<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1999
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
WEBMD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 7375 58-2277528
(PRIMARY STANDARD INDUSTRIALCLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
(STATE OR OTHER IDENTIFICATION NUMBER)
JURISDICTION
OFINCORPORATION OR
ORGANIZATION)
-------------------
400 THE LENOX BUILDING
3399 PEACHTREE ROAD NE
ATLANTA, GEORGIA 30326
(404) 479-7600
(404) 479-7651 (FACSIMILE)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
JEFFREY T. ARNOLD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
WEBMD, INC.
400 THE LENOX BUILDING
3399 PEACHTREE ROAD NE
ATLANTA, GEORGIA 30326
(404) 479-7600
(404) 479-7651 (FACSIMILE)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------
COPIES TO:
GLENN W. STURM, ESQ. NORA L. GIBSON, ESQ.
JAMES WALKER IV, ESQ. MICHAEL A. ZUERCHER, ESQ.
TERRESA R. TARPLEY, ESQ. PETER S. BUCKLAND, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, BROBECK, PHLEGER & HARRISON LLP
L.L.P. SPEAR STREET TOWER
FIRST UNION PLAZA, SUITE 1400 ONE MARKET
999 PEACHTREE STREET, N.E. SAN FRANCISCO, CALIFORNIA 94105
ATLANTA, GEORGIA 30309 (415) 442-0900
(404) 817-6000 (415) 442-1010 (FACSIMILE)
(404) 817-6050 (FACSIMILE)
-------------------
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 of
1933, check the following box. [_]
If this form is filed to register additional securities for any 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, 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, 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,
check the following box. [_]
-------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED (1) REGISTRATION FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, no par value..................... $55,000,000 $15,290
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE +
+SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 28, 1999
[LOGO OF WEBMD, INC. APPEARS HERE}
SHARES
COMMON STOCK
WebMD, Inc. is offering shares of its Common Stock. This is our initial
public offering, and no public market currently exists for our shares. We have
applied for approval for quotation on the Nasdaq National Market under the
symbol "WBMD" for the shares we are offering. We anticipate that the initial
public offering price will be between $ and $ .
--------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to WebMD............................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Certain Selling Shareholders have granted the underwriters a 30-day option to
purchase up to an additional shares of Common Stock to cover any over-
allotments. If the Underwriters exercise this right in full, the Public
Offering Price will total $ , the Underwriting Discounts and Commissions will
total $ , the Proceeds to WebMD will total $ and the Proceeds to the
Selling Shareholders will total $ . BancBoston Robertson Stephens Inc.
expects to deliver the shares of Common Stock to purchasers on , 1999.
--------------
BANCBOSTON ROBERTSON STEPHENS
HAMBRECHT & QUIST
E*TRADE SECURITIES
The date of this Prospectus is , 1999.
<PAGE>
[ARTWORK TO BE INCLUDED WILL INCLUDE THE
COMPANY'S LOGO, SCREEN SHOTS OF THE
COMPANY'S WEB SITE, A DESCRIPTION OF
CERTAIN OF THE COMPANY'S SERVICE OFFERINGS
AND LOGOS OF CERTAIN OF THE COMPANY'S
STRATEGIC PARTNERS.]
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES
ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY
AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, THE
"COMPANY," "WEBMD," "WE," "US" AND "OUR" REFER TO WEBMD, INC. AND ITS
SUBSIDIARIES (UNLESS THE CONTEXT OTHERWISE REQUIRES).
UNTIL , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 3
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 27
Dividend Policy.......................................................... 27
Capitalization........................................................... 28
Dilution................................................................. 29
Selected Consolidated Financial Data..................................... 31
Unaudited Pro Forma Financial Information................................ 33
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 37
Business................................................................. 46
Management............................................................... 60
Certain Transactions..................................................... 67
Principal and Selling Shareholders....................................... 69
Description of Capital Stock............................................. 70
Shares Eligible for Future Sale.......................................... 75
Underwriting............................................................. 77
Legal Matters............................................................ 78
Experts.................................................................. 78
Additional Information................................................... 79
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------------
Unless otherwise indicated, all information in this prospectus assumes:
(a) the conversion of each outstanding share of WebMD's Series B, C, D and
E Common Stock and Series A, B and C Preferred Stock into one share of
Common Stock upon the completion of this offering;
(b) a -for-1 stock dividend which we will declare prior to the
effectiveness of this offering; and
(c) that the underwriters do not exercise their over-allotment option and
that no other person exercises any other outstanding option or warrant.
WebMD SM, Web-MD SM and WebMD OnCall SM are service marks of the Company. We
have applied for federal registration of "WebMD," "Web-MD" and "WebMD OnCall."
This prospectus also refers to other trademarks and trade names of WebMD and
other companies.
2
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is only a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus carefully, and
you should consider the information set forth under "Risk Factors" and in the
Consolidated Financial Statements and Notes, before deciding to invest in
shares of our Common Stock. This prospectus contains forward-looking statements
that involve risks and uncertainties. The words expects, intends, believes,
anticipates, estimates, may, could, should, would, will, plans, hopes and
similar expressions identify forward-looking statements. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under
"Risk Factors" and elsewhere in this prospectus.
THE COMPANY
We provide a branded, integrated, Web-based solution for the administrative,
communications and information needs of healthcare professionals and for the
healthcare information needs of consumers. Our Web destination consists of two
distinct, linked Web sites -- a subscription-based site for healthcare
professionals and our free Health and Wellness Center site for consumers. WebMD
is a single point of access to electronic data interchange services, enhanced
communications services, branded healthcare content and other Web-based
offerings. For healthcare professionals, we designed WebMD to simplify
healthcare practices by integrating multiple administrative, communications and
research functions into a single, easy to use Web-based solution. For
consumers, WebMD provides premium, branded content to assist consumers in
making informed healthcare decisions, personalized information about specific
health conditions targeted according to the medical profiles of individual
consumers, and content-specific online communities that allow consumers to
participate in real-time discussions and support networks via the Web. We
commercially launched WebMD in October 1998, and as of September 30, 1998 we
had not generated any revenues from our Internet operations.
Increasing concern over the rising cost of healthcare in the United States
has caused a shift from fee-for-service reimbursement to managed care forms of
reimbursement such as capitation and fixed fees. These changes have led many of
the approximately 730,000 physicians in the United States to seek ways to
improve practice efficiency. Many healthcare professionals are intensive users
of administrative, communications and information services, such as electronic
data interchange services, transcription services, after-hours answering
services, paging, voice mail and medical references. However, these services
often are provided by multiple vendors, are not integrated, require users to
become familiar with multiple devices and are invoiced separately. We believe
that a significant opportunity exists for healthcare professionals to use the
Internet to increase practice efficiency, achieve measurable cost savings and
improve the quality of patient care.
Health and medical information is one of the fastest growing areas of
interest on the Internet. According to Media Metrix, an independent Web
research company, healthcare-related content was the second most popular
subject of Web-based information retrieval searches in 1997. According to Cyber
Dialogue, an independent research company, approximately 70% of the persons
searching for health and medical information on the Internet believe the
Internet empowers them by providing them with information before and after they
go to a doctor's office. Cyber Dialogue also indicates that during the 12-month
period ended July 1998, approximately 17 million adults in the United States
searched online for health and medical information, and approximately 50% of
these individuals made offline purchases after seeking information online.
Furthermore, Cyber Dialogue estimates that the number of adults in the United
States searching for online health and medical information will grow to
approximately 30 million in the year 2000, and they will spend approximately
$150 billion for all types of health-related products and services offline.
Accordingly, we believe that healthcare and pharmaceutical companies will
increasingly attempt to influence the spending decisions of consumers through
online advertising. An independent research company, Jupiter Communications,
estimates that expenditures for online health and medical advertising will grow
to approximately $265 million by 2002. We believe that the first company to
establish clear brand leadership will have a significant opportunity to
capitalize on multiple revenue opportunities, including recurring subscription,
advertising and sponsorship revenue.
3
<PAGE>
The WebMD Web site is designed for both healthcare professionals and
consumers. Healthcare professionals who subscribe to WebMD have access to
multiple areas of the WebMD Web site, including the Office, Library, Supplies
area, Classroom and Lounge. The Office provides access to insurance coverage
verification and patient referrals via electronic data interchange, the Virtual
Receptionist that integrates Web-based communication functions, including voice
mail, e-mail, fax messaging and paging, a physician-only answering service and
customized physician Web sites. The Library contains topical medical news,
comprehensive physician reference databases, medical encyclopedias and journals
and access to interactive dissectible anatomy software. The Supplies area
provides access to online ordering of medical supplies and equipment from
McKessonHBOC, the leading healthcare supply management company in North
America. The Classroom offers online continuing medical education courses,
which allow healthcare professionals to obtain required educational credits
easily and conveniently. The Lounge provides access to online brokerage and
banking services and to news, stocks, sports, travel and weather information.
In addition, consumers have free access to WebMD's Health and Wellness Center,
which includes premium and proprietary healthcare content, chat rooms, message
boards, personalized healthcare information and e-mail updates.
Our objective is to become the Web's premium brand for healthcare-related
administrative, communications and information services. Key elements of our
strategy include being first to market with an integrated solution for the
administrative, communications and information needs of the healthcare
industry, building recognition of our brand, leveraging our strategic
relationships and the sales forces of our strategic distribution partners,
enhancing the WebMD offerings, engaging in complementary acquisitions of
technologies, products and services and capitalizing on multiple revenue
opportunities. We believe that we have competitive advantages due to our
strategic relationships and integrated, easy-to-use, Web-based solution. We are
currently engaged in a marketing and advertising campaign to increase awareness
of the WebMD brand among healthcare professionals and consumers, and we have
entered into strategic relationships with healthcare and online market leaders
to assist us in rapidly distributing WebMD and building brand awareness.
OUR DISTRIBUTION PARTNERS
We have established strategic distribution relationships with healthcare and
online industry leaders and intend to enter into additional strategic
relationships in the future. Our current relationships include the following:
MCKESSONHBOC McKesson HBOC, Inc. is the leading healthcare supply
management company in North America and is also the leading
provider of integrated patient care, clinical, financial,
managed care and strategic management software solutions to
the healthcare industry. McKessonHBOC has installed
healthcare information systems in approximately 52% of the
U.S. community hospitals with over 100 beds. McKessonHBOC
has agreed to place or pay for a certain number of WebMD
subscriptions, subject to certain conditions, to integrated
delivery networks, acute care hospitals, long-term and
alternate site care facilities, physician offices,
pharmacies, pharmaceutical and biotechnology companies and
medical and surgical supply manufacturers.
ENVOY ENVOY Corporation is a leading provider of electronic data
interchange and transaction processing services. ENVOY's
transaction network, which processed approximately 984
million transactions in the 12 months ended March 31, 1998,
includes approximately 200,000 physicians, 4,500 hospitals
and 811 payors. ENVOY has agreed to use its direct and
indirect sales force to market WebMD.
MEDQUIST MedQuist, Inc. is a leading national provider of electronic
transcription and document management services to the
healthcare industry. MedQuist operates more than 50 client
centers in 24 states and employs over 2,400 trained
4
<PAGE>
transcriptionists to serve 500 clients. MedQuist's clients
consist primarily of hospitals and medical centers, and
also include other non-hospital healthcare providers, such
as managed care providers, surgical centers, outpatient
clinics and physician groups. Through Transcriptions, Ltd.,
a wholly owned subsidiary of MedQuist, MedQuist and we have
agreed to jointly promote our respective services,
including Transcriptions' agreement to place or pay for a
certain number of WebMD subscriptions, subject to certain
conditions.
DUPONT DuPont's Life Sciences division consists of agricultural
products and pharmaceuticals, which includes DuPont's 50%
interest in The DuPont Merck Pharmaceutical Co. DuPont has
agreed to place or pay for a certain number of WebMD
subscriptions, subject to certain limitations.
DEPUY ORTHOPAEDICS
DePuy Orthopaedics, Inc., a Johnson & Johnson company, is a
leading manufacturer and distributor of orthopaedic devices
and supplies. DePuy has agreed to market WebMD to its
existing customer base of orthopaedic specialists.
E*TRADE E*TRADE Group, Inc. is a leading provider of branded online
investing services. E*TRADE was recently named the best
overall online investing service by Gomez Advisors, a
leading independent advisory firm devoted to the online
consumer services market. As part of a limited promotional
offer, E*TRADE has agreed to purchase WebMD subscriptions
for physicians who open E*TRADE accounts.
COMPUSERVE CompuServe Interactive Services, Inc., a subsidiary of
America Online, Inc. and a leading provider of Internet
access to consumers, had approximately two million users as
of August 1998. CompuServe has agreed to feature WebMD as
the anchor tenant on its Web site's Health Channel.
CNN CNN Interactive, a division of Cable News Network, Inc.,
has agreed to position and promote WebMD as its premier
provider of content for CNN's Health Section on CNN's
flagship Web site, "cnn.com."
OUR SERVICE AND CONTENT PROVIDERS
We have entered into strategic relationships to obtain premium services and
content to be offered through WebMD. We provide most of our services through
these relationships, including electronic data interchange services from ENVOY
Corporation, enhanced communications from Premiere Technologies, Inc. and Web
site development from iXL Holdings, Inc. We also provide access to personalized
proprietary healthcare content through our recent acquisitions and premium
healthcare content under our agreements with various content providers. We
intend to introduce additional content and enhanced services, including Web-
enabled medical transcription services through our strategic relationship with
MedQuist, Inc.
RECENT DEVELOPMENTS
Recent Sales of Securities. We recently sold an aggregate of 860,000 shares
of our Series B Preferred Stock to five investors, including 650,000 shares to
HBO & Company of Georgia, a wholly owned subsidiary of McKesson HBOC, Inc., and
100,000 shares to an affiliate of Kelso & Company, for an aggregate purchase
price of $17.2 million. We also recently sold an aggregate of 828,750 shares of
our Series C Preferred Stock to 15 investors, including Trigon Healthcare,
Inc., an affiliate of Premier, Inc., Tenet Healthcare Corporation and
principals of Gleacher NatWest, Inc., for an aggregate purchase price of $16.6
million. Pursuant to our advisory services agreement with Gleacher NatWest, we
granted Gleacher NatWest warrants to purchase 750,000 shares of our Series D
Common Stock at an exercise price of $20.00 per share in lieu of a cash payment
for such services. We also recently issued 180,000 shares of our Series C
Preferred Stock to E.I. du Pont de NeMours and Company in exchange for content
provided by DuPont in lieu of a cash payment for such content. Furthermore, we
recently made a strategic investment in Nationwide Medical Services, Inc. a/k/a
J&C Nationwide through the issuance of 100,000 shares of our Series D Common
Stock, and we have agreed to Web-enable J&C Nationwide's services and to create
a physicians' career and placement center within WebMD.
5
<PAGE>
Sapient Acquisition. On January 25, 1999, we acquired all of the outstanding
capital stock and converted certain debt of Sapient Health Network, Inc.
("SHN") in exchange for approximately 1,619,000 shares of our Series B
Preferred Stock. In addition, we converted existing SHN options and warrants
into options and warrants to acquire approximately 131,000 shares of our Series
B Preferred Stock. At closing, we also paid certain liabilities of SHN. SHN
builds and manages Web-based communities targeted at healthcare consumers and
sells market research and data products, advertising sponsorships and other
online services. SHN currently manages 10 online health communities with
members holding over 130,000 distinct e-mail addresses. These communities
encompass a variety of chronic health conditions including hepatitis C, breast
cancer, diabetes and cardiovascular disease. SHN's Web site also includes the
Women's Health Place, which covers eight distinct women's health topics. SHN's
Web site is driven by proprietary, patent-pending personalization technology
which allows registered members free access to premium health content, chat
rooms, message boards and e-mail updates, each tailored to their unique medical
profiles. Business Week recently named SHN's Web site one of the best Web sites
of 1998. In addition, SHN has participated in a number of marketing and
sponsorship programs with leading companies in the pharmaceutical and
healthcare industries, including Amgen, Johnson & Johnson, SmithKline Beecham
and Eli Lilly.
Direct Medical Knowledge Acquisition. On January 22, 1999, we acquired all of
the outstanding capital stock and converted certain debt of Direct Medical
Knowledge, Inc. ("DMK") in exchange for approximately 494,000 shares of our
Series B Preferred Stock. In addition, we converted existing DMK options and
warrants into options and warrants to acquire approximately 131,000 shares of
our Series B Preferred Stock. At closing, we also paid certain liabilities of
DMK. DMK is a publisher of healthcare information that provides in-depth,
personalized health and medical information to consumers via the Internet. DMK
has an electronic library of healthcare information which is customized for its
individual consumers through its proprietary personalization software. DMK's
main customers are Blue Cross Blue Shield of Minnesota and Blue Shield of
California, other large managed care organizational and hospital systems.
certifiedemail.com Acquisition. On December 31, 1998, we acquired
substantially all of the assets and assumed certain liabilities of
certifiedemail.com, Inc. in exchange for 50,000 shares of our Series D Common
Stock. certifiedemail.com provides secure delivery and confirmation of receipt
of electronic mail. We plan to use the certifiedemail.com system to allow
healthcare professionals to confidentially communicate with each other and with
patients.
--------------------
WebMD was incorporated in Georgia on October 17, 1996 under the name Endeavor
Technologies, Inc., and we changed our name to WebMD, Inc. in August 1998. Our
principal executive offices are located at 400 The Lenox Building, 3399
Peachtree Road NE, Atlanta, Georgia 30326, and our telephone number is
(404) 479-7600.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by WebMD.............. shares
Common Stock to be outstanding after this
offering................................. shares (1)
Use of proceeds............................ Developing and deploying WebMD, funding
operating losses and for working capital and
general corporate purposes.
Proposed Nasdaq National Market symbol..... WBMD
</TABLE>
- --------
(1) The number of shares of Common Stock to be outstanding after this offering
is based on the number of shares outstanding as of January 27, 1999 and
does not include the following:
. 5,396,211 shares subject to options outstanding as of January 27, 1999,
at a weighted average exercise price of $9.79 per share;
. 1,031,868 shares that could be issued under WebMD's Amended and Restated
1997 Stock Incentive Plan;
. 775,000 shares that could be issued under WebMD's Director Option Plan;
. 1,886,148 shares subject to warrants outstanding as of January 27, 1999,
at a weighted average exercise price of $13.15 per share; and
. 150,000 shares and 30,000 shares that are issuable to HBO & Company of
Georgia, a wholly owned subsidiary of McKesson HBOC, Inc., and Matria
Healthcare, Inc., respectively, if this offering is not completed at a
price of at least $18.00 per share on or before May 22, 1999 or March 1,
1999, as the case may be.
--------------------
This prospectus includes statistical data regarding the Internet industry.
Such data are taken or derived from information published by sources including
Media Metrix, Inc., Cyber Dialogue Inc. and Jupiter Communications, LLC, media
research firms specializing in market and technology measurement on the
Internet, and International Data Corporation, a provider of market and
strategic information for the technology industry. Although we believe that
such data are generally indicative of the matters reflected therein, such data
are inherently imprecise, and we caution you not to place undue reliance on
such data.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -----------------------------
PRO PRO
FORMA FORMA
1995 1996 1997 1997 (1) 1997 1998 1998 (1)
------ ------- ------- ----------- ------- ----------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ -- $ -- $ -- $ 678 $ -- $ 75 $ 616
Operating loss.......... -- -- (2,594) (23,835) (1,370) (14,441) (31,260)
Net loss................ (39) (1,682) (4,349) (24,551) (2,401) (7,829) (31,739)
Net loss per share (ba-
sic and diluted):
Continuing operations.. $ -- $ -- $ (0.40) $ (2.96) $ (0.23) $ (1.25) $ (2.70)
Discontinued operations
(2)................... (0.04) (0.64) (0.12) -- (0.07) 0.66 --
Extraordinary loss on
early extinguishment
of notes payable...... -- -- -- -- -- (0.08) --
------ ------- ------- -------- ------- -------- --------
Net loss per share (3).. $(0.04) $ (0.64) $ (0.52) $ (2.96) $ (0.30) $ (0.67) $ (2.70)
====== ======= ======= ======== ======= ======== ========
Weighted average shares
outstanding (3)........ 1,000 2,612 8,300 8,300 7,918 11,750 11,750
====== ======= ======= ======== ======= ======== ========
Pro forma net loss per
share (4).............. $ (2.36) $ (2.27)
======== ========
Pro forma weighted
average shares
outstanding (4)........ 10,417 13,972
======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED (5)
------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $11,737 $ 44,829 $
Working capital........................... 13,346 45,929
Total assets.............................. 17,222 102,046
Total shareholders' equity................ 15,555 97,830
</TABLE>
- --------
(1) The pro forma statement of operations data reflect the acquisition of SHN
and DMK as if each had occurred on January 1, 1997, and the pro forma
balance sheet data give effect to these acquisitions and the sale of
860,000 shares of Series B Preferred Stock and 828,750 shares of Series C
Preferred Stock as if each had occurred on September 30, 1998. The pro
forma revenues include shareholder revenues of $424 and $104 for the year
ended December 31, 1997 and the nine months ended September 30, 1998,
respectively. For further information, see "Unaudited Pro Forma Financial
Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) WebMD was incorporated in October 1996. In March 1997, our subsidiary
merged with Endeavor Technologies, Inc., a provider of cardiac monitoring
services. We have included Endeavor's statement of operations data for all
periods presented. Effective as of July 1, 1998, we sold substantially all
of our cardiac monitoring assets to Matria Healthcare, Inc. Our financial
statements reflect the cardiac monitoring operations as discontinued
operations for all periods and dates prior to such sale of assets. In
addition, on July 1, 1997, we sold our subsidiary, UltraScan, Inc.
(3) Basic and diluted net loss per share was determined using all classes of
our common stock outstanding during each period. It does not include the
conversion of preferred stock. Options or warrants to purchase common stock
were also not included as they are anti-dilutive.
(4) Weighted average shares used in calculating pro forma information include
those described in footnote 3 above, and assumes the weighted average
conversion of preferred stock of 2,117,103 for the year ended December 31,
1997 and 2,918,103 for the nine months ended September 30, 1998.
(5) Gives effect to the sale by us of shares of Common Stock offered hereby
at an assumed initial offering price of $ , after deducting estimated
underwriting discounts and commissions and estimated offering expenses. For
further information, see "Use of Proceeds."
8
<PAGE>
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. Our business, financial condition and
operating results could be adversely affected by any of the following factors,
in which event the trading price of our Common Stock could decline, and you
could lose part or all of your investment. The risks and uncertainties
described below are not the only ones that we face. Additional risks and
uncertainties not presently known to us, or that we currently think are
immaterial, may also impair our business operations.
This prospectus also contains forward-looking statements which involve risks
and uncertainties. These forward-looking statements are identified by words
such as expects, intends, believes, anticipates, estimates, may, could,
should, would, will, plans, hopes and similar expressions. Our actual results
may differ materially from the results anticipated by these forward-looking
statements due to certain factors, including the risks described below and
elsewhere in this prospectus.
WE HAVE A LIMITED OPERATING HISTORY AND ARE TRANSITIONING TO A NEW BUSINESS
MODEL
We were incorporated in October 1996. Until July 1998, we generated revenues
exclusively from our cardiac monitoring operations, which we sold in July
1998. We are now in the process of transitioning from our former cardiac
monitoring business to our new business which is focused on providing Web-
based administrative, communications and information services to healthcare
professionals and healthcare information to consumers. We commercially
launched WebMD in October 1998. As of September 30, 1998, we had not generated
any revenues from our Internet operations. Therefore, we do not have an
operating history upon which you can evaluate us and our prospects, and you
should not rely upon our past performance to predict our future performance.
In transitioning to our new business model, we are substantially changing our
business operations, sales and implementation practices, customer service and
support operations and management focus. We are also facing new risks and
challenges, including a lack of meaningful historical financial data upon
which to plan future budgets, competition from a wider range of sources, the
need to develop strategic relationships and other risks described below. We
cannot guarantee that we will be able to successfully transition to our new
business model.
OUR SERVICES ARE NEW AND OUR INDUSTRY IS EVOLVING
You should consider our prospects in light of the risks, uncertainties and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in the new and rapidly evolving Internet
market. To be successful in this market, we must, among other things:
. develop and introduce functional and attractive service offerings;
. attract and maintain a large base of subscribers and consumers;
. increase awareness of our brand and develop subscriber and consumer
loyalty;
. provide desirable services and compelling and original content to
subscribers at attractive prices;
. 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 to competitive and technological developments;
. build an operations structure to support our business; and
. attract, retain and motivate qualified personnel.
We cannot guarantee that we will succeed in achieving these goals, and our
failure to do so would have a material adverse effect on our business,
prospects, financial condition and operating results.
Our WebMD services are new and were only commercially launched in October
1998, and most of our consumer services were only recently acquired. We are
not certain that these services will function as anticipated or be desirable
to our intended market. We have changed our service offerings frequently in
the past, and we expect to
9
<PAGE>
continue to change them in the future. Also, some of our services have limited
functionalities which may limit their appeal to subscribers and consumers and
put us at a competitive disadvantage. For example, we do not currently provide
a site-wide search capability on our Web site, and our electronic data
interchange ("EDI") services do not include claims processing. If our current
or future services fail to function properly or if WebMD does not achieve or
sustain market acceptance, we could lose subscribers or could be subject to
claims which could have a material adverse effect on our business, financial
condition and operating results.
The Internet market is at an early stage of development, rapidly evolving
and characterized by an increasing number of market entrants who have
introduced or developed competing products and services. As is typical in a
new and rapidly evolving industry, demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty
and risk. Because the market for WebMD is new and evolving, it is difficult to
predict with any certainty the size of this market and its growth rate, if
any. We cannot guarantee that a market for WebMD will develop or that demand
for our services will emerge or be sustainable. If the market fails to
develop, develops more slowly than expected or becomes saturated with
competitors, our business, financial condition and operating results would be
materially adversely affected.
WE ANTICIPATE SIGNIFICANT FUTURE LOSSES AND ARE UNABLE TO ACCURATELY FORECAST
OUR REVENUES
We have incurred net operating losses and negative cash flows from operating
activities from our inception. As of September 30, 1998, we had an accumulated
deficit of $13.9 million. We have not achieved profitability, and we expect to
incur increasing net operating losses and negative cash flows for the
foreseeable future. We will incur direct expenses associated with the
development and deployment of WebMD and our branding campaign and indirect
expenses from promotional arrangements with certain of our distribution
partners. Our agreements and promotional arrangements with distribution
partners and service and content providers require us to pay consideration in
various forms, including the payment of royalties, license fees and certain
other significant guaranteed amounts on a per subscriber and/or a minimum
dollar amount basis over terms ranging from one to three years, whether or not
services are used under these agreements. As of January 27, 1999, under our
current promotional arrangements, we estimate that these aggregate guaranteed
payments will exceed $13.9 million for the year ending December 31, 1999. In
addition, certain promotional arrangements and content agreements require us
to make payments that vary based on usage by subscribers. We intend to enter
into additional arrangements with current and future strategic partners that
will require us to pay consideration in various forms in amounts that may
significantly exceed the amounts we are required to pay under our current
arrangements. We may also offer promotional packages of hardware and software
to subscribers at subsidized prices. These guaranteed payments, promotions and
other arrangements may require us to incur significant expenses, and we cannot
guarantee that we will generate sufficient revenues to offset these expenses.
We intend to use a significant portion of the proceeds from this offering to
fund our branding campaign and these promotional arrangements and subsidies.
We cannot be certain that we can achieve sufficient revenues in relation to
our expenses to ever become profitable. If we do achieve profitability, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis in the future.
Our promotional arrangements and subsidies currently require, and future
arrangements may require, us to pay amounts in lump sums upon the acquisition
of a subscriber that we will only recoup if the subscriber maintains a
subscription and pays all required subscription fees for an extended period of
time. For example, under our current promotional arrangement with McKesson
HBOC, Inc. ("McKessonHBOC"), we have agreed to reimburse McKessonHBOC for
license fees otherwise payable by users of one of its products if McKessonHBOC
successfully markets WebMD to these users or, in the alternative, we have
agreed to fund a rebate toward the purchase of medical supplies that are
purchased through WebMD by subscribers obtained by McKessonHBOC. These
subscribers may cancel their subscriptions after 12 months, in which case we
would not recover the cost of the promotion. In addition, we cannot guarantee
that these subscribers will honor their contracts or pay any early termination
fee, if required. Accordingly, we cannot guarantee that we will generate
sufficient revenue from subscribers we obtain through current or future
promotional arrangements to recoup the cost of the promotion. We also cannot
guarantee that subscribers we obtain through promotional arrangements will
actually use WebMD. Therefore, our number of paying subscribers may not be
indicative of the level of usage of WebMD, and we expect the level of usage of
WebMD to be a primary factor in determining the amount of advertising revenue
that we can derive from WebMD.
10
<PAGE>
We have accounted for the recent acquisitions of certifiedemail.com Inc.
("certifiedemail.com"), SHN and DMK (collectively, the "Acquisitions") using
the purchase method of accounting. As a result of the SHN and DMK
acquisitions, we intend to record an aggregate of $45.9 million in goodwill
beginning in the first quarter of 1999, which will be amortized on a straight-
line basis over a three-year period, and the Company is evaluating any
additional charges that may be required with regard to valuation and other
procedures to be performed with respect to the SHN and DMK acquisitions. Most
acquisitions of software and professional services companies involve the
purchase of significant amounts of intangible assets. Therefore, acquisitions
of such businesses often result in significant goodwill being recorded and
significant amortization charges and may also result in charges for research
and development projects. If we were to incur additional charges for acquired
in-process research and development or amortization of goodwill with respect
to current or future acquisitions, our business, financial condition and
operating results could be materially and adversely affected.
As a result of the limited operating history of our Internet operations, the
recent disposition of our cardiac monitoring operations, the recent
Acquisitions and the emerging nature of the markets in which we intend to
compete, we are unable to forecast our revenues with any degree of certainty.
Our current and projected expense levels are based largely on our estimates of
future revenues and are mostly fixed. We expect our expenses to increase
significantly in the future as we continue to incur significant sales and
marketing, product development and administrative expenses. The success of our
business depends on our ability to increase our revenues to offset our
expenses. We cannot guarantee that we will be able to generate sufficient
revenues to offset our operating expenses or the costs of our promotional
packages or subsidies or that we will be able to achieve or maintain
profitability. If our revenues fall short of our projections, our business,
financial condition and operating results would be materially adversely
affected. We may also need to raise additional capital through public or
private debt or equity financings to fund the deployment of WebMD. However, we
cannot guarantee that we will be able to raise additional capital on terms
favorable to us or at all.
OUR QUARTERLY FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY
We expect our quarterly revenues, expenses and operating results to
fluctuate significantly in the future as a result of a variety of factors,
some of which are outside of our control. These factors include:
. the number of WebMD subscribers and consumers;
. the level of traffic on our Web site and the level of usage of the
Internet generally;
. our ability to establish and strengthen brand awareness;
. our success, and the success of our strategic partners, in
distributing WebMD;
. the addition or loss of service or content providers, advertisers or
sponsors on our Web site;
. our ability to upgrade our Web site;
. the amount and timing of the costs relating to our marketing efforts
or other initiatives;
. the timing of contracts with strategic partners and other parties;
. fees we may pay for distribution, service or content agreements and
promotional arrangements or other costs we incur as we expand our
operations;
. our ability to integrate the Acquisitions successfully and to
identify, acquire and integrate other suitable acquisition candidates;
. the timing of charges related to acquisitions;
. the level of acceptance of the Internet by the healthcare industry;
11
<PAGE>
. our ability to compete in a highly competitive market, and the
introduction of new sites and services by us or our competitors;
. technical difficulties, system downtime, undetected software errors
and other problems affecting the Internet generally or the operation
of our Web site; and
. economic conditions specific to the Internet and online media and
general economic conditions.
We base our expenses to a significant extent on our expectations of future
revenues. Most of our expenses are fixed in the short term, and we may not be
able to quickly reduce spending if our revenues are lower than we expect.
Moreover, in an attempt to enhance our long-term competitive position, we may
from time to time make decisions regarding pricing, marketing, services and
technology that could have a near-term material adverse effect on our
business, financial condition and operating results. Due to the foregoing
factors, we believe that quarter to quarter comparisons of our operating
results are not a good indication of our future performance. It is likely that
our operating results will fall below the expectations of securities analysts
or investors in some future quarter. In such event, the trading price of our
Common Stock would likely decline, perhaps significantly. For more
information, see "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
MARKET ACCEPTANCE OF WEBMD IS UNCERTAIN
WebMD integrates administrative, communications and information services for
the healthcare industry. We cannot guarantee that participants in the
healthcare industry will accept WebMD, or even the Internet, as a replacement
for traditional sources of these services. Market acceptance of WebMD will
depend upon continued growth in the use of the Internet generally and, in
particular, as a source of administrative, communications and information
services for the healthcare industry. The Internet may not prove to be a
viable channel for these services due to inadequate development of the
necessary infrastructure, such as reliable network backbones, or complementary
services, such as high speed modems and security procedures for the
transmission of confidential healthcare information, implementation of
competing technologies, delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet activity,
governmental regulation or other reasons. The acceptance of WebMD for
administrative, communications and information services by healthcare
professionals will require a broad acceptance of new methods of conducting
business and exchanging information. Our future financial success will depend
upon our ability to attract and retain subscribers and consumers and sell
communications services, advertising and sponsorships on our Web site. The
failure of WebMD to achieve market acceptance would have a material adverse
effect on our business, financial condition and operating results.
WE MUST ESTABLISH, MAINTAIN AND STRENGTHEN THE WEBMD BRAND
In order to increase our subscriber and consumer bases and expand our online
traffic, we must establish, maintain and strengthen the WebMD brand. For us to
be successful in establishing our brand, (a) healthcare professionals must,
among other things, perceive us as offering quality, cost-effective
administrative, communications and information services, (b) healthcare
consumers must, among other things, perceive us as offering relevant, reliable
healthcare information from trustworthy sources and (c) medical suppliers,
pharmaceutical companies and other vendors to the healthcare community must,
among other things, perceive our Web site as an effective marketing and sales
channel for their products and services. We may need to substantially increase
our marketing budget in our efforts to generate brand recognition and brand
loyalty. Our business could be materially adversely affected if our marketing
efforts are not productive or if we cannot increase our brand awareness.
Further, our Web site will be more attractive to healthcare advertisers if we
have a large audience of subscribers and consumers with demographic
characteristics that advertisers perceive as favorable. Therefore, we intend
to introduce additional or enhanced services in the future in an effort to
retain our current subscribers and attract new subscribers. Our reputation and
brand name could be adversely affected if we experience difficulties in
introducing new services, if these services are not accepted by subscribers or
consumers, if we are required to discontinue existing services or if our
services do not function properly.
12
<PAGE>
We have applied for federal registration of the service marks "WebMD," "Web-
MD" and "WebMD OnCall." By letter dated July 6, 1998, the United States Patent
and Trademark Office (the "PTO") declined registration of "Web-MD" when used
in connection with our services. Although we responded to the PTO's denial of
registration and we believe it is likely that the "WebMD," "Web-MD" and "WebMD
OnCall" marks will be accepted for registration by the PTO, we cannot
guarantee that we will be able to secure registration of our "WebMD," "Web-MD"
and "WebMD OnCall" marks. If we are required to change our corporate name and
stop using the "WebMD" mark to identify our brand, such a name change could
result in confusion to current and potential customers, or disrupt our
business. Any of these potential effects could seriously harm our business,
prospects, financial condition and operating results. In addition, we must
successfully integrate the SHN and DMK marks into our WebMD service offerings.
If we fail to successfully integrate the SHN and DMK marks, we may lose users
of the SHN and DMK services. See "--We Must Protect Our Intellectual Property"
for more information on issues associated with the registration of our
trademarks.
WE MAY EXPERIENCE DIFFICULTY INTEGRATING RECENT ACQUISITIONS
On January 25, 1999, we acquired SHN through a merger of SHN with one of our
wholly owned subsidiaries. We also acquired DMK on January 22, 1999 through a
merger with the same wholly owned subsidiary. On December 31, 1998, we
acquired substantially all of the assets and assumed certain liabilities of
certifiedemail.com. We must now integrate the technologies, service offerings,
operations and systems of these companies with our own and attempt to grow the
acquired businesses. As we have just begun this assimilation, our integration
plans may materially change in the future. Potential challenges to the
successful integration of the Acquisitions include, but are not limited to,
(a) our ability to migrate their members to our network, (b) our ability to
market and sell these companies' services to users, (c) centralization and
consolidation of financial, operational and administrative functions,
(d) elimination of unnecessary costs, (e) realization of economies of scale,
(f) the technological integration of these companies' services with ours and
(g) the integration of these companies' personnel with ours. We believe that
the process of integrating the Acquisitions will be complex and will place
significant demands on our management, technical, financial and other
resources. We cannot guarantee that any of SHN, DMK or certifiedemail.com will
be successfully integrated with our operations on schedule or at all. We also
cannot guarantee that the Acquisitions will result in sufficient sales or
earnings to justify our investment in, or our expenses related to, the
Acquisitions or that any synergies will develop. The successful integration of
the Acquisitions is critical to our future success.
WE MAY NOT BE ABLE TO MANAGE GROWTH
Our growth has placed significant demands on all aspects of our business,
including our administrative, technical and financial personnel and systems.
Additional expansion may further strain our management, financial and other
resources. We cannot guarantee that our systems, procedures, controls and
existing space will be adequate to support expansion of our operations. Our
future operating results will substantially depend on the ability of our
officers and key employees to manage changing business conditions and to
implement and improve our technical, administrative, financial control and
reporting systems. If we are unable to respond to and manage changing business
conditions, then the quality of our services, our ability to retain key
personnel and our results of operations could be materially adversely
affected. Difficulties in managing continued growth could have a material
adverse effect on our business, financial condition and operating results.
WE DEPEND ON OUR DISTRIBUTION PARTNERS
A principal element of our strategy is the establishment and maintenance of
strategic distribution relationships with other companies. We have entered
into distribution relationships with several companies, and we intend to enter
into additional relationships in the future. We have granted exclusive rights
to market WebMD in certain markets, including the infertility, obstetrics,
gynecology, cardiology, orthopaedics, cardiothoracic and medical supply
markets. We have also agreed not to market WebMD through certain competitors
of our strategic partners. We formed our existing relationships recently, and
they have not yet produced significant revenues.
13
<PAGE>
Although we view our distribution relationships as a key factor in our overall
business strategy, our distribution partners may not view their relationships
with us as significant to their own business, and 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. We
cannot guarantee that any distribution partner will perform its obligations as
agreed or contemplated or that we would be able to specifically enforce any
distribution agreement. Our arrangements with our distribution partners
generally do not establish minimum performance requirements, but instead rely
on the voluntary efforts of our distribution partners. Therefore, we cannot
guarantee that these relationships will be successful.
WE DEPEND ON OUR SERVICE PROVIDERS
We rely on third party suppliers for almost all of the services provided
through WebMD. The following are some of the risks we face through our service
providers:
EDI Services ENVOY Corporation ("ENVOY") has the exclusive right,
subject to certain conditions and limitations, to
provide EDI services through WebMD. ENVOY currently
provides only eligibility verification, referral
submission and referral inquiry services. Due to our
agreement to use ENVOY exclusively for EDI services,
we are limited to providing only those EDI services
that ENVOY offers via the Internet and to providing
EDI connectivity only to the payors with which ENVOY
has agreements. In addition, ENVOY's realtime
electronic transaction services may be disrupted due
to malfunctions in computer software or hardware or
telecommunications services. ENVOY's services rely on
a host computer system and a batch claims processing
center, each of which is contained in a single data
center facility without remote backup capabilities.
These centers are subject to power outages, natural
disasters or similar events that could disable
ENVOY's systems.
Communications Services Orchestrate.com, Inc. ("Orchestrate.com"), a
subsidiary of Premiere Technologies, Inc.
("Premiere"), has the exclusive right, subject to
certain conditions and limitations, to provide
enhanced Web-based communications services through
WebMD. The Orchestrate.com service, which we rely
upon to provide our integrated suite of Web-based
communications services, was commercially introduced
in July 1998. We cannot guarantee that
Orchestrate.com's services, particularly in light of
their recent introduction and lack of testing in the
marketplace, will function as anticipated.
Orchestrate.com's services may also be subject to
disruption due to software or hardware malfunctions,
natural disasters, disruptions affecting
interexchange and local exchange carriers or similar
events.
Internet Services We have agreed to market CompuServe Interactive
Services, Inc. ("CompuServe") as our exclusive
Internet service provider ("ISP") for our subscribers
who are in need of Internet software, Internet access
and customer support. UUNET Technologies, Inc.
("UNNET") provides dial up Internet access to our
subscribers who are Internet ready but do not have an
Internet account. Other ISPs and online service
providers ("OSPs") also provide subscribers and
Internet users access to our Web site. Subscribers
and consumers may experience difficulties in
accessing or using our Web site due to failures or
delays related to ISPs or OSPs. iXL, Inc. ("iXL")
provides Web site development and management
services, including the hosting and development of
customized physician Web sites.
14
<PAGE>
Other Services E*TRADE Group, Inc. ("E*TRADE") has the exclusive
right to provide brokerage services and investment
related products, excluding banking and insurance
products, through WebMD. Transcriptions Ltd., a
wholly owned subsidiary of MedQuist, Inc.
("MedQuist"), has the exclusive right to provide
transcription services through WebMD. Physicians Data
Network ("PDN") has the exclusive right to provide
EDI-based insurance claim fraud and abuse audit
services through WebMD. We also have granted
exclusive rights to providers of other services.
Any problems with these or other services that result in interruptions of
our services or a failure of our services to function as desired could cause
subscriber and consumer complaints and attrition and could have a material
adverse effect on our business, financial condition and operating results. We
may have no means of replacing these services or, in the case of services
which we are obligated to use exclusively, we may be prohibited from replacing
these services, on a timely basis or at all, if such services are inadequate
or in the event of a service interruption or failure.
WE DEPEND ON OUR CONTENT PROVIDERS
We rely on independent content providers for the majority of the clinical,
educational and other general healthcare information that is provided through
WebMD. We have entered into strategic relationships with several companies to
obtain content for WebMD, 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 and to build new
relationships with other content providers. Our agreements with content
providers are short-term and non-exclusive. Termination of one or more
significant content provider agreements would decrease the availability of
healthcare-related news and information which we can offer our subscribers and
consumers and could have a material adverse effect on our business, financial
condition and operating results. Due to the non-exclusivity of our agreements
with content providers, competitors offer, or could offer, content that is
similar or the same as ours. To the extent that content providers, including
but not limited to our current providers, offer information to users or our
competitors at a lower cost, our business, financial condition and operating
results could be materially adversely affected. In addition, we depend on the
abilities of our content providers to deliver high quality content from
reliable sources and to continually upgrade their content in response to
subscriber and consumer demand and evolving healthcare industry trends. Any
failure by these parties to develop and maintain high quality, attractive
content could result in subscriber and consumer dissatisfaction, could inhibit
our ability to add subscribers and consumers and could dilute the WebMD brand
name, each of which could have a material adverse effect on our business,
financial condition and operating results.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS
We regularly evaluate acquisition opportunities and, as a result, regularly
engage in acquisition discussions, conduct due diligence activities in
connection with possible acquisitions, and, where appropriate, engage in
acquisition negotiations. Engaging in acquisitions, including the
Acquisitions, involves numerous risks, including difficulties in the
assimilation of the operations, services, products and personnel of the
acquired company, the diversion of management's attention from other business
concerns, entry into markets in which we have little or no direct prior
experience, the potential loss of key employees of the acquired company and
our inability to maintain subscribers or goodwill of the acquired businesses.
Subscriber and consumer satisfaction or performance problems with an acquired
business could also have a material adverse effect on our reputation as a
whole which could result in a material adverse effect on our business,
financial condition and operating results. In order to grow our business, we
may continue to acquire businesses that we believe are complementary. The
successful implementation of this strategy depends on our ability to identify
suitable acquisition candidates, acquire companies on acceptable terms,
integrate their operations and technology successfully with our own, retain
existing subscribers and customers and maintain the goodwill of the acquired
business. We are unable to predict whether or when any prospective acquisition
candidate will become available or the likelihood that any acquisition will be
completed. Moreover, in pursuing acquisition opportunities, we may compete for
acquisition
15
<PAGE>
targets with other companies with similar growth strategies. Some of these
competitors may be larger and have greater financial and other resources than
we have. Competition for these acquisition targets likely could also result in
increased prices of acquisition targets and a diminished pool of companies
available for acquisition.
Future acquisitions may result in potentially dilutive issuances of equity
securities, the incurrence of additional debt, the assumption of known and
unknown liabilities, the write-off of software development costs and the
amortization of expenses related to goodwill and other intangible assets, all
of which could have a material adverse effect on our business, financial
condition and operating results. We have taken, and in the future may take,
charges in connection with acquisitions. We cannot guarantee that the costs
and expenses incurred will not exceed the estimates upon which such charges
are based.
WE FACE INTENSE COMPETITION AND RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in
the early 1990's, the number of Web sites on the Internet competing for users'
attention has proliferated with no substantial barriers to entry, and we
expect that competition will continue to intensify. We compete, directly and
indirectly, for subscribers, consumers, content and service providers,
advertisers, sponsors and acquisition candidates with the following categories
of companies:
. online services or Web sites targeted to the healthcare industry
generally;
. publishers and distributors of traditional offline media, including
those targeted to healthcare professionals, many of which have
established or may establish Web sites;
. general purpose consumer online services which provide access to
healthcare-related content and services;
. public sector and non-profit Web sites that provide healthcare
information without advertising or commercial sponsorships;
. vendors of healthcare information, products and services distributed
through other means, including direct sales, mail and fax messaging;
and
. Web search and retrieval services and other high-traffic Web sites.
In addition, with regard to our EDI service offering, we also compete with
providers of single function EDI terminals, such as those provided by VeriFone
Incorporated. We do not have the contractual right to prevent our subscribers
from terminating their service or changing to a competing network.
We also compete in the communications services markets through the Web-based
enhanced services offered by Orchestrate.com. These markets are also intensely
competitive, rapidly evolving and subject to rapid technological change. Other
providers currently offer each of the individual services and certain
combinations of the services that we offer. For example, the voice mail
services that we offer compete with voice mail services provided by certain
regional Bell operating companies ("RBOCs") as well as by independent voice
mail vendors. Our communications services and features, such as conference
calling, compete with services provided by companies with significantly
greater resources than ours, as well as smaller interexchange long distance
providers.
We expect competition in our markets to increase significantly as new
companies enter the market and current competitors expand their product lines
and services. Many of these potential competitors are likely to enjoy
substantial competitive advantages, including:
. greater resources that can be devoted to the development, promotion
and sale of their services;
. longer operating histories;
. greater financial, technical and marketing resources;
. greater name recognition; and
. larger subscriber bases.
16
<PAGE>
To be competitive, we must license leading technologies, enhance our
existing services and content, develop new technologies that address the
increasingly sophisticated and varied needs of healthcare professionals and
consumers and respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis. We cannot
guarantee that we will be successful in using new technologies effectively or
adapting our Web site and proprietary technology to user requirements or
emerging industry standards. Any pricing pressures, reduced margins or loss of
market share resulting from our failure to compete effectively would
materially adversely affect our business, financial condition and operating
results. For more information, see "Business--Competition."
RECENT AND CONTINUING PUBLICITY
We have received, and may continue to receive, a high degree of media
coverage, including coverage that includes inaccurate or incomplete
information and forward-looking statements that involve numerous risks and
uncertainties. Accordingly, we disclaim all statements of our officers and
other information appearing in the media for purposes of this offering.
Prospective investors should not rely on any information other than the
information set forth in this prospectus in making a decision to purchase the
Common Stock offered hereby. All statements regarding future events,
including, but not limited to, future revenues, profits, subscriber growth,
amounts to be paid by subscribers and amounts to be paid by sponsors, are
forward-looking statements that involve numerous risks and uncertainties.
Actual results could differ materially from those stated in such forward-
looking statements as a result of numerous factors, including those set forth
in these "Risk Factors" and elsewhere in this prospectus.
ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM IS UNCERTAIN
We expect to derive a portion of our revenues from advertising on our Web
site. However, we have not earned any advertising revenue to date, and we
cannot guarantee that we will be able to generate significant advertising
revenues in the future. No standards have been widely accepted to measure the
effectiveness of Web
17
<PAGE>
advertising. If such standards do not develop, existing advertisers may not
continue their current level of Web advertising, and advertisers that have
traditionally relied upon other advertising media may be reluctant to
advertise on the Web. Advertisers that already have invested substantial
resources in other advertising methods may be reluctant to adopt a new
strategy. Our business would be adversely affected if the market for Web
advertising fails to develop or develops more slowly than expected.
Different pricing models are used to sell advertising on the Web. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues. Our
advertising revenues could be adversely affected if we are unable to adapt to
new forms of Web advertising. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to a Web user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Web advertising.
Advertisers will want accurate measures of the demographics of our
subscriber and consumer bases and the delivery of advertisements on our Web
site. We will have to perform these measured services ourselves or obtain them
from providers. If we do not develop these systems successfully, we may not be
able to accurately evaluate the demographic characteristics of our subscribers
and consumers. Companies may not advertise on our Web site or may pay less for
advertising if they do not perceive our measurements or measurements made by
third parties to be reliable.
WE MAY HAVE SUBSTANTIAL SALES OF OUR COMMON STOCK AFTER THE OFFERING
Sales of substantial amounts of Common Stock in the public market following
this offering, or the perception that such sales will occur, could have a
material adverse effect on the market price of the Common Stock. After the
completion of this offering, shares of Common Stock will be outstanding.
Of such shares, only the shares sold pursuant to this offering will be
tradable in the public market without restriction. The remaining shares of
Common Stock to be outstanding after the offering are "restricted securities"
within the meaning of Rule 144 ("Rule 144") under the Securities Act of 1933,
as amended (the "Securities Act"), and may not be publicly resold, except in
compliance with the registration requirements of the Securities Act or
pursuant to an exemption from registration, including that provided by Rule
144.
Beginning 90 days after the date of this Prospectus, shares and
shares issuable upon exercise of options will be eligible for resale in the
public market, subject to compliance with certain volume, timing and other
requirements of Rule 144 and Rule 701 ("Rule 701") under the Securities Act
and to the lock-up agreements described below. The remaining shares of
currently outstanding Common Stock and shares issuable upon exercise of
options which will vest after such 90-day period will become eligible for
resale pursuant to Rule 144 and Rule 701 at various times within the next
year, and some of such shares could be sold earlier if the holders exercise
their registration rights described below.
We and certain of our existing shareholders (holding an aggregate of
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 BancBoston Robertson
Stephens, subject to certain exceptions. In its sole discretion, and at any
time without notice, BancBoston Robertson Stephens may release all or any
portion of the shares subject to such lock-ups.
