to the Tenant may
discontinue furnishing the electric current but this lease shall otherwise
remain in full force and effect. If Tenant was provided electricity on a rent
inclusion basis when it was so discontinued, then commencing when Tenant
receives such direct service and as long as Tenant shall continue to receive
such service, the fixed annual rent payable under this lease shall be reduced by
the amount of the ERIF which was payable immediately prior to such
discontinuance of electricity on a rent inclusion basis.
DEFAULT
42. Supplementing Article 17 of this Lease:
A. In the event that Tenant is an arrears for rent or any item of
additional rent, Tenant waives its right, if any, to designate the items against
which payments made by Tenant are to be credited and Owner may apply any
payments made by Tenant to any items which Owner in its sole discretion may
elect irrespective of any designation by Tenant as to the items against which
any such payment should be credited.
B. If Owner, as a result of any default by Tenant in its performance of
any of the terms, covenants, conditions and provisions of this Lease makes any
expenditures or incurs any obligations for the payment of money including,
without limitation, attorneys' fees, then any such cost, expense or disbursement
shall be deemed to be additional rent hereunder and paid by Tenant
<PAGE> 27
5
to Owner upon demand and, if Tenant's lease term shall have expired after such
expenditures or obligations have been incurred, such sums shall be recoverable
from Tenant as damages.
C. Tenant shall not seek to remove and/or consolidate any summary
proceeding brought by Owner with any action commenced by Tenant in connection
with this Lease or Tenant's use and/or occupancy of the Premises.
D. In the event of a default by Owner hereunder, no property or assets
of Owner, or any principals, shareholders, officers, or directors of Owner,
whether disclosed or undisclosed, other than the Building in which the premises
are located and the land upon which the Building is situated, shall be subject
to levy, execution or other enforcement procedure for the satisfaction of
Tenant's remedies under or with respect to this Lease, the relationship of Owner
and Tenant hereunder or Tenant's use and occupancy of the Premises.
DESTRUCTION
43. Supplementing Article 9 of this Lease, in the event that the Premises or
portion thereof are damaged by fire or other casualty and Owner has elected not
to terminate this Lease, Tenant shall cooperate with Owner in the restoration of
the Premises and shall remove from the Premises as promptly as reasonably
possible all of Tenant's salvageable inventory, movable equipment, furniture and
other property. Tenant's liability for rent shall resume ten (10) days after
Owner's restoration work shall have been substantially completed.
INSURANCE
44. A. Tenant shall not violate, or permit the violation of, any condition
imposed by the standard fire insurance policy then issued for office buildings
in the Borough of Manhattan, City of New York, and shall not do, or permit
anything to be done, or keep or permit anything to be kept in the Premises which
would subject Owner to any liability or responsibility for personal injury or
death or property damage, or which would increase the fire or other casualty
insurance rate on the Building or the property therein over the rate which would
otherwise then be in effect (unless Tenant pays the resulting premium as
provided in Section C hereof) or which would result in insurance companies of
good standing refusing to insure the Building or any of such property in amounts
reasonably satisfactory to Owner.
B. Tenant covenants to provide on or before the earlier to occur of (i)
the Commencement Date, and (ii) ten (10) days from the date of this Lease, and
to keep in force during the term hereof the following insurance coverage which
coverage shall be effective on the Commencement Date:
<PAGE> 28
6
(a) A comprehensive policy of liability insurance naming Owner
as an additional insured protecting Owner and Tenant against any liability
whatsoever occasioned by accident on or about the Premises in any appurtenances
thereto. Such policy shall have limits of liability of not less than Five
Million (5,000,000.00) Dollars combined single limit coverage on a per
occurrence basis, including property damage. Such insurance may be carried under
a blanket policy covering the Premises and other locations of Tenant, if any,
provided such a policy contains an endorsement (i) naming Owner as an additional
insured, (ii) specifically referencing the Premises; and (iii) guaranteeing a
minimum limit available for the Premises equal to the limits of liability
required under this Lease;
(b) Fire and Extended coverage in an amount adequate to cover
the cost of replacement of all personal property, fixtures, furnishings and
equipment, including Tenant's Alteration Work located in the Premises.
All such policies shall be issued by companies of recognized
responsibility licensed to do business in New York State and rated by Best's
Insurance reports or any successor publication of comparable standing and
carrying a rate of A+ VIII or better or the then equivalent of such rating, and
all such policies shall contain a provision whereby the same cannot be canceled
or modified unless Owner and any additional insured are given at least thirty
(30) days prior written notice of such cancellation or modification.
Prior to the time such insurance is first required to be
carried by Tenant and thereafter, at least fifteen (15) days prior to the
expiration of any such policies, Tenant shall deliver to Owner either duplicate
originals of the aforesaid policies or certificates evidencing such insurance,
together with evidence of payment for the policy. If Tenant delivers
certificates as aforesaid Tenant, upon reasonable prior notice from Owner, shall
make available to Owner, at the Premises, duplicate originals of such policies
from which Owner may make copies thereof, at Owner's cost. Tenant's failure to
provide and keep in force the aforementioned insurance shall be regarded as a
material default hereunder, entitling Owner to exercise any or all of the
remedies as provided in this Lease in the event of Tenant's default. In
addition, in the event Tenant fails to provide and keep in force the insurance
required by this Lease, at the times and for the durations specified in this
Lease, Owner shall have the right, but not the obligation, at any time and from
time to time, and without notice, to procure such insurance and/or pay the
premiums for such insurance in which event Tenant shall repay Owner within five
(5) days after demand by Owner, as additional rent, all sums so paid by Owner
and any costs or expenses incurred by Owner in connection therewith without
prejudice to any other rights and remedies or Owner under this Lease.
Owner and Tenant shall each endeavor to secure an appropriate
clause in, or an endorsement upon, each fire or extended coverage policy
obtained by it and covering the Building, the Premises or the personal property,
fixtures and equipment located therein or thereon, pursuant to which the
respective insurance companies waive subrogation or permit the
<PAGE> 29
7
insured, prior to any loss, to agree with a third party to waive any claim it
might have against said third party. The waiver of subrogation or permission for
waiver of any claim hereinbefore referred to shall extend to the agents of each
party and its employees and, in the case of Tenant, shall also extend to all
other persons and entities occupying or using the Premises in accordance with
the terms of this Lease. If and to the extent that such waiver or permission can
be obtained only upon payment of an additional charge then, except as provided
in the following two paragraphs, the party benefiting from the waiver or
permission shall pay such charge upon demand or shall be deemed to have agreed
that the party obtaining the insurance coverage in question shall be free of any
further obligations under the provisions hereof relating to such waiver or
permission.
In the event that Owner shall be unable at any time to obtain
one of the provisions referred to above in any of its insurance policies, at
Tenant's option, Owner shall cause Tenant to be named in such policy or policies
as one of the assureds, but if any additional premium shall be imposed for the
inclusion of Tenant as such an assured, Tenant shall pay such additional premium
upon demand. In the event that Tenant shall have been named as one of the
assureds in any of Owner's policies in accordance with the foregoing, Tenant
shall endorse promptly to the order of Owner, without recourse, any check, draft
or order for the payment of money representing the proceeds of any such policy
or any other payment growing out of or connected with said policy and Tenant
hereby irrevocably waives any and all rights in and to such proceeds and
payments.