The holders of 8,312,240 shares of Common Stock have the right in certain
circumstances to require us to register their shares under the Securities Act,
for resale to the public. We may also be required to issue an aggregate of
240,000 additional shares upon certain events specified under the terms of the
Series A Preferred Stock, and such shares would also be subject to
registration rights. If such holders, by exercising their demand registration
rights, cause a large number of shares to be registered and sold in the public
market, such sales could have a material adverse effect on the market price
for the Common Stock. Specifically, the holders of approximately 5,000,000
shares of Common Stock or Common Stock equivalents have the right to demand
registration of their shares beginning on the date 180 days after the
effective date of the registration statement
18
<PAGE>
relating to an initial public offering. The simultaneous effectiveness of such
rights may also result in conflicts among such holders, and the resolution of
such claims could have a material adverse effect on our business, financial
condition and operating results. In addition, if we were required to include
shares held by such holders pursuant to the exercise of their piggyback
registration rights in a registration statement filed by us, such sales could
have an adverse effect on our ability to raise needed capital. In addition,
within approximately 180 days after the date of this Prospectus, we expect to
register under the Securities Act a total of 7,191,226 shares of Common Stock
subject to outstanding stock options or reserved for issuance under our stock
option plans. For more information, see "Description of Capital Stock--
Registration Rights."
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 have a material adverse effect on our business, financial
condition or operating results or on the market price for the Common Stock.
For more information, see "Shares Eligible for Future Sale."
WE MUST PROTECT OUR INTELLECTUAL PROPERTY
We rely on a combination of copyright, trademark and trade secret laws and
contractual provisions to establish and protect our proprietary rights. We
have applied for the federal registration of service marks "WebMD," "Web-MD"
and "WebMD OnCall." By letter dated July 6, 1998, the PTO declined
registration of the mark "Web-MD" when used on or in connection with our
services. Although we responded to the PTO's denial of registration and we
believe that it is likely that the "WebMD," "Web-MD" and "WebMD OnCall" marks
will be accepted for registration by the PTO, we cannot guarantee that we will
be able to secure registration of our "WebMD," "Web-MD" or "WebMD OnCall"
marks. If we are required to change our corporate name and stop using the
"WebMD" mark, current and potential customers could be confused and our
business could be disrupted. Any of these potential effects could seriously
harm our business, prospects, financial condition and operating results. In
addition, any name change effected after this offering could result in
confusion to investors which could seriously harm the market price of our
common stock. We have also registered the domain name "webmd.com." In
connection with the acquisition of SHN, we acquired the registered trademark
"Sapient Health Network," two patent applications pending in the PTO and 19
domain name registrations. In connection with the acquisition of DMK, we
acquired the registered trademarks "Direct Medical Knowledge" and "DMK
Electronic Library," two trademark applications pending in the PTO and three
domain names.
There can be no assurance that the steps we have taken to protect our
proprietary rights will be adequate, that we will be able to secure trademark
or service mark registrations for our marks in the United States or in foreign
countries or that third parties will not infringe upon or misappropriate our
copyrights, trademarks, service marks, domain name and similar proprietary
rights. In addition, effective copyright and trademark protection may be
unenforceable or limited in certain foreign countries, and the global nature
of the Internet makes it impossible to control the ultimate destination of our
services. It is possible that our competitors or others will adopt product or
service names similar to ours, thereby impeding our ability to build brand
identity and possibly leading to customer confusion. Moreover, because domain
names derive value from the individual's ability to remember such names, we
cannot guarantee that our domain name will not lose its value if, for example,
users begin to rely on mechanisms other than domain names to access online
resources. Our inability to protect our marks adequately could have a material
adverse effect on the acceptance of the WebMD brand and on our business,
financial condition and operating results. In the future, litigation may be
necessary to enforce and protect our trade secrets, copyrights and other
intellectual property rights. Litigation would divert management resources and
be expensive and may not effectively protect our intellectual property.
We may be subject to litigation for claims of infringement of the rights of
others or to determine the scope and validity of the intellectual property
rights of others. If other parties file applications for marks used or
registered by us, we may have to oppose those applications and participate in
administrative proceedings to determine priority of rights to the mark, which
could result in substantial costs to us due to the diversion of management's
attention and the expense of such litigation, even if the eventual outcome is
favorable to us.
19
<PAGE>
Adverse determinations in such litigation could result in the loss of certain
of our proprietary rights, subject us to significant liabilities, require us
to seek licenses from third parties or prevent us from selling our services.
Any of these results could have a material adverse effect on the acceptance of
the WebMD brand and on our business, financial condition and operating
results. In addition, because we license a substantial portion of our content
from third parties, our exposure to copyright infringement actions may
increase because we must rely upon such third parties for information as to
the origin and ownership of this licensed content. For more information, see
"Business--Intellectual Property."
WE MAY NOT BE ABLE TO PREVENT INTERNET SECURITY BREACHES
The difficulty of securely transmitting confidential information over the
Internet has been a significant barrier to conducting electronic commerce and
engaging in sensitive communications over the Internet. We rely on browser-
level encryption, authentication and certificate technologies, all of which
are licensed from third parties, to provide the security and authentication
necessary to effect secure transmission of e-mail. However, we cannot
guarantee that advances in computer capabilities, new discoveries in the field
of cryptography or other events or developments will not result in a
compromise or breach of our security measures. A party who is able to
circumvent our security measures could misappropriate proprietary information
or confidential communications or cause interruptions in our operations. We
may be required to spend significant capital and other resources to protect
against the threat of such security breaches or to alleviate problems caused
by such breaches. Any well-publicized compromise of Internet security could
deter people from using the Internet or from conducting transactions that
involve transmitting confidential information, including confidential
healthcare information. To the extent that our activities or the activities of
third party contractors involve the storage and transmission of confidential
information, such as patient records or credit information, security breaches
could expose us to claims, litigation or other possible liabilities. Our
inability to prevent security breaches would have a material adverse effect on
our business, financial condition and operating results.
WE MAY EXPERIENCE SYSTEM FAILURES
To succeed, we must be able to operate our Web site 24 hours a day, seven
days a week, without interruption. Almost all of our communications and
information services are provided through our service and content providers.
We do not maintain redundant systems or facilities for our services. To
operate without interruption, our service and content providers must guard
against:
. damage from fire, power loss and other natural disasters;
. communications failures;
. software and hardware errors, failures or crashes;
. security breaches, computer viruses and similar disruptive problems; and
. other potential interruptions.
We have experienced periodic system interruptions in the past, and we cannot
guarantee that they will not occur again. Any significant interruptions in our
services or an increase in response time could result in a loss of potential
or existing subscribers and consumers, strategic partners or advertisers and
sponsors and, if sustained or repeated, could reduce the attractiveness of our
Web site to such parties. Although we maintain insurance for our business, we
cannot guarantee that our insurance will be adequate to compensate us for all
losses that may occur or to provide for costs associated with business
interruptions.
Our Web site may be required to accommodate a high volume of traffic and
deliver frequently updated information. Our Web site may experience slower
response times or system failures due to increased traffic on our site or for
a variety of other reasons. We also depend on content providers to provide
information and data feeds on a timely basis. Our Web site could experience
disruptions or interruptions in service due to the failure or delay in the
transmission or receipt of this information. In addition, our subscribers and
consumers depend on ISPs, OSPs and other Web site operators for access to our
Web site. Each of them has experienced significant
20
<PAGE>
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. Any significant interruption in our operations could have a
material adverse effect on our business, financial condition and operating
results.
STORAGE OF PERSONAL INFORMATION ABOUT OUR USERS
We have a privacy policy displayed on our WebMD site. Our policy is not to
willfully disclose any individually identifiable information about any of our
users to a third party without consent. This policy is accessible to users of
WebMD. Despite this policy, if third persons were able to penetrate our
network security or otherwise misappropriate our users' personal information
or credit card information, we could be subject to liability. Such liability
could include claims for unauthorized purchases with credit card information,
impersonation or other similar fraud claims. Liability could also include
claims for other misuses of personal information, such as for unauthorized
marketing purposes. These claims could result in litigation. In addition, the
Federal Trade Commission and state governmental bodies have been investigating
certain Internet companies regarding their use of personal information. We
could incur additional expenses if new regulations regarding the use of
personal information are introduced or if they chose to investigate our
privacy practices.
WE COULD BE LIABLE FOR INFORMATION RETRIEVED FROM OUR WEB SITE
We may be subject to third party claims for defamation, negligence,
copyright or trademark infringement or other theories based on the nature and
content of information supplied on our Web site by us or third parties,
including our content providers, medical advisors or users. These types of
claims have been brought, sometimes successfully, against online services in
the past. We could be subject to liability with respect to content that may be
accessible through our Web site or third party Web sites linked from our Web
site. For example, claims could be made against us if material deemed
inappropriate for viewing by children could be accessed through our Web site
or if a subscriber or consumer relies on healthcare information accessed
through our Web site to their detriment. Even if such claims do not result in
liability to us, we could incur significant costs in investigating and
defending against such claims and in implementing measures to reduce our
exposure to such liability. Our insurance may not cover potential claims of
this type or may not be adequate to cover all costs incurred in defense of
potential claims or to indemnify us for all liability that may be imposed.
WE MAY FACE YEAR 2000 PROBLEMS
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of
this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as
the year 2000 approaches and are commonly referred to as the "Year 2000
Problem."
Assessment. The Year 2000 Problem could affect computers, software and other
equipment that we use. Accordingly, we are reviewing our internal computer
programs and systems to determine if they will be Year 2000 compliant. We
presently believe that our computer systems will be Year 2000 compliant in a
timely manner. However, while we do not expect the cost of these efforts to be
material to our financial position or any year's operating results, there can
be no assurance to this effect.
Services Sold to Consumers. We depend on third party suppliers for most of
the services provided through WebMD. If these parties are affected by the Year
2000 Problem, our ability to provide services to our subscribers may be
materially adversely affected.
Internal Infrastructure. We believe that we have identified substantially
all of the major computers, software applications and related equipment used
in connection with our internal operations that must be modified, upgraded or
replaced to minimize the possibility of a material disruption to our business.
We have commenced the process of modifying, upgrading and replacing systems
that have been identified as potentially being adversely affected and expect
to complete this process before the end of the third quarter of 1999. We do
21
<PAGE>
not expect the cost related to these efforts to be material to our business,
financial condition or operating results.
Systems Other Than Information Technology Systems. In addition to computers
and related systems, the operation of our office and facilities equipment,
such as fax machines, photocopiers, telephone switches, security systems,
elevators and other common devices may be affected by the Year 2000 Problem.
We are currently assessing the potential effect of, and costs of remediating,
the Year 2000 Problem on this equipment. We estimate that our total cost of
completing any required modifications, upgrades or replacements of these
internal systems will not have a material effect on our business, financial
condition or operating results.
Suppliers. We have been gathering information from and have initiated
communications with our service and content providers to identify and, to the
extent possible, resolve issues involving the Year 2000 Problem. However, we
have limited or no control over the actions of our service and content
providers. Thus, while we expect that we will be able to resolve any
significant Year 2000 Problems with our systems, we cannot guarantee that our
service and content providers will resolve any or all Year 2000 Problems with
their systems before the occurrence of a material disruption to our business.
Any failure of these third-parties to resolve Year 2000 problems with their
systems in a timely manner could have a material adverse effect on our
business, financial condition or operating results.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 Problems that could materially adversely affect our
business, financial condition or operating results. However, we believe that
it is not possible to determine with complete certainty that all Year 2000
Problems affecting us have been identified or corrected. The number of devices
that could be affected and the interactions among these devices are simply too
numerous. In addition, we cannot accurately predict how many failures related
to the Year 2000 Problem will occur or the severity, duration or financial
consequences of such failures. As a result, we expect that we could possibly
suffer the following consequences:
. a significant number of operational inconveniences and inefficiencies for
us, our service and content providers and our subscribers and consumers
that may divert our time and attention and financial and human
resources from our ordinary business activities; and
. a lesser number of serious system failures that may require significant
efforts by us, our service and content providers or our subscribers and
consumers to prevent or alleviate material business disruptions.
Contingency Plans. We are currently developing contingency plans to be
implemented as part of our efforts to identify and correct Year 2000 Problems
affecting our internal systems. We expect to complete our contingency plans by
the end of the third quarter of 1999. Depending on the systems affected, these
plans could include (a) accelerated replacement of affected equipment or
software; (b) short to medium-term use of backup equipment and software; (c)
increased work hours for our personnel or use of contract personnel to correct
on an accelerated schedule any Year 2000 Problems which arise or to provide
manual workarounds for information systems; and (d) other similar approaches.
If we are required to implement any of these contingency plans, such plans
could have a material adverse effect on our business, financial condition or
operating results. For more information, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Issues."
WE ARE SUBJECT TO GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may
be adopted in the future that address issues such as online content, user
privacy, pricing and characteristics 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 certain types of
information and content. In addition, several telecommunications carriers are
seeking to have telecommunications over the Internet regulated by the Federal
Communications Commission (the "FCC") in the same manner as other
telecommunications services. Because the growing popularity and use of the
Internet
22
<PAGE>
has burdened the existing telecommunications infrastructure in many areas,
local exchange carriers have petitioned the FCC to regulate ISPs and OSPs in a
manner similar to long distance telephone carriers and to impose access fees
on the ISPs and OSPs.
Internet user privacy has become an issue both in the United States and
abroad. Current United States privacy law consists of a few disparate statutes
directed at specific industries that collect personal data, none of which
specifically covers the collection of personal information online. We cannot
guarantee that the United States or foreign nations will not adopt legislation
purporting to protect such privacy. Any such legislation could affect the way
in which we are allowed to conduct our business, especially those aspects that
involve the collection or use of personal information, and could have a
material adverse effect on our business, financial condition and operating
results. Moreover, it may take years to determine the extent to which existing
laws governing issues such as property ownership, libel, negligence and
personal privacy are applicable to the Internet.
Currently, our operations are not regulated by any healthcare agency.
However, with regard to healthcare issues on the Internet, the recently
enacted Health Insurance Portability and Accountability Act of 1996, mandates
the use of standard transactions, standard identifiers, security and other
provisions by the year 2000. It will be necessary for our platform and for the
applications that we provide to be in compliance with the proposed
regulations. Congress is also likely to consider legislation that would
establish uniform, comprehensive federal rules about an individual's right to
access his own or someone else's medical information. This legislation would
likely define what is to be considered "protected health information" and
outline steps to ensure the confidentiality of this information. The proposed
Health Information Modernization and Security Act would provide for
establishing standards and requirements for the electronic transmission of
health information.
Issuances of our securities are regulated by the Securities and Exchange
Commission (the "Commission") and the securities commissions of states where
we offer or sell our securities. We issued options to acquire an aggregate of
7,280 shares of stock at an exercise price of $2.00 per share to five
independent sales representatives in the State of Texas for which we may not
have had an exemption available under the securities laws of the State of
Texas. Similarly, we issued options to acquire 111 shares of stock at an
exercise price of $2.00 per share to an independent sales representative in
the State of Oklahoma for which we may not have had an exemption under the
securities laws of the State of Oklahoma. In addition, we may have offered to
issue securities to an independent sales representative in the State of New
Hampshire for which we may not have had an exemption available under the
securities laws of the State of New Hampshire. All of these securities are
potentially subject to recission. While management is not aware of any claims
relating to these options as of the date hereof, we may be subject to claims,
penalties, fines or private or governmental actions relating to these
issuances of securities. For more information, see "Business--Government
Regulation and Legal Uncertainties."
WE COULD BE SUBJECT TO SALES OR OTHER TAXES
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and
by certain foreign governments that could impose taxes on the sale of goods
and services and certain other Internet activities. A recently enacted law
places a temporary moratorium on certain types of taxation on Internet
commerce. We cannot predict the effect of current attempts at taxing or
regulating commerce over the Internet. Any legislation that substantially
impairs the growth of e-commerce could have a material adverse effect on our
business, financial condition and operating results.
WE NEED TO ATTRACT KEY PERSONNEL
Our future success depends, in significant part, upon the continued service
of our senior management and other key personnel. The loss of the services of
Jeffrey T. Arnold, our Chief Executive Officer, Jay P. Gilbertson, our
President and Chief Operating Officer, or one or more of our other executive
officers or key employees could have a material adverse effect on our
business. Our President and Chief Operating Officer joined us in December
23
<PAGE>
1998. He has not previously worked with other members of our management team.
For us to be successful, he must work effectively with other members of
management. For more information, see "Management--Executive Officers and
Directors." Our future success also depends on our ability to attract and
retain highly qualified technical, sales, customer service and managerial
personnel. Competition for such personnel is intense, and we cannot guarantee
that we will be able to attract or retain a sufficient number of highly
qualified employees in the future. If we are unable to hire and retain
personnel in key positions, our business, financial condition and operating
results could be materially adversely affected.
OUR EXISTING SHAREHOLDERS WILL MAINTAIN CONTROL
Upon completion of this offering, our present directors and executive
officers, holders of more than 5% of the Common Stock and their respective
affiliates will beneficially own approximately % of the outstanding Common
Stock (approximately % of the outstanding Common Stock assuming full
exercise of the Underwriters' over-allotment option). As a result, these
shareholders, 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. Such control may have the
effect of delaying or preventing a change in control. For more information,
see "Management," "Principal and Selling Shareholders" and "Description of
Capital Stock."
WE MAY BE SUBJECT TO RISKS FROM THE SALE OF OUR CARDIAC MONITORING ASSETS
In connection with the sale of our cardiac monitoring assets to Matria
Healthcare, Inc. ("Matria"), we, one of our subsidiaries, Endeavor
Technologies, Inc. ("Endeavor"), and Jeffrey T. Arnold agreed not to compete
for five years in the cardiac event monitoring or cardiac disease management
services or home maternity monitoring or management services markets
(excluding patient education or patient requests for medical information via
the Internet). We and Endeavor agreed to indemnify Matria for up to $1.5
million plus the first $1.5 million of any additional contingent consideration
for inaccuracies in representations and warranties and for an unlimited amount
for certain representations and warranties relating to cash contributed to
Matria and the Hart-Scott-Rodino Act (the "HSR Act"), representations and
warranties made by Jeffrey T. Arnold regarding the HSR Act, certain post-
execution date adjustments, and claims relating to certain litigation of our
subsidiary. Although we currently do not believe that such indemnification
provisions will be invoked, there can be no assurance that we or Endeavor will
not be required to indemnify Matria in the future.
In addition, Endeavor retained certain liabilities, including liabilities
relating to actual and potential litigation in connection with the sale of our
cardiac monitoring assets to Matria. These liabilities include potential
sanctions associated with Endeavor's receipt of service of a civil subpoena
from the Department of Health and Human Services, Office of the Inspector
General ("OIG") on July 28, 1998. In a letter from the OIG dated November 25,
1998, Endeavor was advised that, to provide assurances to the OIG that
facsimile machines and telephone lines used in the offices of referral sources
are dedicated to cardiac monitoring, Matria will need to audit use of
facsimile machines and telephone lines and periodically report the results of
the audit to the OIG. After reaching agreement with Matria regarding precise
auditing procedures, the OIG has orally stated that it intends to enter into a
settlement agreement related to the subpoena. In addition, the retained
liabilities include a potential claim by Life Watch ("Life Watch"), an
Illinois corporation and subsidiary of Ralin Medical, Inc., which in February
1998 asserted orally that our use of certain cardiac monitoring devices
constituted an infringement of a patent held by Life Watch. Life Watch then
offered to grant license rights to us under such patent. We have responded by
informing Life Watch that Card Guard Scientific Survival, Ltd. owns all rights
with regard to such devices and that our subsidiary was merely a distributor
of such devices. There has been no further action in this regard. In the event
that this matter results in litigation, an adverse decision could result in
substantial damages and attorneys' fees, either of which could have a material
adverse effect on our business, financial condition or operating results.
24
<PAGE>
THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND OUR STOCK PRICE MAY
BE VOLATILE
Prior to this offering, there has been no public market for our Common
Stock. We cannot predict the extent to which investor interest in WebMD will
lead to the development of a trading market or how liquid that trading market
might become. The initial public offering price for the shares will be
determined by negotiation between us and the representatives of the
underwriters based upon several factors and may not be indicative of future
market prices. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of our Common Stock could be subject to fluctuations in response to quarterly
variations in operating results, announcements of technological innovations or
new services or products by us or our competitors, changes in financial
estimates by securities analysts, the operating and stock price performance of
other companies, general economic conditions and other events or factors. In
addition, the stock market has experienced volatility that has particularly
affected the market prices of equity securities of companies within certain
industry groups, such as technology companies generally and Internet-related
companies in particular. This volatility has included rapid and significant
increases in the trading prices of certain Internet companies following
initial public offerings to levels that do not bear any reasonable
relationship to the operating performance of such companies and large inter-
day swings in the trading prices of such securities. These fluctuations may
materially affect the trading price of our Common Stock. We cannot guarantee
that investors will 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, shareholders have often instituted
securities class action litigation. Such litigation could result in
substantial costs and the diversion of management's attention and resources,
which could have a material adverse effect on our business, financial
condition and operating results.
WE WILL HAVE SUBSTANTIAL DISCRETION OVER THE USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of Common
Stock offered by us will be approximately $ million, at an assumed initial
public offering price of $ per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses. We intend to use a
substantial portion of the net proceeds (a) to fund the development and
deployment of our WebMD services, including promotion of the WebMD brand,
funding of promotional arrangements, subsidization of costs to subscribers,
content development and licensing and expansion of our marketing and
advertising sales efforts, (b) to fund operating losses and (c) for working
capital and other general corporate purposes. We also intend to seek
acquisitions that could provide additional service or content offerings or
technologies. Consequently, our Board of Directors and management will have
significant flexibility in applying the net proceeds of this offering. The
failure of management to apply such funds effectively could have a material
adverse effect on our business, financial condition and operating results. For
more information, see "Use of Proceeds."
CERTAIN PROVISIONS MAY HAVE ANTI-TAKEOVER EFFECTS
Certain provisions of our Amended and Restated Articles of Incorporation, as
amended (the "Articles of Incorporation"), Amended and Restated Bylaws (the
"Bylaws"), other agreements and Georgia law could make it more difficult for a
third party to acquire us, even if a change in control would be beneficial to
our shareholders. For more information, see "Description of Capital Stock--
Certain Provisions of the Articles, Bylaws and the Georgia Law."
NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in the initial public offering will incur an
immediate, substantial dilution of $ in the net tangible book value per
share of the Common Stock from the assumed initial public offering price of
$ per share. On August 24, 1998, we sold 667,000 shares of Series A
Preferred Stock to a wholly owned subsidiary of McKessonHBOC, for an aggregate
purchase price of $10.0 million. On September 1, 1998, we sold 134,000 shares
of Series A Preferred Stock to Matria for an aggregate purchase price of $2.0
million. Subject to the investment agreements entered into between us and each
of such subsidiary of McKessonHBOC and Matria, in the event we offer our
Common Stock to the public in this offering at a price below $18.00 per share,
or in the event this offering is not consummated on or before May 22, 1999 or
March 1, 1999, as the case
25
<PAGE>
may be, we must issue to such subsidiary of McKessonHBOC or Matria as the case
may be, an additional 150,000 and 30,000 shares, respectively, of our Common
Stock (subject to adjustments for stock splits, stock dividends, combinations
or the like) for no additional consideration. In addition, if we fail to close
our initial public offering on or before November 22, 1999 or September 1,
1999, we must issue to such subsidiary of McKessonHBOC or Matria, as the case
may be, an additional 50,000 and 10,000 shares, respectively, of Series A
Preferred Stock for no additional consideration. Furthermore, to the extent
that we issue additional shares of Common Stock pursuant to acquisitions or
our strategic partner agreements, or other outstanding options or warrants to
purchase Common Stock are exercised, there will be further dilution. For more
information, see "Dilution."
26
<PAGE>
USE OF PROCEEDS
The net proceeds to WebMD from the sale of the shares of Common Stock
offered by WebMD are estimated to be $ , assuming an initial public offering
price of $ per share and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company. See "Principal and Selling Shareholders."
The principal purposes of this offering are:
. to continue the development and deployment of WebMD;
. to increase the Company's equity capital;
. to facilitate the Company's future access to public equity markets;
. to increase the Company's visibility in the marketplace; and
. to enhance the Company's ability to use its Common Stock as
consideration for acquisitions and as a means of attracting and
retaining key employees.
The Company will use the net proceeds from this offering (a) to fund the
development and deployment of its WebMD services, including promotion of the
WebMD brand, funding of promotional arrangements, subsidization of costs to
subscribers, content development and licensing, expansion of its marketing and
advertising sales efforts, (b) to fund operating losses and (c) for working
capital and other general corporate purposes. The Company has not identified
specific uses for such proceeds, and management will have significant
discretion over their use and investment. The Company intends to seek
acquisitions that could provide additional service and content offerings or
technologies, and a portion of the net proceeds may be used for such
acquisitions. While the Company discusses potential acquisitions from time to
time and has recently completed the Acquisitions, the Company currently has no
plans, commitments or agreements for any other acquisitions, and there can be
no assurance that any other acquisitions will be completed. Pending these
uses, the Company intends to invest the net proceeds from this offering in
investment-grade, interest-bearing instruments. See "Risk Factors--We Will
Have Substantial Discretion Over the Use of Proceeds."
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The
Company currently intends to retain future earnings, if any, to fund the
development and growth of its business. Payment of future dividends, if any,
will be at the discretion of the Board of Directors after taking into account
various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion.
27
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1998: (i) on an actual basis; (ii) on a pro forma basis to
reflect the issuance of 2,113,263 shares of Series B Preferred Stock in
connection with the acquisitions of SHN and DMK and 1,868,750 shares of
Series B Preferred Stock and Series C Preferred Stock which were recently
issued; and (iii) on a pro forma as adjusted basis to reflect the conversion
into Common Stock of all of the Company's outstanding Series B, C, D and E
Common Stock and Series A, B and C Preferred Stock upon the completion of the
offering and the receipt of the estimated net proceeds from the sale of the
shares of Common Stock offered by the Company at an assumed initial
public offering price of $ per share. See "Use of Proceeds." This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's Consolidated
Financial Statements and the related Notes thereto and the other financial
information appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Shareholders' equity:
Preferred Stock, no par value;
10,000,000 shares authorized:
Series A, non-voting; 1,600,000
shares authorized; 801,000 shares
issued and outstanding, actual and
pro forma; no shares authorized,
issued or outstanding, pro forma as
adjusted............................ $ 12,015 $ 12,015 $ --
Series B, non-voting; 3,400,000
shares authorized; no shares issued
and outstanding, actual; 2,973,263
shares issued and outstanding, pro
forma; no shares authorized, issued
or outstanding, pro forma as
adjusted............................ -- 62,100 --
Series C, non-voting; 2,000,000
shares authorized; no shares issued
and outstanding, actual; 1,008,750
shares issued and outstanding, pro
forma; no shares authorized, issued
or outstanding, pro forma as
adjusted............................ -- 20,175 --
Common Stock, no par value, 97,000,000
shares authorized:
Common Stock, voting; 3,000,000
shares issued and outstanding,
actual and pro forma; shares
issued and outstanding, pro forma as
adjusted (1)........................ 1,181 1,181
Series B, non-voting; 1,400,000
shares issued and outstanding,
actual and pro forma; no shares
authorized, issued or outstanding,
pro forma as adjusted............... 400 400 --
Series C, non-voting; 1,500,000
shares issued and outstanding,
actual and pro forma; no shares
authorized, issued or outstanding,
pro forma as adjusted............... 786 786 --
Series D, non-voting; 4,406,805
shares issued and outstanding,
actual and pro forma; no shares
authorized, issued or outstanding,
pro forma as adjusted (2)........... 10,854 10,854 --
Series E, non-voting; 2,100,000
shares issued and outstanding,
actual and pro forma; no shares
authorized, issued or outstanding,
pro forma as adjusted............... 4,155 4,155 --
Deferred compensation................. (1,007) (1,007) (1,007)
Redeemable warrant issued in connec-
tion with debt....................... 1,110 1,110 1,110
Accumulated deficit (3)............... (13,939) (13,939) (13,939)
----------- ----------- -----------
Total shareholders' equity........... 15,555 97,830
----------- ----------- -----------
Total capitalization................ $ 15,555 $ 97,830 $
=========== =========== ===========
</TABLE>
- --------
(1) Excludes 7,317,359 shares of Common Stock issuable upon the exercise of
outstanding options and warrants. See "Management--Option Plans," "Shares
Eligible for Future Sale" and Note 10 of Notes to Consolidated Financial
Statements. Also excludes 150,000 and 30,000 shares of Common Stock
issuable to McKessonHBOC and Matria, respectively, if this offering is not
consummated at a price of at least $18.00 per share on or before May 22,
1999 or March 1, 1999, respectively.
(2) Excludes an aggregate of 190,000 shares of Series D Common Stock issued
subsequent to September 30, 1998.
(3) In connection with its acquisitions of SHN and DMK, the Company may incur
write-offs relating to valuation and other procedures. No amounts are
reflected in this amount as of September 30, 1998.
28
<PAGE>
DILUTION
The pro forma net tangible book value of WebMD as of September 30, 1998 was
$ , or $ per share of Common Stock. Pro forma net tangible book value per
share is equal to total tangible assets less total liabilities, divided by the
total pro forma number of shares of Common Stock outstanding, after giving
effect to the issuance of Series B Preferred Stock in connection with the
acquisitions of SHN and DMK and the recent issuances of common and preferred
stock and the conversion of all outstanding shares of Series B, C, D and E
Common Stock and Series A, B and C Preferred Stock into Common Stock. After
giving effect to the sale of shares of Common Stock offered by WebMD (at
an assumed initial public offering price of $ per share less underwriting
discounts and commissions and estimated offering expenses), the adjusted pro
forma net tangible book value of WebMD as of September 30, 1998 would have
been $ , or $ per share. This amount represents an immediate increase in
pro forma net tangible book value of $ per share to existing shareholders
and an immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share as of September 30,
1998............................................................. $
Increase in net tangible book value per share attributable to new
investors........................................................
---
Adjusted pro forma net tangible book value after the offering......
---
Dilution per share to new investors................................
===
</TABLE>
The following table summarizes, on an as adjusted basis as of September 30,
1998, the number of shares of Common Stock purchased from WebMD, the total
consideration and the average price per share paid by existing shareholders
and by new investors, at an assumed initial public offering price of $ per
share and before deducting estimated underwriting discounts and commissions
and offering expenses:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION AVERAGE
-------------- -------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Existing shareholders(1)........ % $ % $
New investors(1)................
--- ----- ---- ------
Total......................... 100.0% $ 100.0 %
=== ===== ==== ======
</TABLE>
- --------
(1) Sales by the Selling Shareholders in this offering will reduce the number
of shares held by existing shareholders to , or % of the total number
of shares of Common Stock outstanding after the offering, and will
increase the number of shares held by new investors to , or % of the
total number of shares of Common Stock outstanding after the offering. See
"Principal and Selling Shareholders."
The above computations exclude shares of Common Stock issuable pursuant
to options or warrants outstanding as of September 30, 1998 at a weighted
average exercise price of $ per share. To the extent any of the foregoing
options and warrants are exercised, there will be further dilution to new
investors. In addition, an aggregate of shares of Common Stock are
reserved for issuance pursuant to the Company's Amended and Restated 1997
Stock Incentive Plan (the "Option Plan") and the Company's Director Option
Plan (the "Director Option Plan"). See "Management Option Plans."
On August 24, 1998, the Company sold 667,000 shares of Series A Preferred
Stock to a wholly owned subsidiary of McKessonHBOC, for an aggregate purchase
price of $10.0 million. On September 1, 1998, the Company sold 134,000 shares
of Series A Preferred Stock to Matria for an aggregate purchase price of $2.0
million. Subject to the investment agreements entered into between the Company
and each of McKessonHBOC and Matria, in the event the initial public offering
price is below $18.00 per share, or in the event this offering is not
consummated on or before May 22, 1999 or March 1, 1999, as the case may be,
the Company must issue to McKessonHBOC or Matria, as the case may be, an
additional 150,000 and 30,000 shares, respectively, of
29
<PAGE>
Common Stock (subject to adjustments for stock splits, stock dividends,
combinations or the like) for no additional consideration. In addition, if the
Company fails to close this offering on or before November 22, 1999 or
September 1, 1999, the Company must issue to McKessonHBOC or Matria, as the
case may be, an additional 50,000 and 10,000 shares, respectively, of Series A
Preferred Stock for no additional consideration. Furthermore, to the extent
that the Company issues additional shares of Common Stock pursuant to its
acquisitions or strategic partner agreements, there will be further dilution.
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of the Company for the years ended
December 31, 1995, 1996 and 1997 and as of December 31, 1996 and 1997 are
derived from the Company's consolidated financial statements, which have been
audited by Ernst & Young LLP, independent auditors. The selected statement of
operations data for the period from April 21, 1994 to December 31, 1994 and
the nine months ended September 30, 1997 and 1998 and the selected balance
sheet data as of December 31, 1994 and 1995 and September 30, 1998 were
derived from unaudited consolidated financial statements which, in the opinion
of management, include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the information set forth
therein. The results of operations for the nine months ended September 30,
1998 are not necessarily indicative of the results for a full year. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and related Notes thereto included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(APRIL 21, YEAR ENDED ENDED
1994) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------ -----------------
1994 1995 1996 1997 1997 1998
------------ ------ ------- ------- ------- --------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ -- $ -- $ -- $ -- $ -- $ 75
Operating expenses:
Product development.... -- -- -- 566 -- 5,867
Sales and marketing.... -- -- -- 213 114 1,499
General and
administrative....... -- -- -- 1,806 1,255 7,039
Depreciation and
amortization......... -- -- -- 9 1 111
-------- ------ ------- ------- ------- --------
Total operating
expenses............ -- -- -- 2,594 1,370 14,516
-------- ------ ------- ------- ------- --------
Operating loss.......... -- -- -- (2,594) (1,370) (14,441)
Interest expense, net... -- -- -- (725) (478) (177)
-------- ------ ------- ------- ------- --------
Net loss from continuing
operations............ -- -- -- (3,319) (1,848) (14,618)
Discontinued operations
(1):
Loss from discontinued
operations........... (40) (39) (1,682) (1,195) (718) (383)
Gain on disposal of
discontinued
operations........... -- -- -- 165 165 8,102
-------- ------ ------- ------- ------- --------
Net loss before
extraordinary items... (40) (39) (1,682) (4,349) (2,401) (6,899)
Extraordinary loss on
early extinguishment
of notes payable..... -- -- -- -- -- (930)
-------- ------ ------- ------- ------- --------
Net loss................ $ (40) $ (39) $(1,682) $(4,349) $(2,401) $ (7,829)
======== ====== ======= ======= ======= ========
Net loss per share
(basic and diluted):
Continuing operations.. $ -- $ -- $ -- $ (0.40) $ (0.23) $ (1.25)
Discontinued
operations........... (0.04) (0.04) (0.64) (0.12) (0.07) 0.66
Extraordinary loss on
early extinguishment
of notes payable..... -- -- -- -- -- (0.08)
-------- ------ ------- ------- ------- --------
Net loss per share (2).. $ (0.04) $(0.04) $ (0.64) $ (0.52) $ (0.30) $ (0.67)
======== ====== ======= ======= ======= ========
Weighted average shares
outstanding (2)....... 1,000 1,000 2,612 8,300 7,918 11,750
======== ====== ======= ======= ======= ========
Pro forma net loss per
share (3)............. $ (0.52) $ (0.56)
======= ========
Pro forma weighted
average shares
outstanding (3)....... 8,300 13,972
======= ========
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998
----------- ----- ------ ------ -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...... $ -- $ -- $ -- $2,696 $11,737
Working capital................ -- -- -- 2,532 13,346
Total assets from continuing
operations................... -- -- -- 3,146 17,222
Total assets from discontinued
operations................... 213 638 3,497 6,044 --
Long-term debt, net of discount
(4).......................... -- -- -- 2,965 --
Total liabilities from
continuing operations........ -- -- -- 3,282 1,667
Total liabilities from
discontinued operations...... 244 670 2,939 1,762 --
Total shareholders' (deficit)
equity....................... (31) (32) 558 4,146 15,555
</TABLE>
- --------
(1) The Company was incorporated in October 1996, and in March 1997, a
subsidiary of the Company merged with Endeavor, a provider of cardiac
monitoring services, and Endeavor was the surviving corporation. Endeavor
was incorporated in April 1994. Statement of operations data for all
periods presented include statement of operations data for Endeavor, as
the predecessor of the Company. Effective as of July 1, 1998, the Company
sold substantially all its cardiac monitoring assets to Matria. The
Company's financial statements reflect the cardiac monitoring operations
as discontinued operations for all periods and dates prior to such sale
of assets. In addition, on July 1, 1997, we sold our subsidiary, Ultra
Scan, Inc.
(2) Basic and diluted net loss per share was determined using all classes of
our common stock outstanding during each period. It does not include the
conversion of preferred stock. Options or warrants to purchase common
stock were also not included as they are anti-dilutive.
(3) Weighted average shares used in calculating pro forma information include
those described in footnote 2 above, and assumes the weighted average
conversion of preferred stock of 801,000 for the nine months ended
September 30, 1998.
(4) See Note 5 of the WebMD Notes to Consolidated Financial Statements.
32
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements have been prepared to give effect to the acquisitions of SHN and
DMK. The pro forma consolidated statements of operations of the Company for
the year ended December 31, 1997 and the nine months ended September 30, 1998
give effect to the acquisitions of SHN and DMK as if they occurred on January
1, 1997. The pro forma consolidated balance sheet as of September 30, 1998
gives effect to the acquisitions of SHN and DMK as if they had occurred on
September 30, 1998. The pro forma adjustments are based upon available
information and certain assumptions that the Company believes are reasonable
under the circumstances.
The pro forma consolidated financial statements and notes thereto should be
read in conjunction with "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements and Notes thereto, the historical financial statements,
including notes thereto, of SHN and DMK and other financial and operating
information included elsewhere herein. This pro forma information and the
related notes are provided for illustrative purposes only and do not purport
to represent what the Company's results of operations would have been if the
acquisitions of SHN and DMK had in fact been completed on such dates, nor does
it purport to indicate the future financial position or results of future
operations of the Company.
33
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COMPANY PRO FORMA PRO
HISTORICAL DMK SHN ADJUSTMENTS FORMA
---------- ------- ------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues, including
shareholder revenues of
$424...................... $ -- $ 592 $ 86 $ -- $ 678
Operating expenses:
Product development ....... 566 810 2,512 -- 3,888
Sales and marketing........ 213 221 524 -- 958
General and
administrative........... 1,806 699 1,287 -- 3,792
Depreciation and
amortization............. 9 337 242 15,287 15,875
------- ------- ------- -------- --------
Total operating expenses... 2,594 2,067 4,565 15,287 24,513
------- ------- ------- -------- --------
Operating loss.............. (2,594) (1,475) (4,479) (15,287) (23,835)
Interest income (expense),
net....................... (725) 46 (37) -- (716)
------- ------- ------- -------- --------
Net loss from continuing
operations................ $(3,319) $(1,429) $(4,516) $(15,287) $(24,551)
======= ======= ======= ======== ========
Net loss per share.......... $ (2.96)
========
Weighted average shares
outstanding............... 8,300
========
Pro forma net loss per
share..................... $ (2.36)
========
Pro forma weighted average
shares outstanding........ 10,417
========
</TABLE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
COMPANY PRO FORMA PRO
HISTORICAL DMK SHN ADJUSTMENTS FORMA
---------- ------- ------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues, including
shareholder revenues of
$104...................... $ 75 $ 198 $ 343 $ -- $ 616
Operating expenses:
Product development ....... 5,867 827 1,703 -- 8,397
Sales and marketing........ 1,499 305 432 -- 2,236
General and
administrative........... 7,039 851 1,202 -- 9,092
Depreciation and
amortization............. 111 323 252 11,465 12,151
-------- ------- ------- -------- --------
Total operating expenses... 14,516 2,306 3,589 11,465 31,876
-------- ------- ------- -------- --------
Operating loss.............. (14,441) (2,108) (3,246) (11,465) (31,260)
Interest income (expense),
net....................... (177) 8 (310) -- (479)
-------- ------- ------- -------- --------
Net loss from continuing
operations................ $(14,618) $(2,100) $(3,556) $(11,465) $(31,739)
======== ======= ======= ======== ========
Net loss per share.......... $ (2.70)
========
Weighted average shares
outstanding............... 11,750
========
Pro forma net loss per
share..................... $ (2.27)
========
Pro forma weighted average
shares outstanding........ 13,972
========
</TABLE>
34
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
FOR THE FOR THE
COMPANY DMK AND SHN DMK AND SHN
HISTORICAL DMK SHN ACQUISITIONS (1) ACQUISITIONS
---------- ------- -------- ---------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 11,737 $ 7 $ 1,160 $(1,850) $ 11,054
Accounts receivable.................... -- 25 35 -- 60
Current portion of note receivable..... 117 -- -- -- 117
Inventory.............................. 1,956 -- -- -- 1,956
Other current assets................... 1,203 42 567 -- 1,812
-------- ------- -------- ------- --------
Total current assets.................. 15,013 74 1,762 (1,850) 14,999
PROPERTY AND EQUIPMENT, NET............. 2,176 690 506 -- 3,372
OTHER ASSETS:
Intangibles, net....................... -- 58 -- 45,859 45,917
Note receivable, less current portion.. 33 -- -- -- 33
Other long-term assets................. -- 24 326 -- 350
-------- ------- -------- ------- --------
Total assets.......................... $ 17,222 $ 846 $ 2,594 $44,009 $ 64,671
======== ======= ======== ======= ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.. $ 1,667 $ 392 $ 773 $ -- $ 2,832
Deferred revenue....................... -- 38 506 -- 544
Notes payable and lines of credit...... -- 248 6,124 (5,703) 669
-------- ------- -------- ------- --------
Total current liabilities............. 1,667 678 7,403 (5,703) 4,045
LONG-TERM OBLIGATIONS:
Capital leases, net of current
portion............................... -- 321 171 (321) 171
-------- ------- -------- ------- --------
Total liabilities..................... 1,667 999 7,574 (6,024) 4,216
MANDATORILY REDEEMABLE PREFERRED STOCK.. -- -- 4,994 (4,994) --
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock........................ 12,015 4,098 1 40,801 56,915
Common stock........................... 17,376 4 2 (6) 17,376
Deferred compensation.................. (1,007) -- -- -- (1,007)
Warrants............................... 1,110 2 -- (2) 1,110
Additional paid-in capital............. -- -- 906 (906) --
Accumulated earnings (deficit)......... (13,939) (4,257) (10,883) 15,140 (13,939)
-------- ------- -------- ------- --------
Total shareholders' equity (deficit).. 15,555 (153) (9,974) 55,027 60,455
-------- ------- -------- ------- --------
Total liabilities, redeemable
preferred stock and shareholders'
equity.............................. $ 17,222 $ 846 $ 2,594 $44,009 $ 64,671
======== ======= ======== ======= ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
PREFERRED
STOCK
SALES (2) PRO FORMA
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $33,775 $ 44,829
Accounts receivable.................... -- 60
Current portion of note receivable..... -- 117
Inventory.............................. -- 1,956
Other current assets................... 1,200 3,012
----------- ----------
Total current assets.................. 34,975 49,974
PROPERTY AND EQUIPMENT, NET............. -- 3,372
OTHER ASSETS:
Intangibles, net....................... -- 45,917
Note receivable, less current portion.. -- 33
Other long-term assets................. 2,400 2,750
----------- ----------
Total assets.......................... $37,375 $102,046
=========== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.. $ -- $ 2,832
Deferred revenue....................... -- 544
Notes payable and lines of credit...... -- 669
----------- ----------
Total current liabilities............. -- 4,045
LONG-TERM OBLIGATIONS:
Capital leases, net of current
portion............................... -- 171
----------- ----------
Total liabilities..................... -- 4,216
MANDATORILY REDEEMABLE PREFERRED STOCK.. -- --
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock........................ 37,375 94,290
Common stock........................... -- 17,376
Deferred compensation.................. -- (1,007)
Warrants............................... -- 1,110
Additional paid-in capital............. -- --
Accumulated earnings (deficit)......... -- (13,939)
----------- ----------
Total shareholders' equity (deficit).. 37,375 97,830
----------- ----------
Total liabilities, redeemable
preferred stock and shareholders'
equity.............................. $37,375 $102,046
=========== ==========
</TABLE>
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
1. Pro Forma Adjustments for the SHN and DMK Acquisitions
A total of 1,750,000 shares of Series B Preferred Stock was issued in
connection with the acquisition of SHN in exchange for (i) the total
outstanding shares of SHN capital stock as of the effective time of
acquisition of SHN and (ii) a convertible promissory note and the assumption
by the Company of SHN's options and warrants outstanding at the effective time
of the acquisition of SHN.
A total of 625,000 shares of Series B Preferred Stock was issued in
connection with the acquisition of DMK in exchange for (i) the total
outstanding shares of DMK capital stock as of the effective time of the
acquisition of DMK and (ii) a convertible promissory note and the assumption
by the Company of DMK's options and warrants outstanding at the effective time
of the acquisition of DMK.
The SHN and DMK acquisitions will be accounted for using the purchase method
of accounting. The purchase price was based on a $20.00 per share valuation of
the Company's capital stock, which was established by the Company's Board of
Directors in the absence of a liquid market. The purchase price allocation
reflects a discount attributable to the restrictions on resale of the
Company's capital stock.
The unaudited pro forma financial statements have been prepared on the basis
of assumptions described in these notes, including assumptions relating to the
allocation of the consideration paid for the assets and liabilities of SHN and
DMK based on preliminary estimates of their fair value. The actual allocation
of such consideration may differ from that reflected in the unaudited pro
forma financial statements after valuations and other procedures to be
performed with respect to the SHN and DMK acquisitions are completed. The
following sets forth the estimated acquisition cost and purchase price
allocation with respect to the assets acquired:
<TABLE>
<CAPTION>
SHN DMK
------- -------
(IN THOUSANDS)
<S> <C> <C>
Estimated acquisition cost:
Estimated purchase price.................................. $33,300 $11,100
Acquisition expenses...................................... 1,500 350
------- -------
Total estimated acquisition cost........................ $34,800 $11,450
======= =======
Purchase price allocation:
Historical net book value at September 30, 1998........... $ 544 $ (153)
Goodwill.................................................. 34,256 11,603
------- -------
$34,800 $11,450
======= =======
</TABLE>
The preliminary goodwill allocation is $45.9 million and is being amortized on
a straight-line basis over 3 years.
The pro forma adjustments to "Common Stock," "Preferred Stock" and
"additional paid-in capital" reflect the elimination of these items and the
impact of the issuance of Series B Preferred Stock of the Company in
connection with the acquisitions of SHN and DMK.
2. Pro Forma Adjustments for the Preferred Stock Sales
Reflects the sale of 860,000 shares of the Company's Series B Preferred
Stock and 828,750 shares of the Company's Series C Preferred Stock subsequent
to September 30, 1998. Also reflects the issuance of 180,000 shares of the
Company's Series C Preferred Stock relating to the purchase (in lieu of cash)
of content services.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This prospectus contains "forward-looking statements" relating to, without
limitation, the Company's future economic performance, plans and objectives of
management for future operations, projections of revenue mix and other
financial items that are based on the beliefs of, as well as assumptions made
by and information currently known to, the Company's management. The words
"expects," "intends," "believes," "anticipates," "estimates," "may," "could,"
"should," "would," "will," "plans," "hopes" and similar expressions and
variations thereof are intended to identify forward-looking statements. The
cautionary statements set forth in this section, in "Risk Factors" and
elsewhere in this Prospectus identify important factors with respect to such
forward-looking statements, including certain risks and uncertainties that
could cause actual results to differ materially from those anticipated in such
forward-looking statements. The following discussion should be read in
conjunction with the Company's Consolidated Financial Statements and the
related Notes thereto and other financial information appearing elsewhere in
this prospectus.
OVERVIEW
WebMD provides a branded, integrated Web-based solution for the
administrative, communications and information needs of healthcare
professionals and for the healthcare information needs of consumers. The
Company's Web destination consists of two distinct, linked Web sites--a
subscription-based site for healthcare professionals and a free Health and
Wellness Center site for consumers. WebMD is a single point of access to EDI
services, enhanced communications services, branded healthcare content and
other Web-based offerings. For healthcare professionals, WebMD is designed to
simplify healthcare practices by integrating multiple administrative,
communications and research functions into a single, easy to use Web-based
solution. For consumers, WebMD provides premium, branded content to assist
consumers in making informed healthcare decisions, personalized information
about specific health conditions targeted according to the medical profiles of
individual consumers and content-specific online communities that allow
consumers to participate in real-time discussions and support networks via the
Web. We commercially launched WebMD in October 1998, and as of September 30,
1998 we had not generated any revenues from our Internet operations.
On January 25, 1999, the Company acquired all of the outstanding capital
stock and convertible debt of SHN in exchange for approximately 1,619,000
shares of Series B Preferred Stock. In addition, the Company converted
existing SHN options and warrants into options and warrants to acquire
approximately 131,000 shares of Series B Preferred Stock. At closing, the
Company also paid certain liabilities of SHN. This acquisition was accounted
for using the purchase method of accounting. SHN builds and manages Web-based
communities targeted at healthcare consumers and sells market research and
data products, advertising sponsorships and other online services. SHN
currently manages 10 online communities with members holding over 130,000
distinct e-mail addresses. These communities encompass a variety of chronic
health conditions, including hepatitis C, breast cancer, diabetes and
cardiovascular disease. SHN's Web site also includes the Women's Health Place,
which covers eight distinct women's health topics. SHN's Web site is driven by
proprietary, patent-pending personalization technology which allows registered
members free access to premium health content, chat rooms, message boards and
e-mail updates, each tailored to their unique medical profiles. Business Week
recently named SHN's Web site one of the best Web sites of 1998. In addition,
SHN has participated in a number of marketing and sponsorship programs with
leading companies in the pharmaceutical and healthcare industries, including
Amgen, Johnson & Johnson, SmithKline Beecham and Eli Lilly.
On January 22, 1999, the Company also acquired all of the outstanding
capital stock and convertible debt of DMK in exchange for approximately
494,000 shares of Series B Preferred Stock. In addition, the Company converted
existing DMK options and warrants into options and warrants to acquire
approximately 131,000 shares of Series B Preferred Stock. At closing, the
Company also paid certain liabilities of DMK. This acquisition was accounted
for using the purchase method of accounting. DMK is a publisher of healthcare
information that provides in-depth, personalized health and medical
information to consumers via the Internet. DMK has an electronic library of
healthcare information which is customized for its individual consumers
through its proprietary personalization software. DMK's main customers are
Blue Cross Blue Shield of Minnesota and Blue Shield of California, other large
managed care organizations and hospital systems.