In the event that Tenant shall be unable at any time to obtain
one of the provisions referred to above in any of its insurance policies, Tenant
shall cause Owner to be named in such policy or policies as one of the assureds,
but if any additional premium shall be imposed for the inclusion of Owner as
such an assured, Owner shall pay such additional premium upon demand or Tenant
shall be excused from its obligations under this paragraph with respect to the
insurance policy or policies for which such additional premiums would be
imposed. In the event that Owner shall have been named as one of the assureds in
any of Tenant's policies in accordance with the foregoing, Owner shall endorse
promptly to the order of Tenant, without recourse, any check, draft or order for
the payment of money representing the proceeds of any such policy or any other
payment growing out of or connected with said policy and Owner hereby
irrevocably waives any and all rights in and to such proceeds and payments.
Subject to the foregoing provisions of this Section B, and
insofar as may be permitted by the terms of the insurance policies carried by
it, each party hereby releases the other with respect to any claim (including a
claim for negligence) which it might otherwise have against the other party for
loss, damages or destruction with respect to its property by fire or other
casualty (including rental value or business interruption, as case may be)
occurring during the term of this Lease.
C. If, by reason of a failure of Tenant to comply with the provisions
of Article 14 or Section A above, the rate of fire insurance with extended
coverage on the Building or equipment
<PAGE> 30
8
or other property of Owner shall be higher than it otherwise would be, Tenant
shall reimburse Owner, on demand, for that part of the premiums for fire
insurance and extended coverage paid by Owner because of such failure on the
part of Tenant.
D. Owner may, from time to time, require that the amount of the
insurance to be provided and maintained by Tenant under Section B hereof be
increased so that the amount thereof adequately protects Owner's interest, but
in no event in excess of $1,000,000.00 subject only to a material change in
Tenant's particular manner of use or occupancy of the Premises after the date
set for the commencement of the term of this Lease.
E. A schedule or make up of rates for the Building or the Premises, as
the case may be, issued by the New York Fire Insurance Rating Organization or
other similar body making rates for fire insurance and extended coverage for the
premises concerned, shall be conclusive evidence of the facts therein stated and
of the several items and charges in the fire insurance rate with extended
coverage then applicable to such premises.
F. Each policy evidencing the insurance to be carried by Tenant under
this Lease shall contain a clause that such policy and the coverage evidenced
thereby shall be primary with respect to any policies carried by Owner, and that
any coverage carried by Owner shall be excess insurance.
SUBORDINATION
45. Supplementing the provisions of Article 7 of this Lease:
A. Tenant hereby consents to any and all assignment of Owner's interest
in this lease to any ground lessor or mortgagee as collateral security for the
payment of the ground rent or monies due under any mortgage. Tenant agrees to
attorn to and pay rent to any such ground lessor's or mortgagee in accordance
with the provisions of any such assignment.
B. Tenant agrees that no act, or failure of act, on the part of Owner,
which would entitle Tenant under terms of this Lease, or by law to be relived of
Tenant's obligations hereunder or to terminate this lease, shall result in a
release or termination of such obligations or termination of this lease unless
(i) Tenant shall have first given written notice of Owner's act or failure to
act to the ground lessors under all then existing ground leases, and to all then
existing mortgagees who have requested such notice from Tenant, specifying the
act or failure to act on the part of Owner which could or would given basis to
Tenant's rights and (ii) the ground lessors and such mortgagees, after receipt
of such notice, have failed or refused to correct or cure the condition
complained of within a reasonable time thereafter but nothing herein contained
shall be deemed to impose any obligation on any ground lessor or such mortgagee
to correct or cure any such condition.
<PAGE> 31
9
C. This Lease may not be modified or amended so as to reduce the rent,
shorten the term, or otherwise materially affect the rights of Owner hereunder,
or be canceled or surrendered except as may be otherwise expressly provided in
subparagraph (B) of this Article, without the prior written consent in each
instance of the ground lessors and of any mortgagees whose mortgages shall
require such consent. Any such modification, agreement, cancellation or
surrender made without such prior written consent shall be null and void.
INDEMNIFICATION
46. Except in the case of negligent or willful acts or omissions by Owner or
Owner's agents, Tenant shall indemnify and save harmless Owner and Owner's
agents against and from (i) any and all claims against Owner or such agents of
whatever nature arising from any act, omission or negligence of Tenant, its
contractors, licensees, agents, servants, employees, invitees or visitors; (ii)
all claims against Owner or such agents arising from any accident, injury or
damage whatsoever caused to any person or to the property of any person and
occurring during the term of this Lease in or about the Demised Premises, or
occurring outside of the Demised Premises but anywhere within or about the Real
Property, where such accident, injury or damage results or is claimed to have
resulted from any act, omission or negligence of Tenant or Tenant's agents,
employees, invitees or visitors; (iii) any breach, violation or non-performance
of any covenant, condition or agreement in this Lease set forth and contained on
the part of Tenant to be fulfilled, kept, observed and performed; and (iv) any
cost, liability or responsibility for the payment of any sales tax with respect
to any installations, furniture, furnishings, fixtures or other improvements
located, installed or constructed in the Demised Premises, or the filing of any
tax return in connection therewith (although Owner agrees to execute any such
return if required by law) regardless of whether such tax is imposed upon Owner
or Tenant. This indemnity and hold harmless agreement shall include indemnity
from and against any and all liability, fines, suit, demands, costs and expenses
of any kind or nature incurred in or in connection with any such claims or
proceedings brought thereon, and the defense thereof. The provisions of this
Article 46 shall survive the expiration or earlier termination of the term of
this Lease.
CHANGES AND ALTERATIONS
47. Anything in Article 3 of this Lease to the contrary notwithstanding, Owner
will not unreasonably withhold or delay approval of written requests of Tenant
to make nonstructural interior alterations, decorations, additions and
improvements (herein referred to as "alterations") in the Demised Premises,
provided that such alterations do not affect utility services or plumbing and
electrical lines or other systems of the Building. All alterations shall be
performed in accordance with the following conditions:
<PAGE> 32
10
(a) All alterations costing more than $5,000.00 shall be performed in
accordance with plans and specifications first submitted to Owner for its prior
written approval. Owner shall be given, in writing, a good description of all
other alterations.
(b) All alterations shall be done in a good and workmanlike manner.
Tenant shall, prior to the commencement of any such alterations, at its sole
cost and expense, obtain and exhibit to Owner any governmental permit required
in connection with such alterations.
(c) All alterations shall be done in compliance with all other
applicable provisions of this Lease and with all applicable laws, ordinances,
directions, rules and regulations of governmental authorities having
jurisdiction, including, without limitation, the Americans with Disabilities Act
of 1990 and New York City Local Law No. 57/87 and similar present or future
laws, and regulations issued pursuant thereto, and also New York City Local Law
No. 76 and similar present or future laws, and regulations issued pursuant
thereto, on abatement, storage, transportation and disposal of asbestos, which
work, if required, shall be effected at Tenant's sole cost and expense, by
contractors and consultants approved by Owner and in strict compliance with the
aforesaid rules and regulations and with Owner's rules and regulations thereon.
(d) All work shall be performed with union labor having the proper
jurisdictional qualifications or by such other duly licensed and insured
professionals whose presence at the Demised Premises or the Building will not
result in any labor unrest, slowdown or strike by labor rendering services
within, or delivering goods to, the Building.
(e) Tenant shall keep the Building and the Demised Premises free and
clear of all liens for any work or material claimed to have been furnished to
Tenant or to the Demised Premises.
(f) Prior to the commencement of any work by or for Tenant, Tenant
shall furnish to Owner certificates evidencing the existence of the following
insurance:
(i) Workmen's compensation insurance covering all persons
employed for such work and with respect to whom death or bodily injury claims
could be asserted against Owner, Tenant or the Building.
(ii) Broad form general liability insurance written on an
occurrence basis naming Tenant as an insured and naming Owner an its designee as
additional insureds, with limits of not less than $3,000,000 combined single
limit for personal injury in any one occurrence, and with limits of not less
than $500,000 for property damage (the foregoing limits may be revised from time
to time by Owner to such higher limits as Owner from time to time reasonably
requires). Tenant, at its sole cost and expense, shall cause all such insurance
to be maintained at all time when the work to be performed for or by Tenant is
in progress. All such insurance shall be obtained from a company authorized to
do business in New York and shall provide that it cannot be canceled without
thirty (30) days prior written notice to Owner. All policies, or
<PAGE> 33
11
certificates therefor, issued by the insurer and bearing notations evidencing
the payment of premiums, shall be delivered to Owner. Blanket coverage shall be
acceptable, provided that coverage meeting the requirements of this Article is
assigned to Tenant's location at the Demised Premises.
(g) All work to be performed by Tenant shall be done in a manner which
will not unreasonably interfere with or disturb other tenants and occupants of
the Building.
(h) Any alterations or other work and installations in and for the
Demised Premises, which shall be consented to by Owner as provided herein, if
effected on Tenant's behalf at Tenant's request by Owner, its agents or
contractors, and shall be paid for by Tenant promptly when billed, at cost plus
ten (10%) percent thereof for supervision and overhead, plus ten (10%) percent
for general conditions, as additional rent hereunder.
(i) Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not undertake or permit any third party to install or affix to the
Demised Premises or the Building any work of fine art, modern art, visual art or
sculpture including, but not limited to, any work of art or visual art which may
be subject to, or which may subject Owner or the Building to, the Visual Artists
Act of 1990, 7 U.S.C. Sec. 101 et seq., unless Tenant shall first obtain the
written consent of Owner. In the event Tenant undertakes or permits any of the
foregoing without first obtaining Owner's written consent, Tenant acknowledges
and agrees that same shall constitute a trespass upon the property of Owner, and
Owner shall be entitled to remove same without incurring any liability to Tenant
or the owner or creator of such work.
LANDLORD'S WORK
48. (a) Tenant has examined and agrees to accepts the leased premises in their
existing condition and state of repair and understands that no work is to be
performed by Landlord, except that Landlord, at its expense and with reasonable
dispatch, subject to delay by causes beyond its control or by the action or
inaction of Tenant, shall perform the work as set forth on the schedule attached
hereto and made a part hereof.
The performance by landlord of the above work ("Landlord's
Work") is expressly conditioned upon compliance by Tenant with all the terms and
conditions of this lease, including payment of rent.
(b) Any changes in or additions to the work and installations
mentioned in paragraph (a) above which shall be consented to by Landlord as
provided in Article 7 hereof, and further changes in or additions to the demised
premises after said work has been completed which shall be so consented to shall
be made by Landlord, or its agents, but shall be paid for by Tenant promptly
when billed at cost plus 10% for insurance and overhead and plus 10% for profit,
and in
<PAGE> 34
12
the event of the failure of Tenant so to pay for said changes or additions,
Landlord at its option may consider the cost thereof, plus the above
percentages, as additional rent payable by Tenant and collectible as such
hereunder, as part of the rent for the next ensuing months.
(c) If Landlord's Work is substantially completed prior to the
date first above set forth for the commencement of the term, then the term shall
commence on the day (10) ten days following notice of such completion of
Landlord's Work or upon occupancy of the Premises and shall expire on date set
forth above as the expiration date. If the commencement term is other than the
first day of a month, rent for the first month shall be adjusted.
(d) If Landlord's Work is not substantially completed and is
delayed by acts, omissions or changes made or requested by Lessee, its agents,
designers, architects or any other party acting or apparently acting on Lessee's
behalf, the Tenant shall pay as hereinbefore provided rent and additional rent
on a per diem basis for each day of delay of Landlord's substantial completion
caused by Tenant or any of the aforementioned parties.
(e) Landlord's Work shall be deemed to be substantially
completed notwithstanding that (i) minor or non-material details of
construction, mechanical adjustment or decoration remain to be performed,
provided, that said "Punch List Items" shall be completed by Landlord within a
reasonable time thereafter or (ii) a portion of Landlord's Work is incomplete
because construction scheduling requires that such work be done after incomplete
finishing or after other work to be done by or on behalf of Tenant is completed.
SIGNS
49. Supplementing Article 5 of the Rules and Regulations, Tenant shall be
permitted to affix a suitable sign, plaque or applied lettering on the entrance
door to the Demised Premises, subject to the prior written approval or Owner,
which shall not be unreasonably withheld or delayed in each instance with
respect to location, number, type, size, shape and design thereof, and subject,
also, to compliance by Tenant, at its sole cost and expense, with all applicable
laws, rules and regulations of any governmental authority.
BROKERAGE
50. Tenant represents and warrants to Owner that it did not consult or negotiate
with any broker, finder, or consultant with regard to the Demised Premises other
than none and that no other broker, finder or consultant participated in
procuring this Lease. Tenant hereby indemnifies and agrees to defend, indemnify
and hold Owner, its members, directors, officers, employees, agents and servants
harmless from any and against suit, action, proceeding, controversy, claim or
demand whatsoever at law or in equity that may be instituted against Owner by
anyone for
<PAGE> 35
13
recovery of compensation or damages for procuring this Lease or by reason of a
breach or purported breach of the representations and warranties contained
herein.
FAILURE TO PROVIDE CONSENT
51. In no event shall Tenant be entitled to make, and Tenant shall not make and
hereby waives, any claim for money damages (nor shall Tenant claim any money
damages by way of set-off, counterclaim or defense) based upon any claim or
assertion by Tenant that Owner has unreasonably withheld, delayed or conditioned
its consent or approval to any request by Tenant made under a provision of this
Lease. Tenant acknowledges and agrees that in such event, its sole remedy shall
be an action or proceeding to enforce any such provision, or for specific
performance or declaratory judgment.
ASSIGNMENT AND SUBLETTING
52. Supplementing Article 11 of this Lease:
A. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successor and assigns, expressly
covenants that it shall not assign, mortgage or encumber this Lease, nor
underlet, or suffer or permit the Demised Premises or any part thereof to be
used or occupied by others, without the prior written consent of Owner in each
instance. The merger or consolidation of a corporate Tenant or subtenant where
the net worth of the resulting or surviving corporation is less than the net
worth of the lessee or sublessee immediately prior to such merger or
consolidation shall be deemed an assignment of this lease or such sublease. If
this Lease be assigned, or if the Demised Premises or any part thereof by
underlet or occupied by anybody other than Tenant, Owner may, after default by
Tenant, collect rent from the assignee, undertenant or occupant, and apply the
net amount collected to the rent herein reserved, but no assignment,
underletting, occupancy or collection shall be deemed a waiver of the provisions
hereof, the acceptance of the assignee, undertenant or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Owner to an assignment or
underletting shall not in any way be construed to relieve Tenant from obtaining
the express consent in writing of Owner to any further assignment or
underletting. In no event shall any permitted sublessee assign or encumber its
sublease or further sublet all or any portion of its sublet space, or otherwise
suffer or permit the sublet space or any part thereof to be used or occupied by
others, without Owner's prior written consent in each instance. A modification,
amendment or extension of a sublease shall be deemed a sublease. If any lien is
filed against the Demised Premises or the building of which the same form a part
for brokerage services claimed to have been performed for Tenant, whether or not
actually performed, the same shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's expense, by filing the bond required by law, or
otherwise, and paying any other necessary
<PAGE> 36
14
sums, and Tenant agrees to indemnify Owner and its agents and hold them harmless
from and against any and all claims, losses or liability resulting from such
lien for brokerage services rendered.