37
<PAGE>
In addition, on December 31, 1998, the Company acquired substantially all of
the assets and assumed certain liabilities of certifiedemail.com in exchange
for 50,000 shares of Series D Common Stock. This acquisition was accounted for
using the purchase method of accounting. certifiedemail.com provides secure
delivery and confirmation of receipt of electronic mail. The Company plans to
use the certifiedemail.com system to allow healthcare professionals to
confidentially communicate with each other and with patients.
As a result of the SHN and DMK acquisitions, the Company intends to record
an aggregate of $45.9 million in goodwill beginning in the first quarter of
1999, which will be amortized on a straight-line basis over a three-year
period. The Company is evaluating any additional charges that may be required
with regard to valuations and other procedures to be performed with respect to
the SHN and DMK acquisitions. Most acquisitions of software and professional
services companies involve the purchase of significant amounts of intangible
assets. Therefore, acquisitions of such businesses often result in significant
goodwill being recorded and significant amortization charges and may also
result in charges for research and development projects. If the Company were
to incur additional charges for acquired in-process research and development
or amortization of goodwill with respect to current or future acquisitions,
the Company's business, financial condition and operating results could be
materially and adversely affected.
For the past 12 months, the Company has been transitioning from its former
cardiac monitoring business to its new business, which is focused on providing
Web-based administrative, communications and information services to
healthcare professionals and health and wellness information to consumers. The
Company's activities with respect to its Internet operations have primarily
consisted of licensing and creating content, negotiating relationships with
strategic partners, marketing and branding promotions, recruiting personnel
and raising capital. The Company anticipates that the majority of its revenues
will initially consist of recurring revenues from subscriptions. The Company
will recognize revenue when services are provided. Advance billings and
collections relating to future access services will be recorded as deferred
revenue and recognized when revenue is earned. If the Company is successful in
building its subscriber base and brand recognition and increasing traffic on
its Web site, the Company expects advertising and sponsorship revenues to
increase as a percentage of its total revenues.
The Company currently offers its subscribers two monthly service packages:
WebMD and WebMD OnCall. Subscriptions to WebMD and WebMD OnCall include the
following service offerings, as well as other Web-based service offerings: (i)
EDI services for electronic insurance eligibility verifications and patient
referrals; (ii) the Virtual Receptionist integrated messaging platform, which
manages incoming calls, voice mails, e-mails, fax messages and pages; (iii) a
customized physician Web site; (iv) physician references; (v) continuing
medical education ("CME") courses; (vi) interactive dissectible anatomy
software; (vii) secure e-mail (with tracking and proof of delivery features);
and (viii) lounge content (with access to financial services and products, as
well as news, stock, sports and weather information). A subscription to WebMD
OnCall also includes a physician-only answering service. The Company currently
offers WebMD and WebMD OnCall for $29.95 and $99.95 per month, respectively.
The WebMD and WebMD OnCall basic packages require a 12-month service period
and are terminable upon 90 days prior written notice to the Company. The
Company also provides Internet access, personal computers, network computers,
patient test results and paging services for additional monthly fees. The
Company subsidizes limited promotional packages of its services through its
relationships with McKessonHBOC, E*TRADE and MedQuist. The Company also offers
a limited number of promotional packages through other strategic
relationships. These promotional packages generally require a 12-to-36 month
service period and all are terminable upon 90 days prior written notice to the
Company, and the majority require payment of an early termination fee. The
Company has entered into these promotional arrangements in order to establish
its subscriber base and build brand recognition.
The Company has incurred net operating losses and negative cash flows from
operating activities since its inception. As of September 30, 1998, the
Company had an accumulated deficit of $13.9 million. The Company has not
achieved profitability, and the Company expects to incur increasing net
operating losses and negative cash flows for the foreseeable future. The
Company will incur direct expenses associated with the development and
deployment of WebMD and its branding campaign and indirect expenses from
promotional arrangements with certain of its distribution partners. The
Company's agreements and promotional arrangements with its distribution
partners and service and content providers require it to pay consideration in
various forms, including
38
<PAGE>
the payment of royalties, license fees and certain other significant
guaranteed amounts on a per subscriber and/or a minimum dollar amount basis
over terms ranging from one to three years, whether or not services or content
are used in these agreements. As of January 27, 1999, under the Company's
current promotional arrangements, the Company estimates that these aggregate
guaranteed payments will exceed $13.9 million for the year ending December 31,
1999. In addition, certain promotional arrangements and content agreements
require the Company to make payments that vary based on usage by subscribers.
The Company intends to enter into additional arrangements with current and
future strategic partners that will require the Company to pay consideration
in various forms in amounts that may significantly exceed the amounts that the
Company expects to be obligated to pay under its current arrangements. The
Company may also offer promotional packages of hardware and software to
subscribers at subsidized prices. These guaranteed payments, promotions and
other arrangements may require the Company to incur significant expenses, and
the Company cannot guarantee that it will generate sufficient revenues to
offset these expenses. The Company intends to use a significant portion of the
proceeds from this offering to fund its branding campaign and these
promotional arrangements and subsidies. The Company cannot be certain that it
will achieve sufficient revenues in relation to its expenses to ever be
profitable. If the Company does achieve profitability, it cannot be certain
that it can sustain or increase profitability on a quarterly or annual basis
in the future.
The Company's promotional arrangements and subsidies currently require, and
future arrangements may require, payment of amounts in lump sums upon the
acquisition of a subscriber that the Company will only recoup if the
subscriber maintains a subscription and pays all required subscription fees
for an extended period of time. For example, under the current promotional
arrangement with McKessonHBOC, the Company has agreed to reimburse
McKessonHBOC for license fees otherwise payable by users of one of its
products if McKessonHBOC successfully markets WebMD to these users or, in the
alternative, the Company has agreed to fund a rebate toward the purchase of
medical supplies that are purchased through WebMD by subscribers obtained by
McKessonHBOC. These subscribers may cancel their subscriptions after 12
months, in which case the Company would not recover the cost of the promotion.
In addition, the Company cannot guarantee that these subscribers will honor
their contracts or pay any early termination fee, if required. Accordingly,
the Company cannot guarantee that it will generate sufficient revenue from
subscribers it obtains through current or future promotional arrangements to
recoup the cost of the promotion. The Company also cannot guarantee that
subscribers obtained through promotional arrangements will actually use WebMD.
Therefore, the number of paying subscribers may not be indicative of the level
of usage of WebMD, and the Company expects the level of usage of WebMD to be a
primary factor in determining the amount of advertising revenue that it can
derive from WebMD.
The Company expects its quarterly revenues, expenses and operating results
to fluctuate significantly in the future as a result of a variety of factors,
some of which are outside of the Company's control. These factors include: the
number of WebMD subscribers and consumers; the level of traffic on the
Company's Web site and the level of usage of the Internet generally; the
Company's ability to establish and strengthen brand awareness; the Company's
success, and the success of its strategic partners, in distributing WebMD; the
addition or loss of service or content providers, advertisers or sponsors on
the Company's Web site; the Company's ability to upgrade its Web site; the
amount and timing of costs relating to marketing efforts or other initiatives;
the timing of contracts with strategic partners and other parties; fees the
Company may pay for distribution, service or content agreements and
promotional arrangements or other costs the Company may incur as it expands
its operations; the Company's ability to integrate the Acquisitions
successfully and to identify, acquire and integrate other suitable acquisition
candidates; the timing of charges related to acquisitions; the level of
acceptance of the Internet by the healthcare industry; the Company's ability
to compete in a highly competitive market and the introduction of new sites
and services by it or its competitors; technical difficulties, system
downtime, undetected software errors and other problems affecting the Internet
generally or the operation of the Company's Web site; and economic conditions
specific to the Internet and online media and general economic conditions.
As a result of the limited operating history of its Internet operations, the
recent disposition of its cardiac monitoring operations, the recent
Acquisitions and the emerging nature of the markets in which it intends to
compete, the Company is unable to forecast its revenues with any degree of
certainty. The Company's current
39
<PAGE>
and projected expense levels are based largely on its estimates of future
revenues and are mostly fixed. The Company expects its expenses to increase
significantly in the future as it continues to incur significant sales and
marketing, product development and administrative expenses. The success of the
Company's business depends on its ability to increase its revenues to offset
its expenses. The Company cannot guarantee that it will be able to generate
sufficient revenues to offset its operating expenses or the costs of its
promotional packages or subsidies or that it will be able to achieve or
maintain profitability. If its revenues fall short of its projections, the
Company's business, financial condition and operating results could be
materially and adversely affected. See "Risk Factors We Have a Limited
Operating History and Are Transitioning to a New Business Model," "--We
Anticipate Significant Future Losses and Are Unable to Accurately Forecast Our
Revenues" and "--Our Quarterly Financial Results May Fluctuate Significantly."
In March 1997, a subsidiary of the Company merged with Endeavor, a provider
of diagnostic cardiac monitoring services which was founded in 1994 by Jeffrey
T. Arnold, the Company's Chairman and Chief Executive Officer. Effective as of
July 1, 1998, the Company sold substantially all of its cardiac monitoring
assets to Matria for an aggregate purchase price of $17.0 million in cash and
$6.0 million in additional contingent consideration payable subject to the
achievement during calendar year 1999 of certain revenue goals by Matria in
the operation of the purchased assets. Substantially all of the Company's
historical revenues were derived from its cardiac monitoring operations. The
Company does not consider the historical results of its cardiac monitoring
operations to be meaningful or indicative of the Company's future results of
operations. The Company's financial statements reflect the cardiac monitoring
operations as discontinued operations for all periods and dates prior to such
sale of assets.
RESULTS OF OPERATIONS
In June 1997, the Company began redirecting its focus to the development of
integrated Web-based administrative, communications and information services
to healthcare professionals and healthcare information to consumers. The
Company commercially launched WebMD in October 1998. As of September 30, 1998,
the Company had not generated any revenues from its Internet operations.
Accordingly, the Company believes that year-to-year comparisons of the results
of operations for the years ended December 31, 1996 and 1997 and period-to-
period comparisons of the results of operations for the nine months ended
September 30, 1998 and 1997 are not meaningful and should not be relied upon
as an indication of future performance.
Revenues
As of September 30, 1998, the Company had generated $75,000 in revenues from
its management services contract with Matria. In the future, the Company
anticipates that revenues from its Internet operations will consist primarily
of revenues from subscriber fees and, if the Company is successful in building
its subscriber base and brand recognition and increasing traffic on WebMD,
transaction, sponsorship and advertising fees.
Operating Expenses
Product Development. Product development costs consist of compensation and
related expenses required to support the development of existing and new
service offerings, license and other fees, content acquisition and Web site
development fees. Product development costs are expensed as incurred. Product
development costs were $566,000 for the year ended December 31, 1997 and $5.9
million for the nine months ended September 30, 1998. Product development
costs increased primarily due to expenses related to the development of the
Company's Internet service offerings. The Company anticipates that product
development costs will continue to increase in absolute dollars as the Company
develops and enhances its Internet service offerings and hires additional
technical and Web development personnel.
Sales and Marketing. Sales and marketing costs consist of salaries and
related expenses and advertising, marketing and promotional expenses. Sales
and marketing costs are expensed as incurred. Sales and marketing
40
<PAGE>
costs were $213,000 for the year ended December 31, 1997 and $1.5 million and
$114,000 for the nine months ended September 30, 1998 and 1997, respectively.
Sales and marketing costs increased primarily due to the Company's branding
campaign and increased marketing efforts in connection with the deployment of
WebMD. The Company expects that sales and marketing costs will continue to
increase in absolute dollars as the Company continues to expand its branding
and advertising campaigns, deploy WebMD, enter into new strategic agreements
and increase its sales force.
General and Administrative. General and administrative expenses consist
primarily of: (i) salaries and related expenses for executive and
administrative functions; (ii) occupancy expenses; and (iii) overhead
expenses. General and administrative expenses were $1.8 million for the year
ended December 31, 1997 and were $7.0 million and $1.3 million for the nine
months ended September 30, 1998 and 1997, respectively. General and
administrative expenses increased primarily due to increased salaries,
compensation charges, related expenses for additional executive and
administrative personnel and the building of executive and administrative
infrastructure. The Company expects that its general and administrative costs
will continue to increase in absolute dollars as the Company expands its
administrative and executive staff, including customer service personnel, and
adds infrastructure.
Depreciation and Amortization. Depreciation and amortization expense
consists of the depreciation of property and equipment. Depreciation and
amortization was $9,000 for the year ended December 31, 1997 and was $111,000
and $1,000 for the nine months ended September 30, 1998 and 1997,
respectively. Depreciation and amortization increased due to purchases of
property and equipment for the expansion of the Company. The Company expects
that amortization costs will increase significantly in absolute dollars due to
amortization of $45.9 million in goodwill associated with the Acquisitions.
The Company also expects that depreciation may increase in absolute dollars
due to hardware costs associated with the deployment and distribution of
WebMD.
Interest Expense, Net
Interest expense, net consists primarily of interest paid on certain loans
from related parties and certain loans that have been repaid. Interest
expense, net was $725,000 for the year ended December 31, 1997 and was
$177,000 and $478,000 for the nine months ended September 30, 1998 and 1997,
respectively. Interest expense, net decreased for the nine months ended
September 30, 1998 due to the repayment of a $509,605 loan from a related
party and receipt of interest on the Company's investment of funds received
from McKessonHBOC in a private placement.
Discontinued Operations
Effective as of July 1, 1998, the Company sold substantially all of its
cardiac monitoring assets to Matria for an aggregate of $17.0 million in cash
and $6.0 million in additional contingent consideration payable subject to
achievement during calendar year 1999 of certain revenue goals by Matria in
the operation of the purchased assets. The Company incurred a loss from
discontinued operations of $1.2 million, $1.7 million and $39,000 for the
years ended December 31, 1997, 1996 and 1995, respectively, and a loss of
$383,000 and $718,000 for the nine months ended September 30, 1998 and 1997,
respectively. For the nine months ended September 30, 1998, the Company
recognized a gain of $8.1 million on the sale of its cardiac monitoring
operations. On July 1, 1997, the Company sold UltraScan, a diagnostic imaging
services provider, and recognized a gain on the UltraScan sale of $165,000 for
the year ended December 31, 1997 and the nine months ended September 30, 1997.
Income Taxes
At December 31, 1997, the Company had total net operating loss carryforwards
for federal and state income tax purposes of $5.1 million that expire in years
2010 through 2012. Utilization of the Company's net operating loss
carryforwards may be subject to an annual limitation due to the "change of
ownership" provisions of the Internal Revenue Code of 1986, as amended (the
"Tax Code"), and similar state provisions. The annual
41
<PAGE>
limitation may result in the expiration of net operating losses and credits
before utilization. For financial reporting purposes, a valuation allowance
has been recognized to reduce the net deferred tax assets to zero due to
uncertainties with respect to the Company's ability to generate taxable income
in the future sufficient to realize the benefit of deferred income tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through private equity and debt financings. During the year ended December 31,
1997 and nine months ended September 30, 1998, the Company received $5.8
million and $17.0 million, respectively, in net proceeds from the sale of its
capital stock. On August 29, 1997, the Company borrowed $4.0 million from
Sirrom Capital Corporation ("Sirrom") for working capital and general
corporate purposes. In connection with the loan, the Company issued Sirrom a
warrant to purchase 557,490 shares of Series D Common Stock. In April 1998,
Premiere Technologies exercised warrants to purchase 1,000,000 shares of
Series E Common Stock for an aggregate purchase price of $2.0 million. In July
1998, the Company borrowed an additional $2.0 million from Sirrom.
Effective as of July 1, 1998, the Company sold substantially all of its
cardiac monitoring assets to Matria for an aggregate purchase price of $17.0
million in cash and $6.0 million additional contingent consideration payable
subject to Matria's achievement during calendar year 1999 of certain revenue
goals in the operation of the purchased assets. The Company used approximately
$6.0 million of the proceeds to repay the $4.0 million and $2.0 million loans
from Sirrom. In July 1998, the Company used approximately $2.7 million of the
proceeds for settlement costs of litigation related to Endeavor. The remainder
of the proceeds have been and will continue to be used for product development
costs, sales and marketing costs associated with the introduction of WebMD,
purchases of network computers and related hardware and other general
corporate purposes.
On August 24, 1998, the Company sold 667,000 shares of Series A Preferred
Stock to a wholly owned subsidiary of McKessonHBOC for an aggregate purchase
price of $10.0 million and, on September 1, 1998, sold 134,000 shares of
Series A Preferred Stock to Matria for an aggregate purchase price of $2.0
million. Each share of Series A Preferred Stock is convertible at any time at
the option of the holder into one share of Common Stock, subject to
adjustment, and will be automatically converted into one share of Common Stock
upon the closing of an initial public offering. The Series A Preferred Stock
is non-voting except that the holders of the Series A Preferred Stock vote as
a separate class to elect one member to the Company's Board of Directors and
acquire full voting rights in the event the Company fails to complete an
initial public offering on or before February 20, 1999. Subject to the
investment agreements entered into between the Company and each such
subsidiary of McKessonHBOC and Matria, in the event the Company offers its
Common Stock to the public in this offering at a price below $18.00 per share,
or in the event this offering is not consummated on or before May 22, 1999 or
March 1, 1999, as the case may be, the Company must issue to such subsidiary
of McKessonHBOC or Matria, as the case may be, an additional 150,000 and
30,000 shares, respectively, of Common Stock (subject to adjustments for stock
splits, stock dividends, combinations or the like) for no additional
consideration. Furthermore, if the Company fails to close its initial public
offering on or before November 22, 1999 or September 1, 1999, the Company must
issue to such subsidiary of McKessonHBOC or Matria, as the case may be, an
additional 50,000 and 10,000 shares, respectively, of Series A Preferred Stock
for no additional compensation.
On December 31, 1998, the Company acquired substantially all of the assets
and assumed certain liabilities of certifiedemail.com in exchange for 50,000
shares of Series D Common Stock. On January 25, 1999, the Company acquired all
of the outstanding capital stock and converted certain debt of SHN in exchange
for 1,623,041 shares of Series B Preferred Stock. In addition, the Company
converted existing SHN options and warrants into options and warrants to
acquire 126,959 shares of Series B Preferred Stock. At closing, the Company
also paid certain liabilities at SHN. On January 22, 1999, the Company also
acquired all of the outstanding capital stock and converted certain debt of
DMK in exchange for 494,018 shares of Series B Preferred Stock. In addition,
the Company converted existing DMK options and warrants into options and
warrants to acquire 130,982 shares of Series B Preferred Stock. At closing,
the Company also paid certain liabilities of DMK.
42
<PAGE>
The Company recently sold an aggregate of 860,000 shares of Series B
Preferred Stock to five investors, including 650,000 shares to a wholly owned
subsidiary of McKessonHBOC and 100,000 shares to an affiliate of Kelso &
Company, for an aggregate purchase price of $17.2 million. The Company also
recently sold an aggregate of 828,750 shares of Series C Preferred Stock to 15
investors, including Trigon Healthcare, Inc., an affiliate of Premier, Inc.,
Tenet Healthcare Corporation and principals of Gleacher NatWest Inc.
("Gleacher NatWest") for an aggregate purchase price of $16.6 million.
Pursuant to the Company's advisory services agreement with Gleacher NatWest,
the Company granted Gleacher NatWest warrants to purchase 750,000 shares of
Series D Common Stock at an exercise price of $20.00 per share in lieu of a
cash payment for such services. The Company also recently issued 180,000
shares of Series C Preferred Stock to E.I. du Pont de Nemours and Company
("DuPont") in exchange for content services provided by DuPont in lieu of a
cash payment for such services. Furthermore, the Company recently made a
strategic investment in Nationwide Medical Services, Inc. a/k/a J&C Nationwide
("J&C Nationwide") through the issuance of 100,000 shares of Series D Common
Stock, and the Company has agreed to Web-enable J&C Nationwide's services and
to create a physicians' career and placement center within WebMD.
As of September 30, 1998, the Company's primary source of liquidity
consisted of $11.8 million in cash and cash equivalents, and the Company had
working capital of $13.3 million. Accounts payable and accrued expenses as of
September 30, 1998 were $1.7 million compared to $317,000 as of December 31,
1997. This increase was principally due to fees owed to service providers.
Net cash used by continuing operations was $3.6 million for the year ended
December 31, 1997 and $14.5 million and $2.1 million for the nine months ended
September 30, 1998 and 1997, respectively. The principal uses of cash were to
fund the Company's net losses from operations, partially offset by increases
in depreciation and amortization, non-cash interest and increased accounts
payable and accrued expenses.
Net cash provided by (used in) investing activities was $(1.6) million for
the year ended December 31, 1997 and $10.4 million and $(1.1) million for the
nine months ended September 30, 1998 and 1997, respectively. During 1997,
purchases of property and equipment primarily related to discontinued
operations, and during 1998, approximately half of the purchases of property
and equipment related to continuing operations.
Net cash provided by financing activities of continuing operations was $9.7
million for the year ended December 31, 1997 and $13.2 million and $7.7
million for the nine months ended September 30, 1998 and 1997, respectively.
Financing activities consisted primarily of the proceeds from the issuance of
equity securities and proceeds from the loans from Sirrom.
The Company intends to use the net proceeds from this offering, the
disposition of its cardiac monitoring assets and the recent common and
preferred stock sales to fund the development and deployment of its WebMD
services, including promotion of the WebMD brand, funding of promotional
arrangements, subsidization of costs to subscribers, content development and
licensing and expansion of the Company's marketing and advertising sales
efforts, to fund operating losses and for working capital and other general
corporate purposes. The Company intends to seek acquisitions that could
provide additional service offerings or technologies, and a portion of the net
proceeds of this offering may be used for such acquisitions. While the Company
discusses potential acquisitions from time to time and has recently completed
the Acquisitions, the Company currently has no plans, commitments or
agreements for any such acquisitions, and there can be no assurance that any
other acquisitions will be completed. Pending such uses, the Company intends
to invest the net proceeds from this offering in investment-grade, interest-
bearing instruments. See "Risk Factors--We Will Have Substantial Discretion
Over the Use of Proceeds."
The Company believes that the net proceeds from this offering, the
disposition of its cardiac monitoring assets and the recent common and
preferred stock sales will be sufficient to fund its working capital and
capital expenditure requirements for at least the next 12 months. However, the
Company expects to continue to incur significant operating losses for at least
the next 24 months due to the development and deployment of WebMD and the
Company's branding and advertising campaigns. To the extent the Company
determines that it will require additional funds to support its operations or
the expansion of its business, the Company may sell additional equity, issue
debt or convertible securities or obtain credit facilities through financial
institutions. The
43
<PAGE>
sale of additional equity or convertible securities will result in additional
dilution to the Company's shareholders. There can be no assurance that
additional financing, if required, will be available to the Company in amounts
or on terms acceptable to the Company. See "Risk Factors--We Have a Limited
Operating History and Are Transitioning to a New Business Model" and "--We
Anticipate Significant Future Losses and Are Unable to Accurately Forecast Our
Revenues."
YEAR 2000 COMPLIANCE
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of
this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as
the year 2000 approaches and are commonly referred to as the "Year 2000
Problem."
Assessment. The Year 2000 Problem could affect computers, software and other
equipment that the Company uses. Accordingly, the Company is reviewing its
internal computer programs and systems to determine if they will be Year 2000
compliant. The Company believes that its computer systems will be Year 2000
compliant in a timely manner. However, while the Company does not expect the
cost of these efforts to be material to its financial position or any year's
operating results, there can be no assurance to this effect.
Services Sold to Consumers. The Company depends on third party suppliers for
most of the services provided through WebMD. If these parties are affected by
the Year 2000 Problem, its ability to provide services to its subscribers may
be materially adversely affected.
Internal Infrastructure. The Company believes that it has identified
substantially all of the major computers, software applications and related
equipment used in connection with its internal operations that must be
modified, upgraded or replaced to minimize the possibility of a material
disruption to its business. The Company has commenced the process of
modifying, upgrading and replacing systems that have been identified as
potentially being adversely affected and expect to complete this process
before the end of the third quarter of 1999. The Company does not expect the
cost related to these efforts to be material to its business, financial
condition or operating results.
Systems Other Than Information Technology Systems. In addition to computers
and related systems, the operation of the Company's office and facilities
equipment, such as fax machines, photocopiers, telephone switches, security
systems, elevators and other common devices may be affected by the Year 2000
Problem. The Company is currently assessing the potential effect of, and costs
of remediating, the Year 2000 Problem on this equipment. The Company estimates
that its total cost of completing any required modifications, upgrades or
replacements of these internal systems will not have a material effect on its
business, financial condition or operating results.
Suppliers. The Company has been gathering information from and have
initiated communications with its service and content providers to identify
and, to the extent possible, resolve issues involving the Year 2000 Problem.
However, the Company has limited or no control over the actions of its service
and content providers. Thus, while the Company expects that it will be able to
resolve any significant Year 2000 Problems with its systems, it cannot
guarantee that its service and content providers will resolve any or all Year
2000 Problems with their systems before the occurrence of a material
disruption to its business. Any failure of these third parties to resolve Year
2000 problems with their systems in a timely manner could have a material
adverse effect on the Company's business, financial condition or operating
results.
Most Likely Consequences of Year 2000 Problems. The Company expects to
identify and resolve all Year 2000 Problems that could materially adversely
affect its business, financial condition or operating results. However, the
Company believes that it is not possible to determine with complete certainty
that all Year 2000 Problems affecting it have been identified or corrected.
The number of devices that could be affected and the
44
<PAGE>
interactions among these devices are simply too numerous. In addition, the
Company cannot accurately predict how many failures related to the Year 2000
Problem will occur or the severity, duration or financial consequences of such
failures. As a result, the Company expects that it could possibly suffer the
following consequences:
. a significant number of operational inconveniences and inefficiencies
for the Company, its service and content providers and its subscribers
and consumers that may divert the Company's time and attention and
financial and human resources from its ordinary business activities;
and
. a lesser number of serious system failures that may require significant
efforts by the Company, its service and content providers or its
subscribers and consumers to prevent or alleviate material business
disruptions.
Contingency Plans. The Company is currently developing contingency plans to
be implemented as part of its efforts to identify and correct Year 2000
Problems affecting its internal systems. The Company expects to complete its
contingency plans by the end of the third quarter of 1999. Depending on the
systems affected, these plans could include (a) accelerated replacement of
affected equipment or software; (b) short to medium-term use of backup
equipment and software; (c) increased work hours for the Company's personnel
or use of contract personnel to correct on an accelerated schedule any Year
2000 Problems which arise or to provide manual workarounds for information
systems; and (d) other similar approaches. If the Company is required to
implement any of these contingency plans, such plans could have a material
adverse effect on its business, financial condition or operating results.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. SFAS No. 131 establishes standards for disclosures about operating
segments, products and services, geographic areas and major customers.
Management believes that the adoption of SFAS No. 131 will not have a material
effect on the Company's financial statements.
45
<PAGE>
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this prospectus.
WebMD provides a branded, integrated, Web-based solution for the
administrative, communications and information needs of healthcare
professionals and for the healthcare information needs of consumers. The
Company's Web destination consists of two distinct, linked Web sites--a
subscription-based site for healthcare professionals and a free Health and
Wellness Center site for consumers. WebMD is a single point of access to EDI
services, enhanced communications services, branded healthcare content and
other Web-based offerings. For healthcare professionals, WebMD is designed to
simplify healthcare practices by integrating multiple administrative,
communications and research functions into a single, easy to use Web-based
solution. For consumers, WebMD provides premium, branded content to assist
consumers in making informed healthcare decisions, personalized information
about specific health conditions targeted according to the medical profiles of
individual consumers and content-specific online communities that allow
consumers to participate in real-time discussions and support networks via the
Web. The Company's objective is to become the Web's premium brand for
healthcare-related administrative, communications and information services.
INDUSTRY BACKGROUND
Growth of the Internet
The growth of the Internet as a new means of communicating, accessing
information and engaging in commerce has been rapid and is expected to
accelerate. International Data Corporation estimates that the number of Web
users will grow from approximately 100 million in 1998 to approximately 320
million by 2002. A number of factors have contributed to the growth of the
Internet including: (i) the large and growing installed base of personal
computers in homes and businesses; (ii) improvements in network infrastructure
and bandwidth; (iii) easier and cheaper access to the Internet; (iv) increased
awareness of the Internet among consumer and business users; and (v) the
rapidly expanding availability of online content and commerce.
Need for Reduced Costs and Improved Service within Healthcare Industry
Increasing concern over the rising cost of healthcare in the United States
has caused a shift from fee-for-service reimbursement to managed care forms of
reimbursement such as capitation and fixed fees. As a result, the healthcare
industry has experienced significant consolidation as healthcare providers and
hospitals have formed networks and other affiliations to spread their
financial risks, overhead and operating costs over a broader patient
population. Jupiter Communications, an independent Web research company,
estimates that over 80% of employers in the United States are moving to
managed care programs such as health maintenance organizations and physician
practice organization networks. Healthcare providers are facing new pressures
in this changing practice environment. Physicians have generally experienced
declining incomes and increased levels of financial risk due to the rise of
managed care. These changes have led many of the approximately 730,000
physicians in the United States to seek ways to improve practice efficiency in
order to better absorb revenue decreases, comply with managed care guidelines
and manage risks without compromising the quality of patient care. Because
these changes have resulted in patients directly bearing a greater portion of
healthcare costs, they have increasingly demanded greater involvement in
healthcare decisions.
Many healthcare professionals are intensive users of administrative,
communications and information services, such as EDI services, transcription
services, after-hours answering services, paging, voice mail and medical
references. However, these services often are provided by multiple vendors,
are not integrated, require users to become familiar with multiple devices and
are invoiced separately. The Company believes that certain inefficiencies
could be eliminated if a single provider integrated these multiple services.
The Company believes that a significant opportunity exists for healthcare
professionals to use the Internet to increase practice efficiency, achieve
measurable cost savings and improve the quality of patient care.
46
<PAGE>
Rapid Growth in Internet Use by Healthcare Consumers
Health and medical information is one of the fastest growing areas of
interest on the Internet. According to Media Metrix, an independent Web
research company, in 1997 healthcare-related content was the second most
popular subject of Web-based information retrieval searches. According to
Cyber Dialogue, an independent research company, approximately 70% of the
persons searching for health and medical information on the Internet believe
the Internet empowers them by providing them with information before and after
they go to a doctor's office. Cyber Dialogue also indicates that during the
12-month period ended July 1998, approximately 17 million adults in the United
States searched online for health and medical information, and approximately
50% of these individuals made offline purchases after seeking information
online. Furthermore, Cyber Dialogue estimates that the number of adults in the
United States searching for online health and medical information will grow to
approximately 30 million in the year 2000, and they will spend approximately
$150 billion for all types of health-related products and services offline.
Accordingly, the Company believes that healthcare and pharmaceutical companies
will increasingly attempt to influence the spending decisions of consumers
through online advertising. An independent research company, Jupiter
Communications, estimates that expenditures for online health and medical
advertising will grow to approximately $265 million by 2002. The Company
believes that the first company to establish clear brand leadership will have
a significant opportunity to capitalize on multiple revenue opportunities,
including recurring subscription, advertising and sponsorship revenue.
THE WEBMD SOLUTION
The Company provides healthcare professionals a single, easy to use Web-
based solution that integrates and helps manage their administrative,
communications and information functions. The Company also provides healthcare
consumers with a broad range of healthcare-related information and access to
online healthcare communities at no cost to consumers.
Benefits to Healthcare Professionals
A Single Point of Access. WebMD reduces the need for healthcare
professionals to use multiple administrative, communications and information
services by integrating these services via the Internet. The Company has
entered into relationships to assist healthcare professionals in obtaining all
hardware and ancillary services necessary to use WebMD, including Internet
access and computer hardware.
Premium Services and Content. WebMD provides a suite of premium services and
content, including EDI services for healthcare professionals' eligibility
verification and patient referral needs, the Virtual Receptionist, which
manages incoming calls, e-mail and fax messages, WebMD OnCall for physician-
only answering services, customized physician Web sites and content from
recognized market leaders. The Company intends to add services and content in
the future, including a Web-enabled medical transcription services offering.
Ease of Use. The Company provides its services via the standardized
interface of Web browsers. Therefore, subscribers who use the Company's
services do not require training on multiple proprietary devices.
Cost Savings. The Company offers a bundle of services, including its Virtual
Receptionist unified messaging platform, its WebMD OnCall physician-only
answering service, customized physician Web sites and premium research and
educational content, at a price that it believes is competitive with the price
healthcare professionals would pay for these services if purchased
individually.
Benefits to Healthcare Consumers
Premium and Proprietary Content. WebMD provides healthcare consumers with a
single point of access to premium and proprietary health and wellness content.
Consumers can use the information provided through WebMD without charge to
educate themselves on healthcare-related matters in order to make better
informed healthcare decisions. In addition, WebMD can deliver personalized
content and e-mail updates based on a consumer's profile and can search and
retrieve member-specific healthcare information from the Web.
Online Healthcare Communities. Through recent acquisitions, WebMD provides
access to online communities that provide consumers with personalized
information about their health conditions and allow them
47
<PAGE>
to participate in message boards, real-time chat rooms and support networks
via the Web. In addition, online communities provide member-generated content
based on shared experiences.
Convenience and Reliability. Through a physician's WebMD Web site, patients
can obtain information regarding office hours, location and other matters
without having to place a telephone call to the physician's office. In
addition, patients can receive healthcare information that is reviewed and
approved by medical professionals under their physician's WebMD Web site--a
reliable and familiar source of information.
STRATEGY
The Company's objective is to become the Web's premium brand for healthcare-
related administrative, communications and information services. Key elements
of the Company's strategy include:
Providing a First-to-Market, Integrated Solution. The Company believes that
the first provider to market with an integrated Web-based solution for the
administrative, communications and information needs of the healthcare
industry has the opportunity to establish the leading healthcare brand on the
Web. The Company believes that WebMD provides healthcare professionals with
the ability to adopt Web-based technology with a minimum of difficulty and
expense. Accordingly, the Company intends to continue to leverage its
strategic relationships to integrate premium services and content and rapidly
distribute WebMD in order to be first-to-market with an integrated solution.
Building Brand Name Recognition. The Company believes that establishing the
WebMD brand and building brand recognition is critical to its ability to
attract new subscribers and increase consumers' use of its Web site.
Therefore, the Company is currently engaged in a major campaign to increase
awareness of the WebMD brand among healthcare professionals and consumers. The
Company plans to continue to allocate significant resources to develop and
build brand recognition through online and offline advertising, strategic
alliances and other promotional activities and marketing initiatives. The
Company intends to build an online community of healthcare professionals,
consumers, hospitals, managed care organizations, medical distributors and
suppliers and pharmaceutical companies under the WebMD brand name. Through
WebMD's easy-to-remember Web address, EDI services, enhanced communications
services, branded healthcare content, consumer information and useful
applications, the Company intends to build user loyalty and to become the Web
address of choice for healthcare professionals and consumers.
Leveraging Strategic Relationships. The Company believes that its strategic
relationships and its knowledge of, and contacts in, the healthcare industry
provide it with a significant competitive advantage. The Company has entered
into strategic relationships with several healthcare and online industry
leaders and intends to enter into additional strategic relationships in the
future. See "--Strategic Relationships." The Company believes that its
strategic relationships allow it to market WebMD and provide premium services
and content more efficiently and effectively than would be possible through
its direct efforts alone. The Company also believes that the Company's ongoing
relationships with leading members of the healthcare community will enhance
the WebMD brand name, increase traffic to its Web site and increase its
ability to attract new subscribers and consumers.
Enhancing the WebMD Offerings. The Company focuses on providing an
attractive suite of EDI services, enhanced communications services, branded
healthcare content and other Web-based solutions through WebMD. The Company
intends to use its knowledge of and experience in the healthcare industry to
offer additional services and content that will directly address the needs of
healthcare professionals and consumers. For example, the Company plans to
release a Web-enabled medical transcription service offering in the near
future.
Pursuing Strategic Acquisitions. The Company intends to acquire companies
with complementary technology, products and services. The Company believes
that acquisitions will help it become the premium Web brand for healthcare-
related communications, information and e-commerce services. To date, we have
acquired SHN, a builder and manager of Web-based communities targeted to
healthcare consumers, DMK, a publisher of health and medical information and
certifiedemail.com, a provider of secure delivery and confirmation of receipt
of electronic mail. The Company intends to migrate SHN's and DMK's members to
WebMD. In addition, the
48
<PAGE>
Company recently invested in J&C Nationwide and intends to Web-enable J&C
Nationwide's services and to create a physicians' career and placement center
within WebMD. The Company intends to pursue acquisitions that it believes are
complementary to its existing business and will help it build its subscriber
and consumer bases, increase its services and potentially provide additional
sources of revenue.
Capitalizing on Multiple Revenue Opportunities. The Company is focusing on
providing services that generate recurring revenue. The Company expects that
the majority of its revenues will initially consist of recurring subscription
revenues. If the Company is successful in increasing its subscriber base,
building brand recognition and increasing traffic on its Web site, the Company
expects revenues from advertising, transaction and sponsorship fees to
increase as percentages of its total revenues.
WEBMD OFFERINGS
The Company's Web destination consists of two distinct, linked Web sites--a
subscription-based site for healthcare professionals and a free Health and
Wellness Center site for consumers. The Company currently offers subscribers
two monthly service packages: WebMD, which includes all of the services
available through WebMD, except the physician-only answering service; and
WebMD OnCall, which also includes the physician-only answering service.
Professional Offerings
Healthcare professionals who subscribe to WebMD have access to multiple
areas on the WebMD Web site, including:
OFFICE
<TABLE>
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- ----------------------------------------------------------------------------------
<S> <C> <C>
EDI Offers electronic access to Streamlines the process and
real-time insurance makes insurance
eligibility verification and verification and patient
patient referrals referrals faster and easier
- ----------------------------------------------------------------------------------
Virtual Receptionist Integrates Web-based communica- Allows healthcare profes-
tions and information servic- sionals to communicate and
es, including voice mail, retrieve information via
e-mail, fax messaging, paging, the Internet, telephone or
conference calling, worldwide fax
long distance and active mes-
sage notification
- ----------------------------------------------------------------------------------
WebMD OnCall Offers physician-only answering After hours messages can be
services that utilize experi- delivered via pager, fax or
enced professionals to assist e-mail by the physician's
both physicians and patients personal Virtual Reception-
during physicians' off hours ist
- ----------------------------------------------------------------------------------
Physician Web Sites Allows physicians to develop Allows physicians to more
and manage their own custom- effectively market their
ized Web sites and to include practices and better commu-
information such as e-mail ad- nicate with and educate pa-
dresses, office hours, tele- tients
phone numbers, office
locations and directions, hos-
pital affiliations and links
to patient education informa-
tion
- ----------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
OFFICE
<TABLE>
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Secure Electronic Enables customers to confiden- Ability to communicate in a
Communications tially send, track and verify secure environment to pro-
delivery of e-mails tect patient confidential-
ity
- -------------------------------------------------------------------------------------
Practice Management Provides access to governmental Improves clinical practice
Tools and regulatory compliance and business efficiency
standards and pharmaceutical
updates
- -------------------------------------------------------------------------------------
LIBRARY
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Physician References Provides access to topical med- Allows physicians quick ac-
ical news, comprehensive phy- cess to reliable informa-
sician reference databases, tion necessary for their
medical encyclopedias, jour- practice
nals, dictionaries and
directories from well-recog-
nized sources
- -------------------------------------------------------------------------------------
Interactive Dissectible Offers Web-enabled interactive Healthcare professionals can
Anatomy dissectible anatomy software, use the images for their
including a comprehensive dig- own reference and to pre-
ital database of detailed ana- pare presentations for
tomical images peers and patients
- -------------------------------------------------------------------------------------
MedBookStore Provides online access to medi- Allows healthcare profes-
cal bookstore sionals to purchase current
medical texts and journals
online
- -------------------------------------------------------------------------------------
SUPPLIES
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Medical Supplies Will provide access to online Will allow healthcare pro-
ordering of medical and surgi- fessionals online ordering
cal supplies and equipment capability 24 hours a day
through McKessonHBOC
- -------------------------------------------------------------------------------------
CLASSROOM
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- -------------------------------------------------------------------------------------
<S> <C> <C>
CME Courses Offers CME courses in a variety Provides physicians with the
of practice areas opportunity to obtain re-
quired educational credits
easily and conveniently
- -------------------------------------------------------------------------------------
LOUNGE
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Leisure Content and Provides access to financial Provides financial products
Services services and products, as well and insurance at discounted
as news, stock, sports, travel rates and a single point of
and weather information access to leisure informa-
tion
- -------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
The Company intends to provide additional practice management tools to
improve clinical practice and business office efficiency, such as Web-enabled
transcription services through the Company's relationship with MedQuist, fraud
and abuse audit services through the Company's relationship with PDN and
healthcare professional placement services through the Company's relationship
with J&C Nationwide. The Company also intends to provide certain life science
contents through the Company's relationship with DuPont. In addition, the
Company intends to provide streaming audio and video features with its CME
courses through the Company's relationship with iXL.
The Company offers additional services to subscribers for additional monthly
fees. If a prospective subscriber is not connected to the Internet, the
Company can provide dial-up Internet access. The Company can sell a
prospective subscriber a network computer. The Company also provides automated
patient test results to physicians and optional access to paging services. The
Company intends to provide subscribers the opportunity to purchase personal
computers at a set price.
Consumer Offerings
Healthcare consumers have access to the Health and Wellness Center on the
WebMD Web Site for free.
HEALTH AND WELLNESS CENTER
<TABLE>
<CAPTION>
PRODUCT OR SERVICE FEATURES BENEFITS
- ------------------------------------------------------------------------------------
<S> <C> <C>
Premium and Proprietary Consolidates patient education Healthcare consumers can
Healthcare Content information, including access numerous sources of
information for people with reliable consumer-oriented
chronic or acute conditions, healthcare resources
disease management topics, reviewed by medical
wellness content including professionals for free
fitness and nutrition,
clinical databases, medical
encyclopedias, journals and
directories
- ------------------------------------------------------------------------------------
Online Communities Offers 10 online communities Consumers may develop
focused on chronic health loyalty to their online
conditions and a Women's community which the
Health Place, covering eight Company believes
women's health topics translates into more
frequent usage by
consumers and longer stays
on the Web site
- ------------------------------------------------------------------------------------
Chat Rooms and Message Offer multiple message boards, Consumers can share
Boards 24-hour chat rooms and at experiences and exchange
least one scheduled chat event information in a private
per week with chat guests for environment with other
live events which include members who share their
physicians, social workers and health condition
nurses
- ------------------------------------------------------------------------------------
Personalized Searches and retrieves Consumers can receive
Information healthcare information from healthcare information
WebMD's premium and that is tailored to their
proprietary content based on a condition and level of
member's profile, including sophistication and,
age, gender, reading through updated profiles,
comprehension level and other continue to receive new
factors, and provides and compelling content
personalized e-mail updates to
community members
- ------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
STRATEGIC RELATIONSHIPS
The Company has entered into strategic relationships for distribution,
services and content. The Company believes that these relationships will
enable it to rapidly develop and distribute WebMD, enhance the WebMD
brand, generate traffic on its Web site and capitalize on additional
distribution and revenue opportunities. The Company has strategic
relationships with the following companies:
Distribution Relationships
McKessonHBOC. McKessonHBOC is the leading healthcare supply management
company in North America and is also the leading provider of integrated
patient care, clinical, financial, managed care and strategic management
software solutions to the healthcare industry. McKessonHBOC has installed
healthcare information systems in approximately 52% of the U.S. community
hospitals with over 100 beds. The Company has entered into a strategic
alliance agreement with McKessonHBOC, and McKessonHBOC has agreed to place or
pay for a certain number of WebMD subscriptions, subject to certain
conditions, to integrated delivery networks, acute care hospitals, long-term
and alternate site care relationships, physician offices, pharmacies,
pharmaceutical and biotechnology companies and medical and surgical supply
manufacturers. In connection with a recently announced promotion, McKessonHBOC
also marketed WebMD with its Connect2000 thin client software. Under this
promotion, organizations that purchased a minimum of 250 WebMD subscriptions
prior to December 31, 1998 received an equal number of Connect2000 seat
licenses at no additional charge. WebMD has agreed to reimburse McKessonHBOC
for the cost of the Connect2000 seat licenses granted through this promotion.
Through the Company's strategic relationship with McKessonHBOC, the Company
intends to offer online ordering of medical and surgical supplies and
equipment. Through the Company's strategic alliance with HBOC Call Center
Group, a division of McKessonHBOC, WebMD provides automated test results and
patient and parent advice lines. The Company is currently Web-enabling these
services. A wholly owned subsidiary of McKessonHBOC has made an aggregate
$23.0 million of equity investments in the Company.
ENVOY. ENVOY is a leading provider of EDI and transaction processing
services. ENVOY's transaction network, which processed approximately 984
million transactions in the 12 months ended March 31, 1998, includes
approximately 200,000 physicians, 4,500 hospitals and 811 payors. ENVOY, which
is the designated single source EDI provider for Aetna U.S. Healthcare, Inc.,
has agreed to use its direct and indirect sales force to market WebMD.
DuPont. DuPont's Life Sciences division consists of agricultural products
and pharmaceuticals, which includes DuPont's 50% interest in The Merck
Pharmaceutical Co. WebMD will provide life sciences content through its
strategic relationship with DuPont. DuPont has also agreed to place or pay for
a certain number of WebMD subscriptions, subject to certain conditions.
MedQuist. MedQuist is a leading national provider of electronic
transcription and document management services to the healthcare industry.
MedQuist operates more than 50 client centers in 24 states and employs over
2,400 trained transcriptionists to serve 500 clients, primarily hospitals and
medical centers, as well as other non-hospital healthcare providers, such as
managed care providers, surgical centers, outpatient clinics and physician
groups. The Company has entered into a strategic alliance agreement with
Transcriptions Ltd., a wholly owned subsidiary of MedQuist, pursuant to which
the Company and MedQuist have agreed to jointly promote their respective
services and Transcriptions Ltd. has agreed to place or pay for a certain
number of WebMD subscriptions, subject to certain conditions. Each party has
the right to maintain an exclusive presence on the other's Web site. In
addition, the Company and MedQuist recently announced a promotion which
provides that physicians who agree to use $1,000 in MedQuist services per
month will receive a WebMD subscription for free. The Company has agreed to
subsidize the cost of this promotion. The Company and MedQuist are currently
developing a Web-enabled medical transcription services offering.
DePuy Orthopaedics. DePuy Orthopaedics, Inc. ("DePuy"), a Johnson & Johnson
company, is a leading manufacturer and distributor of orthopaedics devices and
supplies. DePuy has agreed to market WebMD to its existing customer base of
orthopaedic specialists.
Matria. Matria is a leading provider of comprehensive disease management
services for health plans and employers for pregnancy and the chronic
conditions of diabetes, respiratory disorders and cardiovascular disease.
52
<PAGE>
Matria has agreed to market WebMD directly to its established customer base of
obstetricians, gynecologists and cardiologists. In September 1998, Matria made
a $2.0 million equity investment in the Company.
E*TRADE. E*TRADE, a leading provider of online investing services, was
recently named the best overall online investment service by Gomez Advisors, a
leading independent authority devoted to online consumer services. The Company
has entered into a strategic alliance agreement with E*TRADE pursuant to which
E*TRADE has agreed to purchase WebMD subscriptions for physicians who open
E*TRADE accounts as part of a limited promotional offer. In addition, E*TRADE
is the exclusive provider of online investing services to WebMD subscribers.
CompuServe. CompuServe Interactive Services, Inc. ("CompuServe"), a
subsidiary of America Online, Inc. and a leading provider of Internet access
to consumers, had approximately two million users as of August 1998.
CompuServe has agreed to feature WebMD as the anchor tenant on its Web site's
Health Channel. In addition, the Company has agreed to market CompuServe as
its exclusive ISP for subscribers in need of Internet services, Internet
access and customer support. WebMD and CompuServe have agreed to share the
cost of a direct mailing initiative of up to 750,000 CompuServe CD-ROMs to
physicians.
CNN. CNN Interactive, a division of Cable News Network, Inc. ("CNN"), has
agreed to position and promote WebMD as its premier provider of content for
CNN's Health Section on CNN's flagship Web site, "cnn.com." CNN will provide
several promotional arrangements, including banner advertisements, links to
WebMD, e-mails and promotions under health-related chat and message boards.
Real Select. Real Select, Inc., the operator of "realtor.com," the official
Web site of the National Association of Realtors, has agreed to feature WebMD
as its premier provider of health and medical related information in its
Health Care Channel within its Resource Center.
Service Relationships
Premiere. Premiere is a leading provider of enhanced communications
services. The Company uses Premiere's computer telephony platform and private
frame relay network to provide enhanced communications services through WebMD.
WebMD and Orchestrate.com entered into a co-marketing agreement for
communications services. In connection with the Company's strategic
relationship with Orchestrate.com, Premiere, its parent, purchased an
aggregate of 2,100,000 shares of the Company's Series E Common Stock. In
addition, the Company and Premiere entered into a sublease for corporate
office space and an equipment lease of call center technology.
J&C Nationwide. J&C Nationwide is a locum tenens and permanent healthcare
professional placement and staffing services provider. WebMD has agreed to
Web-enable J&C Nationwide's services and to create a physicians' career and
placement center within WebMD. WebMD recently made a strategic investment in
J&C Nationwide through the issuance of 100,000 shares of Series D Common Stock
in exchange for approximately 30% of the capital stock of J&C Nationwide.
PDN. WebMD will provide fraud and abuse audit services to subscribers
through its strategic relationship with PDN.
Medsite Publishing. WebMD provides subscribers access to "medbookstore.com"
for purchases of medical books online through its strategic relationship with
Medsite Publishing, Inc.
CFN. WebMD provides certain insurance and home finance products at discount
rates to subscribers through the Company's relationship with Consumer
Financial Network, Inc. ("CFN"). CFN is a division of iXL Holdings, Inc., the
parent company of iXL.
iXL. WebMD provides customized Web sites for physicians through its
relationship with iXL. These Web sites may feature important information for
patients and provide links to patient education and health and wellness
content on WebMD. iXL also provides Web development and physician Web site
hosting services to WebMD. WebMD will provide streaming audio and visual
features to its CME courses through its relationship with iXL.
UUNET. The Company offers subscribers optional dial-up Internet access
through its relationship with UUNET, a subsidiary of MCI WorldCom.
53
<PAGE>
NCI. The Company offers subscribers the option to purchase network computers
through its relationship with Network Computers, Inc., a subsidiary of Oracle
Corporation.
DoubleClick. WebMD obtains Internet advertising solutions through the
Company's strategic relationship with DoubleClick, Inc.
Content Relationships
Thomson Healthcare. Thomson Healthcare Information Group ("Thompson
Healthcare") is a publisher of leading healthcare reference works and
journals. Thomson Healthcare provides the Company with comprehensive online
physician reference databases, publications and directories, including the PDR
library and articles from the Medical Economics Company journals, the RedBook
pharmaceutical database and Stedman's medical dictionary. Thomson Healthcare
also provides consumer content, including the PDR Family Guide to Prescription
Drugs and the Contemporary Pediatrics Guide for Parents. In addition, Thomson
Healthcare provides a majority of the Company's CME courses.