B. If Tenant desires to assign this Lease or to sublet all or any
portion of the Demised Premises, it shall first submit in writing to Owner the
documents described in Section C hereof, and shall offer in writing (i) with
respect to a prospective assignment, to assign this Lease to Owner without any
payment of monies or other consideration therefor, or, (ii) with respect to a
prospective subletting, to sublet to Owner the portion of the Demised Premises
involved ("Leaseback Area") for the term specified by Tenant in its proposed
sublease or, at Owner's option for the balance of the term of the Lease less one
(1) day, and at the lower of (a) Tenant's proposed subrental or (b) at the same
rate of fixed rent and additional rent, and otherwise on the same terms,
covenants and conditions (including provisions relating to escalation rents), as
are contained herein and as are allocable and applicable to the portion of the
Demised Premises to be covered by such subletting. The offer shall specify the
date when the Leaseback Area will be available to Owner, which date shall be in
no event earlier than forty-five (45) days nor later than one hundred twenty
(120) days following the acceptance of the offer. If an offer of sublease is
made, and if the proposed sublease will result in all or substantially all of
the Demised Premises being sublet, then Owner shall have the option to extend
the term of its proposed sublease for the balance of the term of this Lease less
one (1) day.
Owner shall have a period forty-five (45) days from receipt of
such offer to either accept or reject the same. If Owner shall accept such offer
Tenant shall then execute and deliver to Owner, or to anyone designated or named
by Owner, an assignment or sublease, as the case may be, in either case in a
form reasonably satisfactory to Owner's counsel.
If a sublease is so made it shall expressly:
(a) permit Owner to make further subleases of all or any part
of the Leaseback Area and (at no cost or expense to Tenant) to make and
authorize any and all changes, alterations, installations and improvements in
such space as necessary;
(b) provide the Tenant will at all times permit reasonably
appropriate means of ingress to and egress from the Leaseback Area;
(c) negate any intention that the estate created under such
sublease be merged with any other estate held by either of the parties;
(d) provide that Owner shall accept the Leaseback Area "as is"
except that Owner, at Tenant's expense, shall perform all such work and make all
such alterations as may be required physically to separate the Leaseback Area
from the remainder of the Demised Premises
<PAGE> 37
15
and to permit lawful occupancy, it being intended that Tenant shall have no
other cost or expense in connection with the subletting of the Leaseback Area;
(e) provide that at the expiration of the term of such sublease
Tenant will accept the Leaseback Area in its then existing condition subject to
the obligations of Owner to make such repairs thereto as may be necessary to
preserve the Leaseback Area in good order and condition, ordinary wear and tear
excepted.
Owner shall indemnify and save Tenant harmless from all obligations
under this Lease as to the Leaseback Area during the period of time it is so
sublet, except for fixed annual rent and additional rent, if any, due under the
within Lease, which are in excess of the rents and additional sums due under
such sublease.
Subject to the foregoing, performance by Owner, or its designee,
under a sublease of the Leaseback Area shall be deemed performance by Tenant of
any similar obligation under this Lease and any default under any such sublease
shall not give rise to a default under a similar obligation contained in this
Lease, nor shall Tenant be liable for any default under this Lease or deemed to
be in default hereunder if such default is occasioned by or arises from any act
or omission of the tenant under such sublease or is occasioned by or arises from
any act or omission of any occupant holding under or pursuant to any such
sublease.
C. If Tenant requests Owner's consent to a specific assignment or
subletting, it shall submit in writing to Owner (i) the name and address of the
proposed assignee or sublessee, (ii) a duly executed counterpart of the proposed
agreement of assignment or sublease, (iii) reasonably satisfactory information
as to the nature and character of the business of the proposed assignee or
sublessee and as to the nature of its proposed use of the space, and (iv)
banking, financial or other credit information relating to the proposed assignee
or sublessee reasonably sufficient to enable Owner to determine the financial
responsibility and character of the proposed assignee or sublessee.
D. If Owner shall not have accepted Tenant's offer, as provided in
Section B, then Owner will not unreasonably withhold or delay its consent to
Tenant's request for consent to such specific assignment or subletting. Any
consent of Owner under this Article shall be subject to the terms of this
Article and conditioned upon there being no default by Tenant, beyond any grace
period, under any of the terms, covenants and conditions of this Lease at the
time that Owner's consent to any such subletting or assignment is requested and
on the date of the commencement of the term of any proposed sublease or the
effective date of any proposed assignment.
E. Tenant understands and agrees that no assignment or subletting shall
be effective unless and until Tenant, upon receiving any necessary Owner's
written consent (and unless it was theretofore delivered to Owner) causes a duly
executed copy of the sublease or assignment to be delivered to Owner within ten
(10) days after execution thereof. Any such sublease shall provide
<PAGE> 38
16
that the sublessee shall comply with all applicable terms and conditions of this
Lease to be performed by the Tenant hereunder. Any such assignment of lease
shall contain an assumption by the assignee of all of the terms, covenants and
conditions of this Lease to be performed by the Tenant.
F. Anything herein contained to the contrary notwithstanding:
1) Tenant shall not advertise (but may list with brokers) its space
for assignment or subletting at a rental rate lower than the greater of the then
Building rental rate for such space or the rental rate then being paid by Tenant
to Owner.
2) The transfer of a majority of the issued and outstanding capital
stock of, or a controlling interest in, any corporate tenant or subtenant of
this Lease or a majority of the total interest in any partnership tenant or
subtenant, however, accomplished, and whether in a single transaction or in a
series of related or unrelated transactions, shall be deemed an assignment of
this Lease or of such sublease. The transfer of outstanding capital stock of any
corporate tenant, for purposes of this Article, shall not include sale of such
stock by persons other than those deemed "insiders" within the meaning of the
Securities Exchange Act of 1934 as amended, and which sale is effected through
"over-the-counter market" or through any recognized stock exchange.
3) No assignment or subletting shall be made:
(a) To any person or entity which shall at that time be a tenant,
subtenant or other occupant of any part of the Building of which the Demised
Premises form a part, or who dealt with Owner or Owner's agent (directly or
through a broker) with respect to space in the Building during the six (6)
months immediately preceding Tenant's request for Owner's consent;
(b) By the legal representatives of the Tenant or by a person to
whom Tenant's interest under this Lease passes by operation of law, except in
compliance with the provisions of this Article;
(c) To any person or entity for the conduct of a business which
is not in keeping with the standards and the general character of the Building
of which the Demised Premises form a part.
G. Anything hereinabove contained to the contrary notwithstanding, the
offer back to Owner provisions of Section B hereof shall not apply to, and Owner
will not unreasonably withhold or delay its consent to an assignment of this
Lease, or sublease of all or part of the Demised Premises, to the parent of
Tenant or to a wholly-owned subsidiary of Tenant or of said parent of Tenant,
provided the net worth of transferor or sublessor, after such transaction, is
<PAGE> 39
17
equal to or greater than its net worth immediately prior to such transaction,
and provided also that any such transaction complies with the other provisions
of this Article.
H. Anything hereinabove contained to the contrary notwithstanding, the
offer back to Owner provisions of Section B hereof shall not apply to, and Owner
will not unreasonably withhold or delay its consent to an assignment of this
Lease, or sublease of all or part of the Demised Premises, to any corporation
(i) to which substantially all the assets of Tenant are transferred or (ii) into
which Tenant may be merged or consolidated, provided that the net worth,
experience and reputation of such transferee or of the resulting or surviving
corporation, as the case may be, is equal to or greater than the net worth
experience and reputation of Tenant and of any guarantor of this Lease
immediately prior to such transfer and provided, also, that any such transaction
complies with the other provisions of this Article.