InteliHealth. InteliHealth, Inc. ("InteliHealth") provides the Company with
daily healthcare news, provider directories and consumer information
resources, including condition and wellness center content, information from
the National Institutes of Health and the National Health Council and answers
to frequently asked medical questions. InteliHealth also provides the Company
with information regarding regulatory and governmental compliance standards
and pharmaceutical updates. InteliHealth's healthcare information is reviewed
and approved by Johns Hopkins University and Health System, which has been
ranked as the top hospital in the United States for eight consecutive years in
the annual U.S. News & World Report "Honor Roll" of hospitals.
ADAM. A.D.A.M. Software, Inc. ("ADAM") is a leading developer of anatomical
and medical content and software. ADAM provides the Company with Web-enabled
interactive dissectible anatomy software. ADAM also provides the Company
medical, pediatric and sexually transmitted disease encyclopedias for use by
healthcare professionals and consumers.
Medirisk. Medirisk, Inc. ("Medirisk") is a leading provider of analytical
databases and software for the healthcare industry. The Medirisk products
allow users (physicians, hospitals and insurers) to compare physician fees,
reimbursement and utilization patterns for a broad range of treatments.
Medirisk's clinical performance products measure the efficiency and
effectiveness of care in a variety of medical specialties, and its physician
databases offer detailed information about doctors seeking new practice
affiliations.
HealthGate. HealthGate Data Corporation ("HealthGate") provides the Company
with online physician reference databases, including MEDLINE, which currently
contains over 8,000,000 references from medical journals, and other National
Library of Medicine databases which are updated weekly. HealthGate also
provides weekly editions of its award-winning Healthy Living "webzines."
National Jewish. National Jewish Medical and Research Center ("National
Jewish") is a leading medical and research center devoted entirely to
respiratory, allergic and immune system diseases, including asthma,
tuberculosis, emphysema, severe allergies, AIDS, cancer and autoimmune
diseases. U.S. News & World Report ranked National Jewish as the best hospital
in the United States for pulmonary disease treatment in 1998. National Jewish
provides the Company with physician and consumer content and CME courses
regarding these specialty areas.
MCN. Medical Communications Network, Inc., a leading publisher of healthcare
reference materials, provides the Company with articles from Physician's
Practice Digest.
Although the Company views its strategic relationships as a key factor in
its overall business strategy and in the development and commercialization of
its services, there can be no assurance that its strategic partners
54
<PAGE>
will view their relationships with the Company as significant to their own
business or that they will not reassess their commitment to the Company in the
future. There can be no assurance that any party with whom the Company has an
agreement will perform its obligations as agreed or that any agreement would
be specifically enforceable by the Company. The Company's arrangements with
its strategic partners generally do not establish minimum performance
requirements for the Company's strategic partners, but instead rely on their
voluntary efforts. Therefore, there can be no assurance that these
relationships will be successful. Failure of one or more of these strategic
partners to effectively distribute the Company's products or services or to
provide the Company with satisfactory services or content could have a
material adverse effect on the Company's business, financial condition and
operating results. See "Risk Factors--We Depend on Our Distribution Partners,"
"--We Depend on Our Service Providers" and "--We Depend on Our Content
Providers."
SALES AND MARKETING
The Company markets WebMD through its internal sales force and its strategic
distribution relationships which typically couple the Company's use of the
strategic partner's services or content with the strategic partner's
obligation to market WebMD to its customer or client base. The Company's
distribution partners, which target different healthcare sectors, combined
with the Company's internal sales force, provide the Company with sales and
marketing professionals who are experienced in the healthcare industry. The
Company's and its strategic partners' direct marketing efforts, which may
include promotional offers, direct mail and telemarketing initiatives,
emphasize the ease of use and adoption, attractive pricing and integrated
solution offered by WebMD. The Company has entered into, and intends to
continue to enter into, strategic alliances with parties who have established
customer or client bases that have an anticipated need for the services
provided through WebMD. In connection with certain of these strategic
alliances, such as the alliances with McKessonHBOC, E*TRADE, CompuServe, CNN
and MedQuist, the Company has agreed to bear the cost of certain subsidized
promotional offers, to compensate such partners for each subscriber that WebMD
obtains through their marketing efforts or to make guaranteed payments to such
partners. The Company intends to continue to enter into additional promotional
arrangements in the future. See "Risk Factors--We Anticipate Significant
Future Losses and Are Unable to Accurately Forecast Our Revenues."
The Company is currently engaged in a significant branding and promotional
campaign to increase awareness of the WebMD brand. The Company is employing a
combination of online advertising and other marketing and promotional efforts
aimed at defining a desirable online destination for healthcare professionals
and consumers, attracting new subscribers and consumers, increasing traffic on
its Web site and developing additional revenue opportunities. The Company also
promotes Web-based services through traditional print media, including trade
journals, newspapers and magazines targeted at healthcare professionals, and
participates in tradeshows, conferences and speaking engagements as part of
its ongoing public relations program. The Company plans to continue to
allocate significant resources to marketing WebMD.
CUSTOMER SERVICE AND SUPPORT
The Company believes that effective customer service is essential to
attracting and retaining subscribers and consumers. The Company provides
ongoing telephone support through its customer service and sales support
centers which are accessible by a toll-free call and are available from 8:00
a.m. to 8:00 p.m. Eastern Time Monday through Friday. WebMD's live operators
screen all requests for telephone support and direct the call to the
appropriate customer service personnel. Technical support personnel are
responsible for consulting with the Company's strategic partners regarding
technical support issues and for resolving technical problems encountered by
users, strategic partners or other parties. Through CompuServe, WebMD will
provide 24-hour customer service for WebMD subscribers who use CompuServe as
their ISP.
COMPETITION
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in
the early 1990's, the number of Web sites on the Internet competing for users'
attention has proliferated with no substantial barriers to entry, and the
Company expects that
55
<PAGE>
competition will continue to intensify. The Company competes, directly and
indirectly, for subscribers, consumers, content and service providers,
advertisers and acquisition candidates with the following categories of
companies: (i) online services or Web sites targeted to the healthcare
industry generally; (ii) publishers and distributors of traditional off-line
media, including those targeted to healthcare professionals, many of which
have established or may establish Web sites; (iii) general purpose consumer
online services which provide access to healthcare-related content and
services; (iv) public sector and non-profit Web sites that provide healthcare
information without advertising or commercial sponsorships; (v) vendors of
healthcare information, products and services distributed through other means,
including direct sales, mail and fax messaging; and (vi) Web search and
retrieval services and other high-traffic Web sites. In addition, with regard
to its EDI service offering, the Company also competes with providers of
single function EDI terminals, such as those provided by VeriFone
Incorporated. The Company does not have the contractual right to prevent its
subscribers, other than subscribers under certain promotional plans, from
terminating their service or changing to a competing network.
The Company believes that the principal competitive factors in attracting
and retaining healthcare subscribers are the depth, breadth and timeliness of
services and content, the ability to offer compelling content and services and
brand recognition. Other important factors in attracting and retaining
healthcare professionals include ease of use, quality of service and cost. The
Company believes that the principal competitive factors that will attract
advertisers include price, the number of healthcare professionals who
subscribe to WebMD, the aggregate traffic on WebMD, the demographics of the
Company's subscriber and user bases and the creative implementation of
advertisement placements.
The Company also competes in the communications services markets. These
markets are also intensely competitive, rapidly evolving and subject to rapid
technological change. Other providers currently offer each of the individual
services and certain combinations of the services offered by the Company. The
Company's voice mail services compete with voice mail services provided by
certain RBOCs as well as by independent voice mail vendors. The Company's
communications services and features, such as conference calling, compete with
services provided by companies with significantly greater resources than the
Company, as well as smaller interexchange long distance providers.
Telecommunications companies also compete for consumers based on price, and
major competitors often conduct extensive advertising campaigns to capture
market share. There can be no assurance that a decrease in rates charged by
competitors would not have a material adverse effect on the Company's
business, financial condition and operating results. The Company expects that
the communications and information services markets will continue to attract
new competitors and new technologies, possibly including alternative
technologies that are more sophisticated and cost effective than the Company's
technology.
To be competitive, the Company must license leading technologies, enhance
its existing services and content, develop new technologies that address the
increasingly sophisticated and varied needs of healthcare professionals and
healthcare consumers and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. There
can be no assurance that the Company will be successful in using new
technologies effectively or adapting its Web site and proprietary technology
to user requirements or emerging industry standards. Any pricing pressures,
reduced margins or loss of market share resulting from the Company's failure
to compete effectively would materially adversely affect the Company's
business, financial condition and operating results.
Many of the Company's current and potential competitors have greater
resources to devote to the development, promotion and sale of their services;
longer operating histories; greater financial, technical and marketing
resources; greater name recognition; and larger subscriber bases than the
Company and, therefore, have a significantly greater ability to attract
subscribers and advertisers. Many of these competitors may be able to respond
more quickly than the Company to new or emerging technologies in the Internet
and the personal communications market and changes in Internet user
requirements and to devote greater resources than the Company to the
development, promotion and sale of their services. In addition, the Company
does not have contractual rights to prevent its strategic partners from
entering into competing businesses or directly competing with the Company. See
"Risk Factors--We Depend on Our Distribution Partners," "--We Depend on Our
Service Providers" and "--We Depend on Our Content Providers." There can be no
assurance that the
56
<PAGE>
Company's current or potential competitors will not develop products and
services comparable or superior to those developed by the Company or adapt
more quickly than the Company to new technologies, evolving industry trends or
changing Internet user preferences. Increased competition could result in
price reductions, reduced margins or loss of market share, any of which would
materially and adversely affect the Company's business, financial condition
and operating results. There can be no assurance that the Company will be able
to compete successfully against current and future competitors, or that
competitive pressures faced by the Company will not have a material adverse
effect on its business, financial condition and operating results. See "Risk
Factors--We Face Intense Competition and Risks Associated With Technological
Change."
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may
be adopted in the future that address issues such as online content, user
privacy, pricing and characteristics 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 certain types of
information and content. In addition, several telecommunications carriers are
seeking to have telecommunications over the Internet regulated by the FCC 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 ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs.
Internet user privacy has become an issue both in the United States and
abroad. Current United States privacy law consists of a few disparate statutes
directed at specific industries that collect personal data, none of which
specifically covers the collection of personal information online. The Company
cannot guarantee that the United States or foreign nations will not adopt
legislation purporting to protect such privacy. Any such legislation could
affect the way in which the Company is allowed to conduct its business,
especially those aspects that involve the collection or use of personal
information, and could have a material adverse effect on the Company's
business, financial condition and operating results. Moreover, it may take
years to determine the extent to which existing laws governing issues such as
property ownership, libel, negligence and personal privacy are applicable to
the Internet.
Currently, the Company's operations are not regulated by any healthcare
agency. However, with regard to healthcare issues on the Internet, the
recently enacted Health Insurance Portability and Accountability Act of 1996,
mandates the use of standard transactions, standard identifiers, security and
other provisions by the year 2000. It will be necessary for the Company's
platform and for the applications that it provides to be in compliance with
the proposed regulations. Congress is also likely to consider legislation that
would establish uniform, comprehensive federal rules about an individual's
right to access his own or someone else's medical information. This
legislation would likely define what is to be considered "protected health
information" and outline steps to ensure the confidentiality of this
information. The proposed Health Information Modernization and Security Act
would provide for establishing standards and requirements for the electronic
transmission of health information.
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and
by certain foreign governments that could impose taxes on the sale of goods
and services and certain other Internet activities. A recently-passed law
places a temporary moratorium on certain types of taxation on Internet
commerce. The Company cannot predict the effect of current attempts at taxing
or regulating commerce over the Internet. Any legislation that substantially
impairs the growth of e-commerce could have a material adverse effect on the
Company's business, financial condition and operating results.
Issuances of the Company's securities are regulated by the Commission and
the securities commissions of states where the Company offers or sells its
securities. The Company issued options to acquire an aggregate of 7,280 shares
of Series D Common Stock at an exercise price of $2.00 per share to five
independent sales
57
<PAGE>
representatives in the State of Texas for which the Company may not have had
an exemption available under the securities laws of the State of Texas.
Similarly, the Company issued options to acquire 111 shares of Series D Common
Stock at an exercise price of $2.00 per share to an independent sales
representative in the State of Oklahoma for which the Company may not have had
an exemption under the securities laws of the State of Oklahoma. In addition,
the Company may have offered to issue securities to an independent sales
representative in the State of New Hampshire for which the Company may not
have had an exemption available under the securities laws of the State of New
Hampshire. With respect to the potential option issuance in the State of New
Hampshire or option issuances made in the State of Texas, the Company notified
each of the optionholders of the potential lack of an available exemption.
Each optionholder to whom these notifications were sent returned
acknowledgments and waivers of their rights to rescind the option grants. The
option grant to the Oklahoma resident is the subject of a no-action request
currently pending with the State of Oklahoma Division of Securities. The
options issued in the State of New Hampshire are no longer outstanding due to
a failure by the recipient to meet certain performance requirements. All of
these securities are potentially subject to recision. While management is not
aware of any claims against the Company relating to these options as of the
date hereof, there can be no assurance that the Company will not be subject to
possible claims, penalties, fines, private or governmental actions relating to
these issuances of securities. See "Risk Factors--We Are Subject to Government
Regulation and Legal Uncertainties" and "--We Could Be Subject to Sales or
Other Taxes."
INTELLECTUAL PROPERTY
The Company relies on a combination of copyright, trademark and trade secret
laws and contractual provisions to establish and protect its proprietary
rights. The Company has applied for federal registration of the service marks
"WebMD," "Web-MD" and "WebMD OnCall." By letter dated July 6, 1998, the PTO
refused registration of the "Web-MD" mark when used on or in connection with
the Company's services. Although the Company has responded to the PTO's
refusal of registration and believes that it is likely the "WebMD," "Web-MD"
and "WebMD OnCall" marks will be accepted for registration by the PTO, the
Company cannot guarantee that it will be able to secure registration for the
"WebMD," "Web-MD" or "WebMD OnCall" marks. If the Company is required to
change its corporate name and stop using the "WebMD" mark, current and
potential customers could be confused and the Company's business could be
disrupted. Any of these potential effects could seriously harm the Company's
business, prospects, financial condition and operating results. In addition,
any name change effected after this offering could result in confusion to
investors which could seriously harm the market price of the Company's Common
Stock. The Company has also registered the domain name "webmd.com." In
connection with the acquisition of SHN, the Company acquired the registered
trademark "Sapient Health Network," two patent applications pending in the PTO
and 19 domain name registrations. In connection with the acquisition of DMK,
the Company acquired the registered trademarks "Direct Medical Knowledge" and
"DMK Electronic Library," two trademark applications pending in the PTO and
three domain names.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate, that the Company will be able to secure
trademark or service mark registrations for marks in the United States or in
foreign countries or that third parties will not infringe upon or
misappropriate the Company's copyrights, trademarks, service marks and similar
proprietary rights. In addition, effective copyright and trademark protection
may be unenforceable or limited in certain foreign countries, and the global
nature of the Internet makes it impossible to control the ultimate destination
of the Company's services. It is possible that competitors of the Company or
others will adopt product or service names similar to the Company's, thereby
impeding the Company's ability to build brand identity and possibly leading to
customer confusion. Moreover, because domain names derive value from the
individual's ability to remember such names, the Company cannot guarantee that
its domain name will not lose its value if, for example, users begin to rely
on mechanisms other than domain names to access online resources. The
inability of the Company to protect its marks adequately could have a material
adverse effect on the acceptance of the WebMD brand and on the Company's
business, financial condition and operating results. In the future, litigation
may be necessary to enforce and protect the Company's trade secrets,
copyrights and other intellectual property rights. Litigation would divert
management resources and be expensive and may not effectively protect the
Company's intellectual property.
58
<PAGE>
The Company also relies on a variety of technology that it licenses from
third parties, including its Internet server software, which is used in the
Company's Web site to perform key functions. There can be no assurance that
these third party technology licenses will continue to be available to the
Company on commercially reasonable terms. The loss of or inability of the
Company to maintain or obtain upgrades to any of these technology licenses
could materially adversely affect the Company's business, financial condition
and operating results. In addition, because the Company licenses a substantial
portion of its content from third parties, its exposure to copyright
infringement actions may increase because the Company must rely upon such
parties for information as to the origin and ownership of such licensed
content. The Company generally obtains representations as to the origin and
ownership of such licensed content and generally obtains indemnification to
cover any breach of any such representations; however, there can be no
assurance that such representations will be accurate or that such
indemnification will provide adequate compensation for any breach of such
representations. See "Risk Factors--We Must Establish and Strengthen the WebMD
Brand" and "--We Must Protect Our Intellectual Property."
FACILITIES
The Company's corporate headquarters and call center occupy approximately
20,000 square feet of office space in Atlanta, Georgia under a lease expiring
February 1, 2000, with an option to renew the lease term for one year. In
addition, the Company leases approximately 5,300 square feet of space in
Atlanta, Georgia for its emergency call center. The Company also has offices
in Portland, Oregon and San Francisco, California. The Company believes that
its current office space is sufficient to meet its present needs and does not
anticipate any difficulty securing additional space, as needed, on terms
acceptable to the Company.
EMPLOYEES
As of January 27, 1999, the Company employed 146 persons on a full-time
basis. None of the Company's employees are members of a labor union or are
covered by a collective bargaining agreement. The Company believes its
relationship with its employees is good.
LEGAL PROCEEDINGS
Endeavor, the Company's subsidiary, retained certain liabilities, including
liabilities relating to actual and potential litigation, when the Company sold
its cardiac monitoring operations to Matria. These liabilities include
potential sanctions associated with receipt of service of a civil subpoena
from the OIG on July 28, 1998. In a letter from the OIG dated November 25,
1998, Endeavor was advised that, to provide assurances to the OIG that
facsimile machines and telephone lines used in the offices of referral sources
are dedicated to cardiac monitoring, Matria will need to audit use of
facsimile machines and telephone lines and periodically report the results of
the audit to the OIG. After reaching agreement with Matria regarding precise
auditing procedures, the OIG has orally stated that it intends to enter into a
settlement agreement related to the subpoena. In addition, these retained
liabilities include a potential claim by Life Watch, an Illinois corporation
and subsidiary of Ralin Medical, Inc., which in February 1998 asserted orally
that the Company's use of certain cardiac monitoring devices constituted an
infringement of a patent held by Life Watch. Life Watch then offered to grant
license rights to the Company under such patent. The Company has responded by
informing Life Watch that Card Guard Scientific Survival, Ltd. owns all rights
with regard to such devices and that Endeavor was merely a distributor of such
devices. There has been no further action in this regard. In the event that
this matter results in litigation, an adverse decision could result in
substantial damages and attorneys' fees, either of which could have a material
adverse effect on the Company's business, financial condition or operating
results.
From time to time, the Company may be involved in litigation relating to
claims arising out of its operations. The Company is not currently a party to
any other legal proceedings, the adverse outcome of which, individually or in
the aggregate, would have a material adverse effect on the Company's business,
financial condition or operating results. See "Risk Factors--We Are Subject to
Government Regulation and Legal Uncertainties" and "--We May Be Subject to
Risks from the Sale of Our Cardiac Monitoring Operations."
59
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of January 15, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey T. Arnold(1).... 29 Chairman of the Board and Chief Executive Officer
William P. Payne........ 51 Vice Chairman of the Board
Jay P. Gilbertson....... 38 President and Chief Operating Officer and Director
K. Robert Draughon...... 38 Chief Financial Officer
W. Michael Heekin(1).... 45 Executive Vice President, General Counsel, Secretary and Director
Albert J. Bergonzi(2)... 49 Director
Lucius E. Burch,
III(3)................ 56 Director
U. Bertram Ellis, Jr.... 45 Director
J. Rex Fuqua............ 48 Director
S. Taylor Glover(2)..... 47 Director
Boland T. Jones(1)...... 38 Director
Jouko J. Rissanen(3).... 53 Director
Glenn W. Sturm(1)....... 45 Director
</TABLE>
- --------
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
(3) Member of Compensation Committee of the Board of Directors.
Jeffrey T. Arnold, the founder of the Company, has served as Chairman of the
Board and Chief Executive Officer since the Company's inception in October
1996. In addition, Mr. Arnold served as the President of the Company from its
inception until September 1997. From April 1994 until Endeavor's merger with
the Company in March 1997, Mr. Arnold served in various capacities at
Endeavor, including as Chairman and Chief Executive Officer. Prior to founding
Endeavor, Mr. Arnold was employed as a sales representative by MMD, Inc., a
pharmaceutical company.
William P. Payne has served as Vice Chairman of the Company since September
1998. Mr. Payne also serves as Vice Chairman of Premiere and as Chairman of
Premiere's subsidiary, Orchestrate.com, a provider of Internet-based enhanced
communications services. From February 1997 to June 1998, Mr. Payne was a Vice
Chairman of NationsBank Corporation. He was President and Chief Executive
Officer of the Atlanta Committee for the Olympic Games from 1991 to 1997. Mr.
Payne is also a director of Premiere, Anheuser-Busch Companies, Inc.,
Jefferson-Pilot Corporation, ACSYS, Inc. and Cousins Properties, Inc.
Jay P. Gilbertson has served as President and Chief Operating Officer of the
Company since December 1998. He served as a director of the Company as a
representative of HBO & Company, ("HBOC"), a subsidiary of McKessonHBOC, from
August to November 1998. He was reappointed to the Board in January 1999. From
January 1993 to November 1998, he served in various positions with HBOC,
including President, Co-Chief Operating Officer, Chief Financial Officer,
Treasurer and Principal Accounting Officer. Mr. Gilbertson also serves on the
Board of Directors of Anacomp, Inc.
K. Robert Draughon has served as the Chief Financial Officer of the Company
since February 1998. From January 1988 to February 1998, he served as Chief
Investment Officer for Fuqua Capital Corporation, a private investment firm
based in Atlanta, Georgia. Mr. Draughon also serves on the Board of Directors
of XRT, Corp., an intracoronary radiation therapy provider.
W. Michael Heekin has served as an Executive Vice President of the Company
since November 1998 and General Counsel since January 1999. Mr. Heekin served
as Chief Operating Officer of the Company from August
60
<PAGE>
1997 to November 1998. Mr. Heekin has also served as a director and Secretary
of the Company since September 1997. From March 1993 to August 1997, Mr.
Heekin served as Senior Vice President and Corporate Secretary of American
Heritage Life Investment Corporation. Prior to March 1993, Mr. Heekin served
as an Associate Dean of Florida State University College of Law.
Albert J. Bergonzi has served as a director of the Company since December
1998. Since 1985, Mr. Bergonzi has served in various positions at
McKessonHBOC, most recently as Group President, Information Technology
Business.
Lucius E. Burch, III has served as a director of the Company since its
inception. He served as President from 1981 to 1994 and has been Chairman from
1994 to present of Massey Burch Investment Group, Inc., a private venture
fund. Mr. Burch also serves on the Board of Directors of QMS, Inc., Norrell
Corporation and Physicians Resource Group, Inc.
U. Bertram Ellis, Jr. has served as a director of the Company since June
1997. Since April 1996, he has served as Chairman and Chief Executive Officer
of iXL Holdings, Inc., the parent company of iXL and CFN, and as President,
Chief Executive Officer and Chief Operating Officer of Broadcast Development
Corporation, a television broadcast consulting company. Mr. Ellis founded and
served as President and Chief Executive Officer of Ellis Communications, Inc.,
a broadcast group of 15 television and radio stations from 1993 to 1996. Mr.
Ellis also serves as a director of NOVA Information Systems, Inc.,
OrthAlliance, Inc., First Union National Bank of Georgia, Ames Scullin &
O'Haire and Upper Chattahoochee Riverkeeper.
J. Rex Fuqua has served as a director of the Company since February 1997.
Mr. Fuqua has been President and Chief Executive Officer of Fuqua Capital
Corporation, a private investment firm based in Atlanta, Georgia, since 1989.
Mr. Fuqua serves on the Board of Directors of Aaron Rents, Inc. and Graham-
Field Health Products, Inc. Mr. Fuqua also serves on the Board of Directors of
Convergence.com Corporation ("Convergence.com"), a privately-held broadband
Internet access company. Mr. Fuqua is also Managing Director of Fuqua Ventures
LLC, a firm which invests in emerging technology companies.
S. Taylor Glover has served as a director of the Company since September
1997. Mr. Glover has served in various capacities at Merrill Lynch Pierce
Fenner & Smith Incorporated since 1973, most recently as Senior Vice
President-Investments of the Private Client Group. Mr. Glover also serves on
the Board of Directors of Gaston-Loughlin, Inc., a privately-held workers
compensation managed care company, and Convergence.com.
Boland T. Jones has served as a director of the Company since August 1998.
Since 1990, Mr. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of Premiere. Mr. Jones also serves on the Board of
Directors of Intellivoice Communications, Inc., a privately-held developer of
speech applications and Internet telephony, and Webforia, a privately-held
developer and provider of Internet tools for users to search, catalog and
group information.
Jouko J. Rissanen has served as a director of the Company since its
inception. Mr. Rissanen has founded several medical companies, including
Cardiac Systems, Inc., Ocudyne, Inc., Occumedics, Inc., MedFusion, Inc. and
Sensor Technology, Inc. He served as President of Sensor Technology, Inc. from
1987 to 1994, at which time the company was sold to Eli Lilly and Company.
Currently, Mr. Rissanen is an individual investor and land developer, and
serves as a consultant to Guidant Corporation.
Glenn W. Sturm has served as a director of the Company since February 1997.
Mr. Sturm is a partner in the law firm of Nelson Mullins Riley & Scarborough,
L.L.P., where he serves as Corporate Chairman and as a member of the Executive
Committee. Mr. Sturm is a director of Phoenix International Ltd., Inc., The
InterCept Group, Inc. and Towne Services, Inc. Mr. Sturm is a principal in
Centaurus Ventures, a recently formed venture fund which invests in and
advises electronic commerce, transaction processing and computer telephony
companies.
61
<PAGE>
The Board of Directors is divided into three classes, and each class serves
for a staggered three-year term, or until successors of such class have been
elected and qualified. Messrs. Arnold, Gilbertson, Heekin and Jones are Class
I directors and serve until the annual meeting of shareholders held in 2000.
Messrs. Burch, Glover, Payne and Rissanen are Class II directors and serve
until the annual meeting of shareholders held in 2001. Messrs. Bergonzi,
Ellis, Fuqua and Sturm are Class III directors and will serve until the annual
meeting of shareholders held in 2002. At each annual meeting of shareholders,
a class of directors is elected for a three-year term to succeed the directors
or director of the same class whose terms are then expiring. To the extent
there is an increase in the number of directors, the Board of Directors will
distribute the additional directorships among the three classes so that, as
nearly as possible, each class will consist of an equal number of directors.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until the next annual meeting of shareholders and
until their successors have been duly elected and qualified. There are no
family relationships among any of the executive officers or directors of the
Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Executive Committee,
Audit Committee and Compensation Committee. Messrs. Arnold, Heekin, Jones and
Sturm are members of the Executive Committee, which exercises the power of the
Board of Directors between Board meetings, subject to certain limitations.
Messrs. Bergonzi and Glover are members of the Audit Committee, which reviews
the audit functions of the Company, including the accounting and financial
reporting practices of the Company, the adequacy of the Company's system of
internal accounting controls, the quality and integrity of the Company's
financial statements and the Company's relations with its independent
auditors. Messrs. Burch and Rissanen are members of the Compensation
Committee, which establishes the compensation of the Company's executive
officers, including salaries, bonuses, commissions, benefit plans and
compensation issues which are subject to Section 162(m) of the Tax Code, and
administers the Option Plan in accordance with the terms thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed on September
17, 1998. The current members of the Compensation Committee are Lucius E.
Burch, III and Jouko J. Rissanen. Neither Messrs. Burch or Rissanen has been
an officer or employee of the Company at any time.
For the years ended December 31, 1996 and 1997 and for the nine months ended
September 30, 1998, the Company paid approximately $2,100, $5,000 and $3,600,
respectively, in health, life and dental insurance premiums for Mr. Rissanen
and his wife. The Company does not intend to continue paying these premiums in
the future.
In August 1996, Mr. Rissanen lent $200,000 to Endeavor pursuant to an oral
agreement. In March 1998, pursuant to a conversion of debt, indemnification
and release agreement among the Company, Endeavor, Mr. Rissanen and Finn
Partners, a general partnership of which Mr. Rissanen is the managing partner
and in which he owns a 16.7% equity interest, the parties agreed to convert
such debt into 100,000 shares of Series D Common Stock of the Company which
were issued to Finn Partners.
In January 1997, the Company lent (i) Jeffrey T. Arnold $4,000 to purchase
4,000,000 shares of Common Stock, (ii) Mr. Rissanen $1,400 to purchase
1,400,000 shares of Series B Common Stock and (iii) Mr. Burch $1,000 to
purchase 1,000,000 shares of Series C Common Stock. These unsecured loans are
evidenced by promissory notes bearing interest at the rate of 8.75% per annum.
Principal and interest are payable on the earlier of: (i) January 20, 1999;
(ii) the closing of an underwritten initial public offering, upon the
completion of which the securities will trade on a national securities
exchange or through the Nasdaq National Market System; or (iii) the closing of
a transaction, including, without limitation, a merger, acquisition, tender
offer or sale of assets, pursuant to which all or substantially all of the
capital stock or assets of the Company are sold, exchanged or transferred.
62
<PAGE>
In March 1997, a majority of the shareholders of Endeavor approved and
adopted a Plan and Agreement of Merger pursuant to which Endeavor was merged
(the "Merger") into QDS Acquisition Corporation, a wholly owned subsidiary of
the Company, and Endeavor was the surviving entity. Prior to the Merger, the
shareholders of Endeavor consisted of: Mr. Arnold; Mr. Rissanen; Mr. Burch;
Robert A. Frist; and nine medical doctors. Messrs. Arnold, Rissanen, Burch and
Frist, who owned a majority of Endeavor's capital stock, voted for the Merger.
The minority shareholders of Endeavor asserted the right granted to them under
Georgia Law to dissent with regard to such action and to demand payment for
the fair value of their shares in exchange for the surrender of such shares.
Approval of the Merger was also required of the Company as the sole
shareholder of QDS Acquisition Corporation. The Company's Board of Directors
was, thus, required to approve the Merger. The Merger was approved unanimously
by the Board, which at that time consisted of Messrs. Arnold, Rissanen, Burch
and Frist and three other individuals. In addition, at the time of the Merger,
the four largest shareholders of the Company were Messrs. Arnold, Rissanen,
Burch and Frist, and the sole voting shareholder was Mr. Arnold. In July 1998,
the Company paid an aggregate of approximately $2.7 million to settle the
dissenters' rights action and entered into a consulting agreement with one of
the dissenters.
DIRECTOR COMPENSATION
The Company awards options to purchase its Common Stock to non-employee
directors for their service on the Board of Directors. Each non-employee
director received a grant of options to acquire 20,000 shares of Common Stock
at an exercise price of $15.00 per share on November 13, 1998, the date the
Director Option Plan was approved. In the future, on the date other non-
employee directors are elected to the Board of Directors, they will be granted
options to acquire 20,000 shares of Common Stock with an exercise price equal
to the fair market value of the Common Stock on the date of grant. Further, on
January 1 of each calendar year, each non-employee director will also receive
an additional annual grant of options to acquire 5,000 shares of Common Stock
with an exercise price equal to the fair market value on the date of grant.
See "--Option Plans -- Director Option Plan." The Company reimburses its
directors for out-of-pocket expenses incurred in connection with their
rendering of services as directors. The Company currently does not intend to
pay cash fees to its directors for attendance at meetings.
Effective May 22, 1998, William P. Payne became an employee and the Chairman
of the Board of Orchestrate.com, a wholly owned subsidiary of Premiere. As
Chairman of Orchestrate.com, one of Mr. Payne's principal duties is to assist
the Company in the development of its business for the purpose of increasing
revenue opportunities for Premiere and enhancing the value of Premiere's
investment in the Company. In consideration of Mr. Payne's devotion of up to
60% of his time directly to the business of the Company, the Company
reimburses Premiere $375,000 per year for Mr. Payne's salary, $125,000 per
year for Mr. Payne's minimum bonus and $6,000 per year for Mr. Payne's
automobile allowance, each for the balance of Mr. Payne's two-year employment
with Orchestrate.com. In addition, the Company granted Mr. Payne options to
acquire 200,000 shares of Common Stock with an exercise price of $2.00 per
share. The Company also reimburses Mr. Payne for any expenses he incurs in
discharging his duties to the Company.
63
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the fiscal
year ended December 31, 1998 by the Company's Chief Executive Officer and each
of the Company's other two highest paid executive officers whose total
compensation exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION (1) SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------- ------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Jeffrey T. Arnold ...... $ 214,302 (2) $ -- 1,000,000 $6,000 (3)
Chairman and Chief
Executive Officer
K. Robert Draughon...... 154,000 -- 320,000 5,500 (3)
Chief Financial Officer
W. Michael Heekin....... 150,000 -- -- 6,000 (3)
Executive Vice
President, General
Counsel and Secretary
</TABLE>
- --------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such column. The aggregate
amount of perquisites and other personal benefits provided to each Named
Executive Officer is less than 10% of the total annual salary and bonus of
such officer.
(2) Consists of $180,000 in base salary plus $34,302 representing repayment of
indebtedness owed on a tax adjusted basis to the Company. See "Certain
Transactions."
(3) Consists of amounts paid for car allowances.
OPTION GRANTS
The following table sets forth information concerning grants of stock
options to the Named Executive Officers during the fiscal year ended December
31, 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
GRANTED (1) FISCAL YEAR (2) SHARE (3) DATE 5% 10%
----------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey T. Arnold....... 1,000,000 40.9% $15.00 Sept. 2002 $
K. Robert Draughon...... 265,000 10.8 2.00 Feb. 2002
55,000 2.2 15.00 Nov. 2002
W. Michael Heekin....... -- -- -- --
</TABLE>
OPTION GRANTS DURING LAST FISCAL YEAR
- --------
(1) All options vest according to the following schedule: (i) one-third on the
date of grant; (ii) one-sixth on the first and second anniversaries of the
date of grant; and (iv) one-third on the third anniversary of the date of
grant. In addition, one-half of all shares that have not vested and become
exercisable shall immediately vest and become exercisable upon the
effectiveness of an initial public offering of the Company's stock.
(2) Based on a total of 2,256,132 options granted to all employees during the
fiscal year ended December 31, 1998.
(3) All options were granted at an exercise price equal to the fair market
value of the Common Stock on the date of grant.
(4) Potential realizable values are computed by (i) multiplying the number of
shares of Common Stock subject to a given option by an assumed initial
public offering price of $ per share and (ii) assuming that the
64
<PAGE>
aggregate stock value derived from that calculation compounds at the
annual rate of 5% and 10% for the remainder of the four-year term of the
option. In accordance with the rules of the Commission, the potential
realizable values for such options shown in the table are based on assumed
rates of stock price appreciation of 5% and 10% compounded annually from
the date the respective options were granted to their expiration date.
These assumed rates of appreciation do not represent the Company's
estimate or projection of the appreciation of shares of Common Stock of
the Company.
The following table sets forth information concerning exercisable and
unexercisable stock options held as of December 31, 1998 by each of the Named
Executive Officers. No options were exercised by the Named Executive Officers
in 1998.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998 (1)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey T. Arnold........... 333,333 666,667 $ $
K. Robert Draughon.......... 106,666 213,334
W. Michael Heekin........... 150,000 150,000
</TABLE>
- --------
(1) Value determined by subtracting the exercise price from the initial public
offering price, which is assumed to be $ per share.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement (the "Arnold Employment
Agreement") effective September 30, 1998 with Jeffrey T. Arnold. The Arnold
Employment Agreement has a two-year term and renews for consecutive one-year
terms, unless either party gives 360-days notice prior to the expiration of
any term. Mr. Arnold is paid an annual salary of $180,000 and is entitled to
an annual bonus as determined by the Board of Directors (or the Compensation
Committee thereof). The Arnold Employment Agreement also provides that,
subject to certain exceptions, Mr. Arnold will not compete with the Company
during the term of his employment and for one year thereafter. In the event of
termination of Mr. Arnold's employment without cause, Mr. Arnold will be
entitled to 12 months' salary as severance. The Arnold Employment Agreement
grants Mr. Arnold options to acquire 1,000,000 shares of Common Stock. Mr.
Arnold's options vest one-third on the date of grant and one-sixth, one-sixth
and one-third on the first three anniversaries thereof; provided, however,
that one-half of all shares that have not vested and become exercisable shall
immediately vest and become exercisable upon the effectiveness of an initial
public offering of the Company's stock. All of Mr. Arnold's options shall
immediately vest and become exercisable in the event of a Change of Control
(as defined below). "Change of Control" means a change of the possession,
direct or indirect, of the power to direct or cause the direction of
management and policies of the Company, whether through ownership of voting
securities, by contract (other than a commercial contract for goods or non-
management services), or otherwise. Without limitation, a Change of Control
shall be deemed to have occurred if any person or entity that is not on the
date of the respective employment agreement the beneficial owner of any
securities of the Company becomes the beneficial owner, directly or
indirectly, of 20% or more of the combined voting power of the Company's
outstanding voting securities ordinarily having the right to vote for the
election of directors of the Company.
The Company has entered into employment agreements (the "Employment
Agreements") effective February 1, 1998 and July 11, 1997 with K. Robert
Draughon and W. Michael Heekin, respectively. The Employment Agreements have
two-year terms and renew for one additional term unless either party gives
180-days notice prior to the end of the initial two-year term. Messrs.
Draughon and Heekin are paid an annual salary of $175,000 and $150,000,
respectively, and are entitled to an annual bonus in an amount recommended by
the Chief Executive Officer and approved by the Board of Directors (or the
Compensation Committee thereof). The Employment Agreements also provide that
the executives will not compete with the Company during the term
65
<PAGE>
of their employment and for one year thereafter. In the event of termination
of the executive's employment without cause, the executive will be entitled to
12 month's salary as severance. The Employment Agreements grant Messrs.
Draughon and Heekin options to acquire 265,000 and 300,000 shares,
respectively, of Common Stock, and the options vest one-third on the date of
employment and one-sixth, one-sixth and one-third on the first three
anniversaries thereof; provided, however, that one-half of all shares that
have not vested and become exercisable shall immediately vest and become
exercisable upon the effectiveness of an initial public offering of the
Company's stock. All of the executives' options will immediately vest and
become exercisable in the event of a Change of Control (as defined in the
preceding paragraph) after the effectiveness of an initial public offering of
the Company's stock.
OPTION PLANS
Option Plan. In September 1997, the Board of Directors adopted and the
Company's shareholders approved the Option Plan under which 2,000,000 shares
of Common Stock of the Company are available to be granted to employees,
consultants and others rendering services to the Company. The Option Plan is
effective as of January 1, 1997 by its terms. On September 17, 1998, the Board
of Directors adopted certain amendments to the Option Plan, which provided, in
part, for the increase in the number of authorized shares of Common Stock
under the Option Plan to 5,000,000. The amendments to the Option Plan were
approved by the shareholders in January 1999. Options may be either incentive
stock options within the meaning of Section 422 of the Tax Code, which permits
the deferral of taxable income related to the exercise of such options, or
nonqualified options not entitled to such deferral. Incentive stock options
may only be granted to employees. In addition, the Option Plan allows for the
award of restricted stock.
The Option Plan is administered by the Board of Directors and the
Compensation Committee. Subject to the provisions of the Option Plan, the
Board of Directors and the Compensation Committee, in their discretion, select
the recipients of awards and the number of options granted thereunder and
determine other matters such as: (i) vesting and exercisability schedules;
(ii) the exercise price of options (which cannot be less than 100% of the fair
market value of the Common Stock on the date of grant for all stock options);
and (iii) the duration of awards.
As of January 27, 1999, the Company had granted options to purchase
3,968,132 shares of the Common Stock of the Company outstanding under the
Option Plan. In addition, the Company assumed options to acquire approximately
193,000 shares of Common Stock in connection with the SHN and DMK
acquisitions.
Director Option Plan. In November 1998, the Board adopted the Director
Option Plan, which was approved by the Company's shareholders in January 1999.
The Director Option Plan provides for non-qualified stock options to be
granted to non-employee directors of the Company. The Director Option Plan
authorizes the issuance of up to 1,000,000 shares of Common Stock pursuant to
options having an exercise price equal to the fair market value of the Common
Stock on the date the options are granted. The Director Option Plan contains
provisions providing for adjustment of the number of shares available for
options and subject to unexercised options in the event of stock splits,
dividends payable in Common Stock, business combinations or certain other
events affecting the Common Stock of the Company. The Board of Directors
administers the Director Option Plan subject to certain limitations.
The Director Option Plan provides for: (i) an initial grant of options to
acquire 20,000 shares of Common Stock to each non-employee director who served
on the Board of Directors on November 13, 1998, the date the Director Option
Plan was approved by the Board of Directors; (ii) a grant of options to
acquire 20,000 shares of Common Stock to each non-employee director who is
elected to the Board of Directors after the date of approval of the Director
Option Plan; and (iii) an annual grant of options on January 1 of each
calendar year to acquire 5,000 shares of Common Stock to each non-employee
director. Each option shall be exercisable in full beginning six months after
the date of grant and shall expire ten years after the date of grant, unless
cancelled sooner as a result of termination of service or death, or unless
such option is fully exercised prior to the end of the option period. As of
January 27, 1999, options to acquire 225,000 shares of Common Stock were
outstanding under the Director Option Plan.
66
<PAGE>
CERTAIN TRANSACTIONS
In July 1996, Endeavor, the Company's subsidiary, loaned Jeffrey T. Arnold,
the Company's Chairman and Chief Executive Officer, $57,142 to purchase 5,000
shares of common stock of Endeavor. This loan is evidenced by a promissory
note bearing interest at 8.5% per annum. The principal and accrued interest
are payable in 24 equal installments of $2,597.43 beginning on August 1, 1996
and continuing on the first day of each month thereafter until the
indebtedness is paid in full. In March 1997, the terms of this note were
modified to provide that the obligation to make payments on the note began on
July 1, 1997 rather than August 1, 1996. The principal and interest on the
note are payable in 24 equal installments of $2,381. During Mr. Arnold's
employment and through December 31, 1998, the Company has paid Mr. Arnold
$52,015 in compensation additional to his annual salary under his employment
agreement with the Company, which Mr. Arnold has repaid to the Company in
payment of the obligations under the above-referenced note. In addition, the
Company has paid Mr. Arnold $11,814 for use by Mr. Arnold in making all tax
payment obligations imposed upon Mr. Arnold as a result of this additional
compensation.
In August 1997, each of J. Rex Fuqua and S. Taylor Glover, each a director
of the Company, lent the Company $100,000. The unsecured loans are evidenced
by promissory notes payable in full on demand on or after November 21, 1997.
The interest rate applicable to the unpaid principal under the notes is the
prime rate (as published in the "Money Rates" section of the Eastern Edition
of the Wall Street Journal). In conjunction with these loans, the Company
granted to each of Messrs. Fuqua and Glover an option to purchase 10,000
shares of Series D Common Stock at a price of $2.00 per share. The options are
effective for three years and expire on the consolidation, merger, sale of all
or substantially all of the Company's assets or dissolution or winding up of
the Company.
In December 1997, Premiere purchased 1,100,000 shares of Series E Common
Stock for $2,200,000. In conjunction with the stock purchase, the Company
issued Premiere a warrant to purchase an additional 1,000,000 shares of Series
E Common Stock for $2,000,000. In April 1998, Premiere exercised the warrant
in full. All shares held by Premiere are subject to registration rights. See
"Description of Capital Stock--Registration Rights." Boland T. Jones, a
director of the Company, is the Chairman and Chief Executive Officer of
Premiere. The Company also subleases from a subsidiary of Premiere the space
for its corporate headquarters and call center in Atlanta, Georgia. The term
of the sublease ends on February 1, 2000, with an option to renew the lease
term for one additional year. The sublease requires monthly payments by the
Company to Premiere of $36,466.50 and the payment of certain additional costs
and expenses. The Company also leases from Premiere certain equipment and
certain other personal property necessary for the operation of the Company's
call center. The term of this lease ends on February 1, 2000, with an option
to renew the lease term for one additional year. This lease requires monthly
payments by the Company to Premiere of $24,311. The Company provides its
subscribers with Premiere's enhanced communications services pursuant to a Co-
Marketing and Integration Agreement, as amended (the "Premiere Agreement"),
with a subsidiary of Premiere, Orchestrate.com. The Premiere Agreement is
effective until January 31, 2001 and contains minimum commitments for per
account and transaction payments by the Company to Premiere. The minimum
commitments began at $10,000 per month as of September 1998. For each month
following September 1998, the minimum commitments increase by $10,000 per
month to a maximum of $80,000 per month in April 1999 and thereafter. The
Premiere Agreement also provided for a $350,000 development fee which was paid
by the Company in January 1999 and a $100,000 technical integration fee which
was paid in November 1998. Additionally, the Premiere Agreement requires that
the Company spend $750,000 for joint marketing efforts with Premiere.
In February 1998, the Company granted to Mr. Fuqua the option to purchase
35,000 shares of the Series D Common Stock of the Company at a price of $2.00
per share. This option expires three years from the date of grant. The Company
granted this option in exchange for services provided by K. Robert Draughon to
the Company while he was an employee of Fuqua Capital Corporation, of which
Mr. Fuqua is the President, Chief Executive Officer and a shareholder.
67
<PAGE>
In June 1998, the Company entered into two agreements with iXL whereby iXL
provides certain Web development services to the Company. Under such
agreements, the Company will pay to iXL a minimum of $3.2 million for services
over the next two years. U. Bertram Ellis is the Chairman, Chief Executive
Officer and a shareholder of iXL Holdings, Inc., the parent of iXL, and
Messrs. Fuqua and Rissanen are shareholders of iXL Holdings, Inc.
On August 24, 1998, a wholly owned subsidiary of McKessonHBOC purchased
667,000 shares of Series A Preferred Stock for $10,005,000. In connection with
this investment, McKessonHBOC also received a warrant to purchase 300,000
shares of Series A Preferred Stock with an exercise price of $18.00 per share.
On January 27, 1999, the same subsidiary of McKessonHBOC also purchased
650,000 shares of Series C Preferred Stock for $13,000,000. All shares held by
McKessonHBOC are subject to registration rights. See "Description of Capital
Stock--Registration Rights." The Company has entered into two strategic
alliance agreements with McKessonHBOC, whereby McKessonHBOC agreed to market
WebMD. These agreements require McKessonHBOC to place or pay for a certain
number of WebMD subscriptions, subject to certain conditions. This agreement
also requires WebMD to provide McKessonHBOC with $5.0 million in research and
development services, to pay McKessonHBOC $5 per month per subscription placed
by McKessonHBOC and to provide a credit for subscribers toward purchases of
medical and surgical supplies through McKessonHBOC. See "Business--Strategic
Relationships--Distribution Relationships--McKessonHBOC." Jay P. Gilbertson,
the Company's President and Chief Operating Officer and a director, was
President and Co-Chief Operating Officer and Chief Financial Officer of HBOC,
a predecessor company of McKessonHBOC, prior to November 1998. Albert J.
Bergonzi has been a director of the Company since November 1998 and is the
Group President, Information Technology Business of McKessonHBOC.
All sales of capital stock were made at a price per share equal to the fair
market value of such stock on the date of sale as determined by the Board of
Directors. Certain of the transactions described above may be on terms more
favorable to officers, directors and principal shareholders than they could
obtain in a transaction with an unaffiliated party. The Company intends to
adopt a policy requiring that all material transactions between the Company
and its officers, directors or other affiliates must (i) be approved by a
majority of the disinterested members of the Board of Directors of the
Company, and (ii) be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
For additional information concerning Messrs. Arnold, Burch and Rissanen,
see "Management--Compensation Committee Interlocks and Insider Participation."
For additional information concerning Mr. Payne, see "Management--Director
Compensation."
68
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's outstanding Common Stock as of January
27, 1999, and as adjusted to reflect the sale of the Common Stock offered
hereby, by: (i) each person or entity known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock;
(ii) each director and Named Executive Officer of the Company; (iii) all
directors and executive officers of the Company as a group; and (iv) each
Selling Shareholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING (2) AFTER THE OFFERING (2)
----------------------------- ----------------------------
NAME OF BENEFICIAL OWNER NUMBER OF
(1) NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- ------------------------ --------------- --------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Jeffrey T. Arnold (3)... 3,883,332 21.5% -- %
Boland T. Jones (5)..... 2,200,000 12.7 --
Premiere Technologies,
Inc. (4).............. 2,100,000 12.1 --
Jouko J. Rissanen (6)... 2,050,000 11.8 --
HBO & Company of Georgia
(7)................... 1,617,000 9.2 --
Finn Partners (6)....... 1,500,000 8.6 --
Lucius E. Burch, III.... 1,000,000 5.8 --
Sirrom Investments, Inc.
(13).................. 557,490 3.1
J. Rex Fuqua (8)........ 545,000 3.1 --
S. Taylor Glover (9).... 519,305 3.0 --
Jay P. Gilbertson (10).. 333,333 1.9 --
K. Robert Draughon
(11).................. 285,416 1.6 --
W. Michael Heekin (12).. 225,000 1.3 --
U. Bertram Ellis, Jr.... 200,000 1.2 --
Glenn W. Sturm.......... 100,000 -- --
William P. Payne........ -- -- --
Albert J. Bergonzi...... -- -- --
All directors and
executive officers as
a group (13 persons)
(14).................. 11,341,386 60.0
</TABLE>
- --------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o WebMD, Inc., 400 The Lenox Building, 3399 Peachtree
Road, N.E., Atlanta, Georgia 30326. Except as otherwise indicated, such
beneficial owners have sole voting and investment power with respect to
all shares of Common Stock owned by them, subject to community property
laws where applicable.
(2) Percentage of ownership is based on shares of Common Stock
outstanding as of January 27, 1999 and shares outstanding after
this offering (assuming no exercise of the Underwriters' over-allotment
option). Shares of Common Stock issuable pursuant to options or warrants
held by the respective person or group which may be exercised within 60
days after January 27, 1999 are referred to herein as "presently
exercisable stock options" or "presently exercisable warrants." Pursuant
to the rules of the Commission, presently exercisable stock options or
warrants are deemed to be outstanding and to be beneficially owned by the
person or group holding such options for the purpose of computing the
percentage ownership of such person or group, but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person or group.
(3) Includes 666,666 shares subject to presently exercisable options.
(4) The address of Premiere is 3399 Peachtree Road, N.E., The Lenox Building,
Suite 600, Atlanta, Georgia 30326.
(5) Includes 2,100,000 shares of Common Stock held of record by Premiere, of
which Mr. Jones is Chairman of the Board and Chief Executive Officer. Mr.
Jones disclaims beneficial ownership of the shares held by Premiere.
(6) Includes (i) 550,000 shares of Common Stock held of record; and (ii)
1,500,000 shares of Common Stock held of record by Finn Partners, of
which Mr. Rissanen is the managing general partner and in which he owns a
one-third interest along with his wife. Other than the 500,000 shares
held by Finn Partners attributable to Mr. Rissanen, he disclaims
beneficial ownership of the shares held by Finn Partners.
(7) The address of HBO & Company of Georgia, a wholly owned subsidiary of
McKessonHBOC, is 301 Perimeter Center North, Atlanta, Georgia 30346.
Includes 300,000 shares subject to a presently exercisable warrant.
(8) Includes: (i) 350,000 shares held of record; (ii) 150,000 shares held by
Fuqua Holdings I, L.P., of which Fuqua Holdings, Inc. is the general
partner and Mr. Fuqua is the President; and (iii) 45,000 shares subject
to presently exercisable stock options.
(9) Includes 10,000 shares subject to presently exercisable stock options.
(10) Includes 333,333 shares subject to presently exercisable stock options.
(11) Includes 235,416 shares subject to presently exercisable stock options.
(12) Includes 225,000 shares subject to presently exercisable stock options.
(13) Includes 557,490 shares subject to presently exercisable warrants. If the
Underwriters exercise their over-allotment option in full, Sirrom
Investments, Inc. will sell shares and will beneficially own
shares, or % of the Common Stock outstanding after this offering.
(14) Includes 1,515,415 shares subject to presently exercisable stock options.
69
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject to and
qualified in its entirety by the provisions of the Company's Articles of
Incorporation and Bylaws, and by the applicable provisions of Georgia Law.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The Company's authorized capital stock currently consists of the following:
(i) 75,000,000 shares of Common Stock, without par value and without
designation as to series; (ii) 3,000,000 shares, without par value, designated
as Series B Common Stock; (iii) 1,500,000 shares, without par value,
designated as Series C Common Stock; (iv) 15,000,000 shares, without par
value, designated as Series D Common Stock; (v) 2,500,000 shares, without par
value, designated as Series E Common Stock; and (vi) 10,000,000 shares of
Preferred Stock, with such rights and preferences as the Board of Directors
shall determine, with 1,600,000 of such shares designated as Series A
Preferred Stock, 3,400,000 of such shares designated as Series B Preferred
Stock and 2,000,000 of such shares designated as Series C Preferred Stock. All
shares designated as Series B, C, D and E Common Stock and Series A, B and C
Preferred Stock currently issued and outstanding will be converted
automatically by their terms on a one-for-one basis into shares of Common
Stock without designation on the closing date of this offering. The authorized
shares of Series B, C, D and E Common Stock will be eliminated, and the
authorized shares of Series A, B and C Preferred Stock will revert to
authorized, but unissued, shares of Preferred Stock. Accordingly, no
information regarding the currently outstanding shares of Series B, C, D and E
Common Stock and Series A, B and C Preferred Stock is set forth below. As of
January 27, 1999, there were 12,596,805 shares of Common Stock outstanding,
held of record by 47 shareholders, 801,000 shares of Series A Preferred Stock
outstanding, held of record by two shareholders, 2,973,263 shares of Series B
Preferred Stock, held of record by 78 shareholders and 1,008,750 shares of
Series C Preferred Stock, held of record by 16 shareholders.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record for matters on which Common Stock holders are entitled to vote. There
are no sinking fund provisions nor any cumulative voting, preemptive,
redemption or conversion rights applicable to the Common Stock. The rights,
preferences and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of holders of any shares of any series of
Preferred Stock which may be issued by the Company's Board of Directors from
time to time in the future. Subject to the preference rights of the holders of
any outstanding shares of Preferred Stock, holders of Common Stock are
entitled to receive ratably such dividends and other distributions, if any, as
may be declared by the Board of Directors out of funds legally available
therefor and, upon the liquidation, dissolution or winding up of the Company,
are entitled to share ratably in all assets of the Company after the payment
of its debts and other liabilities. The outstanding shares of Common Stock are
fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority pursuant to the Articles of
Incorporation, without the approval of or any action by the shareholders, to
issue up to 10.0 million shares of Preferred Stock in such series and with
such preferences, powers, limitations and relative rights as may be determined
by the Board of Directors from time to time. The terms of the voting,
conversion, dividend, liquidation, preemptive and redemption rights and
preferences, and other qualifications, powers and privileges conferred upon
the holders of any such Preferred Stock, may be more favorable than those, if
any, granted to holders of Common Stock. The designation of any Preferred
Stock with greater rights, privileges and preferences than those applicable to
the Common Stock may adversely affect the voting power, market price and other
rights and privileges of the Common Stock, and may hinder or delay the removal
of directors, attempted tender offers, proxy contests or takeovers, or other
attempts to change control of the Company, some or all of which may be desired
by holders of the Common Stock.
70
<PAGE>
CERTAIN PROVISIONS OF THE ARTICLES, BYLAWS AND THE GEORGIA LAW
Certain provisions of the Company's Articles of Incorporation and Bylaws and
the Georgia Law, summarized in the following paragraphs, may be considered to
have anti-takeover effects and may hinder, delay, deter or prevent a tender
offer, proxy contest or other attempted takeover that a shareholder may deem
to be in such shareholder's best interest, including such an attempted
transaction as might result in payment of a premium over the market price for
shares held by such shareholder.
Number, Term and Removal of Directors. The Company's Articles provide that
the Company shall have not more than 15 directors, and the number of directors
shall be set by resolution of the Board of Directors in accordance with the
Company's Bylaws. Currently, the Company has twelve directors. The Board of
Directors is divided into three classes of directors, each serving for
staggered three-year terms. Directors may be removed from the Board of
Directors only for cause and only upon the affirmative vote of at least a
majority of the shareholders entitled to vote for directors at a duly held
shareholders' meeting for which notice of the removal action was properly
given. Upon a vacancy created in the Board of Directors by such removal action
or for any other reason (including an increase in the size of the Board of
Directors), a successor or new director may be appointed only by the
affirmative vote of a majority of the directors then in office.
Special Shareholder Meetings; Actions by Written Consent of
Shareholders. The Company's Bylaws provide that special meetings of
shareholders or a class or series of shareholders may be called at any time by
the Board of Directors, the Chairman of the Board or the Chief Executive
Officer of the Company, and that such meetings shall be called upon the
written request of the holders of shares representing at least 50% of the
votes entitled to be cast on each issue presented at such meeting (25% at any
time the Company has fewer than 100 shareholders of record). The Bylaws also
provide that shareholders seeking to bring business before a shareholders'
meeting or to nominate candidates for election as directors must provide
notice thereof not less than 60 nor more than 90 days prior to the first
anniversary of the previous year's annual shareholder meeting, and, in such
notice, provide to the Company certain information concerning the proposal or
nominee. All actions by the shareholders must be taken at a meeting with prior
notice in accordance with the Bylaws. No actions by the shareholders can be
taken by written consent.
Constituency Provisions. The Articles of Incorporation permit the Board of
Directors, its committees and individual directors to consider the interests
of various constituencies, including employees, customers, suppliers, and
creditors of the Company, communities in which the Company maintains offices
or operations and other factors which directors deem pertinent in carrying out
and discharging the duties and responsibilities of their positions and in
determining what is believed to be in the best interests of the Company.
WARRANTS
On August 29, 1997, the Company issued to Sirrom a warrant to purchase
557,490 shares of Series D Common Stock at an exercise price of $0.01 per
share. The warrant may be exercised at any time on or before August 1, 2002.
Sirrom will be a selling shareholder in the event the Underwriters exercise
their over-allotment option and intends to sell up to shares of Common
Stock which are currently subject to the warrants.
On July 21, 1998, the Company issued Matria a warrant to purchase 80,000
shares of Series D Common Stock at an exercise price equal to the price at
which shares are offered to the public hereby. The warrant may be exercised at
any time on or before July 20, 2003.
On August 24, 1998, the Company issued McKessonHBOC a warrant to purchase
300,000 shares of Series A Preferred Stock at an exercise price of $18.00 per
share. The warrant may be exercised at any time on or before August 23, 2001.
On September 1, 1998, the Company issued McKessonHBOC a warrant for up to
66,666, 66,667, and 66,667 shares of Series A Preferred Stock at an exercise
price equal to fair market value on the dates of grant (March 31, 1999, 2000
and 2001, respectively), provided that such grants shall be effective only if
the marketing efforts of McKessonHBOC and the Company under the strategic
alliance agreement between such parties
71
<PAGE>
generates to the Company gross revenues of at least $1.0 million, $8.0 million
and $15.0 million for the twelve months ended March 31, 1999, 2000 and 2001,
respectively. Each grant is exercisable for three years after the date of the
grant.
On September 1, 1998, the Company issued Matria a warrant to purchase 60,000
shares of Series A Preferred Stock at an exercise price of $18.00 per share.
The warrant may be exercised at any time on or before August 31, 2001.
On January 22, 1999, the Company completed the acquisition of DMK and, in
connection therewith, assumed two warrants previously issued by DMK to
Eucalyptus, Ltd. In accordance with the terms of the acquisition, such
warrants currently provide for the right to purchase 56,372 shares of Series B
Preferred Stock at an exercise price of $2.217 per share. The warrants may be
exercised at any time on or before December 29, 2003.
On January 25, 1999, the Company completed the acquisition of SHN and, in
connection therewith, assumed certain warrants previously issued by SHN to 21
individuals and entities. In accordance with the terms of the acquisition,
such warrants currently provide for the right to purchase 12,286 shares of
Series B Preferred Stock at exercise prices ranging from $1.66 to $23.40 per
share. The exercise periods of these warrants vary.
On January 27, 1999, the Company issued the twelve principals of Gleacher
NatWest a warrant to purchase 750,000 shares of Series D Common Stock at an
exercise price of $20.00 per share. The warrant vests immediately with regard
to 500,000 shares and vests on January 27, 2000 with regard to the remaining
250,000 shares. The warrant may be exercised at any time on or before January
27, 2004.
On January 28, 1999, the Company issued J&C Nationwide a warrant to purchase
50,000 shares of Series D Common Stock at an exercise price of $20.00 per
share. The warrant may be exercised at any time on or before January 28, 2004.
On January 28, 1999, the Company issued Premier a warrant to purchase
100,000 shares of Series C Preferred Stock at an exercise price of $20.00 per
share. The warrant may be exercised at any time on or before January 28, 2004.
In conjunction therewith, the Company issued Premier a warrant for 50,000 and
50,000 shares of Series C Preferred Stock at an exercise price equal to fair
market value on the dates of grant (January 28, 2000 and 2001, respectively),
provided that such grants will be effective only if the marketing efforts of
Premier and the Company under the strategic alliance agreement between such
parties generates to the Company gross revenues of at least $4.5 million and
$8.0 million in calendar years 1999 and 2000, respectively. Each grant is
exercisable for five years after the date of grant.
REGISTRATION RIGHTS
The holders of approximately 8,312,240 shares of Common Stock and Common
Stock equivalents and their permitted transferees are entitled to certain
rights with respect to the registration of such shares under the Securities
Act. In addition, the terms of the Preferred Stock Sales require the Company
to issue 240,000 additional shares of Common Stock upon certain events; and
such shares would also be subject to such registration rights.
Demand Rights. The SHN holders, with respect to approximately 1,750,000
shares of Common Stock and Common Stock equivalents, have the one-time right
to require the Company to file a registration statement under the Securities
Act, provided that (i) such request is made at least 180 days after the
effective date of a registration statement relating to an initial public
offering and (ii) the Company shall not be obligated to file or cause to be
declared effective a registration statement until 90 days after the effective
date of a registration statement filed pursuant to the demand of another
holder who has exercised its demand rights.
72
<PAGE>
McKessonHBOC, with respect to 1,617,000 shares of Common Stock and Common
Stock equivalents, has the right to require the Company to file up to two
registration statements on Form S-1 under the Securities Act and up to four
registration statements on Form S-3 under the Securities Act; provided that
such requests are made at least 180 days after the completion of an initial
public offering or at any time after August 24, 1999 if an initial public
offering has not been completed by such date (a "Demand IPO"). In addition,
each registration must be with respect to at least 200,000 shares of Common
Stock. Premiere has the one-time right to require the Company to file a
registration statement under the Securities Act, provided that such request is
made at least 180 days after the completion of an initial public offering. In
addition, the registration must be with respect to a minimum number of shares
of Common Stock having an aggregate proposed offering price equal to at least
$10.0 million.
Certain holders of Series B Preferred Stock and Series C Preferred Stock
collectively (the "B and C Holders"), with respect to 968,750 shares, have the
one time right to require the Company to file a registration statement under
the Securities Act, subject to certain limitations, including that (i) such
request is made at least one year after the effective date of a registration
statement relating to an initial public offering and (ii) the Company shall
not be obligated to file or cause to be declared effective a registration
statement until 120 days after the effective date of a registration statement
filed pursuant to the demand of another holder who has exercised its demand
rights.
Premier, with respect to 450,000 shares, has the one-time right to require
the Company to file a registration statement under the Securities Act,
provided that (i) such request is made at least 180 days after the effective
date of a registration statement relating to an initial public offering and
(ii) the Company shall not be obligated to file or cause to be declared
effective a registration statement until 90 days after the effective date of a
registration statement filed pursuant to the demand of another holder who has
exercised its demand rights.
Piggyback Rights. The Company has also granted piggyback registration rights
to the SHN holders, Matria, McKessonHBOC, Premiere and Sirrom. In each of
these instances, the Company is required to notify the holders of the
Company's intent to register under certain circumstances its Common Stock
under the Securities Act and allow such holders an opportunity to include
their shares of Common Stock in the Company's registration. With respect to
Matria, McKessonHBOC and Premier, such notice must be given only if the
Company determines to register any Common Stock in a public offering solely
for cash on a form other than Forms S-4 or S-8 or another form not available
for registering the shares of Common Stock held by Matria, McKessonHBOC and
Premier, provided that McKessonHBOC shall not have the right to participate in
an initial public offering declared effective prior to August 24, 1999, Matria
shall not have the right to participate in an initial public offering declared
effective prior to September 1, 1999 and Premier shall not have the right to
participate in an initial public offering declared effective prior to January
28, 2000. With respect to Premiere, such notice must be given only if the
Company determines to register any Common Stock in any underwritten public
offering for its own account (excluding an initial public offering or an
offering conducted at the demand of Premiere or an offering that is registered
on Forms S-4 or S-8 or another form not available for registering the shares
of Common Stock held by Premiere) or in a demand registration pursuant to a
Demand IPO. With respect to Sirrom, such notice must be given only if the
Company proposes to file a registration statement with respect to any of the
Common Stock on a form suitable for a secondary offering. These registration
rights are subject to certain limitations and restrictions, including the
right of the underwriters to limit the number of shares offered in such
registration if such underwriter determines that the number of shares
requested to be registered cannot be underwritten.
In each of the above instances, subject to certain limitations and
conditions, including provisions granting certain preferences, such
registrations may include securities sold for the account of the Company or
other shareholders, or both. The Company generally is required to bear the
expenses relating to the sale of the holders' securities under registration,
except for underwriting discounts and commissions, and in certain cases the
fees and expenses of the holders' counsel and filing fees related to the
registration statement. The Company also is obligated to indemnify the holders
whose shares are included in any of the Company's registrations against
certain losses and liabilities, including liabilities under the Securities Act
and state securities laws.
73
<PAGE>
DIRECTOR EXCULPATION AND INDEMNIFICATION
The Company's Articles of Incorporation provide that no director shall be
personally liable to the Company or any of its shareholders for any breach of
the duties of such position, except that such elimination of liability does
not apply to: (i) appropriations of business opportunities from the Company in
violation of such director's duties; (ii) knowing or intentional misconduct or
violation of law; (iii) liability for assent to distributions which are
illegal or improper under the Georgia Law or the Company's Articles; and (iv)
liability for any transaction in which an improper personal benefit is
derived. In addition, the Articles state that if the Georgia Law is ever
amended to allow for greater exculpation of directors than presently
permitted, the directors shall be relieved from liabilities to the fullest
extent provided by the Georgia Law, as so amended, without further action by
the shareholders of the Company, unless the Georgia Law provides otherwise. No
modification or repeal of this provision will adversely affect the elimination
or reduction in liability provided thereby with respect to any alleged act
occurring before the effective date of such modification or repeal. The
Company has entered into indemnification agreements with each of its directors
and certain of its officers that provide such individuals with similar rights
to indemnification and contribution.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is SunTrust Bank,
Atlanta, Georgia.
74
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have shares of Common
Stock outstanding ( shares if the Underwriter's over-allotment option is
exercised in full), assuming no exercise of options after , 1999. Of this
amount, the shares offered hereby will be available for immediate sale in
the public market as of the date of this prospectus. An additional shares
are not subject to an 180-day lockup and will be available for sale in the
public market 90 days following the date of this prospectus pursuant to Rule
701. Approximately additional shares will be available for sale in the
public market following the expiration of 180-day lockup agreements with the
Representatives of the Underwriters or the Company, subject in some cases to
compliance with the volume and other limitations of Rule 144.
<TABLE>
<CAPTION>
DAYS AFTER THE DATE OF APPROXIMATE SHARES
THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
---------------------- ------------------------ -------
<C> <C> <S>
Upon effectiveness.. Freely tradeable shares sold
in offering and shares salable
under Rule 144(k) that are not
subject to 180-day lockup.
90 days............. (1) Shares salable under Rule 144,
144(k) or 701 that are not
subject to 180-day lockup.
180 days............ Lockup released; shares
salable under Rule 144, 144(k)
or 701.
Over 180 days....... Restricted securities held for
one year or less.
</TABLE>
- --------
(1) If the Underwriters waive the 180-day lockup agreements within the first
90 days after the date of the Prospectus, an additional shares will be
available for sale in the public market 90 days following the date of this
prospectus, subject in some cases to compliance with the volume and other
limitations of Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least
one year is entitled to sell within any three-month period commencing 90 days
after the date of this Prospectus a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock
(approximately shares immediately after the offering) or (ii) the
average weekly trading volume during the four calendar weeks preceding such
sale, subject to the filing of a Form 144 with respect to such sale. A person
(or persons whose shares are aggregated) who is not deemed to have been an
affiliate of the Company at any time during the 90 days immediately preceding
the sale and who has beneficially owned his or her shares for at least two
years is entitled to sell such shares pursuant to Rule 144(k) without regard
to the limitations described above. Persons deemed to be affiliates must
always sell pursuant to Rule 144, even after the applicable holding periods
have been satisfied.
The Company is unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for the Common
Stock of the Company, the personal circumstances of the sellers and other
factors. Prior to the offering, there has been no public market for the Common
Stock, and there can be no assurance that a significant public market for the
Common Stock will develop or be sustained after the offering. Any future sale
of substantial amounts of the Common Stock in the open market may adversely
affect the market price of the Common Stock offered hereby.
The Company, its directors, executive officers, stockholders with
registration rights and certain other stockholders and optionholders have
agreed pursuant to the Underwriting Agreement and other agreements that they
will not sell any Common Stock without the prior written consent of BancBoston
Robertson Stephens Inc. for a period of 180 days from the date of this
prospectus (the "180-day Lockup Period") except that the Company may, without
such consent, grant options and sell shares pursuant to the Company's stock
plans.
Any employee or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with the
Rule 144 holding period restrictions, in each case commencing 90 days after
the date of this prospectus. As of , 1999, the holders of options to
purchase approximately shares of Common
75
<PAGE>
Stock will be eligible to sell their shares upon the expiration of the 180-day
Lockup Period, subject in certain cases to vesting of such options.
The Company intends to file a registration statement on Form S-8 under the
Securities Act within 180 days after the completion of the offering to
register shares of Common Stock subject to outstanding stock options or
reserved for issuance under the Company's Option Plan and Director Option
Plan, thus permitting the resale of such shares by nonaffiliates in the public
market without restriction under the Securities Act.
In addition, certain shareholders have registration rights with respect to
5,600,000 shares of Common Stock and Common Stock equivalents. The Company may
also be required to issue 240,000 additional shares upon certain events
specified under the terms of the Company's preferred stock, and such shares
would also be subject to registration rights. Registration of these securities
subject to registration rights under the Securities Act would result in such
shares becoming freely tradeable without restriction under the Securities Act.
See "Description of Capital Stock--Registration Rights" and "Risk Factors--We
May Have Substantial Sales of Our Common Stock After the Offering."
76
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC and E*TRADE
Securities, Inc. (the "Representatives"), have severally agreed with the
Company and the Selling Shareholders, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company and the Selling
Shareholders the number of shares of Common Stock set forth opposite their
names below. The Underwriters are committed to purchase and pay for all such
shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc....................................
Hambrecht & Quist LLC................................................
E*TRADE Securities, Inc..............................................
---
Total..............................................................
===
</TABLE>
The Representatives have advised the Company and the Selling Shareholders
that they propose to offer the shares of Common Stock to the public at the
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of not more than $ per share, of
which $ may be reallowed to other dealers. After the completion of the
offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall affect the amount
of proceeds to be received by the Company and the Selling Shareholders as set
forth on the cover page of this Prospectus.
Certain Selling Shareholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of Common Stock at the same price per
share as the Company will receive for the shares that the Underwriters
have agreed to purchase from the Company. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above
table represents as a percentage of the shares offered hereby. If
purchased, such additional shares will be sold by the Underwriters on the same
terms as those on which the shares are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.
Each executive officer and director and certain securityholders of the
Company have agreed with the Representatives not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of Common Stock, any options or warrants to purchase any
shares of Common Stock, or any securities convertible into or exchangeable for
shares of Common Stock owned as of the date of this prospectus or thereafter
acquired directly by such holders or with respect to which they have or
thereafter acquire the power of disposition for a period of 180 days following
the date of this prospectus (the "Lock-Up Period"), without the prior written
consent of BancBoston Robertson Stephens Inc. However, BancBoston Robertson
Stephens Inc. may, in its sole discretion at any time or from time to time,
without notice, release all or any portion of the securities subject to the
lock-up agreements. Approximately of such shares will be eligible for
immediate public sale following expiration of the Lock-Up Period, subject to
the provisions of Rule 144. In addition, the Company has agreed that during
the Lock-Up Period, it will not, without the prior written
77
<PAGE>
consent of BancBoston Robertson Stephens Inc., issue, sell, contract to sell
or otherwise dispose of any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock other than the
issuance of Common Stock upon the exercise of outstanding options and the
Company's issuance of options under the Option Plan, the Director Option Plan
and other agreements. See "Shares Eligible For Future Sale."
The Representatives have advised the Company that, pursuant to rules
promulgated by the Commission, certain persons participating in the offering
may engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level
above that which might otherwise prevail in the open market. A "stabilizing
bid" is a bid for or the purchase of the Common Stock on behalf of the
Underwriters for the purpose of fixing or maintaining the price of the Common
Stock. A "syndicate covering transaction" is the bid for or the purchase of
the Common Stock on behalf of the Underwriters to reduce a short position
incurred by the Underwriters in connection with the offering. A "penalty bid"
is an arrangement permitting the Representatives to reclaim the selling
concession otherwise accruing to an Underwriter or syndicate member in
connection with the offering if the Common Stock originally sold by such
Underwriter or syndicate member is repurchased by the Representatives in
syndicate covering transactions, in stabilizing transactions or otherwise. The
Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.
Prior to this offering, there has been no public market for the Company's
securities. The initial public offering price of the Common Stock will be
determined by negotiation among the Company, the Selling Shareholders and the
Representatives. Among the factors to be considered in such negotiations will
be prevailing market conditions, the results of operations of the Company in
recent periods, market valuations of publicly traded companies that the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development, the current state of the industry and the economy as a
whole, and other factors deemed relevant.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia
("Nelson Mullins"). Glenn W. Sturm, a partner of Nelson Mullins, is a director
of the Company, and as of January 27, 1999, Mr. Sturm beneficially owned
100,000 shares of Common Stock. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Brobeck, Phleger &
Harrison LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of WebMD, Inc. at December 31, 1996
and 1997 and for each of the three years in the period ended December 31,
1997, appearing in this prospectus and registration statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Sapient Health Network, Inc. as of September 30,
1997 and 1998 and the period from November 21, 1995 (date of inception)
through September 30, 1996 and each of the years in the two-year period ended
September 30, 1998, have been included herein and in the WebMD registration
statement on Form S-1 in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, appearing elsewhere
78
<PAGE>
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP dated November 18, 1998 contains
an explanatory paragraph that states that SHN has incurred losses since
inception and has a net capital deficiency; these conditions raise substantial
doubt about the entity's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome
of that uncertainty.
The financial statements of DMK, a development stage company, as of December
31, 1997, and for the year then ended and for the period from May 24, 1995
(date of incorporation) to December 31, 1997 included in this registration
statement and the related prospectus, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing. The
financial statements of DMK for the period from May 24, 1995 (date of
incorporation) to December 31, 1996 were audited by other auditors, and the
report of PricewaterhouseCoopers LLP relies on the report of these other
auditors in so far as it relates to the amounts included for the period from
May 24, 1995 (date of incorporation) to December 31, 1996. The report of
PricewaterhouseCoopers LLP includes an explanatory paragraph about DMK's
recurring losses and negative cash flows from operations which raise
substantial doubt about its ability to continue as a going concern.
ADDITIONAL INFORMATION
The Company has filed with the Commission through the Electronic Data
Gathering and Retrieval ("EDGAR") system a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in such Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. For further information, reference is made to such registration
statement, including the exhibits thereto, which may be inspected without
charge at the Commission's principal office at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; and at the following Regional Offices of the
Commission, except that copies of the exhibits may not be available at certain
of the Regional Offices: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of all or any part
of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, upon
payment of certain fees prescribed by the Commission. The Commission maintains
a World Wide Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements, and registration statements and
other information regarding registrants that file electronically with the
Commission through the EDGAR system. Reports and other information concerning
the Company also may be inspected at the offices of the Nasdaq National
Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company is not presently a reporting company and does not file reports
or other information with the Commission. On the effective date of the
Registration Statement, however, the Company will become a reporting company.
Further, the Company will register its securities under the Exchange Act.
Accordingly, the Company will become subject to the additional reporting
requirements of the Exchange Act and in accordance therewith will file
reports, proxy statements and other information with the Commission. In
addition, after the completion of this offering, the Company intends to
furnish its shareholders with annual reports containing audited financial
statements and with quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal year.
79
<PAGE>
WEBMD, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WEBMD, INC.--CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Shareholders' Equity.......................... F-5
Consolidated Statements of Cash Flows.................................... F-7
Notes to Consolidated Financial Statements............................... F-8
DIRECT MEDICAL KNOWLEDGE, INC.--FINANCIAL STATEMENTS
Report of Independent Accountants........................................ F-20
Balance Sheets........................................................... F-23
Statements of Operations................................................. F-24
Statements of Shareholders' Equity....................................... F-25
Statements of Cash Flows................................................. F-26
Notes to Financial Statements............................................ F-27
DIRECT MEDICAL KNOWLEDGE, INC.--UNAUDITED CONDENSED FINANCIAL STATEMENTS
Unaudited Condensed Statements of Operations............................. F-36
Unaudited Condensed Balance Sheets....................................... F-37
Unaudited Condensed Statements of Cash Flows............................. F-38
Notes to Unaudited Condensed Financial Statements........................ F-39
SAPIENT HEALTH NETWORK, INC.--FINANCIAL STATEMENTS
Independent Auditors' Report............................................. F-40
Balance Sheets........................................................... F-41
Statements of Operations................................................. F-42
Statements of Shareholders' Deficit...................................... F-43
Statements of Cash Flows................................................. F-44
Notes to Financial Statements............................................ F-45
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
WebMD, Inc.
We have audited the accompanying consolidated balance sheets of WebMD, Inc.
(formerly Endeavor Technologies, Inc.) and subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of WebMD, Inc. and subsidiaries at December 31, 1996 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
July 21, 1998
F-2
<PAGE>
WEBMD, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------- -------------------
PRO FORMA
1996 1997 1998 1998
------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ -- $ 2,696 $ 11,737
Current portion of note receivable...... -- 100 117
Inventory............................... -- -- 1,956
Other current assets.................... -- 53 1,203
------- ------- --------
Total current assets................... -- 2,849 15,013
Property and equipment, net.............. -- 73 2,176
Intangibles, net......................... -- 118 --
Note receivable, less current portion.... -- 106 33
------- ------- --------
Total assets from continuing operations.. -- 3,146 17,222
Total assets from discontinued opera-
tions................................... 3,497 6,044 --
------- ------- --------
Total assets........................ $ 3,497 $ 9,190 $ 17,222
======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses... $ -- $ 317 $ 1,667
------- ------- --------
Total current liabilities................ -- 317 1,667
Long-term debt, net of discount.......... -- 2,965 --
------- ------- --------
Total liabilities from continuing opera-
tions................................... -- 3,282 1,667
Total liabilities from discontinued oper-
ations.................................. 2,939 1,762 --
------- ------- --------
Total liabilities...................... 2,939 5,044 1,667
Shareholders' equity:
Preferred Stock; no par value;
10,000,000 shares authorized:
Series A, non-voting; 1,600,000 shares
authorized; 0,0, 801,000 and 0 shares
issued and outstanding at December 31,
1996 and 1997, September 30, 1998 and
September 30, 1998 pro forma,
respectively.......................... -- -- 12,015 $ --
Common stock, no par value; 97,000,000
shares authorized:
Common Stock, voting; 3,000,000,
3,000,000, 3,000,000 and 13,207,805
shares issued and outstanding at
December 31, 1996 and 1997,
September 30, 1998 and September 30,
1998 pro forma, respectively.......... 1,190 1,181 1,181 29,391
Series B, non-voting; 700,000,
1,400,000, 1,400,000 and 0 shares
issued and outstanding at December 31,
1996 and 1997, September 30, 1998 and
September 30, 1998 pro forma,
respectively.......................... 400 400 400 --
Series C, non-voting; 750,000,
1,500,000, 1,500,000 and 0 shares
issued and outstanding at December 31,
1996, 1997 and September 30, 1998 and
September 30, 1998 pro forma,
respectively.......................... 786 786 786 --
Series D, non-voting; 0, 3,506,805,
4,406,805 and 0 shares issued and
outstanding at December 31, 1996 and
1997, September 30, 1998 and September
30, 1998 pro forma, respectively...... -- 4,832 10,854 --
Series E, non-voting; 0, 1,100,000,
2,100,000 and 0 shares issued and
outstanding at December 31, 1996 and
1997, September 30, 1998 and September
30, 1998 pro forma, respectively...... -- 2,155 4,155 --
Deferred compensation................... -- (8) (1,007) (1,007)
Redeemable warrant issued in connection
with debt.............................. -- 1,110 1,110 1,110
Stock subscription receivables.......... (57) (200) -- --
Accumulated deficit..................... (1,761) (6,110) (13,939) (13,939)
------- ------- -------- --------
Total shareholders' equity............. 558 4,146 15,555 $ 15,555
======= ======= ======== ========
Total liabilities and shareholders'
equity.............................. $ 3,497 $ 9,190 $ 17,222
======= ======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
WEBMD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $ -- $ -- $ -- $ -- $ 75
Operating expenses:
Product development ... -- -- 566 -- 5,867
Sales and marketing.... -- -- 213 114 1,499
General and
administrative....... -- -- 1,806 1,255 7,039
Depreciation and
amortization......... -- -- 9 1 111
--------- --------- --------- --------- ----------
Total operating
expenses.............. -- -- 2,594 1,370 14,516
--------- --------- --------- --------- ----------
Operating loss.......... -- -- (2,594) (1,370) (14,441)
Interest expense, net... -- -- (725) (478) (177)
--------- --------- --------- --------- ----------
Net loss from continuing
operations............ -- -- (3,319) (1,848) (14,618)
Discontinued operations:
Loss from discontinued
operations........... (39) (1,682) (1,195) (718) (383)
Gain on disposal of
discontinued
operations........... -- -- 165 165 8,102
--------- --------- --------- --------- ----------
Net loss before
extraordinary item.... (39) (1,682) (4,349) (2,401) (6,899)
Extraordinary loss on
early extinguishment
of notes payable..... -- -- -- -- (930)
--------- --------- --------- --------- ----------
Net loss................ $ (39) $ (1,682) $ (4,349) $ (2,401) $ (7,829)
========= ========= ========= ========= ==========
Net loss per share
(basic and diluted):
Continuing operations.. $ -- $ -- $ (0.40) $ (0.23) $ (1.25)
Discontinued
operations........... (0.04) (0.64) (0.12) (0.07) 0.66
Extraordinary loss on
early extinguishment
of note payable...... -- -- -- -- (0.08)
--------- --------- --------- --------- ----------
Net loss per share...... $ (0.04) $ (0.64) $ (0.52) $ (0.30) $ (0.67)
========= ========= ========= ========= ==========
Weighted average shares
outstanding........... 1,000,000 2,611,918 8,300,261 7,918,030 11,749,964
========= ========= ========= ========= ==========
Pro forma net loss per
share................. $ (0.52) $ (0.66)
========= ==========
Pro forma weighted
average shares
outstanding........... 8,300,261 11,854,598
========= ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
WEBMD, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D SERIES E
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------ --------- ------ --------- ------ --------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995 (Combined)........ 1,000,000 $ 48 -- $ -- -- $ -- -- $ -- -- $ --
Net loss............... -- -- -- -- -- -- -- -- --
---------- ------ --------- ----- --------- ----- --------- ------- --------- ------
Balance at December 31,
1995 (Combined)........ 1,000,000 48 -- -- -- -- -- -- -- --
Stock subscription
receivable including
non-cash compensation
charge................ 2,500,000 1,428 -- -- -- -- -- -- -- --
Issuance of common
stock for cash........ -- -- 700,000 400 250,000 500 -- -- -- --
Transfer of common
stock from Series A to
Series C.............. (500,000) (286) -- -- 500,000 286 -- -- -- --
Net loss............... -- -- -- -- -- -- -- -- -- --
---------- ------ --------- ----- --------- ----- --------- ------- --------- ------
Balance at December 31,
1996 (Combined)........ 3,000,000 1,190 700,000 400 750,000 786 -- -- -- --
Issuance of Endeavor
common stock to
founders.............. 2,000,000 -- 700,000 -- 750,000 -- -- -- -- --
Dissent of QDS minority
shareholders.......... (1,000,000) (9) -- -- -- -- -- -- -- --
Cancellation of the
common stock of QDS... (2,000,000) -- (700,000) -- (750,000) -- -- -- -- --
Issuance of Endeavor
common stock in
exchange for QDS
stock................. 2,000,000 -- 700,000 -- 750,000 -- -- -- -- --
Transfer of common
stock from Series A to
Series D.............. (1,000,000) -- -- -- -- -- 1,000,000 -- -- --
Stock subscription
receivable............ -- -- -- -- -- -- 100,000 200 -- --
Issuance of common
stock for cash, net of
issuance costs........ -- -- -- -- -- -- 1,897,500 3,596 1,100,000 2,155
Issuance of common
stock upon conversion
of note payable....... -- -- -- -- -- -- 509,305 1,018 -- --
Issuance of common
stock options......... -- -- -- -- -- -- -- 18 -- --
Non-cash stock option
compensation.......... -- -- -- -- -- -- -- -- -- --
Issuance of common
stock warrants........ -- -- -- -- -- -- -- -- -- --
Payment of stock
subscription
receivable............ -- -- -- -- -- -- -- -- -- --
Net loss............... -- -- -- -- -- -- -- -- -- --
---------- ------ --------- ----- --------- ----- --------- ------- --------- ------
Balance at December 31,
1997................... 3,000,000 1,181 1,400,000 400 1,500,000 786 3,506,805 4,832 1,100,000 2,155
Issuance of common
stock for cash........ -- -- -- -- -- -- 900,000 1,900 1,000,000 2,000
Issuance of preferred
stock for cash........ -- -- -- -- -- -- -- -- -- --
Issuance of common
stock options......... -- -- -- -- -- -- -- 1,015 -- --
Non-cash stock option
compensation.......... -- -- -- -- -- -- -- 3,107 -- --
Payment on stock
subscription
receivable............ -- -- -- -- -- -- -- -- -- --
Net loss............... -- -- -- -- -- -- -- -- -- --
---------- ------ --------- ----- --------- ----- --------- ------- --------- ------
Balance at September 30,
1998 (unaudited)....... 3,000,000 $1,181 1,400,000 $ 400 1,500,000 $ 786 4,406,805 $10,854 2,100,000 $4,155
========== ====== ========= ===== ========= ===== ========= ======= ========= ======
</TABLE>
See accompanying notes.
F-5
<PAGE>
WEBMD, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------
STOCK SHAREHOLDERS'
SERIES A DEFERRED REDEEMABLE SUBSCRIPTION ACCUMULATED TOTAL
SHARES AMOUNT COMPENSATION WARRANT RECEIVABLES DEFICIT EQUITY
------- ------- ------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995 (Combined)........ -- $ -- $ -- $ -- $ -- $ (40) $ 8
Net loss............... -- -- -- -- -- (39) (39)
------- ------- ------------- ----------- ----------- ------------ ------------
Balance at December 31,
1995 (Combined)........ -- -- -- -- -- (79) (31)
Stock subscription
receivable including
non-cash compensation
charge................ -- -- -- -- (57) -- 1,371
Issuance of common
stock for cash........ -- -- -- -- -- -- 900
Transfer of common
stock from Series A to
Series C.............. -- -- -- -- -- -- --
Net loss............... -- -- -- -- -- (1,682) (1,682)
------- ------- ------------- ----------- ----------- ------------ ------------
Balance at December 31,
1996 (Combined)........ -- -- -- -- (57) (1,761) 558
Issuance of Endeavor
common stock to
founders.............. -- -- -- -- -- -- --
Dissent of QDS minority
shareholders.......... -- -- -- -- -- -- (9)
Cancellation of the
common stock of QDS... -- -- -- -- -- -- --
Issuance of Endeavor
common stock in
exchange for QDS
stock................. -- -- -- -- -- -- --
Transfer of common
stock from Series A to
Series D.............. -- -- -- -- -- -- --
Stock subscription
receivable............ -- -- -- -- (200) -- --
Issuance of common
stock for cash, net of
issuance costs........ -- -- -- -- -- -- 5,751
Issuance of common
stock upon conversion
of note payable....... -- -- -- -- -- -- 1,018
Issuance of common
stock options......... -- -- (18) -- -- -- --
Non-cash stock option
compensation.......... -- -- 10 -- -- -- 10
Issuance of common
stock warrants........ -- -- -- 1,110 -- -- 1,110
Payment of stock
subscription
receivable............ -- -- -- -- 57 -- 57
Net loss............... -- -- -- -- -- (4,349) (4,349)
------- ------- ------------- ----------- ----------- ------------ ------------
Balance at December 31,
1997................... -- -- (8) 1,110 (200) (6,110) 4,146
Issuance of common
stock for cash........ -- -- -- -- -- -- 3,900
Issuance of preferred
stock for cash........ 801,000 12,015 -- -- -- -- 12,015
Issuance of common
stock options......... -- -- (1,015) -- -- -- --
Non-cash stock option
compensation.......... -- -- 16 -- -- -- 3,123
Payment on stock
subscription
receivable............ -- -- -- -- 200 -- 200
Net loss............... -- -- -- -- -- (7,829) (7,829)
------- ------- ------------- ----------- ----------- ------------ ------------
Balance at September 30,
1998 (unaudited)....... 801,000 $12,015 $ (1,007) $ 1,110 $ -- $ (13,939) $ 15,555
======= ======= ============= =========== =========== ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
WEBMD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- --------------------
1995 1996 1997 1997 1998
------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss.................... $ (39) $ (1,682) $ (4,349) $ (2,401) $ (7,829)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization.............. -- -- 9 3 111
Gain on disposal of
discontinued operations... -- -- (165) (165) (8,102)
Non-cash compensation
expense................... -- -- 11 -- 2,000
Non-cash interest expense.. -- -- 593 553 1,035
Changes in operating assets
and liabilities:
Inventory................. -- -- -- -- (1,956)
Other current assets...... -- -- (53) (221) (1,150)
Accounts payable and
accrued expenses......... -- -- 317 86 1,350
------ -------- -------- --------- ---------
Net cash used in operating
activities by continuing
operations................. -- -- (3,637) (2,145) (14,541)
Net cash provided by (used
in) operating activities of
discontinued operations.... 22 1,627 (249) (1,556) 166
------ -------- -------- --------- ---------
Net cash used in operating
activities................. (17) (55) (3,886) (3,701) (14,375)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property and
equipment.................. -- -- (76) (12) (2,214)
Purchases of property and
equipment for discontinued
operations................. (387) (2,325) (1,713) (1,243) (1,102)
Payment of dissenters'
claim...................... -- -- -- -- (2,653)
Proceeds received on note
receivable................. -- -- -- -- 56
Proceeds from sale of
discontinued operations.... -- -- 200 200 16,292
------ -------- -------- --------- ---------
Net cash provided by (used
in) investing activities... (387) (2,325) (1,589) (1,055) 10,379
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from sale of
common stock............... -- -- 5,751 3,675 5,023
Net proceeds from sale of
preferred stock............ -- -- -- -- 12,015
Proceeds from issuance of
notes payable and other
debt....................... -- -- 2,890 2,890 2,000
Proceeds from issuance of
common stock warrants
associated with notes
payable.................... -- -- 1,110 1,110 --
Amounts received on stock
subscriptions.............. -- -- 57 57 200
Payments on notes payable... -- -- -- -- (6,000)
Deferred financing costs.... -- -- (124) (15) --
------ -------- -------- --------- ---------
Net cash provided by
financing activities of
continuing operations...... -- -- 9,684 7,717 13,238
Net cash provided by (used
in) financing activities of
discontinued operations.... 404 2,380 (1,513) (1,202) (201)
------ -------- -------- --------- ---------
Net cash provided by
financing activities....... 404 2,380 8,171 6,515 13,037
------ -------- -------- --------- ---------
Net increase in cash and
cash equivalents........... -- -- 2,696 1,759 9,041
Cash and cash equivalents at
beginning of period........ -- -- -- -- 2,696
------ -------- -------- --------- ---------
Cash and cash equivalents at
end of period.............. $ -- $ -- $ 2,696 $ 1,759 $ 11,737
====== ======== ======== ========= =========
</TABLE>
See accompanying notes.
F-7
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Endeavor Technologies, Inc., a Georgia corporation, was formed on October
17, 1996 and was renamed WebMD, Inc. (the "Company") in August 1998. The
Company will provide a branded, integrated, Web-based solution for the
administrative, communications and information needs of healthcare
professionals and for the healthcare information needs of consumers. The
Company has two wholly-owned subsidiaries: Quality Diagnostic Services, Inc.
("QDS") and Telemedics, Inc. ("Telemedics"). QDS provides arrhythmia
monitoring services. Telemedics distributes arrhythmia monitoring devices.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. On March 26, 1997, the Company acquired
QDS. The assets and liabilities of QDS were acquired in a transaction
accounted for as a reverse acquisition/recapitalization and are recorded at
historical cost. Additionally, the results of operations of the combined
companies are reflected as if the above transaction took place at January 1,
1995. All significant intercompany accounts and transactions have been
eliminated in consolidation. Consequently, for comparative purposes, the
combined financial statements have been presented as if the Company and its
subsidiaries were a single entity for the period.
Effective July 1, 1997, the Company sold all of the outstanding stock of
UltraScan, Inc. ("UltraScan") for $400. Subsequent to December 31, 1997, the
Company entered into negotiations to sell substantially all of the assets of
its subsidiaries, QDS and Telemedics (see Note 2 and 13). The consolidated
financial statements reflect the results of UltraScan, QDS, and Telemedics as
discontinued operations. See Note 2 for further discussion.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of cash and cash
equivalents. The Company maintains cash and cash equivalents with three
separate financial institutions located in Georgia. At December 31, 1997,
substantially all of the Company's cash and cash equivalents are invested in
short-term money market accounts, which bear minimal risk, and are available
on demand.
The carrying amount reported in the balance sheet for cash and cash
equivalents and accounts payable approximate their fair values due to the
short-term nature of these financial instruments. The carrying amount reported
in the balance sheet for long-term debt approximates its fair value based on
discounted cash flows.
F-8
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets, generally five to seven years.
Product Development Costs
Product development costs which consist primarily of license fees for
content acquisition, web site development services, and the allocation of
overhead costs are expensed as incurred.
Advertising Costs
Advertising costs are charged to expense in the period the costs are
incurred. Advertising expense for the year ended December 31, 1997 was $164.
Income Taxes
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes."
Revenue Recognition
The Company recognizes revenue when services are provided. Advance billings
and collections relating to future access services are recorded as deferred
revenue and recognized as revenue when earned.
Unaudited Financial Statements
According to management, the accompanying unaudited financial statements as
of September 30, 1998 and for the nine months ended September 30, 1997 and
1998 have been prepared on substantially the same basis as the audited
financial statements and include all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
financial information set forth therein.
Unaudited Pro Forma Information
If the offering contemplated by this prospectus is consummated, all classes
of the Preferred Stock and Common Stock outstanding as of the closing date
will be converted into shares of undesignated common stock. The pro forma
stockholders' equity as of September 30, 1998 reflects conversion into
10,207,805 shares of common stock.
Stock Split
On October 2, 1997, the Company effected a one-for-two reverse stock split.
The share and per share amounts in the financial statements have been
retroactively adjusted for the reverse stock split.
Net Loss Per Share
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
128, "Earnings per Share", and in February 1998, the Securities and Exchange
Commission issued Staff Accounting Bulletin ("SAB") No. 98 related to SFAS
128. SFAS 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings
per share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is similar to
the previously reported fully diluted earnings per share. The Company's common
stock equivalents were antidilutive and therefore were not included in the
computation of weighted average shares used in computing diluted loss per
share.
F-9
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Options and warrants to purchase 3,257,490 shares of common stock with a
weighted average exercise price of $1.66 per share were outstanding in 1997,
but were not included in the computation of diluted loss per share because the
Company reported a loss and, therefore, the effect would be anti-dilutive.
Pro forma weighted average shares outstanding include the weighted average
conversion of 801,000 shares of Preferred Stock.
Stock Based Compensation
SFAS No. 123, "Accounting for Stock Based Compensation" sets forth
accounting and reporting standards for stock-based employee compensation
plans. As permitted by SFAS 123, the Company continues to account for stock
option grants in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations
(collectively "APB 25"). Under APB 25, no compensation expense is recognized
for stock options granted to employees at fair market value. Accordingly, as
all employee options were granted at their fair market value, the adoption of
SFAS 123 has not affected the Company's results of operations or financial
position relating to grants to employees. Certain stock, stock options and
warrants were granted with exercise prices below the then fair market value or
at fair market value to third parties. In connection with these issuances, the
Company recognized $1,371 and $11 in compensation expense during 1996 and
1997, respectively.
Recently Issued Accounting Standards
The Company adopted SFAS No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of," as of December 31,
1997. The Statement requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the asset's carrying amount. There was no effect on the consolidated
financial statements as a result of the adoption of this Statement.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 is effective for financial
statement periods beginning after December 31, 1997. SFAS 131 establishes
standards for disclosures about operating segments, products and services,
geographic areas and major customers. Management believes that the adoption of
SFAS 131 will not have a material effect on the Company's financial
statements.
2. DISCONTINUED OPERATIONS
Effective July 1, 1997, the Company sold all of the outstanding shares of
common stock of Ultrascan to its former President. The sale resulted in a net
gain of approximately $165. The operations of this subsidiary are included in
the statements of operations as a loss from discontinued operations. Revenue
and net losses from Ultrascan for the year ended December 31, 1996 and the six
month period ended June 30, 1997, were approximately $13 and $189 and $37 and
$417, respectively. As of December 31, 1997, a note receivable of $206 is due
from the purchaser related to this sale.
Subsequent to year end but prior to the issuance of the financial
statements, the Company entered into negotiations to sell substantially all of
the assets of QDS and Telemedics. The Company does not expect the sale to
result in a loss. The operations of these subsidiaries are included in the
statements of operations as a loss from discontinued operations. Net patient
service revenue from QDS for the years ended December 31, 1995, 1996 and 1997
were approximately $659, $3,257 and $7,091, respectively. Product sales from
Telemedics for the year ended December 31, 1997 (the first year of operations)
were approximately $283. Net losses for QDS and Telemedics combined for the
years ended December 31, 1995, 1996 and 1997 were $39, $1,645 and $778,
respectively.
F-10
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS (CONTINUED)
QDS revenues from arrhythmia monitoring services are recognized as the
services are performed over the contract term. Telemedics product sales
revenue from the sale of arrhythmia monitoring devices are recognized upon
shipment. QDS and Telemedics revenue is earned throughout the United States,
and QDS extends credit to certain customers who are insured under third-party
payor agreements. Net patient service revenue for QDS is reported at the
estimated net realizable amounts from third-party payors and others for
services rendered.
Contractual allowances have been reflected as a reduction in gross charges
to arrive at net patient service revenue. An allowance for doubtful accounts
is established for revenue estimated to be uncollectible and is adjusted
periodically based upon management's evaluation of current economic
conditions, historical collection experience and other relevant factors that,
in the opinion of management, require recognition in estimating such
allowance.
The Company's payor mix for its QDS subsidiary includes commercial payors
representing 59% and 60% of accounts receivable as of December 31, 1996 and
1997, respectively. Amounts due from the Medicare and Medicaid programs are
30% and 24% of accounts receivable as of December 31, 1996 and 1997,
respectively. Due to the dependence upon revenues from the Medicare and
Medicaid programs, there are significant risks associated with any proposed
changes in federal and state regulations under these programs.
QDS obtained greater than 90% of all medical equipment from one vendor
located in Israel through an exclusive buying contract.