No consent from Owner shall be necessary under Subdivisions G and
H hereof where (i) reasonably satisfactory proof is delivered to Owner that the
net worth and other provisions of G or H, as the case may be, and the other
provisions of this Article, have been satisfied and (ii) Tenant, in a writing
reasonably satisfactory to Owner's attorneys, agrees to remain primarily liable
jointly and severally with any transferee or assignee, for the obligations of
Tenant under this Lease.
I. If Owner shall not have accepted any required Tenant's offer and/or
Tenant effects any assignment or subletting, then Tenant thereafter shall pay to
Owner a sum equal to fifty (50%) percent of (a) any rent or other consideration
paid to Tenant by any subtenant which (after deducting the cost of Tenant, if
any, in effecting the subletting, including reasonable alteration costs,
commissions and legal fees) is in excess of the rent allocable to the subleased
space which is then being paid by Tenant to Owner pursuant to the terms hereof,
and (b) any other profit or gain (after deducting any necessary expenses
incurred) realized by Tenant from any such subletting or assignment. All sums
payable hereunder by Tenant shall be payable to Owner as additional rent upon
receipt thereof by Tenant.
J. In no event shall Tenant be entitled to make, nor shall Tenant make,
any claim, and Tenant hereby waives any claim, for money damages (nor shall
Tenant claim any money damages by way of set-off, counterclaim or defense) based
upon any claim or assertion by Tenant that Owner has unreasonably withheld or
unreasonably delayed its consent or approval to a proposed assignment or
subletting as provided for in this Article. Tenant's sole remedy shall be an
action or proceeding to enforce any such provision, or for specific performance,
injunction or declaratory judgment.
K. Notwithstanding anything contained herein to the contrary, Tenant
shall be permitted to license "desk space" within the Demised Premises for uses
permitted under this Lease only, provided that same does not result in the
addition of more than three (3) additional persons as occupants within the
Demised Premises, and provided that any such "desk space" so
<PAGE> 40
18
licensed by Tenant is not separately demised, does not have separate means of
ingress to or egress from the public corridors of the Building, and Owner is
delivered prompt notice of each such "desk space" license agreement entered into
by Tenant, including but not limited to, the identification of each proposed
licensee.
TAX ESCALATION
53. Tenant shall pay to Owner, as additional rent, Tenant's share of tax
escalation in accordance with this Article:
A. Definitions: For the purpose of this Article, the following
definitions shall apply:
(i) "Assessed Valuation" shall mean the amount for which the Real
Property is assessed pursuant to applicable provisions of the New York City
Charter and of the Administrative Code of the City of New York for the purpose
of imposition of Taxes.
(ii) "Base Taxes"* shall mean the Taxes payable for the Tax Year
commencing on July 1, 1998 and ending on June 30, 1999.*
* will not take effect until March 1, 2000
(iii) The term "Tenant's Share" for purposes of computing tax
escalation shall mean three and 9/10 percent (3.9%). The Tenant's Share has been
computed on the basis of a fraction, the numerator of which is the deemed
rentable square foot area of the presently Demised Premises and the denominator
of which is the deemed total rentable square foot area of the office space in
the Building. The parties acknowledge and agree that the total rentable square
foot area of the presently Demised Premises shall be deemed to be 5537 square
feet and that the rentable square foot area of the office space in the Building
shall be deemed to be 140,000 square feet.*
* will not take effect until March 1, 2000
(iv) Will not take effect until March 1, 2000.
(v) "Real Property" shall mean the Building, together with the
parcel of land upon which it stands.
(vi) "Taxes" shall mean the aggregate amount of real estate taxes
and any general or special assessments (exclusive of penalties and interest
thereon) imposed upon the Realty Property including, without limitation, (i)
assessments made upon or with respect to any "air" and "development" rights now
or hereafter appurtenant to or affecting the Real Property; (ii) any fee, tax or
charge imposed by any governmental authority for any vaults, vault space or
other
<PAGE> 41
19
space within or outside the boundaries of the Real Property; and (iii) any taxes
or assessments levied after the date of this Lease in whole or in part for
public benefits to the Real Property or the Building) without taking into
account any discount that Owner may receive by virtue of any early payment of
Taxes; provided, that if because of any change in the taxation of real estate,
any other tax or assessment, however denominated (including, without limitation,
any franchise, income, profit, sales, use, occupancy, gross receipts or rental
tax) is imposed upon Owner or the owner of the Real Property of the Building, or
the occupancy, rents or income therefrom, in substitution for any of the
foregoing Taxes, such other tax or assessment shall be deemed part of Taxes
computed as if Owner's sole asset were the Real Property. With respect to any
Tax Year, all expenses, including attorneys' fees and disbursements, experts'
and other witnesses' fees incurred in contesting the validity or amount of any
Taxes or in obtaining a refund of Taxes shall be considered as part of the Taxes
for such Tax Year. Anything contained herein to the contrary notwithstanding,
Taxes shall not be deemed to include (w) any taxes on Owner's income, (x)
franchise taxes, (y) estate or inheritance taxes or (z) any similar taxes
imposed on Owner, unless such taxes are levied, assessed or imposed in lieu of
or as a substitute for the whole or any part of the taxes, assessments, levies,
impositions which now constitute Taxes.
(vii) "Tax Statement" shall mean a statement in setting forth the
Taxes payable for a Tax Year, the Base Taxes and the Tax Payment.
(viii) "Tax Year" shall mean the period July 1 through June 30 (or
such other period as hereinafter may be duly adopted by the governmental
authority then imposing taxes as its fiscal year for real estate tax purposes,
any portion of which occurs during the term of this Lease).
B. (1) If the Taxes payable for any Tax Year shall represent an
increase above the Base Taxes, then Tenant shall pay as additional rent for such
Tax Year and continuing thereafter until a new Tax Statement is rendered to
Tenant, Tenant's Share of such increase (the "Tax Payment") as shown on the Tax
Statement with respect to such Tax Year. The Taxes shall be computed initially
on the basis of the Assessed Valuation in effect at the time of the Tax
Statement is rendered (as the Taxes may have been settled or finally adjudicated
prior to such time) regardless of any then pending application, proceeding or
appeal respecting the reduction of any such Assessed Valuation, but shall be
subject to subsequent adjustment as provided in Section C.(1) of this Article
13.
(2) At any time during or after the Term, Owner may render to Tenant
a Tax Statement or Tax Statements. Tenant shall pay to Owner the Tax Payment
shown thereon or in four (4) equal installments. The first such installment
shall be paid for each tax year in advance on June 1. The following three (3)
installments for each such Tax Year shall be paid in advance on September 1,
December 1 and March 1, respectively. If Taxes are required to be paid on any
other date or dates than as presently required by the governmental authority
imposing the same, then the due date of the installments of the Tax Payment
shall be correspondingly accelerated or
<PAGE> 42
20
revised so that the Tax Payment (or the four (4) installments thereof) is due at
least thirty (30) days prior to the date the corresponding payment is due to the
governmental authority. If the Tax Year established by the applicable
governmental authority shall be changed, any Taxes for the Tax year prior to
such change which are included within the new Tax Year and which were the
subject of a prior Tax Statement shall be apportioned for the purpose of
calculating the Tax Payment payable with respect to such new Tax Year. Owner's
failure to render a Tax Statement during or with respect to any Tax Year shall
not prejudice Owner's right to render a Tax Statement during or with respect to
any subsequent Tax Year, and shall not eliminate or reduce Tenant's obligation
to make Tax Payments for such Tax Year. Whenever so requested, but no more than
once a year, Owner shall furnish Tenant with a reproduced copy of the tax bill
(or receipted bill) for the Taxes for the current or next succeeding Tax Year
(if theretofore issued by the governmental authority).