Balance sheet information for QDS, Telemedics and Ultrascan is provided as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1996 1997 1998
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash.......................................... $ 141 $ 192 $--
Other current assets.......................... 918 1,919 --
Property and equipment, net................... 2,428 3,280 --
Intangibles, net.............................. 10 653 --
------ ------ ----
Total assets................................... $3,497 $6,044 $--
====== ====== ====
LIABILITIES
Accounts payable, accrued expenses and other.. $2,738 $1,762 $--
Amounts due to related parties, net of current
portion...................................... 201 -- --
------ ------ ----
Total liabilities.............................. $2,939 $1,762 $--
====== ====== ====
</TABLE>
F-11
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS (CONTINUED)
Supplemental cash flow information from the operations of QDS, Telemedics
and Ultrascan is provided as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER ENDED
31, SEPTEMBER 30,
----------------------- --------------
1995 1996 1997 1997 1998
----- ------- ------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................. $ (39) $(1,682) $(1,195) $ (718) $(383)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization...... 120 326 777 359 529
Loss on write-off of property and
equipment......................... -- -- 235 -- 97
Non-cash compensation expense...... -- 1,371 -- -- 224
Changes in operating assets and
liabilities:
Accounts receivable, net.......... (154) (693) (1,155) (624) (507)
Other current assets.............. 2 (35) 11 32 4
Accounts payable and accrued
expenses......................... 14 733 (280) (693) 15
Deferred contract revenue......... 42 64 216 88 187
----- ------- ------- ------- -----
Net cash (used in) provided by
operating activities................ $ (15) $ 84 $(1,391) $(1,556) $ 166
===== ======= ======= ======= =====
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of common
stock............................... $ 38 $ 900 $ -- $ -- $ --
Proceeds from amounts due to related
parties............................. 547 1,302 500 500 --
Payments on amounts due to related
parties............................. (146) (1,505) (262) (262) (201)
Proceeds from issuance of notes
payable and other debt.............. 42 1,879 206 206 --
Payments on notes payable and other
debt................................ (77) (196) (1,957) (1,646) --
----- ------- ------- ------- -----
Net cash provided by (used in)
financing activities................ $ 404 $ 2,380 $(1,513) $(1,202) $(201)
===== ======= ======= ======= =====
</TABLE>
F-12
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS (CONTINUED)
The net increases in cash balances associated with the discontinued
operations were $2, $139, and $53 during the years ended December 31, 1995,
1996 and 1997 and have been reflected in cash flows from operating activities
of discontinued operations.
In connection with the acquisition of QDS by the Company, certain
shareholders of QDS asserted their rights granted under Georgia law to dissent
with regard to such action and to demand payment for the fair value of their
shares in exchange for the surrender of such shares. In accordance with
Georgia law, the Company offered to pay the former shareholders approximately
$400 for their interest in QDS. The former shareholders rejected that offer.
On August 1, 1997, in accordance with statutory provisions relating to the
valuation process, QDS filed a complaint against the dissenting shareholders
for the judicial appraisal of their shares. In July 1998, the Company paid the
former shareholders of QDS, approximately $2,700 in settlement of the
dissenters' rights action.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Computer equipment and
purchased software..... $ -- $ 23
Furniture and fixtures.. -- 53
Property and equipment
from discontinued oper-
ations................. 2,901 4,263
------ ------
2,901 4,339
Less accumulated depre-
ciation................ -- (3)
Less accumulated depre-
ciation from discontin-
ued operations......... (473) (983)
------ ------
Property and equipment,
net.................... $2,428 $3,353
====== ======
</TABLE>
4. COMMITMENTS
Operating Lease Commitments
The Company leases its facilities and certain office equipment under
operating lease agreements expiring through 2001. Lease expense was
approximately $204 for the years ended December 31, 1997. At December 31,
1997, future minimum lease commitments under operating leases, a significant
portion of which are with a shareholder, are $669, $729 and $61 for 1998, 1999
and 2000, respectively.
Additionally, certain UltraScan equipment leases with total lease
commitments of $848 as of December 31, 1997, are under guarantee by the
Company. These leases expire through 2002. In April 1998, a primary vendor of
QDS and Telemedics, took occupancy of space previously occupied by the Company
under a sublease agreement for which the Company is a guarantor. Total lease
commitments as of December 31, 1997 are $428 and the lease expires in 2001.
F-13
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LONG-TERM DEBT
A summary of long-term debt at December 31, 1996 relating to QDS and 1997
relating to the Company, follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Note payable to Sirrom Capital Corporation ("Sirrom")
interest payable monthly at 13.5%, principal due on August
1, 2002, secured by substantially all of the Company's
assets, guarantee of subsidiaries and the pledge of
3,000,000 shares of an officer and shareholder............ $ -- $ 4,000
Note payable to bank, interest payable monthly at prime plus
1% (9.25% at December 31, 1996), principal payable monthly
of $18, secured by accounts receivable, property and
equipment and guarantee of an officer and shareholder..... 1,040 --
Note payable to bank, interest payable monthly at prime plus
1% (9.25% at December 31, 1996), principal payable monthly
of $8, secured by accounts receivable, property and
equipment and guarantee of an officer and shareholder..... 158 --
Note payable to bank, interest payable monthly at prime plus
1% (9.25% at December 31, 1996), principal payable monthly
of $12, secured by accounts receivable, property and
equipment and guarantee of an officer and shareholder..... 501 --
Line of credit, interest payable monthly at prime plus 1%
(9.25% at December 31, 1996), secured by accounts
receivable and equipment and guarantee of an officer and
shareholder............................................... 52 --
------- -------
1,751 4,000
Less current portion........................................ (1,751) --
Less unamortized discount on debt........................... -- (1,035)
------- -------
$ -- $ 2,965
======= =======
</TABLE>
Finance costs related to the Sirrom debt instrument totaling $124 were
capitalized and are being amortized over five years.
6. DUE TO RELATED PARTIES
In August 1996, QDS received a $200 loan from a shareholder for working
capital needs. The indebtedness bears no interest and is payable on demand. As
of December 31, 1997, no payments had been made on this obligation. In
February 1998, the Company converted the indebtedness into 100,000 shares of
Series D common stock.
In October 1995, QDS received $170 from and executed a promissory note with
a former shareholder. Principal and interest are payable monthly at 8.75%
through January 1998. The indebtedness is secured by Atlanta Cardiology Group,
P.C., a former shareholder. Principal outstanding as of December 31, 1996 and
1997 was approximately $62 and $1, respectively.
7. STRATEGIC ALLIANCES
During the fourth quarter of 1997, the Company entered into a strategic
alliance with a subsidiary of Premiere Technologies, Inc., a shareholder of
the Company ("Premiere"), to promote, sell and provide joint communication
services to customers through integration of the Company's and Premiere's
services. Product development costs incurred during 1997 associated with this
alliance were $350. The Company has committed
F-14
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. STRATEGIC ALLIANCES (CONTINUED)
to spend an additional $100 for continued technical development and $750 for
promotion associated with this alliance during 1998. The agreement also
contains minimum commitment payments which begin at $10 per month and increase
by $10 per month to $80 in the eighth month and thereafter.
During the fourth quarter of 1997, the Company entered into a strategic
alliance with HealthGate Data Corporation, Inc., ("HealthGate") for HealthGate
to develop, design and host two web sites on behalf of the Company. HealthGate
will provide private label access to medical related links, technical support,
and statistical information on usage and will create search engine databases.
HealthGate is responsible for royalty fees paid to content providers. Product
development costs incurred during 1997 associated with this alliance were
approximately $188. The Company is committed to pay approximately $188
associated with this alliance during 1998.
8. RETIREMENT PLAN
The Company has a defined contribution 401(k) plan. The plan is for the
benefit of generally all employees 21 years of age or older with at least six
months of employment and permits voluntary employee contributions and Company
profit sharing contributions. The Company has not made any such contributions
to the plan through December 31, 1997.
9. RELATED PARTY TRANSACTIONS
In August 1997, the Company received loans of $100 each from two
shareholders of the Company. Each unsecured loan was evidenced by a promissory
note payable and paid in full during 1997. In conjunction with these loans,
the Company granted each of the two shareholders the option to purchase 10,000
shares of Series D Common Stock of the Company at an exercise price of $2.00
per share. In connection with these options, the Company recorded their fair
value, as determined by the minimum value method, as additional interest
expense.
The Company has entered into an office sublease and an equipment lease with
a shareholder of the Company, which expire on February 1, 2000. Total monthly
lease commitments under these leases are $61.
10. SHAREHOLDERS' EQUITY
Common Stock
As discussed in Note 1, the merger between the Company and QDS has been
accounted for as a reverse acquisition/recapitalization and, as a result, for
comparative purposes, the financial statements, including equity transactions
have been presented as if the Company and QDS were a single entity for all
periods presented. Shares were issued to founders of Endeavor in exchange for
nominal consideration.
The Company has authorized and issued shares of Series A, B, C, D and E
common stock. The rights of the series are identical except that (i) Series B,
C, D and E shares of common stock are non-voting and (ii) Series B, C and E
common stock have a liquidation preference of $0.29, $1.00 and $1.00 per
share, respectively. Upon a liquidation of the Company, if the assets of the
Company are insufficient to permit full payment of the liquidation preference,
then the assets of the Company available for such distribution shall be
distributed pro rata based on the relative liquidation preferences.
Upon the effective date of a public offering of the Company's common stock,
the Series A, B, C, D and E common stock will be automatically converted into
one series of voting common stock.
F-15
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
Stock Warrant
On August 29, 1997, the Company borrowed $4,000 from Sirrom. In connection
with the loan, Sirrom received a warrant to purchase 557,490 shares of the
Company's Series D common stock for $0.01 per share. Under the warrant, if any
portion of the indebtedness is outstanding on the second anniversary date of
the agreement, the number of shares under the warrant is increased by an
additional 118,615 shares of the Company's Series D common stock. If any
portion of the indebtedness is outstanding on the third anniversary date of
the agreement, the number of shares under the warrant is increased by another
121,165 shares of the Company's Series D common stock. If any portion of the
indebtedness is outstanding on the fourth anniversary date of the agreement,
the number of shares under the warrant is increased by another 123,800 shares
of the Company's Series D common stock. None of these additional warrants have
been issued; therefore, they are not considered outstanding. Of the $4,000 in
borrowings, $1,110 was allocated to the value of the warrant and recorded as a
separate component of equity such amount will be adjusted in the future based
on its fair value as discussed below. The warrant expires on August 1, 2002.
In connection with the warrant, $75 was amortized to interest expense during
1997.
In addition, for a period of thirty days after the expiration date, Sirrom
may require the Company to purchase all, but not less than all, of the common
shares underlying the warrant. The put price is calculated as the fair market
value of the shares of common stock issuable to Sirrom upon exercise of the
warrant and totaled $1,110 at December 31, 1997.
Stock Option Plan
Effective January 1, 1997, the Board of Directors and shareholders of the
Company adopted the 1997 Stock Incentive Plan (the "1997 Plan"), which
provides for issuance of stock options and restricted stock awards to
employees, consultants and directors. Options may be granted under the 1997
Plan with an exercise price not less than the fair value of the Company's
common stock on the date of the grant, as determined by the Board of Directors
or a committee of the Board in the absence of a readily available market for
the Company's stock. Options become exercisable and expire as determined by
the Board of Directors or a committee of the Board (generally over 2 to 7
years).
Pro forma information regarding net income and loss per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a minimum
value pricing model with the following weighted average assumptions for 1997:
risk-free interest rates of 6.19%; no dividend yield; and an expected life of
an option of four years.
Option valuation models used under SFAS 123 were developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require input
of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the
options granted to employees are amortized to expense over the vesting period.
The weighted average fair value per option granted in 1997 was $0.44. The
Company's pro forma net loss and net loss per share would have been $(4,514)
and $(0.54), respectively, for the year ended December 31, 1997.
F-16
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
Stock Option Plan (continued)
The following stock options were outstanding under the 1997 Plan for the
year ended December 31, 1997:
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE PER
OF OPTIONS SHARE
---------- ------------------
<S> <C> <C>
Outstanding at January 1, 1997................. -- --
Granted........................................ 1,590,000 $2.00
---------
Balance at December 31, 1997................... 1,590,000 $2.00
=========
Exercisable at December 31, 1997............... 247,334 $2.00
=========
</TABLE>
As discussed above, the Company granted a warrant to purchase 557,490 shares
of the Company's Series D common stock for $0.01 per share to Sirrom. The fair
value of the warrant has been recorded in equity and is amortized to interest
over the life of the debt. The Company granted a warrant to purchase 1,000,000
shares of the Company's Series E common stock for $2.00 per share to Premiere.
The warrant was issued in connection with a sale of the Company's Series E
common stock and the fair value of the warrant has been recorded as issuance
cost. The two warrants described above have not been included in the table
below.
The Company also granted options and warrants to certain outside directors,
consultants and certain third parties. These options and warrants are not
covered under the incentive and nonqualified stock option plan and are
included in the table below:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS AND EXERCISE PRICE
WARRANTS PER SHARE
----------- --------------
<S> <C> <C>
Outstanding at January 1, 1997.................... -- --
Granted........................................... 110,000 $2.00
-------
Balance at December 31, 1997...................... 110,000 $2.00
=======
Exercisable at December 31, 1997.................. 80,000 $2.00
=======
</TABLE>
Certain options and warrants were issued with exercise prices below the then
fair market value or were issued at fair market value to third parties. In
connection with these issuances, the Company recognized $11 in compensation
expense during 1997. Certain sales representatives of the Company entered into
stock option agreements that do not fix the number of shares until certain
sales goals are met. Because the exercise price of these options is fixed but
the number of shares is variable, this is a variable stock option plan and,
the Company may have to record compensation expense relating to these options
to the extent the fair market value of the underlying stock is in excess of
the exercise price at the time when the number of shares is determined.
F-17
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
----- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................... $ 610 $ 1,966
Allowance for bad debts................................... 161 456
Valuation allowance....................................... (660) (2,116)
----- -------
111 306
Deferred tax liability:
Depreciation.............................................. 111 306
----- -------
$ -- $ --
===== =======
</TABLE>
At December 31, 1997 the Company has total net operating loss carryforwards
for federal and state income tax purposes of approximately $5,121 that expire
in years 2010 through 2012.
Utilization of the Company's net operating loss carryforwards may be subject
to an annual limitation due to the "change of ownership" provisions of the
Internal Revenue Code and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before
utilization. For financial reporting purposes, a valuation allowance has been
recognized to reduce the net deferred tax assets to zero due to uncertainties
with respect to the Company's ability to generate taxable income in the future
sufficient to realize the benefit of deferred income tax assets.
A reconciliation of the provision for income taxes to the federal statutory
rate is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ----- -------
<S> <C> <C> <C>
Tax at statutory rate................................. $(13) $(572) $(1,479)
State taxes, net of federal benefit................... (2) (67) (174)
Permanent differences................................. 2 8 197
Valuation allowance................................... 13 631 1,456
---- ----- -------
$-- $ -- $ --
==== ===== =======
</TABLE>
12. SUBSEQUENT EVENTS--UNAUDITED
Sale of Common Stock
On April 29, 1998, Premiere Technologies, Inc. exercised its option to
purchase 1,000,000 shares of Series E Common Stock at $2.00 per share.
Change in capitalization
On August 3, 1998, the shareholders of the Company voted to change the
designation of its Common Stock Series A to Common Stock and increase the
number of authorized shares of Common Stock to 75,000,000 shares. The
shareholders of the Company also voted to increase the number of authorized
shares of Common Stock Series D to 15,000,000 shares and authorized 10,000,000
shares of Preferred Stock.
F-18
<PAGE>
WEBMD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUBSEQUENT EVENTS -- UNAUDITED (CONTINUED)
Sales of Preferred Stock
In August 1998, the Company sold 667,000 shares of its Series A Preferred
Stock to HBO & Company at $15.00 per share. In connection with this sale, the
Company also issued HBO & Company warrants to purchase 300,000 shares of the
Company's Series A Preferred Stock at $18.00 per share.
In September 1998, the Company sold 134,000 shares of its Series A Preferred
Stock to Matria Healthcare, Inc. at $15.00 per share. In connection with this
sale, the Company also issued Matria Healthcare, Inc. warrants to purchase
60,000 shares of the Company's Series A Preferred Stock at $18.00 per share.
In January 1999, the Company sold 860,000 and 828,750 shares of its Series B
and Series C Preferred Stock, respectively, to 20 investors at $20.00 per
share.
Sale of QDS and Telemedics
Effective July 1, 1998, the Company completed the sale of substantially all
of the assets of QDS and Telemedics.
Note Payable
On July 8, 1998, the Company borrowed an additional $2,000 from Sirrom.
Interest is payable monthly at 13.5% and principal is due in its entirety on
August 1, 2002. On July 22, 1998, the Company repaid all outstanding
borrowings from Sirrom. In connection with the retirement of these borrowings,
the Company recognized an extraordinary loss of $930.
Product Launch
During the fourth quarter of 1998, the Company began offering Internet
services and recording revenues.
Recent Acquisitions
In January 1999, the Company acquired the outstanding stock of Sapient
Health Network, Inc and Direct Medical Knowledge, Inc. The consideration was
approximately 2.4 million shares of the Company's Series B Preferred Stock.
These acquisitions will be accounted for as purchases and the Company expects
to record goodwill of approximately $45,900.
Equity Issued for Services
In January 1999, the Company issued a warrant to purchase 750,000 shares of
its Series D Common Stock with an exercise price of $20.00, in exchange for
financial advisory services to be provided over a two year period. The
services agreement provides for a monetary penalty of up to $3.4 million and
the potential loss of the ability to exercise a portion of the warrants if the
financial advisor does not perform under its agreement with the Company. In
connection with this agreement, the Company will amortize the value of the
warrants issued over the life of the agreement.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Direct Medical Knowledge, Inc.:
We have audited the accompanying balance sheet of Direct Medical Knowledge,
Inc. a development stage company (the Company) as of December 31, 1997, and
the related statements of operations, changes in shareholders' equity, and
cash flows for the year then ended and for the period from May 24, 1995 (date
of incorporation) to December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of the Company for the period from May 24, 1995 (date of
incorporation) to December 31, 1996 were audited by other auditors, whose
reports expressed an unqualified opinion on those statements. Our opinion, in
so far as it relates to the amounts included for the period from May 24, 1995
(date of incorporation) to December 31, 1996, is based solely on the reports
of the other auditors.
We conducted our audit 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 audit and the report of the other
auditors provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
financial statements referred to above, after the restatement described in
Note 9, present fairly, in all material respects, the financial position of
Direct Medical Knowledge, Inc., a development stage company, as of December
31, 1997, and the results of its operations and its cash flows for the year
then ended and for the period from May 24, 1995 (date of incorporation) to
December 31, 1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained recurring losses and negative
cash flows from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 6, 1998, except for Notes 8 and 9, for which the date is January 18,
1999
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Direct Medical Knowledge, Inc.
We have audited the accompanying balance sheet of Direct Medical Knowledge,
Inc. (the Company) as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the management of Direct
Medical Knowledge, Inc. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Direct Medical Knowledge,
Inc., at December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
As discussed in Note 9, the Company previously recorded net deferred tax
assets due to net operating loss carryforwards from 1996 and 1995. The Company
has restated these financial statements to record a retroactive valuation
allowance against its net deferred tax assets.
/s/ Berg & Company
San Francisco, California
February 7, 1997, except for Notes 8 and 9 as to which the date is January 16,
1999
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Direct Medical Knowledge, Inc.
We have audited the accompanying balance sheet of Direct Medical Knowledge,
Inc., a development stage company (the Company) as of December 31, 1995, and
the related statements of operations, stockholders' equity, and cash flows for
the period from May 24, 1995 (date of incorporation) to December 31, 1995.
These financial statements are the responsibility of the management of Direct
Medical Knowledge, Inc. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Direct Medical Knowledge,
Inc., at December 31, 1995, and the results of its operations and its cash
flows for the period from May 24, 1995 (date of incorporation) to December 31,
1995 in conformity with generally accepted accounting principles.
/s/ Berg & Company
San Francisco, California
January 16, 1999
F-22
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 1,082 $ 100
Accounts receivable, trade.................................. 6 --
Accounts receivable, shareholder............................ 69 --
Prepaid expenses............................................ 9 7
------- ------
Total current assets..................................... 1,166 107
Property and equipment, net................................... 709 470
Intangibles, net.............................................. 14 19
Content license fees, net..................................... 67 47
Other assets, net............................................. 26 18
------- ------
Total assets........................................... $ 1,982 $ 661
======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 243 $ 162
Accrued expenses............................................ 13 $ 3
Deferred revenue............................................ 30 125
Accrued dividends........................................... -- 54
------- ------
Total current liabilities................................ 286 344
------- ------
Commitments (Note 5)
Shareholders' equity:
Common stock, no par value; authorized 5,000,000 shares;
1,048,667 and 1,025,000 shares issued and outstanding at
December 31, 1997 and 1996, respectively.................. 5 --
Note receivable from shareholder............................ (250) --
Convertible preferred stock, no par value; authorized
2,600,000 shares; 2,536,071 and 975,000 shares issued and
outstanding; liquidation preference of $4,073 and $1,029
at December 31, 1997 and 1996, respectively............... 4,098 1,000
Deficit accumulated during the development stage............ (2,157) (683)
------- ------
Total shareholders' equity............................... 1,696 317
------- ------
Total liabilities and shareholders' equity............. $ 1,982 $ 661
======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 24, 1995 MAY 24, 1995
YEAR ENDED YEAR ENDED (DATE OF (DATE OF
DECEMBER 31, DECEMBER 31, INCORPORATION) TO INCORPORATION) TO
1997 1996 DECEMBER 31, 1995 DECEMBER 31, 1997
------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues, including
shareholder revenues
of $424 in 1997, $0 in
1996 and 1995, and
$424 from inception to
December 31, 1997..... $ 592 $ 350 $ -- $ 942
------- ----- ----- -------
Operating expenses:
Cost of revenues...... 48 24 -- 72
Product development
costs............... 762 340 38 1,140
General and
administrative...... 699 311 100 1,110
Depreciation and
amortization........ 337 78 2 417
Sales and marketing... 221 72 23 316
------- ----- ----- -------
Total operating
expenses.............. 2,067 825 163 3,055
------- ----- ----- -------
Operating loss.......... (1,475) (475) (163) (2,113)
Interest and other
income (expense),
net................... 46 12 (1) 57
------- ----- ----- -------
Net loss from continuing
operations before
income taxes.......... (1,429) (463) (164) (2,056)
Income tax expense...... (1) (1) (1) (3)
------- ----- ----- -------
Net loss before
preferred stock
dividend.............. $(1,430) $(464) $(165) $(2,059)
======= ===== ===== =======
Preferred stock
dividend.............. (44) (54) -- (98)
------- ----- ----- -------
Net loss attributable to
common stock.......... $(1,474) $(518) $(165) $(2,157)
======= ===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 24, 1995 (DATE OF INCORPORATION) TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK DEFICIT
---------------------------------- ACCUMULATED
COMMON STOCK RECEIVABLE DURING THE TOTAL
---------------- SERIES A SERIES B FROM DEVELOPMENT SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHAREHOLDER STAGE EQUITY
--------- ------ --------- ------ --------- ------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, May 24, 1995
(date of
incorporation)......... -- -- -- -- -- -- -- -- --
Issuance of common
stock for cash
$0.00001 per share in
October 1995.......... 1,000,000 -- --
Issuance of Series A
convertible preferred
stock for cash at
$1.00 per share in
December 1995......... 300,000 $ 300 $ 300
Net loss for the
period................ $ (165) (165)
--------- --- --------- ------ --------- ------ ----- ------- -------
Balance, December 31,
1995................... 1,000,000 -- 300,000 300 -- -- -- (165) 135
Conversion of Series A
convertible preferred
stock into common
stock in January
1996.................. 25,000 -- (25,000) -- --
Issuance of Series A
convertible preferred
stock for cash at
$1.00 per share in May
1996.................. 200,000 200 200
Issuance of Series A
convertible preferred
stock for cash at
$1.00 per share July
1996.................. 500,000 500 500
Declaration of Series A
convertible preferred
stock dividends in
December 1996......... (54) (54)
Net loss for the year.. (464) (464)
--------- --- --------- ------ --------- ------ ----- ------- -------
Balance, December 31,
1996................... 1,025,000 -- 975,000 1,000 -- -- -- (683) 317
Issuance of common
stock through exercise
of stock options
$0.205 per share...... 23,667 $ 5 5
Declaration of Series A
convertible preferred
stock dividends in
July 1997............. (44) (44)
Issuance of Series A
convertible preferred
stock in lieu of
dividends payable in
July 1997............. 97,658 98 98
Issuance of Series B
convertible preferred
stock for cash and
note receivable at
$2.05 per share in
July 1997............. 1,463,413 $3,000 $(750) 2,250
Payment on shareholder
note receivable....... 500 500
Net loss for the year.. (1,430) (1,430)
--------- --- --------- ------ --------- ------ ----- ------- -------
Balance, December 31,
1997................... 1,048,667 $ 5 1,072,658 $1,098 1,463,413 $3,000 $(250) $(2,157) $ 1,696
========= === ========= ====== ========= ====== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 24, 1995 MAY 24, 1995
(DATE OF (DATE OF
INCORPORATION) INCORPORATION)
YEAR ENDED YEAR ENDED TO TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1997
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $(1,430) $(464) $(165) $(2,059)
------- ----- ----- -------
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization of
property and
equipment........... 228 64 2 294
Amortization of
copyright fees...... 104 9 -- 113
Amortization of
organization
costs............... 5 5 -- 10
Changes in operating
assets and
liabilities:
Increase in accounts
receivable,
trade.............. (6) -- -- (6)
Increase in accounts
receivable,
shareholder........ (69) -- -- (69)
Increase in prepaid
expenses........... (1) (4) (4) (9)
Increase in other
assets............. (8) (15) (27) (50)
Increase in accounts
payable and
accrued expenses... 90 135 31 256
(Decrease) Increase
in deferred
revenue............ (95) 125 -- 30
------- ----- ----- -------
Total adjustments.. 248 319 2 569
------- ----- ----- -------
Net cash used in
operating
activities....... (1,182) (145) (163) (1,490)
------- ----- ----- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment........ (468) (502) (33) (1,003)
Purchase of content
licenses............. (123) (57) -- (180)
------- ----- ----- -------
Net cash used in
investing
activities....... (591) (559) (33) (1,183)
------- ----- ----- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of stock............. 2,255 700 300 3,255
Advances from
shareholder.......... 250 -- 44 294
Repayment of
shareholder
advances............. (250) (39) (5) (294)
Payments on shareholder
note receivable...... 500 -- -- 500
------- ----- ----- -------
Net cash provided
by financing
activities....... 2,755 661 339 3,755
------- ----- ----- -------
Net increase in
cash............ 982 (43) 143 1,082
Cash and cash
equivalents, beginning
of period............. 100 143 -- --
------- ----- ----- -------
Cash and cash
equivalents, end of
period................ $ 1,082 $ 100 $ 143 $ 1,082
======= ===== ===== =======
SUPPLEMENTAL CASH FLOW
INFORMATION AND
NONCASH ACTIVITIES:
Declaration of
dividends payable.... $ 44 $ 54 $ -- $ 98
======= ===== ===== =======
Issuance of convertible
preferred stock to
extinguish dividends
payable.............. $ 98 $ -- $ -- $ 98
======= ===== ===== =======
Issuance of convertible
preferred stock for
note receivable...... $ 750 $ -- $ -- $ 750
======= ===== ===== =======
Interest paid.......... $ 1 $ 1 $ 1 $ 3
======= ===== ===== =======
Income taxes paid...... $ 1 $ 1 $ 1 $ 3
======= ===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. COMPANY BACKGROUND:
Description of business:
Direct Medical Knowledge, Inc. ("the Company") was incorporated on May 24,
1995 to provide individualized, customized medical and health information to
individuals through contracts with major health providers. The Company uses
web technology, electronic retrieval, and on-line support groups to deliver
health information over the internet. Since its incorporation, the Company has
focused on developing its products and marketing strategy and recruiting human
resources. It has not generated a significant amount of revenue and,
accordingly, is a development stage company.
Basis of presentation:
The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has sustained recurring
losses and negative cash flows from operations. The Company's continued
existence is dependent upon its ability to increase operating revenues and/or
raise additional equity financing. Management is currently in the process of
negotiating additional equity financing with potential investors. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Business Risks and Credit Concentrations:
The Company operates in the internet content industry segment which is new,
rapidly evolving and highly competitive. The Company relies on third party
suppliers of health information content. There can be no assurance that the
Company will be able to complete product development and secure content
sufficient to support its operations.
The Company performs ongoing credit evaluations of its customers' financial
condition. It generally requires no collateral and maintains reserves for
potential credit losses on customer accounts, when necessary. Management
estimates that no such reserves are warranted at December 31, 1997 or December
31, 1996. At December 31, 1997, one shareholder comprises 91% of accounts
receivable and, with one other customer, accounted for 100% of revenue for the
year then ended.
Two customers accounted for 100% of revenue for the year ended December 31,
1996, while the shareholder and the other two customers accounted for 100% of
revenue for the period from May 24, 1995 (date of incorporation) to December
31, 1997.
Cash and Cash Equivalents:
The Company considers all highly liquid monetary instruments with an
original maturity of three months or less to be cash equivalents.
Substantially all of the Company's cash is held at one major financial
institution.
F-27
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Content License Fees:
License fees for website content are capitalized and amortized over the life
of the license. During 1997 and 1996, most license agreements covered one year
periods with the option to renew annually. Subsequent to year-end, the Company
is transitioning to three to five year agreements. Accumulated content license
fee amortization totaled $113 and $9, at December 31, 1997 and 1996
respectively.
Property and Equipment:
Property and equipment are stated at cost. Maintenance and repairs are
charged to operations as incurred. Depreciation and amortization are
determined on the straight-line method over the estimated useful lives of the
related assets, which range from three to five years. When assets are retired
or otherwise disposed of, the cost and accumulated depreciation and
amortization are removed from the accounts, and any resulting gain or loss is
reflected in operations in the period realized.
Revenue Recognition:
Revenue from report orders is recognized upon delivery of the corresponding
report. Support services, including revenue from marketing and distribution
agreements with ongoing support requirements, are recognized ratably over the
life of the contract. Revenue from website development is recognized using the
percentage-of-completion method. Amounts billed in excess of revenue earned
and advance payments are deferred and recorded as revenues when earned.
Content Development:
The Company expenses content development costs as incurred.
Income Taxes:
In accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109), Accounting for Income Taxes, deferred income taxes are recognized for
the differences between the tax basis of assets and liabilities and their
financial reporting amounts based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. A valuation allowance is recognized for deferred tax assets
when it is more likely than not that some portion or all of the deferred tax
asset will not be realized. Income tax expense is comprised of tax payable or
refundable for the current period plus the change during the period in
deferred tax assets and liabilities.
Impairment of Long-Lived Assets:
Statement of Financial Accounting Standards No. 121 (SFAS No. 121),
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of, requires that long-lived assets and certain intangible
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If undiscounted
expected future cash flows are less than the carrying value of the assets, an
impairment loss is to be recognized based on the fair value of the assets. The
Company considers the requirements of SFAS No. 121 on an ongoing basis. No
impairment losses have been recognized to date.
Recently Issued Accounting Pronouncements:
During 1997, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 97-2, Software Revenue Recognition, which
supersedes SOP 91-1. This statement is effective for fiscal years beginning
after December 15, 1997. The impact of adopting this statement has not been
determined at this time.
F-28
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Recently Issued Accounting Pronouncements (continued):
During 1997, the Financial Accounting Standards Board issued Statements No.
129, Disclosure of Information About Capital Structure, and No. 130, Reporting
Comprehensive Income. These statements establish standards for reporting and
disclosing information about an organization's capital structure and
comprehensive income. They are effective for fiscal years beginning after
December 15, 1997. The impact of adopting these statements has not been
determined at this time.
3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Computer equipment and purchased software.......... $ 162 $ 54
Website equipment and software..................... 507 462
Furniture and fixtures............................. 259 9
Leasehold improvements............................. 75 10
------ ----
1,003 535
Accumulated depreciation and amortization.......... (294) (65)
------ ----
Property and equipment, net........................ $ 709 $470
====== ====
</TABLE>
Depreciation expense amounted to $198 and $62 for the years ended December
31, 1997 and 1996, respectively, $2 for the period from May 24, 1995 (date of
incorporation) to December 31, 1995, and $262 for the period from May 24, 1995
(date of incorporation) to December 31, 1997. Amortization expense for
leasehold improvements was $30 and $1 for the years ended December 31, 1997
and 1996, respectively, $1 for the period from May 24, 1995 to December 31,
1995, and $32 for the period from May 24, 1995 (date of incorporation) to
December 31, 1997.
4. INCOME TAXES:
The provision for income taxes are summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE
ENDED PERIOD FROM
DECEMBER 31, MAY 24 TO
-------------- DECEMBER 31,
1997 1996 1995
------ ------ ------------
<S> <C> <C> <C>
Current tax expense:
Federal......................................... -- --
State........................................... $ 1 $ 1 $ 1
Deferred tax expense
Federal......................................... $ (577) (164) (40)
State........................................... $ (76) (44) (13)
Valuation allowance for deferred tax assets....... 653 208 53
------ ------ ----
$ 1 1 1
====== ====== ====
</TABLE>
F-29
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES (CONTINUED):
The primary components of the net deferred tax asset are:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Net operating loss carryforwards............................. $ 910 $ 282
Other........................................................ 4 --
----- -----
914 282
Valuation allowance.......................................... (914) (262)
----- -----
-- 20
Deferred tax liability....................................... -- (20)
----- -----
Net deferred tax asset....................................... $ -- $ --
===== =====
</TABLE>
Due to uncertainty surrounding the realization of deferred tax assets, the
Company has recorded a valuation allowance against its net deferred tax asset.
As of December 31, 1997, the Company has net operating loss carryforwards of
approximately $2,286 for federal income tax purposes. These carryforwards
expire in years 2010 through 2012. In addition, the Company has carryforwards
of approximately $2,283 as of December 31, 1997 for California franchise tax
purposes, expiring in 2003.
As a result of changes in the Company's ownership, the amount of loss
carryforwards available to offset future federal and state taxable income may
be limited by IRS Code Section 382 pursuant to the Tax Reform Act of 1986. The
amount of such limitation, if any, has not been determined.
A reconciliation of the provision for income taxes to the federal statutory
rate is as follows:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE
DECEMBER PERIOD FROM
31, MAY 24 TO
------------ DECEMBER 31,
1997 1996 1995
----- ----- ------------
<S> <C> <C> <C>
Provision computed at federal statutory rate.... $(564) $(167) $(56)
State taxes, net of federal tax benefit......... (75) (43) (13)
Change in valuation allowance................... 653 208 53
Permanent difference............................ 1 1 1
Others.......................................... (14) 2 16
----- ----- ----
Net tax provision............................... $ 1 $ 1 $ 1
===== ===== ====
</TABLE>
F-30
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. LEASE OBLIGATIONS:
The Company leases office facilities under noncancelable operating leases.
Minimum future payments under these lease agreements for the years ending
December 31 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1998............................................................. $198
1999............................................................. 198
2000............................................................. 198
2001............................................................. 198
2002............................................................. 182
----
Total minimum lease payments..................................... $974
====
</TABLE>
The Company's rental expense for office facilities was approximately $86,
$36 and $16 for the years ended December 31, 1997 and 1996 and for the period
from May 24 to December 31, 1995, respectively, and $138 for the period from
May 24, 1995 (date of incorporation) to December 31, 1997.
6. CONVERTIBLE PREFERRED STOCK:
The Company is authorized to issue up to 2,600,000 shares of no par
preferred stock in one or more series. The Company has designated 1,100,000 of
the preferred shares as Series A and 1,500,000 as Series B.
Series A and Series B preferred shareholders are entitled to receive, when
and if declared by the Board of Directors, out of funds legally available, a
preferential, noncumulative annual cash dividend of $0.08 per share and $0.16
per share, respectively. Preferred shareholders are also entitled to
participate in cash dividends paid to common shareholders in an amount per
share as would be payable on the number of whole shares of common stock into
which the preferred shares could be converted. So long as any preferred shares
are outstanding, no cash or property dividends may be declared or paid on
common stock until all preferred stock dividends have been paid or declared
and set apart. Through December 31, 1997, $98 in Series A dividends have been
declared, and 97,658 shares of Series A preferred stock have been issued in
lieu of cash dividends. Concurrent with the issuance of Series B preferred
stock, the Company's Articles of Incorporation were amended to eliminate
mandatory dividend provisions on Series A preferred stock.
Preferred shareholders are entitled to vote together with the holders of
common stock. The number of votes equals the number of whole shares of common
stock into which each holder's preferred shares could be converted. So long as
at least 100,000 shares of Series A remain outstanding, Series A shareholders
are collectively entitled to elect one director. So long as at least 100,000
shares of Series B remain outstanding, Series B shareholders are collectively
entitled to elect one director. Common shareholders are also collectively
entitled to elect one director. All shareholders are collectively entitled to
elect the remaining directors. Certain transactions which could affect the
relative rights and privileges of preferred shareholders, as defined in the
Articles of Incorporation, require majority approval by Series A shareholders
and 60% approval by Series B shareholders, respectively. Certain other
transactions require approval by not less than two-thirds of Series A
shareholders.
At the option of the shareholder, preferred shares are convertible into
common stock at any time on a one-for-one basis, subject to certain
adjustments. Series A and Series B preferred shares are automatically
converted into common stock on a one-for-one basis, subject to certain
adjustments, in the event of a public offering with
F-31
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. CONVERTIBLE PREFERRED STOCK (CONTINUED):
gross proceeds of at least $15 million and a price of at least $7 per share,
subject to certain adjustments, or upon the consent by 50% of Series A
shareholders or by 60% of Series B shareholders. Any declared and unpaid
dividends must be paid upon automatic conversion. The Company has reserved
sufficient common shares for conversion.
In the event of any liquidation, dissolution or winding up of the Company,
preferred shareholders are entitled to receive an amount equal to $1.00 per
share of Series A and $2.05 per share of Series B plus all declared and unpaid
dividends on a pari passu basis prior and in preference to any distributions
to common shareholders. After payment has been made to the preferred
shareholders, any remaining assets will be distributed ratably to all
shareholders in proportion to the amount of stock owned by each shareholder.
If the Company's assets are insufficient to provide for the full preference
amount for the preferred stock outstanding, then such assets will be
distributed ratably among preferred shareholders in proportion to the amount
of such stock owned by each shareholder.
7. STOCK OPTION PLAN:
The Company has an Stock Option Plan (the Plan) under which the Board of
Directors may grant common stock options to employees, directors and
consultants. Under the Plan, options generally vest 20% one year from the
vesting commencement with an additional 2% vesting each month thereafter. A
total of 350,000 shares of the Company's common stock have been reserved for
issuance under the Plan. Shares sold under the Plan are subject to various
restrictions as to resale and right of repurchase by the Company.
Options under the Plan may be either "incentive stock options" (ISO) or
"nonqualified stock options" (NQSO) as defined under Section 422 of the
Internal Revenue Code. Options shall be exercisable within the periods or upon
the events determined by the Board of Directors or a committee appointed by
the Board of Directors as set forth by a written stock option grant, provided
however, that no option shall become exercisable after the expiration of 10
years from the date the option is granted. Additionally, no option granted to
a person who directly or by attribution owns more than 10% of the total
combined voting power of all classes of stock of the Company shall be
exercisable after the expiration of five years from the date the option is
granted. Vested options held by individuals upon termination of their
relationship with the Company may be exercised no later than three months
following the date of termination or twelve months following death or
disability until expiration of the option.
The exercise price of an NQSO shall not be less than 85% of the fair market
value of the shares on the date the option is granted. The exercise price of
an ISO shall not be less than 100% of the fair market value of the shares on
the date the option is granted. The exercise price of any ISO granted to a
person owning more than 10% of the total combined voting power of all classes
of stock of the Company shall not be less than 110% of the fair market value
of the shares on the date the option is granted.
F-32
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. STOCK OPTION PLAN (CONTINUED):
The following table summarizes activity under the Company's stock option
plan for the year ended December 31, 1997. There was no activity under the
Plan in prior periods.
<TABLE>
<CAPTION>
WEIGHTED
SHARES NUMBER OF AVERAGE
AVAILABLE OPTIONS EXERCISE
FOR GRANT OUTSTANDING PRICE
--------- ----------- --------
<S> <C> <C> <C>
Reserved for issuance........................ 350,000 -- --
Granted...................................... (297,600) 297,600 $0.205
Exercised.................................... (23,667) 0.205
Cancelled or forfeited....................... 18,833 (18,833) 0.205
-------- ------- ------
Balance as of December 31, 1997.............. 71,233 255,100 $0.205
======== ======= ======
</TABLE>
Of the 23,667 options exercised during the year, 14,251 are unvested and are
subject to repurchase by the Company at the exercise price.
The Company accounts for the plan in accordance with APB No. 25, Accounting
for Stock Issued to Employees, and related interpretations. The following
information concerning the Company's stock options outstanding as of December
31, 1997 is provided in accordance with Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123).
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
---------------------------------- ---------------------
NUMBER WEIGHTED
OUTSTANDING AVERAGE WEIGHTED NUMBER WEIGHTED
AT REMAINING AVERAGE VESTED AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1997 LIFE (YEARS) PRICE 1997 PRICE
--------------- ------------ ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.205............. 255,100 9.55 $0.205 61,136 $0.205
</TABLE>
The fair value of each option has been estimated on the date of grant using
the minimum value method with the following assumptions.
<TABLE>
<S> <C>
Expected life................................................... 5 years
Risk-free interest rate......................................... 6.12%
Expected dividend rate.......................................... --
</TABLE>
Based on this method, the pro forma effects of applying SFAS 123 are
determined to be immaterial for the year ended December 31, 1997. Therefore,
the application of SFAS 123 would not result in a significant difference from
the reported net loss. The weighted average fair value of options granted for
the year ended December 31, 1997 was $0.05.
These pro forma effects may not be representative of the effects on reported
results of operations for future years as options vest over several years and
additional awards are expected to be made each year.
8. SUBSEQUENT EVENTS:
Credit facility:
In February 1998, the Company obtained a $1 million credit facility to
finance equipment purchases through December 31, 1998. Borrowings under this
facility are executed as 36 month promissory notes collateralized by
F-33
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. SUBSEQUENT EVENTS (CONTINUED):
the purchased equipment. Interest accrues at an effective rate of 18% per
annum, including an additional interest payment of 15% of the original loan
amount due at the end of the loan term. Borrowings under this facility were
$469 as of December 31, 1998.
Note and Warrant Purchase Agreement:
In September 1998, the Company entered into a Note and Warrant Purchase
Agreement, (the "Agreement") with a shareholder, whereby the Company may
borrow up to a maximum of $500 under Convertible Promissory Notes (the
"Notes"). Each of the Notes is non-interest bearing, has a term of six months
and, in the event the Company issues shares of its Preferred Stock during the
term of the Notes, is convertible into that Preferred Stock at a conversion
price equal to the price per share paid by investors purchasing the preferred
stock. Warrants to purchase common stock of the Company are attached to each
of the Notes. Each of the Warrants allows the holder to purchase one share of
common stock for each dollar borrowed at an exercise price of $0.25 per share
and is exercisable for a period of five years. As of December 31, 1998, the
Company had borrowed $500 and issued warrants to purchase 500,000 shares of
common stock under the Agreement.
Stock options:
On June 6, 1998, the Company's shareholders approved an increase in the
number of shares available under the Company's Stock Option Plan by 400,000 to
750,000. Subsequent to December 31, 1997 options to purchase 534,605 shares of
the Company's common stock were granted to employees, directors and
consultants under this plan at an exercise price of $0.205 per share.
Merger:
In January 1999, the shareholders approved the merger of the Company with a
wholly-owned subsidiary of WebMD, Inc. ("WebMD"). Under the terms of the
merger agreement, shares of the Company's capital stock will be exchanged for
shares of WebMD Series B Preferred Stock as set forth below. Outstanding
options and warrants to purchase the Company's common stock will be assumed by
WebMD and will be subject to the same terms and conditions, with the exception
that they will be exercisable for shares of WebMD Series B Preferred Stock
based upon the exchange ratio set forth below for the Company's common stock.
The $500 Convertible Promissory Note outstanding as of the date of the merger
will be exchanged for 25,000 shares of WebMD Series B Preferred Stock.
The ratios for the exchange of the Company's capital stock for shares of
WebMD Series B Preferred Stock are as follows:
<TABLE>
<CAPTION>
DIRECT MEDICAL EQUIVALENT SHARE OF
KNOWLEDGE, INC. WEBMD SERIES B
CAPITAL STOCK PREFERRED STOCK
--------------- -------------------
<S> <C>
Common Stock............................................ 0.11274380
Series A Convertible Preferred Stock.................... 0.16867768
Series B Convertible Preferred Stock.................... 0.22225378
</TABLE>
F-34
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. RESTATEMENT:
The Company previously recognized a deferred tax asset as of December 31,
1996. A valuation allowance was recognized against the deferred tax assets as
of December 31, 1997. The financial statements as of December 31, 1996, for
the years ended December 31, 1997 and 1996, for the period from May 24, 1995
(date of incorporation) to December 31, 1995 and for the period from May 24,
1995 (date of incorporation) to December 31, 1997 were restated to recognize a
valuation allowance for these deferred tax assets as of December 31, 1996 and
1995. The effect of the restatement on net earnings is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE FOR THE
ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, MAY 24 TO MAY 24 TO
-------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995 1997
------- ----- ------------ ------------
<S> <C> <C> <C> <C>
Net loss as previously
reported.............. $(1,691) $(256) $(112) $(2,059)
Net effect of the
restatement........... 261 (208) (53) --
------- ----- ----- -------
Net loss................ $(1,430) $(464) $(165) $(2,059)
======= ===== ===== =======
</TABLE>
F-35
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues, including shareholder revenues of $104 and
$270, respectively..................................... $ 198 $ 434
Operating expenses:
Cost of revenues....................................... 41 34
Product development costs.............................. 786 561
Sales and marketing.................................... 305 130
General and administrative............................. 851 467
Depreciation and amortization.......................... 323 223
--------- ---------
Operating Loss........................................... (2,108) (981)
Interest and other income (expense), net............... 8 22
--------- ---------
Net loss from continuing operations before income
taxes................................................ (2,100) (959)
Income tax provision (benefit)........................... -- 1
--------- ---------
Net loss before preferred stock dividend............... (2,100) (960)
Preferred stock dividend................................. -- 44
--------- ---------
Net loss attributable to common stock.................. $ (2,100) $ (1,004)
========= =========
Net loss per common share................................ $ (2.01) $ (0.98)
========= =========
Weight average shares outstanding...................... 1,046,047 1,025,167
========= =========
</TABLE>
F-36
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 7 $ 1,082
Accounts receivable, trade........................ 25 6
Accounts receivable, shareholder.................. -- 69
Prepaid expenses and other........................ 42 9
------- -------
Total current assets........................... 74 1,166
Property and equipment, net......................... 690 709
Intangibles, net.................................... 8 14
Content license fees, net........................... 50 67
Other assets, net................................... 24 26
------- -------
Total assets................................... $ 846 $ 1,982
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 327 $ 243
Accrued expenses.................................. 65 13
Deferred revenue.................................. 38 30
Convertible promissory note to shareholder........ 100 --
Senior secured promissory note, current portion... 148 --
------- -------
Total current liabilities...................... 678 286
Long-term Obligations:
Senior secured promissory note, less current
portion......................................... 321 --
Shareholder's equity (deficit):
Common stock, no par value; authorized 5,000,000
shares; 1,046,233 and 1,048,667 shares issued
and outstanding................................. 4 5
Note receivable from shareholder.................. -- (250)
Convertible preferred stock, no par value;
authorized 2,600,000 shares; 2,536,071 shares
issued and outstanding; liquidation preference
of $4,072,658 and $4,072,658.................... 4,098 4,098
Warrants for purchase of common stock............. 2 --
Deficit accumulated during the development
stage........................................... (4,257) (2,157)
------- -------
Total shareholders' equity (deficit)........... (153) 1,696
------- -------
Total liabilities and shareholders' equity..... $ 846 $ 1,982
======= =======
</TABLE>
F-37
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
--------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (2,100) $ (960)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization of property and
equipment.......................................... 236 151
Amortization......................................... 87 73
Changes in operating assets and liabilities:......... 166 (102)
--------- --------
Net cash used in operating activities................... (1,611) (838)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment...................... (1) (138)
Reimbursement of prior years' equip. purchases.......... 297 --
Purchase of content licenses............................ (64) (65)
--------- --------
Net cash provided by (used in) investing activities..... 232 (203)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock......................... -- 2,250
Repurchase of common stock.............................. (1) --
Borrowings under convertible promissory note............ 100 --
Payments on shareholder note receivable................. 250 250
Borrowings/(Payments) against senior secured promissory
note.................................................. (45) --
--------- --------
Net cash provided by financing activities............... 304 2,500
--------- --------
Net (decrease) increase in cash........................... (1,075) 1,459
--------- --------
Cash and cash equivalents, beginning of period............ 1,082 100
--------- --------
Cash and cash equivalents, end of period.................. $ 7 $ 1,559
========= ========
</TABLE>
F-38
<PAGE>
DIRECT MEDICAL KNOWLEDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for fair
presentation have been included. For further information, refer to the
financial statements and footnotes for the year ended December 31, 1997,
included elsewhere herein.
NOTE 2--SUBSEQUENT EVENT
On January 22, 1999, the shareholders of Direct Medical Knowledge, Inc. sold
their shares through a share exchange to WebMD, Inc.
F-39
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Sapient Health Network, Inc.:
We have audited the accompanying balance sheets of Sapient Health Network,
Inc. (the Company) as of September 30, 1997 and 1998, and the related
statements of operations, shareholders' deficit, and cash flows for the period
from November 21, 1995 (date of inception) through September 30, 1996 and each
of the years in the two-year period ended September 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Sapient Health Network,
Inc. as of September 30, 1997 and 1998, and the results of its operations and
its cash flows for the period from November 21, 1995 (date of inception)
through September 30, 1996 and each of the years in the two-year period ended
September 30, 1998 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
Sapient Health Network, Inc. will continue as a going concern. As discussed in
note 2 to the financial statements, the Company has incurred losses since
inception and has a net capital deficiency; these conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in note 2 to the financial
statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
November 18, 1998
F-40
<PAGE>
SAPIENT HEALTH NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1997 1998
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................... $ 117,671 $ 1,159,659
Accounts receivable................................ 2,113 34,555
Unbilled revenue................................... -- 536,333
Prepaid expenses and other current assets.......... 6,021 30,981
---------- ------------
Total current assets.............................. 125,805 1,761,528
Property and equipment, net......................... 635,569 505,790
Restricted investment............................... 200,000 200,000
Other assets, net................................... 35,681 57,908
Deposits............................................ 68,034 68,508
---------- ------------
Total assets..................................... $1,065,089 $ 2,593,734
========== ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................... $ 412,310 $ 476,527
Accrued liabilities................................ 59,953 81,087
Deferred revenue................................... -- 506,333
Current installments of obligations under capital
leases........................................... 201,952 214,801
Convertible promissory notes....................... -- 5,523,795
Line of credit..................................... 600,000 600,000
---------- ------------
Total current liabilities......................... 1,274,215 7,402,543
Obligations under capital leases, net of current
installments...................................... 298,248 171,024
---------- ------------
Total liabilities................................. 1,572,463 7,573,567
Commitments and contingencies
Redeemable preferred stock; aggregate liquidation
preference $13,559,467:
Series C, $.001 par value. Authorized 1,200,000
shares; no shares issued and outstanding......... -- --
Series B, $.001 par value. Authorized 6,000,000
shares; issued and outstanding 2,811,680 shares
on September 30, 1997 and 1998, respectively..... 4,649,756 4,994,182
Shareholders' deficit:
Convertible preferred stock; aggregate liquidation
preference $850,000:
Series A, $.001 par value. Authorized, issued and
outstanding 850,000 shares on September 30, 1997
and 1998, respectively.......................... 850 850
Common stock, $.001 par value. Authorized
15,000,000 shares; issued and outstanding
2,029,100 and 2,133,560 shares on September 30,
1997 and 1998, respectively...................... 2,029 2,134
Additional paid-in capital......................... 863,482 906,496
Accumulated deficit................................ (6,023,491) (10,883,495)
---------- ------------
Total shareholders' deficit....................... (5,157,130) (9,974,015)
---------- ------------
Total liabilities, redeemable preferred stock and
shareholders' deficit.......................... $1,065,089 $ 2,593,734
========== ============
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE>
SAPIENT HEALTH NETWORK, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 21,
1995 (DATE OF
INCEPTION) YEARS ENDED SEPTEMBER
THROUGH 30,
SEPTEMBER 30, ------------------------
1996 1997 1998
------------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Market research....................... $ -- $ -- $ 160,750
Sponsorship........................... -- 75,418 190,000
Other revenue......................... -- 762 2,016
----------- ----------- -----------
Total revenue........................ -- 76,180 352,766
----------- ----------- -----------
Operating expenses:
Sales and marketing................... 171,134 562,085 543,449
Community/content development......... 308,160 1,126,024 1,142,165
Research and development.............. 260,147 1,467,348 1,041,168
General and administrative............ 410,529 1,413,332 1,802,290
----------- ----------- -----------
Total operating expenses............. 1,149,970 4,568,789 4,529,072
----------- ----------- -----------
Loss from operations................. (1,149,970) (4,492,609) (4,176,306)
Other income (expense):
Interest income....................... -- 68,887 8,708
Interest expense...................... 18,505 (86,868) (347,980)
----------- ----------- -----------
Net loss before provision for income
taxes.............................. (1,168,475) (4,510,590) (4,515,578)
Provision for income taxes............. -- -- --
----------- ----------- -----------
Net loss............................. (1,168,475) (4,510,590) (4,515,578)
Accretion of Series B preferred stock
dividends............................ -- (344,426) (344,426)
----------- ----------- -----------
Net loss attributed to common
shareholders....................... $(1,168,475) $(4,855,016) $(4,860,004)
=========== =========== ===========
Net loss per common share--basic and
diluted.............................. $ (0.58) $ (2.40) $ (2.35)
Shares used in computing net loss per
common share--basic and diluted...... 2,002,000 2,019,113 2,069,072
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE>
SAPIENT HEALTH NETWORK, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
PREFERRED STOCK
STOCK SERIES A COMMON STOCK ADDITIONAL SUBSCRIPTION TOTAL
-------------- ----------------- PAID-IN NOTE ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT DEFICIT
------- ------ --------- ------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at November 21,
1995 (date of
inception)............ -- $ -- -- $ -- $ -- $ -- $ -- $ --
Preferred stock--less
issuance costs....... 850,000 850 -- -- 806,647 -- -- 807,497
Common stock issued.... -- -- 2,002,000 2,002 -- 2,002 -- --
Consulting expense on
stock option grants.. -- -- -- -- 105,925 -- -- 105,925
Net loss............... -- -- -- -- -- -- (1,168,475) (1,168,475)
------- ----- --------- ------- --------- ------ ------------- ------------
Balance at September 30,
1996.................. 850,000 850 2,002,000 2,002 912,572 (2,002) (1,168,475) (255,053)
Exercise of stock
options.............. -- -- 27,100 27 2,683 -- -- 2,710
Consulting expense on
stock option grants.. -- -- -- -- 42,558 -- -- 42,558
Adjustment to
consulting expense on
stock options........ -- -- -- -- (94,331) -- -- (94,331)
Repayment of stock
subscription note
receivable........... -- -- -- -- -- 2,002 -- 2,002
Accretion of Series B
preferred stock
dividends............ -- -- -- -- -- -- (344,426) (344,426)
Net loss............... -- -- -- -- -- -- (4,510,590) (4,510,590)
------- ----- --------- ------- --------- ------ ------------- ------------
Balance at September 30,
1997.................. 850,000 850 2,029,100 2,029 863,482 -- (6,023,491) (5,157,130)
Exercise of stock
options.............. -- -- 104,460 105 14,032 -- -- 14,137
Issuance of stock
warrants............. -- -- -- -- 21,876 -- -- 21,876
Consulting expense on
stock option grants.. -- -- -- -- 7,106 -- -- 7,106
Accretion of Series B
preferred stock
dividends............ -- -- -- -- -- -- (344,426) (344,426)
Net loss............... -- -- -- -- -- -- (4,515,578) (4,515,578)
------- ----- --------- ------- --------- ------ ------------- ------------
Balance at September 30,
1998.................. 850,000 $ 850 2,133,560 $ 2,134 $ 906,496 $ -- $ (10,883,495) $ (9,974,015)
======= ===== ========= ======= ========= ====== ============= ============
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE>
SAPIENT HEALTH NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 21,
1995 (DATE OF YEARS ENDED SEPTEMBER 30,
INCEPTION) THROUGH --------------------------
SEPTEMBER 30, 1996 1997 1998
------------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss....................... $(1,168,475) $ (4,510,590) $ (4,515,578)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization................. 43,936 204,105 326,058
Loss on disposal of property
and equipment................ -- 1,659 --
Non-cash consulting expense
for stock option grants...... 105,925 (51,773) 7,106
Change in assets and
liabilities:
Accounts receivable.......... -- (2,113) (32,442)
Unbilled revenue............. -- -- (536,333)
Prepaid expenses and other
current assets.............. (31,166) 4,396 (24,960)
Deposits..................... (64,321) (3,713) (474)
Restricted investment........ -- (200,000) --
Accounts payable............. 209,283 203,027 64,217
Accrued liabilities.......... 22,537 37,416 21,134
Deferred revenue............. -- -- 506,333
----------- ------------ ------------
Net cash used in operating
activities.................... (882,281) (4,317,586) (4,184,939)
----------- ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisitions of property and
equipment..................... (47,384) (169,958) (74,290)
Increase in other assets
related to patents............ -- (25,997) (5,089)
----------- ------------ ------------
Net cash used in investing
activities.................... (47,384) (195,955) (79,379)
----------- ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of stock subscription
note receivable............... -- 2,002 --
Borrowings under bank line of
credit........................ -- 600,000 --
Principal payments on capital
leases........................ (28,256) (128,406) (225,415)
Proceeds from preferred and
common stock offerings........ 807,497 2,710 14,137
Proceeds from redeemable
preferred stock offering...... 165,000 4,140,330 --
Borrowings under convertible
promissory notes.............. -- -- 5,523,795
Proceeds from issuance of
warrants...................... -- -- 21,876
Increase in other assets
related to financing costs.... -- -- (28,087)
----------- ------------ ------------
Net cash provided by financing
activities.................... 944,241 4,616,636 5,306,306
----------- ------------ ------------
Net increase in cash........... 14,576 103,095 1,041,988
Cash at beginning of year...... -- 14,576 117,671
----------- ------------ ------------
Cash at end of year............ $ 14,576 $ 117,671 $ 1,159,659
=========== ============ ============
SUPPLEMENTAL DISCLOSURES:
Cash paid during year for
interest...................... $ 18,505 $ 86,868 $ 114,907
=========== ============ ============
Non-cash investing and
financing activities:
Equipment acquired under
capital lease obligations.... $ 321,603 $ 335,259 $ 111,040
=========== ============ ============
Accretion of redemption
preference................... $ -- $ 344,426 $ 344,426
=========== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-44
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1998
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Sapient Health Network, Inc. (the Company), an Oregon Corporation, was
founded in November 1995 and creates online disease specific patient
communities on the World Wide Web, through which it brings members
personalized, condition-specific information and interactive community
features. The Company provides members with an extensive reference library,
in-depth reports on current topics and daily news articles from Reuters
Medical News. Through message boards and live chat rooms, members can share
personal experiences and coping strategies and provide each other emotional
support. The Company currently hosts ten online communities for patients
interested in asthma, breast cancer, cardiovascular disease, depression,
diabetes, fibromyalagia (FMS) chronic fatigue immune dysfunction syndrome,
hepatitis C, prostate cancer, obesity, women's health and kidney failure.
For the period November 31, 1995 (date of inception) through September 30,
1996 and the year ended September 30, 1997, the Company was a development
stage enterprise.
Revenue Recognition
Revenue from market research contracts is recognized upon delivery and
acceptance of the product by the customer. The amount of revenue for specific
projects is determined by market pricing models or associated direct costs of
the delivered and accepted product.
Revenue from sponsorship contracts for Web development and related
activities is recognized in time milestones, usually prorated over the length
of the agreement. Revenue from additional specified projects within the
sponsorship contract is determined by precedent pricing models or associated
direct costs of the project, and recognized when delivered and accepted by the
customer.
Deferred revenue and unbilled revenue represent amounts to be recognized and
billed upon project completion or upon achievement of project milestones.
Contracts may have termination and refund provisions that require payment for
all work completed through date of termination notice. Contracts may have
nonrefundable fees due upon signing associated with upfront set up costs that
are not related to project milestones or product deliverables. These fees are
recognized upon signing.
All of the Company's revenues for the years ended September 30, 1997 and
1998 were from sales in the U.S.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated on the straight-line method over the estimated useful
life of the assets, generally three years. Property and equipment held under
capital leases and leasehold improvements are amortized based on the straight-
line method over the shorter of the lease term or estimated useful life of the
assets, generally three years.
Maintenance and repairs are charged to expense as incurred. Major repairs
and improvements are capitalized and depreciated.
Restricted Investment
The Company has a certificate of deposit held by a bank as collateral for a
$200,000 standby letter of credit for costs incurred by the landlord, for the
Company's office space remodeling.
F-45
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Other Assets
Other assets consist primarily of patents and legal costs to obtain
financing. Patents are amortized using the straight-line method over the
estimated future economic benefit, which is generally three years. Financing
costs are amortized over the life of the loan unless conversion is expected
within a twelve month period, in which case they are netted against the
proceeds upon conversion. Amortization expense for the period from
November 21, 1995 (date of inception) through September 30, 1996 and the years
ended September 30, 1997 and 1998 was $3,029, $8,036 and $10,949,
respectively. Accumulated amortization at September 30, 1997 and 1998 was
$11,065 and $22,014, respectively.
Research and Development Expenditures
The Company incurs research and development expenses relating to the
development of its product. All research and development costs are expensed as
incurred.
Capitalized Software
Under Statement of Financial Accounting Standards No. 86, software
development costs are to be capitalized beginning when a product's
technological feasibility has been established and ending when a product is
made available for general release to customers. The establishment of
technological feasibility of the Company's products has occurred shortly
before general release and, accordingly, no costs have been capitalized.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities.
Estimates and assumptions are also used in 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.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established to reduce deferred tax assets to the amount
expected to be realized.
Stock-Based Compensation
The Company accounts for stock-based compensation using Statement of
Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation. This statement permits a company to choose either a fair-value
based method of accounting for its stock-based compensation arrangements or to
comply with the current Accounting Principles Board Opinion 25 (APB Opinion
25) intrinsic-value-based method adding pro-forma disclosures of net loss
computed as if the fair-value-based method had been applied in the financial
F-46
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
statements. The Company applies SFAS No. 123 by retaining the APB Opinion 25
method of accounting for stock-based compensation for employees with annual
pro-forma disclosures of net loss. Stock-based compensation for non-employees
is accounted for using the fair-value-based method.
Net Loss Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share ("SFAS No. 128"). SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary and fully diluted earnings per share, outstanding
nonvested shares are not included in the computations of basic and diluted
earnings per share until the time-based vesting restriction has lapsed. Basic
earnings per share also excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, capital leases, convertible promissory notes and the line of
credit. At September 30, 1997 and 1998, the fair value of the Company's
receivables, payables, line of credit, capital lease obligations and
convertible promissory notes approximated fair value.
Advertising
The Company expenses the costs of advertising when the costs are incurred.
Advertising expense was approximately $2,000, $229,000 and $519,000 for the
period from November 21, 1995 (date of inception) through September 30, 1996
and the years ended September 30, 1997 and 1998, respectively.
Reclassifications
Certain amounts for 1996 and 1997 have been reclassified to conform to the
presentation for 1998. Such reclassifications have no effect on previously
reported results of operations.
Effect of Recent Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income, which establishes requirements for
disclosure of comprehensive income. The objective of SFAS 130 is to report all
changes in equity that result from transactions and economic events other than
transactions with owners. Comprehensive income is the total of net income and
all other non-owner changes in equity. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of earlier financial
statements for comparative purposes is required. The Company does not expect
implementation to have a significant impact on its financial statements.
Also in June 1997, the FASB issued SFAS No. 131, Disclosure about Segments
of an Enterprise and Related Information. SFAS 131 requires public companies
to report certain information about their operating segments in a complete set
of financial statements to shareholders. It also requires reporting of certain
enterprise-wide information about the company's products and services, its
activities in different geographic areas and its reliance on major customers.
The basis for determining the company's operating segments is the manner in
which management operates the business. SFAS 131, is effective for fiscal
years beginning after December 15, 1997. The Company does not expect
implementation to have a significant impact on its financial statements.
F-47
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
In October 1997, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 97-2, Software Revenue Recognition,
which provides guidance on applying generally accepted accounting principles
in recognizing revenue of software transactions. The Company adopted SOP 97-2
on January 1, 1998. The impact to the Company's financial statements was not
material.
Related to the SOP 97-2, the AICPA issued SOP 98-4 Deferral of the Effective
Date of a Provision of SOP 97-2, Software Revenue Recognition. SOP 98-4 defers
for the one year, the application of several paragraphs and examples in SOP
97-2 that limit the definition of vendor specific objective evidence of the
fair value of various elements in a multiple element arrangement. The impact
on the Company's financial statements is not expected to be material.
In April 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up
Activities. The SOP requires that costs incurred during start-up activities,
including organizational costs, be expensed as incurred. SOP 98-5 is effective
for financial statements for fiscal years beginning after December 15, 1998.
Restatement of previously issued financial statements is not permitted. The
Company does not expect implementation to have a significant impact on its
financial statements.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability at its fair value. The
standard also requires that changes in the derivatives' fair value be
recognized currently in the results of operations unless specific hedge
accounting criteria are met. SFAS 133 is effective for fiscal years beginning
after June 15, 1999. The Company does not expect SFAS 133 to have a material
impact on its financial statements.
(2) LIQUIDITY
To meet the cash flow needs of the Company in fiscal 1999, the Company will
need to issue additional equity securities, borrow additional funds, or obtain
other financing. The Company has no commitments for additional financing and
there can be no assurance that such financing will be available on
satisfactory terms, if at all. The accompanying financial statements have been
prepared on the basis that the Company will be able to meet its cash needs and
continue as a going concern. See note 15.
(3) PROPERTY AND EQUIPMENT
Property and equipment at September 30, consists of the following:
<TABLE>
<CAPTION>
1997 1998
--------- ----------
<S> <C> <C>
Computers and related equipment..................... $ 814,260 $ 998,368
Furniture and office equipment...................... 21,690 15,532
Leasehold improvements.............................. 36,595 43,975
--------- ----------
872,545 1,057,875
Less accumulated depreciation and amortization...... (236,976) (552,085)
--------- ----------
$ 635,569 $ 505,790
========= ==========
</TABLE>
Depreciation and amortization expense on property and equipment was $40,907,
$196,069 and $315,109 for the period from November 21, 1995 (date of
inception) through September 30, 1996 and the years ended September 30, 1997
and 1998, respectively.
F-48
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) CAPITAL LEASES
The Company is obligated for equipment under various capital leases that
expire at various dates through 2001. These leases are secured by the related
equipment. At September 30, 1997 and 1998, the gross amount of the equipment
acquired under capital leases was $656,862 and $774,386, respectively, and
related accumulated amortization was $187,466 and $472,564, respectively.
Amortization of assets held under capital leases is included with
depreciation and amortization expense in the accompanying financial
statements.
Future minimum capital lease payments are as follows:
<TABLE>
<S> <C>
YEAR ENDING SEPTEMBER 30:
1999........................................................ $ 241,978
2000........................................................ 142,396
2001........................................................ 39,077
---------
Total minimum lease payments................................ 423,451
Less amount representing interest........................... (37,626)
---------
Present value of net minimum capital lease payments........ 385,825
Less current installments of obligations under capital
leases.................................................... (214,801)
---------
Obligations under capital leases, net of current
installments............................................. $ 171,024
=========
</TABLE>
(5) LINE OF CREDIT
The Company utilizes a $600,000 revolving line of credit agreement with a
bank at an annual interest rate of prime plus 1% (9.5% at September 30, 1998).
Amounts outstanding under the line of credit were $600,000 at September 30,
1997 and 1998, respectively. The bank holds a security interest in the
Company's assets throughout the term of this loan, due October 1, 1998. The
line was renewed subsequent to year end, as discussed in note 14.
(6) CONVERTIBLE PROMISSORY NOTES
The Company issued the following convertible promissory notes in fiscal
1998:
. In October 1997, $1,020,000 at 10% interest per annum, principal and
interest converted to Series B Preferred Stock in October 1998. (See
note 14)
. In March 1998, $2,000,000 in senior debt at 8% interest per annum, with
the lender having the option to convert principal amount into equivalent
equity securities at due date in March 1999.
. In July 1998, $2,275,400 at 8% per annum, principal and interest to
convert to equivalent equity securities in January 1999.
The outstanding balance at September 30, 1998 includes accrued interest
payable on these notes.
(7) INCOME TAXES
Due to the Company's losses before income taxes in each period since
inception there has been no provision for federal and state income taxes for
the period from November 21, 1995 (date of inception) through September 30,
1996 and the years ended September 30, 1997 and 1998.
F-49
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES--(CONTINUED)
The reconciliation of the statutory federal income tax rates to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
THE PERIOD FROM YEARS ENDED
NOVEMBER 21, 1995 SEPTEMBER
(DATE OF 30,
INCEPTION) THROUGH -------------
SEPTEMBER 30, 1996 1997 1998
------------------ ----- -----
<S> <C> <C> <C>
Federal statutory rate................ (34.0)% (34.0)% (34.0)%
State income taxes, net of federal
benefit............................. (4.4) (4.4) (4.4)
Change in valuation allowance......... 38.5 39.3 39.2
Other, net............................ (0.1) (0.9) (0.8)
----- ----- -----
-- % -- % -- %
===== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's deferred tax assets as of September
30 are as follows:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards............... $ 1,840,300 $ 3,653,900
Option compensation............................ 57,000 31,000
Amortization of startup and organizational
costs........................................ 278,300 210,000
Research and experimentation credits........... 56,000 87,800
Other.......................................... 15,800 13,900
----------- -----------
2,247,400 3,996,600
Valuation allowance............................ (2,222,800) (3,992,700)
----------- -----------
Net deferred tax assets....................... 24,600 3,900
DEFERRED TAX LIABILITIES:
Depreciation and amortization.................. (24,600) (3,900)
----------- -----------
Net deferred tax assets....................... $ -- $ --
=========== ===========
</TABLE>
The valuation allowance for deferred tax assets as of September 30, 1997 and
1998, was $2,222,800 and $3,992,700, respectively. The net change in the total
valuation allowance for the period November 21, 1995 (date of inception)
through September 30, 1996 and the years ended September 30, 1997 and 1998,
was an increase of $450,000, $1,772,800 and $1,769,900, respectively.
At September 30, 1998, the Company has net operating loss carryforwards of
approximately $9,526,000 and research and experimentation credit carryforwards
of $87,800 to offset future federal taxable income and income taxes, if any,
through 2017. As defined in Internal Revenue Section 382, the utilization of a
portion of the net operating loss and credit carryforwards may be limited due
to a change in ownership caused by additional investors, occurring on November
1, 1996. The Company believes no additional ownership changes have occurred,
however a formal analysis has not been completed.
F-50
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) STOCK OPTION PLAN
Effective January 30, 1996, the Company adopted a Stock Option Plan (the
Plan) which provides for the granting of stock options to employees, directors
and consultants within the meaning of Section 442 of the Internal Revenue
Code, and non-statutory stock options. The right to exercise these options
vests from zero to forty-eight months. The Company has reserved 1,500,000
shares of common stock for issuance upon exercise of options granted under the
Plan.
As of September 30, 1998, 1,097,409 options remain outstanding pursuant to
the Plan. The per share weighted-average fair value of stock options granted
during the period from November 21, 1995 (date of inception) through September
30, 1996 and the years ended 1997 and 1998 were $.10, $.16 and $.27,
respectively, on the date of grant using the Black-Scholes pricing model with
the following weighted-average assumptions:
<TABLE>
<CAPTION>
THE PERIOD
FROM
NOVEMBER 21,
1995 (DATE OF
INCEPTION) YEARS ENDED
THROUGH SEPTEMBER 30,
SEPTEMBER 30, ------------------
1996 1997 1998
------------- -------- --------
<S> <C> <C> <C>
Dividend yield............................. -- -- --
Expected volatility........................ 100% 100% 100%
Risk-free interest rate.................... 5.7% 6% 6.5%
Expected life.............................. 10 years 10 years 10 years
</TABLE>
The total value of options granted during the period September 21, 1995
(date of inception) through September 30, 1996 and for the years ended
September 30, 1997 and 1998 were $18,281, $36,691 and $35,681, respectively,
which would be amortized on a straight-line basis over the vesting period of
the options (typically four years).
The Company applies Accounting Principle Bulletin Opinion No. 25 in
accounting for stock options issued to employees and directors under the Plan,
accordingly, no compensation cost has been recognized for these stock options
in the financial statements. Had the Company determined compensation cost
based on the fair value at the grant date for its stock options under
Statement of Financial Accounting Standards (SFAS) No. 123 the Company's net
loss would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
THE PERIOD
FROM NOVEMBER
21, 1995
(DATE OF
INCEPTION) YEARS ENDED
THROUGH SEPTEMBER 30,
SEPTEMBER 30, ------------------------
1996 1997 1998
------------- ----------- -----------
<S> <C> <C> <C>
Net loss:
As reported......................... $(1,168,475) $(4,510,590) $(4,515,578)
Pro forma........................... $(1,169,822) $(4,518,701) $(4,530,958)
</TABLE>
F-51
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) STOCK OPTION PLAN (CONTINUED)
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------
<S> <C> <C>
Options outstanding at January 30, 1996
(date of the Plan adoption)........................... -- $--
Granted................................................. 396,125 .10
Exercised............................................... -- --
Canceled................................................ -- --
--------- ----
Options outstanding at September 30, 1996............... 396,125 .10
Granted................................................. 652,239 .16
Exercised............................................... (27,100) .10
Canceled................................................ (68,246) .10
--------- ----
Options outstanding at September 30, 1997............... 953,018 .14
Granted................................................. 379,375 .27
Exercised............................................... (104,460) .14
Canceled................................................ (130,524) .12
--------- ----
Options outstanding at September 30, 1998............... 1,097,409 $.19
========= ====
</TABLE>
At September 30, 1998, the weighted-average exercise price and weighted-
average remaining contractual life of outstanding options was $.19 and nine
years, respectively.
At September 30, 1998, 603,282 outstanding options were currently
exercisable, and the weighted-average exercise price of these options was
$.14.
(9) REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of preferred
stock. During fiscal 1998, the Company amended its articles of incorporation
to designate a new series of preferred stock, designated as Series C preferred
stock, and to amend certain terms of the rights, privileges and preferences of
its Series B preferred stock. Following such amendment, the Company had three
series of convertible preferred stock, designated as Series A, B and C
preferred stock. The Company's Series B and C preferred stock is redeemable as
described more fully below. The material rights, preferences, privileges and
restrictions for each series of preferred stock are summarized below:
Dividends
Holders of the Series B and C preferred stock shall be entitled to receive
cumulative dividends of eight percent (8%) of the original issue per share
price of each such series per share per annum prior and in preference to the
holders of any other stock of the Company. Such cumulative dividends shall
cease to accrue when the balance of such cumulative dividends, whether paid or
unpaid, equals, in the aggregate, two times the respective original issue
price of the Series B and C preferred stock. The holders of the Series B and C
preferred stock are also entitled to receive an amount equal per share to any
dividend declared and paid to holders of the Company's common stock. The
holders of the Series A preferred stock are entitled to receive an amount
equal per share to any dividend declared and paid to holders of the Company's
common stock.
F-52
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT--(CONTINUED)
Liquidation Preferences
Upon the occurrence of a liquidation event, such as a dissolution of the
Company or a merger or sale of assets, the holders of Series C preferred stock
shall be entitled to receive in preference to holders of Series A and B
preferred stock and common stock an amount equal to the proportion that the
Series C preferred stock represents to the fully diluted capital stock of the
Company, the holders of Series B preferred stock shall be entitled to receive
in preference to holders of Series A preferred stock and common stock an
amount equal to the original issue price of the Series B preferred stock, the
holders of Series A preferred stock shall be entitled to receive in preference
to holders of common stock an amount equal to up to the original issue price
of the Series A preferred stock, the holders of Series B preferred stock shall
be entitled to then receive in preference to the holders of common stock up to
an amount equal to two times the original issue price of the Series B
preferred stock, and thereafter, the holders of Series A, B and C preferred
stock shall share any remaining proceeds on a pro rata basis with the holders
of common stock based on the number of shares of common stock held by each,
assuming full conversion of the Series A, B and C preferred stock.
Conversion
Holders of the Series A, B and C preferred stock may convert all or part of
their shares at any time after the date of issuance into such number of common
stock as is determined by multiplying such number of shares by the series
conversion rate in effect at the time. Conversion is automatic upon the
closing of an IPO of the Company's common stock at a price of not less than
$6.16 per share and with aggregate gross proceeds of not less than $20,000,000
or by written consent or agreement of the holders of two-thirds of the
outstanding shares of Series A, B and C preferred stock voting together as a
single class.
Redemption
The Company shall redeem the Series B and C preferred stock at the option of
the holders of such preferred stock after September 30, 2001 and before
September 30, 2004, subject to reasonable financial stability considerations,
payable in eight equal quarterly installments. The holders of the Series B and
C preferred stock shall be entitled to a redemption price per share equal to
the original issuance price, plus accrued and unpaid dividends with respect to
such shares.
Common Stock
The Company is authorized to issue up to 15,000,000 shares of common stock.
The common stock shareholders have voting rights and, subject to any
preferential rights granted to any series of preferred shareholders, are
entitled to receive distributions legally payable to shareholders upon
liquidation of the Company.
Warrants
During fiscal 1997, the Company issued warrants to investors. Each warrant
permits the holder to purchase one share of the Company's common stock. At
September 30, 1998 warrants to purchase 67,788 shares and 34,016 shares at
exercise prices of $2.25 and $0.16, respectively were outstanding. Each of the
warrants are exerciseable within five years from the date of purchase.
During fiscal 1998, in connection with the convertible promissory note
financing, the Company issued 871,226 warrants to purchase Series B Preferred
Stock to investors. The warrants are exercisable at a price of $1.54 per share
within ten years from date of issuance.
F-53
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT--(CONTINUED)
The holders/subscribers of shares of stock and stock warrants are subject to
the restrictions set forth in Shareholder Agreements/Subscription Agreements.
The terms of these agreements primarily relate to the right of first refusal.
Before any common shareholder may sell or otherwise transfer any share of
common stock, such shares shall first be offered to the Company.
(10) RETIREMENT BENEFIT PLAN
The Company sponsors a defined contribution 401(k) plan (the Retirement
Plan). Employees who are at least 21 years old are eligible to participate in
the Retirement Plan beginning the month subsequent to employment. Participants
may defer up to 15% of eligible compensation. Currently, the Company does not
provide matching contributions for the Retirement Plan.
(11) COMMITMENTS AND CONTINGENCIES
Leases
The company leases office space under a non-cancelable operating leases
which expire at various times through May 2004.
Future minimum lease payments under the operating lease is as follows:
<TABLE>
<S> <C>
YEAR ENDING SEPTEMBER 30:
1999........................................................... $ 264,212
2000........................................................... 273,012
2001........................................................... 273,012
2002........................................................... 273,012
2003........................................................... 273,012
Thereafter..................................................... 182,008
----------
$1,538,268
==========
</TABLE>
Total rent expense under operating leases was $18,284, $93,011 and $230,182
for the period from November 21, 1995 (date of inception) through September
30, 1996 and for the years ended September 30, 1997 and 1998, respectively.
Litigation
From time to time the Company may be involved in various legal actions in
the normal course of business. Management is of the opinion that the outcome
of such actions will not have a material adverse effect on the Company's
financial condition.
(12) CUSTOMER INFORMATION
The Company had one customer that accounted for approximately 25% and 59% in
1997 and 1998, respectively, of the Company's revenues.
F-54
<PAGE>
SAPIENT HEALTH NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(13) RISK OF TECHNOLOGICAL CHANGE
Contingencies and Factors that Could Affect Future Results
A substantial portion of the Company's revenues each year are generated from
the development of websites and market research performed over the Internet.
In the extremely competitive industry environment in which the Company
operates, such product generation, development and marketing processes are
uncertain and complex, requiring accurate prediction of demand as well as
successful management of various development risks inherent to the Internet.
In light of these dependencies, it is possible that failure to successfully
manage future changes in technology with respect to the Internet could have
long-term impact on the Company's growth and results of operations.
(14) SUBSEQUENT EVENTS
The convertible promissory notes issued October 1997 were converted on
October 9, 1998 to 732,895 shares of Series B Preferred Stock at $1.54 per
share.
The $600,000 bank line of credit, due October 1998, was subsequently
amended. The new Agreement reduced the line to $500,000 and extends maturity
through December 31, 1998. A warrant to purchase 16,234 shares of Series B
Preferred Stock was granted in consideration for this Amendment.
(15) UNAUDITED RECENT DEVELOPMENT
On January 4, 1999, the Company entered into a merger agreement with WebMD.
Pursuant to the merger agreement, among other things, all issued and
outstanding shares of the Company's common and preferred stock will be
converted into the right to receive shares of preferred series B stock of
WebMD,
The acquisition is expected to provide the Company with the additional
financial resources to continue operations. If the acquisition is not
completed, the Company would have to find alternative financing sources to
continue operations.
F-55
<PAGE>
[LOGO OF WEBMD, INC. APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with the Offering
described in the Registration Statement. All amounts are estimates except the
SEC Registration Fee and the NASD fees:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 15,290
NASD fees........................................................ 6,000
Nasdaq fees...................................................... 95,000
Blue Sky Fees and Expenses....................................... 5,000
Printing and Engraving........................................... 200,000
Legal Fees and Expenses.......................................... 750,000
Accounting Fees and Expenses..................................... 500,000
Transfer Agent Fees.............................................. 10,000
Miscellaneous Expenses........................................... 16,710
----------
Total.......................................................... $1,598,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Georgia Business Corporation Code, as amended (the "Georgia Law"),
permits a corporation to eliminate or limit the personal liability of a
director to the corporation or its shareholders for monetary damages for
breach of duty of care or other duty as a director, provided that no provision
shall eliminate or limit the liability of a director for: (i) an
appropriation, in violation of his duties, of any business opportunity of the
corporation; (ii) acts or omissions which involve intentional misconduct or a
knowing violation of law; (iii) unlawful corporate distributions; or (iv) any
transaction from which the director received an improper personal benefit.
This provision relates only to breaches of duty by directors in their capacity
as directors (and not in any other corporate capacity, such as officers) and
limits liability only for breaches of fiduciary duties under Georgia Law (and
not for violation of other laws, such as the federal securities laws). The
Company's Amended and Restated Articles of Incorporation, as amended (the
"Articles of Incorporation"), exonerate the Company's directors from monetary
liability to the extent described above.
In addition to such rights as may be provided by law, the Company's Amended
and Restated Bylaws (the "Bylaws") provide broad indemnification rights to the
Company's directors and such officers, employees and agents as may be selected
by such directors, with respect to various civil and criminal liabilities and
losses which may be incurred by such director, officer, agent or employee
pursuant to any pending or threatened litigation or other proceedings, except
that such indemnification does not apply in the same situations described
above with respect to the exculpation from liability of the Company's
directors. The Company is also obligated to reimburse such directors and other
parties for expenses, including legal fees, court costs and expert witness
fees, incurred by such person in defending against any such liabilities and
losses, as long as such person in good faith believes that he or she acted in
accordance with the applicable standard of conduct with respect to the
underlying accusations giving rise to such liabilities or losses and agrees to
repay to the Company any advances made under the Bylaws. Any amendment or
other modification to the Bylaws which limits or otherwise adversely affects
the rights to indemnification currently provided therein shall apply only to
proceedings based upon actions and events occurring after such amendment and
delivery of notice thereof to the indemnified parties.
The Company has entered into separate indemnification agreements with each
of its directors and certain of its officers, whereby the Company agreed,
among other things, to provide for indemnification and advancement of expenses
in a manner and subject to terms and conditions similar to those set forth in
the Bylaws. These agreements may not be abrogated by action of the
shareholders. In addition, the Company
II-1
<PAGE>
holds an insurance policy covering directors and officers under which the
insurer agrees to pay, subject to certain exclusions, for any claim made
against the directors and officers of the Company for a wrongful act that they
may become legally obligated to pay or for which the Company is required to
indemnify the directors or officers.
The Company believes that the above protections are necessary in order to
attract and retain qualified persons as directors and officers.
Reference is hereby made to Section of the Underwriting Agreement, the
form of which is filed as Exhibit 1.1 hereto, in which the Underwriters agree
to indemnify the directors and officers of the Company and certain other
persons against certain civil liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission (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 the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The share numbers presented below are provided with respect to the shares of
Common Stock, Series B Common Stock, Series C Common Stock, Series D Common
Stock, Series E Common Stock, Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock and reflect the recapitalization on a share
for share basis into Common Stock which will occur upon the completion of the
offering.
In January 1997, the Company sold an aggregate of 3,450,000 shares of Common
Stock to four investors at a price of $0.002 per share as the initial
issuances of stock in the Company. Each of the investors was an accredited
investor.
In December 1996, the Company entered into a $500,000 convertible promissory
note with an accredited investor. In April 1997, the investor converted the
outstanding principal amount and promissory note and accrued interest thereon
into 509,305 shares of Common Stock at a price of $1.00 per share.
In March 1997, the Company issued 3,450,000 shares of Common Stock in
exchange for 3,450,000 shares of common stock of Endeavor to four investors
pursuant to an agreement of merger. Each of the investors were accredited.
From February 1997 to July 1998, the Company sold 2,797,500 shares of Common
Stock to 35 accredited investors at a price of $2.00 per share.
In August 1996, Endeavor borrowed $200,000 from an accredited investor. In
March 1998, the Company converted the debt into 100,000 shares of Common Stock
at a price of $2.00 per share.
In August 1997, the Company borrowed $4.0 million from Sirrom Investments,
Inc. ("Sirrom"). In connection with this loan, the Company issued Sirrom
warrants to purchase 557,490 shares of Common Stock at $0.01 per share.
In December 1997, the Company sold 1.1 million shares of Common Stock to
Premiere Technologies, Inc. ("Premiere Technologies") at a price of $2.00 per
share and issued a warrant to purchase an additional 1.0 million shares of
Common Stock at an exercise price of $2.00 per share. In April 1998, Premiere
Technologies exercised the outstanding warrant in full.
II-2
<PAGE>
From January 1997 to August 1998, the Company granted options to purchase
2,101,422 shares of Common Stock at an exercise price of $2.00 per share to
directors, executive officers, employees, independent sales representatives
and consultants and options to purchase 28,114 shares of Common Stock at an
exercise price of $4.00 per share to employees and independent sales
representatives. From November 1998 to December 1998, the Company granted
options to purchase 1,950,000 shares of Common Stock at an exercise price of
$15.00 per share to certain executive officers. From December 1998 to January
1999, the Company granted options to purchase 827,000 shares of Common Stock
at an exercise price of $20.00 per share to employees. As of September 16,
1998, options to purchase 120,000 shares at an exercise price of $2.00 had
been exercised.
In July 1998, the Company issued to Matria Healthcare, Inc. ("Matria") a
warrant to purchase 80,000 shares of Common Stock at an exercise price equal
to the price offered to the public hereby.
In August 1998, the Company sold 667,000 shares of Common Stock to HBO &
Company of Georgia ("HBOC") at a price of $15.00 per share. In connection with
the sale of stock to HBOC, the Company issued to HBOC a warrant to purchase
300,000 shares of Common Stock at $18.00 per share.
In September 1998, the Company sold 134,000 shares of Common Stock to Matria
at a price of $15.00 per share. In connection with the sale of stock to
Matria, the Company issued to Matria a warrant to purchase 60,000 shares of
Common Stock at $18.00 per share.
In October 1998, the Company issued 30,000 shares of restricted stock in
exchange for corporate communications services.
In December 1998, the Company issued 50,000 shares of Common Stock to
certifiedemail.com, Inc. in exchange for all of its assets. The exchange price
per share was equal to $20.00.
In January 1999, the Company issued 1,750,000 shares of Common Stock to SHN
in exchange for all of the outstanding stock, options and warrants and certain
convertible debt of Sapient Health Network, Inc. The exchange prices per share
was equal to $20.00.
In January 1999, the Company issued 625,000 shares of Common Stock in
exchange for all of the outstanding stock, options and warrants and certain
convertible debt of Direct Medical Knowledge, Inc. The exchange prices per
share was equal to $20.00.
In January 1999, the Company sold 1,698,750 shares of Common Stock to 21
holders at a price of $20.00 per share.
In January 1999, the Company issued warrants to purchase an aggregate of
900,000 shares of Common Stock at an exercise price of $20.00 per share.
In January 1999, the Company issued 180,000 shares of Common Stock in
exchange for life sciences content.
In January 1999, the Company issued 100,000 shares of Common Stock to
Nationwide Medical Services, Inc. in exchange for a 30% interest in such
Company.
Each issuance of securities described above was made in reliance on one or
more of the exemptions from registration provided by Sections 3(a)(11), 4(2)
and 4(6) of the Securities Act, Regulation D and Rule 701, as promulgated by
the Commission pursuant to the Securities Act. Recipients of securities in
these transactions represented their intention to acquire the securities for
investment purposes only and not with a view to or for the sale in connection
with any distribution thereof, and appropriate legends were affixed to the
share certificates issued in such transactions. All recipients of these
securities had adequate access, through their relationships with the Company,
to information about the Company.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Asset Purchase Agreement between Matria Healthcare, Inc., Quality
Diagnostic Services, Inc., Telemedics, Inc. and the Company dated
July 21, 1998, but effective as of July 1, 1998.+
2.2 Asset Purchase Agreement between certifiedemail.com, Inc., Gary B.
"Court" Coursey, Jr. and the Company dated December 31, 1998.+
2.3* Agreement and Plan of Merger dated as of January 4, 1999 between
the Company, SHN Merger Corp. and Sapient Health Network, Inc.+
2.4* Agreement and Plan of Merger dated as of January 12, 1999 by and
among the Company, SHN Merger Corp., Direct Medical Knowledge,
Inc., the shareholders of Direct Medical Knowledge, Inc. and Kemp
Battle, the indemnitor representative.+
2.5* Amendment to Agreement and Plan of Merger dated as of January 15,
1999 by and among the Company, Direct Medical Knowledge, Inc.,
SHN Merger Corp., the shareholders of Direct Medical Knowledge,
Inc. and Kemp Battle, the indemnitor representative.+
2.6* Stock Purchase Agreement dated as of January 28, 1999 between the
Company and Nationwide Medical Services, Inc.+
Amended and Restated Articles of Incorporation dated August 12,
3.1 1998.
3.2 Articles of Amendment to the Amended and Restated Articles of
Incorporation dated August 17, 1998.
3.3 Articles of Amendment to the Amended and Restated Articles of
Incorporation dated August 24, 1998.
3.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation dated January 22, 1999.
3.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation dated January 26, 1999.
3.6 Amended and Restated Bylaws.
4.1 See Exhibits 3.1 through 3.6 for provisions of the Amended and
Restated Articles of Incorporation, as amended, and the Amended
and Restated Bylaws defining the rights of the holders of Common
Stock of the Company.
4.2* Specimen Common Stock Certificate.
5.1* Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
9.1* Voting Agreement dated on or about January 14, 1999 between the
Company and certain shareholders.
10.1 Stock Purchase Warrant between Sirrom Capital Corporation and the
Company dated August 29, 1997 (as assigned to Sirrom Investments,
Inc.).
10.2* Escrow Agreement dated as of January 28, 1999 by and among the
Company, Nationwide Medical Services, Inc. and SunTrust Bank,
Atlanta, as escrow agent.
10.3 Registration Rights Agreement between Premiere Technologies, Inc.
and the Company dated December 15, 1997.
10.4 Sublease Agreement between Premiere Technologies, Inc. and the
Company dated December 15, 1997.
10.5 Equipment Lease between Premiere Technologies, Inc. and the
Company dated December 15, 1997.
10.6* Co-Marketing and Integration Agreement between Premiere
Communications, Inc. and the Company dated December 15, 1997.
10.7* Contract Addendum to Co-Marketing and Integration Agreement
between Premiere Communications, Inc. and the Company dated
September 1, 1998.
10.8 Escrow Agreement between certifiedemail.com, Inc., SunTrust Bank,
Atlanta and the Company dated December 31, 1998.
10.9 Stock Purchase Warrant between Matria Healthcare, Inc. and the
Company dated July 21, 1998.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.10 Noncompetition Agreement between Quality Diagnostic Services,
Inc., Telemedics, Inc., Matria Healthcare, Inc. and the Company
dated July 21, 1998, but effective as of July 1, 1998.
10.11 Management Services Agreement between Matria Healthcare, Inc. and
the Company dated July 1, 1998.
10.12 Licensed Premises Agreement between Matria Healthcare, Inc. and
the Company dated July 21, 1998.
10.13* Escrow Agreement dated January 22, 1999 among the Company,
SunTrust Bank, Atlanta, as escrow agent, the shareholders of
Direct Medical Knowledge, Inc. and Kemp Battle, as indemnitor
representative.
10.14 Noncompetition Agreement between Jeffrey T. Arnold, Matria
Healthcare, Inc. and the Company dated July 21, 1998.
10.15 Form of Noncompetition Agreement between certain employees of the
Company, Matria Healthcare, Inc. and the Company dated July 21,
1998. (Certain employees include Rick Anderson, Jeff M. Brown and
Stuart Gurr).
10.16 Noncompetition Agreement between Blake Whitney, Matria Healthcare,
Inc. and the Company dated July 21, 1998.
10.17 Investment Agreement between HBO & Company of Georgia and the
Company dated August 24, 1998 as amended by Amendment to
Investment Agreement dated October 23, 1998.**
10.18 Amendment to Investment Agreement dated as of October 23, 1998
between the Company and HBO & Company of Georgia.**
10.19 Warrant between HBO & Company of Georgia and the Company dated
August 24, 1998.
10.20 Investment Agreement between Matria Healthcare, Inc. and the
Company dated September 1, 1998.
10.21 Warrant between Matria Healthcare, Inc. and the Company dated
September 1, 1998.
10.22 Procurement and Trafficking Agreement between DoubleClick Inc. and
the Company dated June 16, 1998.**
10.23 Strategic Alliance Agreement between ENVOY Corporation and the
Company dated June 15, 1998.**
10.24 First Amended and Restated Siteman Interactive and Support
Services Agreement (including Non-Exclusive License) between iXL,
Inc. and the Company dated June 17, 1998.**
10.25 iLearn Development and Interactive Services Agreement between iXL,
Inc. and the Company dated June 17, 1998.**
10.26 License Agreement between Network Computer, Inc. and the Company
dated May 29, 1998.**
10.27 Amendment No. 1 to the License Agreement between Network Computer,
Inc. and the Company dated as of November 11, 1998.**
10.28 Physician Service License and Service Agreement between Thomson
Healthcare Information Company, Inc. and the Company dated July
15, 1998.**
10.29 Virtual Internet Provider (VIP) Agreement between UUNET
Technologies, Inc. and the Company dated September 11, 1998.**
10.30 Lease Agreement between Quality Diagnostic Cardiac Services, Inc.
and Pavilion Partners, L.P. dated September 16, 1996.
10.31 Sublease Agreement between Quality Diagnostic Services, Inc. and
CardGuard USA, Inc. dated March 30, 1998.
Employment Agreement between Jeffrey T. Arnold and the Company
10.32 dated September 30, 1998.
10.33 Employment Agreement between W. Michael Heekin and the Company
dated July 11, 1997.
Employment Agreement between K. Robert Draughon and the Company
10.34 dated February 1, 1998.
10.35 Memorandum of Understanding between William P. Payne, Premiere
Technologies, Inc. and the Company dated July 6, 1998.
10.36 Amended and Restated 1997 Stock Incentive Plan.
10.37* Escrow Agreement dated January 25, 1999 by and among the Company,
SunTrust Bank, Atlanta, as escrow agent, and Philippe Carnlon, as
the shareholder representative of the shareholders of Sapient
Health Network, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.38 WebMD, Inc. Director Stock Option Plan.
10.39 Form of Director's and Officer's Indemnification Agreement.
10.40 Co-Marketing Agreement between E*TRADE Group, Inc. and the Company
dated October 20, 1998.**
10.41 License and Service Agreement between Delmar Publishers and the
Company dated December 22, 1998.**
10.42 Memorandum of Understanding between CNN Interactive, a division of
Cable News Network, Inc., and the Company dated December 16,
1998.**
10.43 Strategic Distribution Alliance Agreement between HBO & Company of
Georgia and the Company dated October 23, 1998.**
10.44 Addendum to Strategic Distribution Alliance Agreement dated
November 3, 1998 between the Company and HBO & Company of
Georgia.**
10.45 Internet Customization and Access Services Agreement between
CompuServe Interactive Services, Inc. and the Company dated
December 18, 1998.**
10.46* Letter Agreement dated as of January 20, 1999 between the Company
and McKesson HBOC, Inc.
10.47 Restated Shareholders Agreement between certain shareholders and
the Company dated October 18, 1996.
10.48 First Amendment to Restated Shareholders Agreement between certain
shareholders and the Company dated December 15, 1997.
10.49 Second Amendment to Restated Shareholders Agreement between
certain shareholders and the Company dated August 24, 1998.
10.50 Third Amendment to Restated Shareholders Agreement between certain
shareholders and the Company dated September 1, 1998.
10.51 Fourth Amendment to Restated Shareholders Agreement between
certain shareholders and the Company dated January 21, 1999.
10.52 Shareholders Agreement between certain shareholders and the
Company dated August 24, 1998.
10.53* First Amendment dated January 27, 1999 to Shareholders Agreement
dated as of August 24, 1998 between the Company and certain
shareholders.
10.54* Letter Agreement and Related Documents dated December 31, 1998
between the Company and HBO & Company of Georgia.
10.55* Data License and Product Remarketer Agreement dated December 31,
1998 by and between MediRisk, Inc. and the Company.
10.56* Content License Agreement dated as of December 31, 1998 between
InteliHealth, Inc. and the Company.
10.57* Letter Agreement dated as of January 15, 1999 between the Company
and Transcriptions, Ltd.
10.58* Registration Rights Agreement (the "1999 Registration Rights
Agreement") dated as of January 13, 1999 among the Company and
KEP VI, LLC, Hall Family Investments, L.P. and Holcombe T. Green,
Jr.
10.59* First Amendment dated as of January 22, 1999 between the Company
and Croft & Bender, LLC. to the 1999 Registration Rights
Agreement.
10.60* Second Amendment dated as of January 25, 1999 between the Company
and KEP VI, LLC, Hall Family Investments, L.P. and Holcombe T.
Green, Jr. to the 1999 Registration Rights Agreement.
10.61* Third Amendment dated as of January 27, 1999 between the Company
and certain principals of Gleacher NatWest Inc. and Tenet
Healthcare Corporation to the 1999 Registration Rights Agreement.
10.62* Fourth Amendment dated as of January 28, 1999 between the Company
and Trigon Healthcare, Inc. to the 1999 Registration Rights
Agreement.
10.63* Investment Agreement dated as of January 27, 1999 between the
Company and Premier Purchasing Partners, L.P.
10.64* Amendment dated January 27, 1999 to the Investment Agreement dated
August 24, 1998 between the Company and HBO & Company of Georgia.
10.65* Investment Warrant between Premier Purchasing Partners, L.P. and
the Company dated January 27, 1999.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.66* Performance-based Warrant between Premier Purchasing Partners,
L.P. and the Company dated January 27, 1999.
10.67* Letter Agreement dated January 27, 1999 between the Company and
Gleacher NatWest Inc.
10.68* Warrant between Gleacher NatWest Inc. and the Company dated
January 27, 1999.
10.69* Letter Agreement dated January 28, 1999 between E. I. du Pont de
Nemours and Company and the Company.
10.70* Stock Purchase Agreement dated January 28, 1999 between the
Company and E. I. du Pont de Nemours and Company.
21.1 Subsidiaries of the Company.
23.1* Consent of Nelson Mullins Riley & Scarborough, L.L.P.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of Berg & Company.
24.1 Power of Attorney (included on signature pages hereto).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment has been requested for certain confidential portions
of this exhibit pursuant to Rule 406 under the Securities Act. In
accordance with Rule 406, these confidential portions have been omitted
from this exhibit and filed separately with the Commission.
+ The Company agrees to furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request, as
provided in Item 601(b)(2) of Regulation S-K.
(b) Financial Statement Schedules
Valuation and Qualifying Accounts Schedule
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide to the underwriter, at the closing
specified in the underwriting agreement, certificates in such denominations
and registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Company 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 Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company 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.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on this 27th day of January, 1999.
WEBMD, INC.