C. (1) Only Owner shall be eligible to institute tax reduction or other
proceedings to reduce the Assessed Valuation. In the event that, after a Tax
Statement has been sent to Tenant, an Assessed Valuation which had been utilized
in computing the Taxes for a Tax Year is reduced (as a result of settlement,
final determination of legal proceedings or otherwise), and as a result thereof
a refund of Taxes is actually received by or on behalf of Owner, then, promptly
after receipt of such refund, Owner shall send Tenant a Tax Statement adjusting
the Taxes for such Tax Year (taking into account any expense for which Owner is
otherwise compensated through the proceeds of insurance or is otherwise
compensated by any tenant (including Tenant) of the Building for services in
excess of the services Owner is obligated to furnish to Tenant hereunder) and
setting forth Tenant's Share of such refund and Tenant shall be entitled to
receive such Share either, at Owner's option, by way of a credit against the
Fixed Annual Rent next becoming due after the sending of such Tax Statement or
by a refund to the extent no further Fixed Annual Rent is due; provided,
however, that Tenant's Share of such refund shall be limited to the portion of
the Tax Payment, if any, which Tenant had theretofore paid to Owner attributable
to increases in Taxes for the Tax Year to which the refund is applicable on the
basis of the Assessed Valuation before it had been reduced. Anything herein to
the contrary notwithstanding, Tenant shall not pay any expenses, including
attorneys' fees and disbursements, experts' and other witnesses' fees, incurred
by Owner in contesting the validity or amount of the Assessed Valuation which
had been utilized in computed the Base Taxes.
(2) Should the Base Taxes be reduced by final determination of legal
proceedings, settlement or otherwise, then, the Tax Payment theretofore paid or
payable hereunder for all Tax Years shall be recomputed on the basis of such
reduction, and Tenant shall pay to Owner as additional rent, within ten (10)
days after being billed therefor, any deficiency between the amount of such Tax
Payment as theretofore computed and the amount thereof due as the result of such
recomputations.
D. The expiration or termination of this Lease during any Tax Year
shall not affect the rights or obligations of the parties hereto respecting any
payments of Tax Payments for such Tax Year, and any Tax Statement relating to
such Tax Payment may be sent to Tenant subsequent to,
<PAGE> 43
21
and all such rights and obligations shall survive, any such expiration or
termination. In determining the amount of the Tax Payment for the Tax Year in
which the term of this Lease shall expire, the payment of the Tax Payment for
the Tax Year, including any adjusted Taxes owing under this Article 43, shall be
prorated based on the number of days of the term of this Lease which fall within
such Tax Year, as the case may be. Any payments due under such Tax Statement
shall be payable within twenty (20) days after such Statement is sent to Tenant.
E. Tenant shall pay to Owner, on demand, as additional rent, a sum
equal to Tenant's Share of any business improvement district assessment payable
by the Building or the building project. The payment of any business improvement
district assessment shall be allocated to Tenant on a direct pass-through basis,
and such payment shall not be reduced notwithstanding any reduction in real
estate taxes.
HEAT
54. Supplementing Article 31 of this Lease, Tenant acknowledges and agrees
that by virtue of the configuration of the elevators, freight elevators and
entrance doors to the Demised Premises, as well as the manner of Tenant's use of
the Demised Premises and said elevators and freight elevators, Owner may be
unable to maintain in the Demised Premises the average minimum temperature
required by applicable local laws. However, should the average minimum
temperature in the Building satisfy the requirements set b applicable local
laws, Tenant acknowledges and agrees that Owner shall be deemed to have
furnished sufficient heat to the Demised Premises and Tenant waives any claims
of any sort whatsoever against Owner in connection therewith.
OBLIGATION TO VACATE AND SURRENDER THE DEMISED PREMISES
55. Supplementing Article 22 of this Lease, Tenant acknowledges and agrees
that it shall surrender possession of the Demised Premises to Owner upon the
expiration or sooner termination of the term of this Lease, vacant and in broom
clean condition, free of all occupancies, trade fixtures and personal property.
Tenant hereby indemnifies and saves Owner harmless from and against any and all
claims, costs, losses and liabilities resulting from any delay by Tenant
whatsoever in timely surrendering possession of the Demised Premises in
compliance with all of the terms, covenants and conditions of this Lease
including, but not limited to, those arising from any claims made by any
succeeding tenant or occupant founded upon such delay. Tenant acknowledges and
agrees that the damage to Owner as a result of any such failure by Tenant will
be significant and will exceed the monthly installment of fixed monthly rent and
additional rent previously payable under this Lease, and will likely be
incapable of accurate measurement. As a consequence thereof, Tenant agrees that
in the event of such failure by Tenant as set forth at length above, at the
option of Owner in lieu of the indemnity set forth above, Tenant shall pay to
<PAGE> 44
22
Owner as liquidated damages for each calendar month and for each portion thereof
after the expiration or sooner termination of the term of this Lease until such
time as Tenant surrendered to Owner possession of the Demised Premises in
compliance with all of the terms, covenants and conditions of this Lease, a sum
equal to two (2) times the average monthly installment of fixed annual rent and
additional rent payable under this Lease during the last six (6) months of the
term hereof. The provisions of this Article shall survive the expiration or
sooner termination of the term of this Lease.
RIGHT TO RELOCATE
56. INTENTIONALLY DELETED
RENT CONTROL
57. In the event the fixed annual rent or additional rent or any part
thereof provided to be paid by Tenant under the provisions of this Lease shall
become uncollectible or shall be reduced or required to be reduced or refunded
by virtue of any Federal, State, County or City law, order or regulation, or by
any direction of a public officer or body pursuant to law, or the order, rules,
code or regulations of any organization or entity formed pursuant to law,
whether such organization or entity be public or private, then Owner, at its
option, may at any time thereafter terminate this Lease, by not less than thirty
(30) days' written notice to Tenant, on a date set forth in said notice, in
which event the term of this Lease shall expire on the date fixed in said notice
as if the said date were the date originally fixed herein for the termination of
the term of this Lease. Owner shall not have the right so to terminate this
Lease if Tenant within such period of thirty (30) days shall in writing lawfully
agree that the rentals herein reserved are a reasonable rental and agree to
continue to pay said rentals, if such agreement by Tenant shall then be legally
enforceable by Owner.
AIR CONDITIONING
58. Tenant shall not install or operate any air conditioning equipment in
the Demised Premises (either existing or hereinafter installed) without Owner's
prior written consent. In the event that Owner consent to the foregoing, Tenant
shall maintain and repair such equipment at its sole cost and expense solely by
means of licensed third party maintenance and repair contractor(s) approved in
advance by Owner, and Tenant shall reimburse Lessor, in accordance with Article
1 of this Lease, for electricity consumed by such equipment in its operation.
The type, capacity and manner and location of installation of air conditioning
equipment shall be subject solely to Owner's discretion and prior consent, and
such equipment shall be sized in capacity to accommodate reasonable usage and
occupancy density for the Demised Premises. Owner
<PAGE> 45
23
reserves the right to suspend Tenant's operation of all air conditioning
equipment at any time that Owner, in its judgment, deems it necessary to do so
for reasons such as accidents, emergencies or any situation arising in the
Demised Premises or within the Building, including but not limited to, reasons
relating to repairs, alterations or improvements in the Demised Premises or the
Building, and Tenant agrees that any such suspension in the operation of the air
conditioning equipment may continue until such time as the reason causing such
suspension has been remedied and that Owner shall not be held responsible or be
subject to any claim by Tenant due to such suspension. Tenant further agrees
that Owner shall have no responsibility or liability to Tenant if operation of
the air conditioning equipment is prevented by strikes or accidents or any cause
beyond Owner's reasonable control, or by the orders or regulations of any
federal, state, county or municipal authority or by failure of the equipment or
electric current, steam and/or water or other required power source.
LATE FEES
59. Supplementing Article 25 of this Lease, in the event that any payment
provided for in this Lease from Tenant to Owner shall become overdue for a
period in excess of ten (10) days then, at Owner's option, in each such instance
a late charge of $100.00 shall become due and payable to Owner, as additional
rent. In the event that any such overdue payment shall remain overdue for a
period in excess of twenty-five (25) days, then in that instance such late
charge shall no longer be $100.00 but shall instead be the greater of (i)
$100.00 or (ii) two (2%) percent of the overdue payment for each month of
portion thereof that such payment remains outstanding, from the date such
payment was first due until the date such payment is made in full.
MISCELLANEOUS
60. A. This Lease constitutes the entire agreement between the parties
hereto as to the matters addressed herein and may not be modified except by a
writing signed by Owner and Tenant. No prior statement, agreement or
understanding, oral or written, express or implied, as to these same matters
shall have any further force or effect, and are hereby merged herein. Tenant
agrees that it is not relying on any representations or agreements other than
those contained in this Lease, which shall not be modified or canceled except by
written instrument subscribed by both parties. The covenants, conditions and
agreements contained in this Lease shall bind and inure to the benefit of Owner
and Tenant and their respective heirs, distributees, executors, administrators,
successors and their permitted assigns.
B. This Rider modifies and supersedes certain provisions of the printed
portion of this Lease. In the event any term, covenant, condition or agreement
contained in this Rider shall conflict or be inconsistent with any term,
covenant, condition or agreement contained in the printed portion of the Lease,
then the parties agree that the Rider provision shall prevail.
<PAGE> 46
24
C. This Lease shall be construed without regard to any presumption or
other rule requiring construction against the party causing this Lease to be
drafted.
RENT CREDIT
61. If and so long as Tenant is not in default under this Lease beyond any
grace period, Tenant shall be entitled to a rent credit in the amount of $ N/A,
to be applied against the N/A monthly installment of fixed monthly rent (without
electricity) accruing under this Lease after possession of the premises is
delivered to Tenant, so that Tenant shall occupy the Demised Premises free of
such fixed monthly rent for that period; except that Tenant shall nevertheless
be obligated, from and after the commencement date of the term, to pay
additional rents hereunder and to make payment of the ERIF portion of the fixed
monthly rent due under Article __ hereof, (anything in said Article __ to the
contrary notwithstanding).
Anything contained hereinabove to the contrary notwithstanding, if
Tenant at any time during the term of this Lease, breaches any material
covenant, condition or provision of this Lease and fails to cure such breach
within any applicable grace period, and provided that this Lease is terminated
by Landlord because of such material default, then, in addition to all other
damages and remedies herein provided and to which Landlord may be otherwise
entitled, Landlord shall also be entitled to the repayment in full of any rent
credit theretofore enjoyed by Tenant, which repayment Tenant shall make upon
demand therefor.
PORTER'S WAGE ESCALATION
62. Tenant shall pay to Landlord, as additional rent, Porter's Wage
escalation, in accordance with this Article:
(a) Definitions: For the purpose of this Article the following
definitions shall apply: *
*no porter wage escalation until March 1, 2000.
(i) The term "Base Rate" as hereinafter set forth for the
determination of Porter's Wage escalation, shall mean the labor rate determined
as hereinafter provided, as of the first day of the calendar year 1999 (the
"base year"). The term "comparative year" shall mean each calendar year, or a
portion thereof, subsequent to the base year.
(ii) For purposes of this Lease, the rentable square foot area of
the presently demised premises shall be deemed to be 5537 square feet.
<PAGE> 47
25
(iii) The term "labor rate" shall mean the average of the minimum
regular hourly wage rate, plus any taxes applicable thereto, (1) for a porter
and (2) for an office cleaner, determined as follows:
(1) The minimum regularly hourly wage rate for porters with 5
years service in Class A office buildings, from time to time established by
Agreement between the Realty Advisory Board on Labor Relations, Inc., and Local
32B-32J of the Building Service Employees International Union AFL-CIO or by the
successors to either or both of them; (this rate shall be used in computations
under this Article whether or not porters' wages are actually paid by or for the
Landlord or by independent contractors who furnish such services to the Demised
Premises or to the Building).
(2) The minimum regular hourly wage rate for office cleaners
with 5 years service in Class A office buildings, from time to time established
by agreement between the Realty Advisory Board on Labor Relations, Inc., and
Local 32B-32J of the Building Service Employees International Union AFL-CIO or
by the successors to either or both of them; (this rate shall be used in
computations under this Article whether or not office cleaners' wages are
actually paid by or for the Landlord or by independent contractors who furnish
such services to the Demised Premises or to the Building).
(3) As used herein, the term "porters" and the term "office
cleaners" shall mean, respectively, that classification of employee engaged in
the general maintenance and operation of office buildings most nearly comparable
to that classification now applicable to porters or office cleaners, as the case
may be, in the 1993-1995 Agreement with said Local 32B-32J (which
classification is presently termed "others" in said Agreement).
(4) If any such union agreement shall require the regular
employment of porters or office cleaners on days or during hours when overtime
or other premium pay rates are in effect, then the minimum "regular hourly wage
rate" as used above and subject to the other adjustments provided for herein,
shall be deemed to mean the average hourly wage rate for the hours in a calendar
week during which porters or office cleaners are required to be regularly
employed (e.g., if, for example, as of October 1, 1997, an agreement between RAB
and Local 32B-32J shall require the regular employment of building porters for
forty (40) hours during a calendar week at a regular hourly rate of $3.00 for
the first thirty (30) hours, and premium or overtime hourly wage rate of $4.50
for the remaining ten hours, then the regular straight time hourly wage rate
under this Article, as of October 1, 1998, shall be deemed to be the total
weekly wage rate of $135.00, divided by the total number of required hours of
employment, forty (40) or $3.375).
(5) Subject to the provisions herein contained, and at
Landlord's option, computation of the minimum regular hourly wage rate shall be
based on the number of hours that a porter or office cleaner is expected to work
in any comparison year. In determining
<PAGE> 48
26
said number of hours, Landlord may make reasonable estimates of the average
number of days or hours not worked by an average porter or office cleaner, where
such days or hours are not specified by, or vary with individual circumstances
pursuant to, the union agreement.
If there is no such union agreement in effect at any time
during or prior to the term of this Lease, then all computations and payments
shall, nevertheless, be made, but shall be on the basis of the regular hourly
wage rates, plus any taxes applicable thereto, actually being paid or accrued at
such time by the Landlord or by the contractor performing the cleaning services
for Landlord for such porters or office cleaners, as the case may be, or, if
there are no such persons employed at the building, then such computation shall
be based on the wage rates (with fringe benefits) or porters or office cleaners,
as the case may be, at the Empire State Building, New York, New York.
Appropriate retroactive adjustment shall thereafter be made if and when the
minimum regular hourly wage rate pursuant to such agreement is finally
determined; provided, however, that if as of the last day of any comparative
year, no union agreement shall be in effect January 1, occurring in such
comparative year, then the minimum regular hourly wage rate computed as
aforedescribed shall for all purposes hereof be deemed to be the minimum regular
hourly wage rate for purposes of this Article, and that no retroactive
adjustment shall be made with respect thereto.
(b) The parties acknowledge that the labor rate is intended to be
an index in the nature of a cost of living or other such index; it is not
intended to reflect the actual costs of wages or expenses for the building.
(c) In the event that the labor rate in effect for any comparative
year following the base year shall exceed the Base Rate, then Tenant shall pay
to Landlord, as additional rent for such comparative year, an amount equal to
the product obtained by multiplying (i) the rentable square foot area of the
Demised Premises, by (ii) one cent for each cent (including any fraction of a
cent) by which the labor rate in effect during such comparative year exceeds the
Base Rate. Subject to subdivision (f) hereof, each such annual amount of
additional rent shall commence to be payable, in equal monthly installment, as
of the first day of the period for which such labor rate shall have changed;
and, after Landlord shall furnish Tenant with an escalation statement relating
to such increase in the labor rate, all monthly installments of rent shall
contain an item of additional rent equal to one-twelfth (1/12) of the annual
amount determined above, until a new change shall take place in the labor rate.
In the event that the escalation statement is furnished to the Tenant after the
commencement or effective date of any change in the labor rate, there shall be
promptly paid by Tenant to Landlord the amount theretofore accrued or allocable
to the period prior to the furnishing of the said escalation statement. In the
event that the labor rate shall be changed or shall change more frequently than
once a year, the adjustment hereunder shall similarly be made by Landlord in an
additional escalation statement furnished by Landlord, so as to reflect such
change in the monthly installments, as of the effective date of each such
change.
<PAGE> 49
27
(d) The statements furnished by Landlord to Tenant, as provided
above, shall be prepared in reasonable detail by Landlord. The statements thus
furnished to Tenant shall constitute a final determination as between Landlord
and Tenant of the labor rate and Porter's Wage escalation additional rent for
the period represented thereby, unless Tenant within sixty (60) days after they
are furnished shall in writing challenge their accuracy or their
appropriateness, which notice shall specify the particular respects in which the
statement is inaccurate or inappropriate. If Tenant shall so dispute said
statements then, pending the resolution of such dispute, Tenant shall pay the
additional rent to Landlord in accordance with the statements furnished by
Landlord.
(e) In no event shall the fixed annual rent payable under this
Lease be reduced by virtue of this Article.
(f) If the rent commencement date of this Lease is not the first
day of the first comparative year, then the additional rent due hereunder for
such first comparative year shall be a proportionate share of said additional
rent for the entire comparative year, said proportionate share to be based upon
the length of time that this Lease's term will be in existence during such first
comparative year. Upon the date of any expiration or termination of this Lease
(except termination because of Tenant's default), whether the same be the date
hereinabove set forth for the expiration of the term or any prior or subsequent
date, a proportionate share of said additional rent for the comparative year
during which such expiration or termination occurs shall immediately become due
and payable by Tenant to Landlord. The said proportionate share shall be based
upon the length of time that this Lease shall have been in existence during such
comparative year. Prior to or promptly after said expiration or termination,
Landlord shall compute the additional rent, if any, due from Tenant as
aforesaid, which computations shall either be based on that comparative year's
labor rate(s) or be an estimate, based upon the most recent statements
theretofore prepared by Landlord and furnished to Tenant. If an estimate is
used, then Landlord thereafter shall cause statements to be prepared on the
basis of that comparative year's actual labor rate(s) and, upon Landlord's
furnishing such statement to Tenant. Landlord and Tenant shall make appropriate
adjustments of amounts then owing or estimated payments theretofore made.
(g) Notwithstanding any cancellation or termination of the term of
this Lease prior to the Lease's expiration date (except in the case of a
cancellation by mutual agreement or Tenant's cancellation as of right) Tenant's
obligation t pay any and all additional rent under this Article shall continue
and shall cover all periods up to the Lease expiration date. Landlord's and
Tenant's obligation to make the adjustments referred to in subdivision (f) above
shall survive any expiration or sooner termination of the term of this Lease.
(h) Any delay or failure of Landlord in billing for any additional
rent payable as hereinabove provided shall not constitute a waiver of or in any
way impair the continuing obligation of Tenant to pay such additional rent
hereunder.
<PAGE> 50
28
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date set forth on the first page hereof.
224 W 30 LLC MEDSCAPE, INC.
Owner Tenant
By: /s/ By: /s/ Tony Plesner
----------------------------- --------------------------------
<PAGE> 51
29
Rider to Lease
224 West 30th Street, Suite 407 Medscape Inc.
Demolish existing non-structural walls and patch areas where walls have been
removed. No paint. Wall with electrical panel will remain.
Wash Concrete floor. No scraping or patching. Remove carpet.
Test and repair as necessary existing light fixtures, outlets and switches.
Test and repair as necessary existing sprinkler system.
Clean and paint existing mens and ladies bathroom.
Tenant shall have the right to use existing air conditioners. If they are not
operational, Tenant will have to repair or replace at own expense.
Plans for any renovation must be submitted to the building owner for approval.
Approval will not be unreasonably withheld.
Landlord will provide one front door key to allow 24 hour 7 day a week access to
Tenant.
Tenant shall give additional 1 month's rent equal to $7,844 that will apply for
his last month's rent.
Tenant has the right to renew as from October 31st 1999 for 4 months, month by
month.
/s/ Don Eckert
- --------------------------
/s/ BK
- --------------------------
<PAGE> 52
MEMORANDUM
TO: NEW TENANT OF 224 WEST 30TH STREET
FROM: 224 W 30 LLC
- --------------------------------------------------------------------------------
As you commence occupancy of your space within the building, please be reminded
of the following points, all of which already appear in your lease agreement:(1)
1. Prior to your initial occupancy of your space, in order to relocate any
of your equipment and furnishings to your space in the building, you
must deliver to the Landlord written verification of all insurance
required by your lease.
2. Prior to your commencing any work within your space (alterations,
additions, improvements, etc.), you must deliver to the Landlord plans
for its review and you must obtain the Landlord's written approval of
such plans, all as required by your lease.
3. Prior to changing the existing locks or installing new locks on any
doors at your space, you must obtain the Landlord's written approval,
and promptly thereafter, you must deliver to the Landlord copies of
keys to all such locks.
4. There is NO SMOKING permitted within the building, even and especially
at fire stairs and landings. This constitutes not only a violation of
year lease, but also a violation of law.
5. Rubbish will be collected by the Landlord every other business evening,
and must be collected by you within your space and deposited by you
after 5:00 PM on the days of the Landlord's collection only, in sealed,
plastic garbage bags in a neat and orderly manner immediately adjacent
to the front door to your space. The Landlord will not collect any
rubbish which is oversized, hazardous or extraordinary in quantity; you
shall be responsible for the disposal of any such rubbish in compliance
with all laws, rules and regulations. (If the Landlord does choose to
dispose of such rubbish at your request, you shall be charged at the
rate of $60.00 per cubic yard of such rubbish as additional rent under
your lease).
- ------------
(1) This memorandum and the contents hereof are in no way intended
to modify or amend any lease agreement for space in the
building known as 224 West 30th Street, New York, New York.
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
33-77665 of Medscape, Inc. on Form S-1 of our report dated February 12, 1999
(May 17, 1999 as to Note 13) relating to the consolidated financial statements
of Medscape, Inc. and of our report dated April 9, 1999 relating to the
financial statements of Healthcare Communications Group, LLC appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
July 8, 1999