/s/ Jeffrey T. Arnold
By __________________________________
JEFFREY T. ARNOLD CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each of the undersigned officers and
directors of WebMD, Inc. (the "Company"), a Georgia corporation, for himself
and not for one another, does hereby constitute and appoint Jeffrey T. Arnold
and Jay P. Gilbertson, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign his name to any and all amendments,
including post-effective amendments, to this registration statement, and to
sign any registration statement for the same offering covered by this
registration statement that is to be effective upon filing pursuant to Section
462(b) of the Securities Act of 1933, and all post-effective amendments
thereto, and to cause the same (together with all Exhibits thereto and all
documents in connection therewith) to be filed with the Securities and
Exchange Commission, granting unto said attorneys and each of them full power
and authority to do and perform each and every act and thing necessary and
proper to be done in and about the premises, as fully to all intents and
purposes as the undersigned could do if personally present, and each of the
undersigned for himself hereby ratifies and confirms all that said attorneys-
in-fact and agents or any one of them, or his or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities listed and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Jeffrey T. Arnold Chairman of the January 27,
- ------------------------------------- Board and Chief 1999
JEFFREY T. ARNOLD Executive Officer
(Principal
Executive Officer)
/s/ K. Robert Draughon Chief Financial January 27,
- ------------------------------------- Officer (Principal 1999
K. ROBERT DRAUGHON Financial and
Accounting Officer)
/s/ William P. Payne Vice Chairman of the January 27,
- ------------------------------------- Board 1999
WILLIAM P. PAYNE
II-8
<PAGE>
SIGNATURE TITLE DATE
/s/ Jay P. Gilbertson President, Chief January 27,
- ------------------------------------- Operating Officer 1999
JAY P. GILBERTSON and Director
/s/ W. Michael Heekin Executive Vice January 27,
- ------------------------------------- President, General 1999
W. MICHAEL HEEKIN Counsel, Secretary
and Director
/s/ Albert J. Bergonzi Director January 27,
- ------------------------------------- 1999
ALBERT J. BERGONZI
/s/ Lucius E. Burch, III Director January 27,
- ------------------------------------- 1999
LUCIUS E. BURCH, III
/s/ U. Bertram Ellis, Jr. Director January 27,
- ------------------------------------- 1999
U. BERTRAM ELLIS, JR.
/s/ J. Rex Fuqua Director January 27,
- ------------------------------------- 1999
J. REX FUQUA
/s/ S. Taylor Glover Director January 27,
- ------------------------------------- 1999
S. TAYLOR GLOVER
/s/ Boland T. Jones Director January 27,
- ------------------------------------- 1999
BOLAND T. JONES
/s/ Jouko J. Rissanen Director January 27,
- ------------------------------------- 1999
JOUKO J. RISSANEN
/s/ Glenn W. Sturm Director January 27,
- ------------------------------------- 1999
GLENN W. STURM
II-9
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 21st day of July, 1998 (the "Execution Date"), to be effective as of July
1, 1998 (the "Effective Date"), by and among MATRIA HEALTHCARE, INC., a Delaware
corporation (together with any of its designated wholly-owned subsidiaries,
"Purchaser"), ENDEAVOR TECHNOLOGIES, INC., a Georgia corporation ("Endeavor"),
QUALITY DIAGNOSTIC SERVICES, INC., a Georgia corporation ("QDS") and TELEMEDICS,
INC., a Georgia corporation ("Telemedics"). QDS and Telemedics are sometimes
hereinafter referred to together as the "Sellers" and individually as a
"Seller."
BACKGROUND:
----------
A. Endeavor owns all of the issued and outstanding shares of the capital
stock of QDS and of Telemedics.
B. The Sellers are engaged in the business of distributing heart
monitoring equipment and providing diagnostic telemedicine heart monitoring
services (the "Business").
C. Subject to the terms and conditions contained herein, as set forth in
this Agreement, the Sellers sell to Purchaser, and Purchaser purchases from the
Sellers, as of the Effective Date, substantially all of the Sellers' assets.
D. It is the intent of the parties that this Agreement reflect and
document the terms of the above transfer of the assets of the Business from
Endeavor and the Sellers to the Purchaser as of the Effective Date.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 TRANSFER OF ASSETS. Upon the terms and subject to the conditions
------------------
contained herein, QDS and Telemedics hereby sell, convey and deliver to
Purchaser, and Purchaser hereby purchases from QDS and Telemedics, as of the
Effective Date, all the "QDS Assets" and "Telemedics Assets", respectively (as
each are defined in Section 1.2 hereof), free and clear of any and all liens,
charges, security interests, mortgages, claims and encumbrances of any kind
(each a "Security Interest"), other than the Security Interests listed on
Schedule 1.1 hereto (the "Permitted Liens").
- ------------
1.2 ASSETS. For purposes of this Agreement, "Assets" means the "QDS
------
Assets" (as defined in Section 1.2.1 hereof) and the "Telemedics Assets" (as
defined in Section 1.2.2 hereof).
<PAGE>
1.2.1 THE QDS ASSETS. The QDS Assets means all assets, properties
--------------
and rights of QDS, other than the "QDS Excluded Assets" (as defined in Section
1.3 hereof). Without limiting the generality of the foregoing, QDS Assets
includes the following assets of QDS, except to the extent that such assets are
QDS Excluded Assets:
(a) all machinery, equipment, supplies, inventories, office
equipment, furniture, vehicles and other personal property;
(b) all copyrightable works, copyrights, trademarks, service marks,
logos, trade dress, trade names, patents, patent applications, processes,
inventories, computer programs, trade secrets, confidential business
information, goodwill and other intellectual property owned or used by QDS and
all of QDS's rights in and to any QDS intellectual property licensed to QDS by
third parties, including, without limitation, the names "Quality Diagnostic
Services and "QDS" (collectively, "QDS Intellectual Property");
(c) all cash, cash equivalents, deposits or investments equal to the
aggregate amount of "Current Liabilities" as set forth on the "June 30, 1998
Balance Sheets," (as both are defined in Section 1.4(b) hereof);
(d) all accounts receivable, notes receivable and other receivables
and all documents, records and other agreements relating thereto;
(e) to the extent assignable, all licenses, franchises, approvals,
permits, registrations and other similar rights obtained from governmental
agencies or authorities (and all applications therefor);
(f) all of QDS's rights under all contracts, agreements, covenants,
options, leases, guaranties and other similar arrangements (whether oral or
written) listed on Schedule 1.2.1(f) hereof;
-----------------
(g) all prepaid property and ad valorem taxes, interest and other
expenses;
(h) all telephone and facsimile numbers;
(i) all catalogs, brochures, customer lists, files, training
materials, marketing materials, and other books and records;
(j) all claims, refunds, causes of action, choses in action, rights
of recovery, rights of set off and rights of recoupment against any other person
or entity;
(k) all right, title and interest of QDS, if any, in and to the
software (the "Endeavor 2000 Software") to be developed pursuant to Exhibit I of
that certain Distribution Agreement by and between Card Guard Scientific
Survival Ltd. ("Card Guard") and QDS (the "Card Guard Agreement"), but only to
the extent that such right, title and interest is transferable, it being
understood and agreed that: (i) the Endeavor 2000 Software is taken by
Purchaser, if at
-2-
<PAGE>
all, as is, without any representation or warranty of any kind whatsoever; and
(ii) neither Endeavor nor the Sellers makes any representation or warranty as to
whether any right, title or interest, if any, in or to the Endeavor 2000
Software is transferable; and
(l) all QDS Assets, purchased or received by QDS in the ordinary
course of the Business, during the period from the Effective Date through the
Execution Date (the "Interim Period").
1.2.2 THE TELEMEDICS ASSETS. The Telemedics Assets means all
---------------------
assets, properties and rights of Telemedics, other than the "Telemedics Excluded
Assets" (as defined in Section 1.3 hereof). Without limiting the generality of
the foregoing, Telemedics Assets includes the following assets of Telemedics,
except to the extent such assets are Telemedics Excluded Assets:
(a) all machinery, equipment, supplies, inventories, office
equipment, furniture, vehicles and other personal property;
(b) all copyrightable works, copyrights, trademarks, service marks,
logos, trade dress, trade names, patents, patent applications, processes,
inventories, computer programs, trade secrets, confidential business
information, goodwill and other intellectual property owned or used by
Telemedics, and all of Telemedics' rights in and to any Telemedics intellectual
property licensed to Telemedics by third parties (collectively, "Telemedics
Intellectual Property"), but excluding the name "Telemedics,";
(c) all cash, cash equivalents, deposits or investments equal to the
aggregate amount of "Current Liabilities" as set forth on the "June 30, 1998
Balance Sheets;"
(d) all accounts receivable, notes receivable and other receivables
and all documents, records and other agreements relating thereto;
(e) to the extent assignable, all licenses, franchises, approvals,
permits, registrations and other similar rights obtained from governmental
agencies or authorities (and all applications therefor);
(f) all of Telemedics' rights under all contracts, agreements,
covenants, options, leases, guaranties and other similar arrangements (whether
oral or written) listed on Schedule 1.2.2(f) hereof;
-----------------
(g) all prepaid property and ad valorem taxes, interest and other
expenses;
(h) all telephone and facsimile numbers;
(i) all catalogs, brochures, customer lists, files, training
materials, marketing materials, and other books and records;
-3-
<PAGE>
(j) all claims, refunds, causes of action, choses in action, rights
of recovery, rights of set off and rights of recoupment against any other person
or entity; and
(k) all Telemedics Assets, purchased or received by Telemedics, in
the ordinary course of the Business, during the Interim Period.
1.3 EXCLUDED ASSETS. Only the assets of QDS as set forth on Schedule 1.3A
--------------- --------------
(the "QDS Excluded Assets") and only the assets of Telemedics as set forth on
Schedule 1.3B (the "Telemedics Excluded Assets") are retained by QDS and
- -------------
Telemedics, respectively, and not sold to Purchaser pursuant to this Agreement.
The QDS Excluded Assets and the Telemedics Excluded Assets are referred to
collectively herein as the "Excluded Assets."
1.4 ASSUMED LIABILITIES. Upon the terms and subject to the conditions
-------------------
contained herein, at the "Execution" (as defined in Section 2.1 hereof)
Purchaser shall execute and deliver to the Sellers the "Assumption Agreement"
(as defined in Section 2.3(b) hereof), pursuant to which Purchaser assumes and
agrees to perform and discharge the following debts, liabilities and obligations
of each Seller (collectively, the "Assumed Liabilities"), as of the Effective
Date:
(a) all debts, liabilities and obligations arising after the
Effective Date under the contracts assigned to Purchaser pursuant to Sections
1.2.1(f) and 1.2.2(f) and listed and described on Schedule 1.2.1(f) and Schedule
----------------- --------
1.2.2(f) , respectively (but excluding any liabilities or obligations under such
- --------
contracts arising from any acts or omissions occurring prior to the Effective
Date), including, without limitation, the Sellers' obligations to provide heart
monitoring services thereunder;
(b) the liabilities and obligations reflected as current liabilities
on the (i) unaudited consolidated balance sheet of QDS dated as of June 30,
1998, and (ii) unaudited consolidated balance sheet of Telemedics dated as of
June 30, 1998 (collectively, the "June 30, 1998 Balance Sheets"), such June 30,
1998 Balance Sheets to be delivered to Purchaser at the Execution pursuant to
Section 2.2(h) hereof, including, without limitation, all amounts reflected
thereon for trade payables, accrued operating expenses, and accrued wages,
salaries and benefits (including vacation pay and sick leave) payable by
Endeavor or the Sellers to only the employees hired by Purchaser pursuant to
Section 5.2 hereof, but specifically excluding (i) payments or obligations
relating to severance pay or any other amounts due any such employees pursuant
to the terms of any employment agreement with Endeavor or either Seller,
including without limitation, severance payments and any other amounts due to
Anna McNamara and Alva Teets; (ii) payments or obligations relating to sick
leave for any employee in excess of payments due for 5 days of such sick leave
per employee; (iii) any liability or obligation payable to Endeavor or any other
affiliate of either Seller (including, without limitation, the amount of
$6,306,342.07 which is reflected as the "Due to Endeavor" line item on the June
30, 1998 Balance Sheet of QDS and the amounts of $160,189.70 and $135,589.07
which are reflected as the "Due to Endeavor" and the "Due to QDS" line items on
the June 30, 1998 Balance Sheet of Telemedics); (iv) the amount of $509,165.00
that is shown as "Deferred Revenue" on the June 30, 1998 Balance Sheet of QDS;
(v) the amount of $157,600.00 which represents sales and tax liability for past
purchases of cardiac monitors from Card Guard, and which is included in the
"Accounts
-4-
<PAGE>
Payable" line item on the June 30, 1998 Balance Sheet of QDS; (vi) the amount of
$36,007.29 that constitute Excluded Liabilities which are included in the
"Accounts Payable" line item on the June 30, 1998 Balance Sheet of QDS; and
(vii) any other liabilities listed as Excluded Liabilities in Sections 1.5(a)
through 1.5(p) hereof (the "Current Liabilities"); and
(c) the liabilities and obligations of either Seller, other than
Excluded Liabilities in Sections 1.5(a) through 1.5(p), incurred in the ordinary
course of the Business, during the Interim Period.
1.5 EXCLUDED LIABILITIES. Notwithstanding anything else contained herein
--------------------
to the contrary, all liabilities and obligations of Endeavor or the Sellers
(whether known or unknown, liquidated or unliquidated, contingent or fixed)
other than the Assumed Liabilities (collectively, the "Excluded Liabilities")
shall remain the liabilities and obligations of Endeavor and the Sellers and are
not assumed by Purchaser pursuant hereto (regardless of whether any such
liabilities or obligations are disclosed in this Agreement). Endeavor and each
Seller hereby agree that it shall fully and timely pay, perform and discharge
all of its Excluded Liabilities in accordance with their respective terms.
Without limiting the generality of the foregoing, Excluded Liabilities include
the following, whether or not reflected as Current Liabilities on the June 30,
1998 Balance Sheets:
(a) any liability or obligation arising under any contract not listed
on Schedule 1.2.1(f) or Schedule 1.2.2(f) hereof;
----------------- -----------------
(b) any liability or obligation related to the Excluded Assets;
(c) any liability or obligation to any employee of Endeavor or either
Seller, not hired by Purchaser pursuant to Section 5.2 hereof, and any liability
or obligation under any employee benefit plan maintained by Endeavor or either
Seller;
(d) any liability or obligation arising out of any termination by
Endeavor or either Seller of the employment of any employee as a result of this
transaction or otherwise and any liability or obligation related to any former
employee of Endeavor or either Seller who retired effective as of or prior to
the Execution Date;
(e) any liability or obligation under any litigation, arbitration,
investigation or other proceeding brought against either Seller with respect to
any matter occurring prior to the Execution Date (regardless of whether it is
pending as of or has been threatened or asserted prior to the Execution Date),
including, without limitation, the lawsuit entitled QDS v. Harry A. Kopelman,
-------------------------
MD, et al., file number E-61332 in the Superior Court of Fulton County, State of
- ----------
Georgia;
(f) any liability or obligation for any income taxes owed by Endeavor
or either Seller and any liability or obligation for any sales, use or other
taxes arising in connection with the consummation of the transactions
contemplated by this Agreement. Purchaser hereby acknowledges and agrees that
income taxes on the revenue of the Business earned during the
-5-
<PAGE>
Interim Period shall be the liability of Purchaser and any income taxes assessed
against Endeavor or Sellers with respect to the revenue of the Business earned
during the Interim Period will be paid by Purchaser;
(g) any tax liability that may be imposed, with respect to the
Assets, by any federal, state or local government on the ownership, sale,
operation or use of the Assets, relating to any period ending on or before the
Effective Date;
(h) any liability or obligation of either Seller relating to any
breach of contract, breach of warranty, tort, infringement or violation of law;
(i) any liability or obligation payable to Endeavor or any other
affiliate of either Seller;
(j) any liability or obligation of Endeavor or either Seller to
indemnify any person by reason of the fact that such person was an employee,
officer, director or agent of Endeavor or such Seller (or such person was
serving as an employee, officer, director or agent of any other entity at the
request of Endeavor or such Seller) prior to the Execution Date;
(k) any liability or obligation of Endeavor or either Seller for
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby;
(l) any liability or obligation of QDS under or pursuant to the Card
Guard Agreement;
(m) any liability or obligation of Endeavor or either Seller relating
to the current portion of the long-term debt of Endeavor or the Sellers or
Endeavor's or the Sellers' indebtedness to Sirrom Capital Corporation and Sirrom
Investments, Inc. (the "Sirrom Indebtedness");
(n) any liability or obligation of Endeavor or either Seller relating
to that certain Lease by and between Pavilion Partners, L.P. and QDS, dated
September 16, 1996, for the premises of 1100 Lake Hearn Drive, Atlanta, Georgia
and that certain Lease dated April 1, 1996 between Siemens' Credit Corporation
and Atlanta Cardiology Group, P.C.;
(o) any liability or obligation of Endeavor or either Seller relating
to Current Liabilities in excess of cash, cash equivalents, deposits or
investments as set forth on the June 30, 1998 Balance Sheets;
(p) any liability covered by insurance maintained by Endeavor or
either Seller immediately prior to the Execution Date, to the extent of such
coverage; and
(q) any other liability or obligation of either Seller not
specifically set forth in Section 1.4 hereof.
-6-
<PAGE>
1.6 PROCEDURES FOR ASSETS NOT TRANSFERABLE. If any of the contracts or
--------------------------------------
other property or rights included in the Assets are not assignable or
transferable either by virtue of the provisions thereof or under applicable law
without the consent of some other person or entity and such consents are not
obtained by Endeavor or the Sellers by the Execution Date, the appropriate
Seller shall notify Purchaser thereof at the Execution or by indicating such
fact on a Schedule to the Agreement. With respect to any such required consent
not obtained prior to the Execution, this Agreement and the related instruments
of transfer shall not constitute an assignment or transfer thereof, and
Purchaser shall not assume such Seller's obligations thereunder. Instead, such
Seller shall use all reasonable efforts to obtain any such required consents not
previously obtained as soon as reasonably possible after the Execution.
1.7 PURCHASE PRICE. Subject to the terms and conditions contained herein,
--------------
at the Execution Purchaser shall pay to QDS an aggregate purchase price for the
Assets in the amount of $17,000,000 (the "Purchase Price") in accordance with
Section 2.3(a) hereof.
1.8 ADDITIONAL PURCHASE PRICE PAYMENTS. Subject to the terms and
----------------------------------
conditions set forth in this Section 1.8, Purchaser shall make additional
payments to QDS (or, if QDS no longer exists, to Endeavor) in consideration for
the Assets and in addition to the Purchase Price (each such additional payment
being an "Additional Purchase Price Payment"), as follows:
(a) If Revenues (as defined below) equal or exceed $16,000,000 during
the calendar year 1999, Purchaser shall pay an Additional Purchase Price Payment
of $1,000,000;
(b) In addition to the Additional Purchase Price Payment set forth in
Section 1.8(a) above, if the Revenues equal or exceed $17,000,000 but are less
than or equal to $20,000,000, Purchaser shall pay an Additional Purchase Price
Payment equal to $1,000,000 multiplied by the number of $1,000,000 increments by
which Revenues exceed $16,000,000, during calendar year 1999; and
(c) In addition to the Additional Purchase Price Payments set forth
in Sections 1.8(a) and (b) above, if Revenues equal or exceed $20,300,000 during
the calendar year 1999, Purchaser shall pay an Additional Purchase Price Payment
of $1,000,000.
As used in this Section 1.8, the term "Revenues" shall mean all revenues of
the Business (as it exists on the date hereof and net of any subsequent
acquisitions by Purchaser) recognized by the Purchaser in accordance with
generally accepted accounting principles ("GAAP").
No later than March 31, 2000, Purchaser shall cause to be prepared in
accordance with GAAP and delivered to Endeavor an income statement of the
Business for the year ended December 31, 1999. Payment of all Additional
Purchase Price Payments calculated by the Purchaser to be due shall be made by
wire transfer simultaneously with the delivery of such income statement. At
Purchaser's expense, prior to the date of delivery such income statement shall
be reviewed, and the achievement of the goals, or the failure to achieve the
goals, set forth in this Section 1.8 shall be verified by, KPMG Peat Marwick LLP
(or such other national accounting firm chosen by Purchaser). Endeavor and, on
Endeavor's behalf, Ernst & Young,
-7-
<PAGE>
LLP (or such other national accounting firm chosen by Endeavor) shall have the
right at reasonable times during normal business hours at any time commencing on
the date of receipt of the income statement delivered pursuant to this Section
1.8 and ending 60 days thereafter to inspect the books and records of Purchaser
in order to confirm the information set forth in such income statement. Any
dispute arising concerning such income statement shall be resolved in the same
manner as disputes are resolved pursuant to Section 1.9(c) below.
1.9 EXECUTION DATE ADJUSTMENTS.
--------------------------
(a) Within 10 days following the Execution Date, (i) Purchaser shall
inform Sellers in writing ("Purchaser's Adjustment Letter") of any amounts it
believes represent (x) any amount by which the cash, cash equivalents, deposits
or investments of Sellers as of June 30, 1998, plus any cash contributed to
Sellers by Endeavor during the Interim Period, was less than the Current
Liabilities of Sellers on June 30, 1998; (y) cash or other assets of the
Business received by the Sellers after the Effective Date which were not
deposited in a bank account of Sellers transferred to Purchaser on the Execution
Date or otherwise retained in the Business or used in the ordinary course of the
Business; or (z) payments or other disbursements made by Sellers, or assets
transferred by Sellers, during the Interim Period, otherwise than in the
ordinary course of the Business, other than non-cash accounting adjustments
contemplated by Section 1.4(b)(iii), it being understood and agreed that any
payments of Current Liabilities are in the ordinary course of the Business
(collectively, "Purchaser's Adjustments"); and (ii) Sellers shall inform
Purchaser in writing ("Sellers' Adjustment Letter") of any amounts it believes
represent (A) cash deposited after the Effective Date in bank accounts of
Sellers transferred to Purchaser on the Execution Date or other assets received
by Sellers after the Effective Date which were not derived from the Business and
represent property of Endeavor; (B) unreimbursed payments or other transfers of
property made by Endeavor after the Effective Date in the ordinary course of the
Business, other than payments referred to in clause (C); and (C) payments made
by Endeavor to either Seller which increased the cash, cash equivalents,
deposits or investments of Sellers above the amount of Current Liabilities as of
June 30, 1998 (collectively, "Sellers' Adjustments"). Purchaser agrees to allow
Endeavor reasonable access to the books of Purchaser in order to analyze the
Sellers' Adjustments, if any.
(b) Within 5 days following the receipt by Sellers of Purchaser's
Adjustment Letter, Sellers shall pay to Purchaser the amount of the Purchaser's
Adjustments, or shall object in writing as to any items thereon with which
Sellers disagree. Within 5 days following the receipt by Purchaser of Sellers'
Adjustment Letter, Purchaser shall pay to Sellers the amount of the Sellers'
Adjustments, or shall object in writing as to any items thereon with which
Purchaser disagrees.
(c) In the event of a dispute or disagreement between Purchaser and
Sellers as to any portion of the Purchaser's Adjustment or the Sellers'
Adjustment which Purchaser and Sellers are unable to resolve either Purchaser or
Endeavor may elect that the items remaining in dispute be submitted for
resolution to Arthur Andersen LLP, or such other national accounting firm
selected by mutual agreement of Purchaser and Endeavor (the member of which who
will be primarily responsible for resolving such dispute will have had
substantial audit experience and substantial
-8-
<PAGE>
experience in arbitration or other dispute resolution proceedings concerning
accounting issues) (the "Accountants"). The Accountants will, within 30 days
after submission, determine, based solely on presentations by Purchaser and
Endeavor and not by independent review, and render a written report to the
parties upon such remaining disputed items and the resultant calculation of the
Purchaser's Adjustment and/or the Sellers' Adjustment in accordance with the
provisions hereof, and such determination will be final, binding and conclusive
on the parties hereto. In resolving any disputed item, the Accountants may not
assign a value to such item greater than the greatest value for such item
claimed by either party or less than the smallest value for such item claimed by
either party. The fees and disbursements of the Accountants will be paid equally
by the Purchaser and Endeavor. Purchaser and Endeavor hereby agree to cooperate
and work in good faith and as expeditiously as reasonably possible to resolve
any and all disputes and disagreements.
(d) Upon resolution of any disagreements with respect to Purchaser's
Adjustment, Sellers shall pay to Purchaser the amount of Purchaser's Adjustment
determined to be correct pursuant to Section 1.9(c) above. Upon resolution of
any disagreements with respect to Sellers' Adjustment, Purchaser shall pay to
Sellers the amount of Sellers' Adjustment determined to be correct pursuant to
Section 1.9(c) above.
2. THE EXECUTION.
2.1 PLACE OF EXECUTION. Contemporaneously with the execution of this
------------------
Agreement, the closing of the transactions contemplated hereby (the "Execution")
shall occur at the offices of Troutman Sanders LLP, 600 Peachtree Street, N.E.,
Suite 5200, Atlanta, Georgia 30308.
2.2 DELIVERIES BY ENDEAVOR AND THE SELLERS. At the Execution, Endeavor
--------------------------------------
and the Sellers shall deliver to Purchaser the following:
(a) a Bill of Sale and Assignment (the "Bill of Sale"), substantially
in the form attached hereto as Exhibit A, and such other assignments and other
---------
instruments of transfer and conveyance necessary or appropriate to transfer and
assign the Assets to Purchaser, either before or after the Execution Date;
(b) an opinion of Nelson Mullins Riley & Scarborough, L.L.P., counsel
to Endeavor and the Sellers, dated as of the Execution Date, addressed to
Purchaser, in form and substance reasonably satisfactory to Purchaser,
addressing such matters as the Purchaser may reasonably request;
(c) a Noncompetition Agreement (the "Endeavor Noncompetition
Agreement"), substantially in the form attached hereto as Exhibit B, executed by
---------
each of Endeavor and the Sellers;
(d) a Management Services Agreement (the "Management Agreement"),
substantially in the form attached hereto as Exhibit C, executed by Endeavor;
---------
-9-
<PAGE>
(e) a License Agreement (the "Licensed Premises Agreement"),
substantially in the form attached hereto as Exhibit D, executed by Endeavor;
---------
(f) [EXHIBIT E IS INTENTIONALLY OMITTED]
---------
(g) a Strategic Alliance Agreement (the "Strategic Alliance
Agreement"), substantially in the form attached hereto as Exhibit F, executed by
---------
Endeavor;
(h) the June 30, 1998 Balance Sheets;
(i) Noncompetition Agreements (the "Employee Noncompetition
Agreements"), substantially in the forms attached hereto as Exhibits G-1, G-2,
------------------
G-3, G-4, G-5 and G-6, one to be executed by each of Jeffrey T. Arnold, Rick
- ---------------------
Anderson, Mark Bogart, Jeffrey M. Brown, Stuart Gurr and Blake Whitney,
respectively;
(j) a copy of the audited, consolidated financial statements of
Endeavor and its subsidiaries for the three year period ended December 31, 1997;
(k) a Stock Purchase Warrant (the "Incentive Warrant") substantially
in the form attached hereto as Exhibit H, executed by Endeavor;
---------
(l) the "Disclosure Letter" (as defined in Section 3 hereof);
(m) Hart-Scott-Rodino Representation Letter (the "Arnold Side
Letter"), dated as of the Execution Date, executed by Purchaser and Jeffrey T.
Arnold, in form and substance reasonably satisfactory to Purchaser; and
(n) evidence satisfactory to Purchaser that (i) the Sirrom
Indebtedness has been paid in full and (ii) that the holder of the Stock
Purchase Warrant issued by Endeavor to Sirrom Capital Corporation on August 29,
1997 has consented or agreed in writing to the issuance of the Incentive
Warrant.
(o) such other certificates or documents reasonably requested by
Purchaser.
2.3 DELIVERIES OF PURCHASER. At the Execution, Purchaser shall deliver to
-----------------------
Endeavor and the Sellers the following (each of which shall be in form and
substance reasonably satisfactory to Endeavor):
(a) the Purchase Price required pursuant to Section 1.7 hereof via
wire transfer of immediately available funds to such bank accounts as QDS has
instructed Purchaser in writing;
(b) an Assumption Agreement (the "Assumption Agreement"),
substantially in the form attached hereto as Exhibit I, executed by Purchaser;
---------
-10-
<PAGE>
(c) the Management Agreement executed by Purchaser;
(d) the Licensed Premises Agreement executed by Purchaser;
(e) the Strategic Alliance Agreement executed by the Purchaser;
(f) an opinion of Troutman Sanders LLP, counsel to Purchaser, dated
as of the Execution Date addressed to Seller, in form and substance reasonably
satisfactory to Seller, addressing such matters as the Seller may reasonably
request;
(g) the Incentive Warrant executed by Purchaser; and
(h) such other certificates or documents reasonably requested by
Endeavor and the Sellers.
3. REPRESENTATIONS AND WARRANTIES OF ENDEAVOR, QDS AND TELEMEDICS. Each
of the following representations and warranties is qualified by the disclosure
letter, dated as of the Execution Date (the "Disclosure Letter"), delivered to
Purchaser by Endeavor at the Execution. Endeavor, QDS and Telemedics hereby,
jointly and severally, represent and warrant, as of the Execution Date, to
Purchaser as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of Endeavor and the Sellers is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. Any Seller's failure to be duly qualified as a foreign
corporation to do business, and to be in good standing, in each jurisdiction
where the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, will not have a "Material Adverse
Effect." As used in this Agreement, the term "Material Adverse Effect" shall
mean a material adverse effect on the Business, financial condition, results of
operations, properties, assets or liabilities of the Sellers taken as a whole,
or on the ability of the Sellers to enter into this Agreement and perform their
obligations hereunder.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Endeavor and the
------------------------------------
Sellers has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of each of
Endeavor and the Sellers, and no other corporate proceedings on the part of
Endeavor or either Seller are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Endeavor and the Sellers and constitutes the legal, valid
and binding obligation of each of such entities, enforceable in accordance with
its terms. Except as set forth in the Disclosure Letter, or, solely with respect
to the Sirrom Indebtedness, as may have been waived, none of Endeavor or the
Sellers is subject to or obligated under any provision of (a) its respective
Articles of Incorporation or Bylaws, (b) any contract to which it is a party or
by which it is bound, (c) any license, franchise or permit, or (d) any law,
regulation, order, judgment or decree, which would be breached, violated or
defaulted (with or without due notice or lapse of time or both) or in
-11-
<PAGE>
respect of which a right of termination or acceleration or a loss of a material
benefit or any encumbrance on any of its assets would be created or suffered by
its execution and performance of this Agreement, except (as to clauses (b), (c)
or (d) above) where such breach, violation, right of termination or
acceleration, or encumbrance, individually or in the aggregate, would not have a
Material Adverse Effect. Except as set forth in the Disclosure Letter, neither
the execution of this Agreement or the consummation of the transactions
contemplated hereby will require the consent or approval of or registration or
filing with any federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign, other than where the failure to obtain such consents or
approvals or to make any such registration or filing would not have individually
or in the aggregate a Material Adverse Effect on or prevent or materially delay
Endeavor or either Seller from performing its obligations under this Agreement.
Schedule 3.2, attached hereto and made a part hereof, lists all of the
- ------------
contracts, agreements, covenants, options, leases, guaranties and other similar
arrangements (whether oral or written) which require the consent of any party
thereto or any other third party, to assign such contracts to Purchaser pursuant
to the terms of this Agreement.
3.3 FINANCIAL STATEMENTS. The (i) audited consolidated financial
--------------------
statements of Endeavor for the period October 17, 1996 (inception) through
December 31, 1996; (ii) audited consolidated financial statements of QDS for the
years ended December 31, 1996 and 1995; (iii) audited consolidated financial
statements of Endeavor for the years ended December 31, 1995, 1996 and 1997,
which reflect QDS and Telemedics as discontinued operations; and (iv) the June
30, 1998 Balance Sheets (collectively, the "Financial Statements") (a) were or
will be prepared in accordance with GAAP applied on a consistent basis (except
as noted therein and except that the unaudited financials will not contain any
notes, as is required by GAAP), including all accrued vacation and sick leave
for employees, and (b) fairly present or will present the assets, liabilities
and financial position of the Sellers as of their respective dates, and the
results of the Sellers' operations and the sources and uses of funds for the
periods then ended, except as shown in the Disclosure Letter with regard to
subsequently discovered liabilities and with respect to the Financial Statements
referred to in clauses (i) and (ii) above, except as restated as set forth in
the Ernst & Young list of audit adjustments attached to the Disclosure Letter.
The Disclosure Letter contains a complete and correct copy of the Financial
Statements. During the Interim Period, each of Endeavor and the Sellers have
maintained its books and records related to the Business in the usual, regular
and ordinary course of the Business on a basis consistent with past practices.
3.4 ABSENCE OF CERTAIN EVENTS. Except as set forth in the Disclosure
-------------------------
Letter, there has not been since December 31, 1997:
(a) any adverse change in the Business or in the financial condition,
assets, liabilities, earnings or results of operations of the Business of the
Sellers that constitutes a Material Adverse Effect;
(b) any damage, destruction or casualty loss (whether or not covered
by insurance) that constitutes a Material Adverse Effect;
-12-
<PAGE>
(c) any material change in the accounting methods or business
practices followed by the Sellers;
(d) any direct or indirect redemption or purchase or other
acquisition by the either Seller of any shares of its capital stock or any
acquisition or proposed acquisition of real property by such Seller;
(e) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, capital stock or property) by either Seller with
respect to its capital stock which would leave either Seller with current
liabilities, as set forth, or as required to be set forth, on the June 30, 1998
Balance Sheets, in excess of such Seller's cash and cash equivalents, as set
forth on the June 30, 1998 Balance Sheets;
(f) any increase in any manner of the benefits or other compensation
of any of either Seller's employees except normal increases in accordance with
established prior practice; any payment or agreement to pay any pension,
retirement or severance allowance not required by any existing plan or agreement
to any current or former officer or employee of either Seller; or any amendment
to any employment agreement or any incentive compensation, profit sharing, stock
purchase, stock option, stock appreciation rights, savings, consulting, deferred
compensation, retirement, pension or other "fringe benefit" plan or arrangement
with or for the benefit of any current or former officer or employee of either
Seller;
(g) any sale, transfer, lease, assignment or other disposition by
either Seller of any of its property, or any tangible or intangible asset used
in the operation of the Business, to any other person or entity, except in the
ordinary course of the Business;
(h) any amendment or termination of any material oral or written
contract, agreement or license to which either Seller is a party or by which it
is bound;
(i) any revaluation by either Seller of any of its Assets;
(j) any mortgage, pledge, or other encumbrance of any of the Assets
of either Seller; or
(k) any agreement (oral or written) by either Seller to do any of the
things described in this Section 3.4.
3.5 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. The accounts receivable and
-------------------------------------
accounts payable shown on the June 30, 1998 Balance Sheets (as the same have
changed since the date thereof) represent sales made or services provided and
expenses incurred in the ordinary course the Business consistent with past
practices. Except as set forth in the Disclosure Letter, the accounts receivable
reflected on the June 30, 1998 Balance Sheets shall be collected in the ordinary
course of the Business in amounts not less than the aggregate amount thereof
carried on the books of the Sellers (net of allowances and reserves shown on the
June 30, 1998 Balance Sheets), provided, however, that the representation and
warranty contained in this sentence shall
-13-
<PAGE>
not apply to the accounts receivable being sold to Purchaser by Telemedics.
Except as set forth in the Disclosure Letter, none of such accounts receivable
is the subject of a pledge or assignment to secure debt, is subject to any
Security Interest, or has been placed for collection with any attorney or
collection agency or similar individual or firm. Except as set forth in the
Disclosure Letter, to the "Knowledge" (as defined in Section 8.13 hereof) of
Endeavor or the Sellers, no referral source or payor accounting for more than
2.5% of the Sellers' total revenues during 1997 (a) has expressed
dissatisfaction with the services of the Sellers, other than those types and
immaterial amounts of complaints incurred in the ordinary course of the Business
or (b) has expressed an intent to reduce materially its business with the
Sellers or that any such referral source or payor will be unable to pay for its
purchases.
3.6 NO UNDISCLOSED LIABILITIES. Except as set forth in the Disclosure
--------------------------
Letter, or as reflected in or provided for in the Financial Statements, the
Sellers have no debts, liabilities or obligations, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, which individually or
in the aggregate are material to the financial condition, assets, liabilities,
earnings, or results of operations of the Business.
3.7 LITIGATION. Except as set forth in the Disclosure Letter, there are
----------
no actions, suits, claims, investigations or proceedings (legal, administrative
or arbitrative) pending or, to the Knowledge of Endeavor or either Seller,
threatened by or against either Seller relating to the Business or the
transactions contemplated hereby, whether at law or in equity and whether civil
or criminal in nature, before or by any federal, state, municipal or other
court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency or instrumentality outstanding against either Seller.
3.8 TITLE TO PROPERTIES AND SUFFICIENCY OF ASSETS. Except as set forth in
---------------------------------------------
the Disclosure Letter, each Seller has good and marketable title to all of its
Assets, free and clear of all Security Interests other than Permitted Liens,
except that neither Endeavor nor Sellers make any representation or warranty as
to the Endeavor 2000 Software. The Assets, together with the Excluded Assets,
constitute all of the assets necessary to conduct the Business as such Business
was conducted prior to and is conducted as of the date hereof, and only the
Assets and Excluded Assets are reflected on the June 30, 1998 Balance Sheets.
3.9 CONDITION OF TANGIBLE PROPERTY. Except as set forth in the Disclosure
------------------------------
Letter, all real and personal property, equipment and other tangible property
included in the Assets is in good repair and operating condition (normal wear
and tear excepted).
3.10 LEASE OF REAL AND PERSONAL PROPERTY. The Disclosure Letter sets
-----------------------------------
forth a list of (a) all leases pursuant to which either Seller leases, as
lessee, real property, (b) all leases pursuant to which either Seller leases, as
lessor, real property and (c) all leases pursuant to which either Seller leases,
as lessee, personal property for use in its Business and which either (i) are or
should have been reflected as liabilities on the June 30, 1998 Balance Sheets or
(ii) provide for annual rental payments in excess of $1,000 per annum. Except as
set forth in the Disclosure Letter, as to all leases listed in the Disclosure
Letter, the appropriate Seller (A) has performed all
-14-
<PAGE>
material obligations required to be performed by it prior to the date hereof and
(B) is not in default or, to its Knowledge, alleged to be in default. To the
Knowledge of Endeavor and the Sellers, there exists no material default, or any
event which upon the giving of notice or passage of time would give rise to any
material default, in the performance of any obligation to be performed by any
other party to any of such leases.
3.11 INTELLECTUAL PROPERTY All trademarks, service marks or trade names
---------------------
owned or used by QDS or Telemedics are listed in the Disclosure Letter. Except
as set forth in the Disclosure Letter, each Seller owns or has the right to use
the QDS Intellectual Property and Telemedics Intellectual Property,
respectively, in the manner used by it in the Business, there are no pending or,
to such Seller's Knowledge, threatened claims or proceedings against such Seller
asserting that its use of any QDS Intellectual Property and Telemedics
Intellectual Property, respectively, infringes the rights of any other person or
entity and neither Seller has any Knowledge of any use by it that may, with
notice or passage of time, give rise to such a claim, and neither Seller has
licensed or otherwise assigned any QDS Intellectual Property and Telemedics
Intellectual Property, respectively, used in the Business to any other person or
entity. The Sellers have, with the QDS Intellectual Property and Telemedics
Intellectual Property, respectively, all intellectual property rights needed to
operate the Business as such Business is conducted as of the date hereof. Each
of Endeavor and the Sellers has taken all reasonable precautions to protect all
confidential information and trade secrets of the Business. Notwithstanding
anything to the contrary in this Agreement, none of Endeavor, QDS or Telemedics
makes any representation or warranty with respect to the Endeavor 2000 Software.
3.12 GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. The Sellers
---------------------------------------------------
have complied in a timely manner with all laws and governmental regulations and
orders relating to any of the Assets, or applicable to the Business, including,
but not limited to, the labor, equal employment opportunity, occupational safety
and health, environmental, hazardous or medical waste disposal and antitrust
laws, except where the failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect. Neither Seller has been charged or
received any inquiries, except as set forth in the Disclosure Letter, in or
relating to any violations of any state or federal statute or regulation
involving fraudulent or abusive practices relating to its reimbursement from
third party payors or its participation in state or federally sponsored
reimbursement programs, including but not limited to fraudulent billing
practices, nor, to the Knowledge of Endeavor or either Seller, has either Seller
been investigated for such violations. No significant amount of funds are now or
are expected by Endeavor or the Sellers to be withheld by any Medicare carrier,
state agency or third party payor, other than pursuant to practices or policies
of applicability to multiple parties within the industry.
3.13 LICENSES AND PERMITS.
--------------------
(a) QDS has obtained all licenses and permits necessary to conduct
the Business and to own and operate its assets and such licenses and permits are
valid and in full force and effect except where the failure to obtain such
licenses and permits would not individually or in the aggregate have a Material
Adverse Effect. QDS has all supplier numbers and authorizations necessary to
receive payment for its services from and covered by Part B of
-15-
<PAGE>
the Medicare Program ("Medicare Authorizations"). No defaults or violations
exist or have been recorded in respect of any license or permit of QDS other
than defaults or violations which would not reasonably be expected individually
or in the aggregate to have a Material Adverse Effect. No proceeding is pending
or, to the best Knowledge of Endeavor and the Sellers, threatened looking toward
the revocation, limitation or non-renewal of any such license, permit or
Medicare Authorizations, except for pending or threatened proceedings that would
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Sellers have delivered or made available for inspection to
Purchaser a true and complete list of each such license and permit, and each
pending application for any license or permit, relating to the Business. All of
such pending applications are in good standing and, to the Knowledge of the
Sellers, without challenge of any kind, and each statement, application and
other document submitted or filed by Endeavor, on behalf of either Seller, or
either Seller to or with any federal, state or other governmental agency or
authority, or to or with any other person or entity, for purposes of obtaining a
new or renewed license, permit or Medicare Authorization of any type described
in this Section 3.13 in connection with the transactions contemplated hereby is
true and complete, and except as set forth in the Disclosure Letter, none of the
rights of either Seller under any license, permit or Medicare Authorization will
be impaired by the consummation of the transactions contemplated hereby, except,
as to the foregoing matters, for such challenges, incompletenesses or
inaccuracies, nondisclosures or impairments which do not relate to the Business
or which would not, individually or in the aggregate, have a Material Adverse
Effect.
(c) Neither of the Sellers nor Endeavor, as with respect to the
Business, has received any written notice from and has not been made a party to
any proceeding brought by any governmental authority alleging that (i) it is, or
may be in violation of, any such law, governmental regulation or order, (ii) it
must change any of its business practices to remain in compliance with such law,
governmental regulation or order, (iii) it has failed to obtain any license,
permit or Medicare Authorization required for the conduct of its business, or
(iv) it is in default under or violation of any license, permit or Medicare
Authorization.
3.14 BENEFIT PLANS. The Disclosure Letter contains a true and complete
-------------
list of each pension, retirement, savings, profit sharing, deferred
compensation, incentive compensation, bonus, stock option, severance or
termination pay, medical, dental, life or other insurance, disability plan or
other employee benefit plan or program, agreement or arrangement maintained,
sponsored or contributed to by either Seller, whether covering employees of such
Seller, former employees of such Seller, or directors or former directors of
such Seller (including, but not limited to, any "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), all of the foregoing being herein called "Benefit Plans."
With respect to the Benefit Plans, individually and in the aggregate, each
Seller has made available to Purchaser a true and correct copy or description
of: (a) the most recent annual report (Form 5500) filed with the IRS, if any,
(b) such Benefit Plan, (c) any summary plan description relating to such Benefit
Plan, (d) each trust agreement and group annuity contract, if any, relating to
such Benefit Plan, and (e) the most recent actuarial report or valuation
relating to each Benefit Plan subject to Title IV of ERISA (if any).
-16-
<PAGE>
With respect to the Benefit Plans, individually and in the aggregate, no
event has occurred and, to the Knowledge of Endeavor or the Seller, there
currently exists no condition or set of circumstances in connection with which
either Seller could be subject to any liability under ERISA, the Code, or any
other applicable statute, order or governmental rule or regulation.
(a) Except as noted in the Disclosure Letter, neither Seller sponsors
or maintains any Benefit Plan or related trust that is intended to be qualified,
respectively, under Section 401(a) and Section 501(a) of the Code.
(b) With respect to the Benefit Plans, individually and in the
aggregate, all required reports and descriptions have been appropriately filed
and distributed.
(c) With respect to the Benefit Plans, individually and in the
aggregate, there has been no prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code and there has been no action,
suit, grievance, arbitration or other claim with respect to the administration
or investment of assets of the Benefit Plans (other than routine claims for
benefits made in the ordinary course of plan administration pending or, to the
Knowledge of Endeavor and the Seller, threatened, and none of Endeavor or the
Sellers has any Knowledge of any facts which are reasonably likely to give rise
to any such action, suit grievance, arbitration or other claim), except in any
case for those which would not have a Material Adverse Effect.
(d) Neither Seller has ever sponsored or maintained any Benefit Plan
subject to the provisions of Title IV of ERISA or been subject to any potential
liability under such Title as a result of the sponsorship of any such plan by an
"affiliate" as defined in Section 407(d)(7) of ERISA, and neither Seller has
ever been obligated to make any contributions to any "multiemployer plan" as
defined in Section 3(37) of ERISA.
3.15 TAXES.
-----
(a) Except as set forth in the Disclosure Letter, with respect to the
Assets, each of the Sellers has duly and timely filed all tax returns required
to be filed by it, and all taxes shown to be due on such tax returns have been
paid in full by it. There are no liens for taxes (other than for taxes not yet
assessed or due and payable) on any of the Assets and there are no rulings or
other agreements executed with any tax authority relating to the Assets that
will be binding upon the Purchaser after the Execution. The Sellers have
previously delivered or made available to Purchaser complete and correct copies
of their federal income tax returns for each of the years 1995, 1996 and 1997.
For the purpose of this Agreement, the term "tax" (including, with correlative
meaning, the terms "taxes" and "taxable") shall include all federal, state,
local and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts.
-17-
<PAGE>
(b) All tax returns filed by the Sellers are complete and accurate in
all material respects. Except as set forth in the Disclosure Letter, none of the
Sellers currently is the beneficiary of any extension of time with which to file
any tax return.
(c) To the Knowledge of Endeavor and the Sellers, no claim has ever
been made by an authority in a jurisdiction where either of the Sellers does not
file tax returns that either of the Sellers is or may be subject to taxation by
that jurisdiction.
(d) Each of the Sellers has withheld and paid all taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third party who
has performed services in connection with the Business.
(e) Neither of the Sellers has waived any statute of limitations in
respect of taxes or agreed to any extension of time with respect to a tax
assessment or deficiency.
(f) Except as set forth in the Disclosure Letter, there is no notice
of deficiency, assessment, audit, examination, claim or other dispute concerning
any tax liability of the Sellers either (i) raised by any governmental entity in
writing or (ii) as to which Endeavor or any Seller has any Knowledge based upon
any contact with any agent of any governmental entity.
3.16 LABOR RELATIONS. Except as set forth in the Disclosure Letter:
---------------
(a) Each Seller has paid or made provision for payment of all
salaries, wages, and vacation pay accrued through the date of this Agreement, is
in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and non-discrimination in employment, and is not
engaged in any unfair employment practice;
(b) There is no charge pending or, to the Knowledge of the Sellers,
threatened before any court or agency alleging unlawful discrimination in
employment practices or any unfair labor practice by either Seller nor, to the
Knowledge of the Sellers, is there a basis for any such claim;
(c) There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the Knowledge of Endeavor or the Sellers, threatened against or
involving either Seller;
(d) There are no collective bargaining agreements binding on either
Seller;
(e) No collective bargaining agreement has been requested by any
employee representative or labor organization or is currently being negotiated
by either Seller; and
(f) Neither Seller has experienced work stoppage or any other
material labor difficulty during the three years immediately preceding the date
of this Agreement.
-18-
<PAGE>
3.17 INSURANCE. The Disclosure Letter sets forth a true and complete
---------
list, showing company, type and amount of coverage, of all insurance policies
for the benefit of the Sellers, their employees or third parties which are
carried by or cover the Sellers. Each such policy is in full force and effect
and shall continue to provide coverage to the Business and the Assets through
the Execution Date. Neither Seller is in material default with respect to any
provision of any of its insurance policies or has failed to give any notice or
present any claim thereunder in due or timely fashion or as required by any of
such insurance policies which would result in failure to recover under such
policies. Each Seller has materially complied with the insurance requirements of
all leases to which it is a party. None of Endeavor or the Sellers has received
any actual notice of cancellation or indication of intention not to renew any
insurance policy.
3.18 CERTAIN CONTRACTS. Except as listed in the Disclosure Letter,
-----------------
(a) Neither Seller has any employment agreement or any incentive
compensation, profit sharing, stock option, stock appreciation rights, stock
purchase, savings, consultant, deferred compensation, retirement, pension or
other plans or other benefit arrangements or practices with or for the benefit
of any officer, employee or any other person who performs services in connection
with the Business, or any consulting agreement or arrangement with any officer,
employee, former officer or former employee who performs services in connection
with the Business;
(b) No officer or director of either Seller has any agreement (oral
or written), other than any agreement with such officer or director described in
Section 3.18(a) above, or listed on Schedule 3.2, with either Seller or any
interest in any of the real, personal or QDS Intellectual Property or Telemedics
Intellectual Property used in or pertaining to the Business, other than the
normal interest of a shareholder; and
(c) All contracts of the Sellers are listed or described in Schedule
--------
1.2.1(f) and Schedule 1.2.2(f) hereof, and neither of the Sellers is a party to
- -------- -----------------
or bound by any other contract, purchase order or sales order pursuant to which
any party thereto is obligated to make payments (not yet made) aggregating more
than $10,000 in any 12 month period.
(d) All mortgages and liens and all material leases, agreements,
licenses or instruments, to which either Seller is a party, or by which any of
its assets or properties are bound or affected, are in full force and effect and
binding obligations of the parties thereto, and no event or condition has
occurred or exists, or to the Knowledge of Endeavor and the Sellers, is alleged
by any of the other parties thereto to have occurred or existed, which
constitutes, or with the lapse of time or giving of notice or both might
constitute, a material default or a basis for acceleration of any obligation, or
other claim of non-performance thereunder or in respect thereof on the part of
either Seller.
(e) Neither Seller is a party to any agreement and has a policy,
program or arrangement (whether or not in writing), providing for severance or
termination payments, or payments by such Seller in connection with any change
in control of such Seller.
-19-
<PAGE>
3.19 NAMES AND ADDRESSES; COMPENSATION. Set forth in the Disclosure
---------------------------------
Letter is a complete and accurate list of the names and annual compensation of
all employees of either Seller, which are not excluded pursuant to Section 5.2
hereof and who are paid $30,000 or more in base salary per annum and other cash
compensation (the "Key Employees"). Also set forth in the Disclosure Letter is a
list of names of employees of QDS (other than employees set forth on Schedule
5.2) and all QDS independent contractor sales representatives. The location of
employment records, if any, pertaining to the Key Employees is set forth in the
Disclosure Letter. The Disclosure Letter also contains a list of all written
agreements and summaries of all existing oral agreements with any consultants
and agents of the Seller.
3.20 POWERS OF ATTORNEY; BANK ACCOUNTS. The Disclosure Letter contains or
---------------------------------
will contain a complete and accurate list setting forth for the Sellers (a) the
names and addresses of all persons holding a power of attorney on behalf of
either Seller; and (b) the names and addresses of all banks or other financial
institutions in which either Seller has an account, deposit, or safe deposit
box, with pertinent identification numbers therefor and the names of all persons
authorized to draw on these accounts or deposits or to have access to these
boxes.
3.21 CASH EQUAL TO CURRENT LIABILITIES. Sellers' cash, cash equivalents,
---------------------------------
deposits and investments on June 30, 1998, plus any cash contributed by Endeavor
to Sellers during the Interim Period, in the aggregate, is not less than the
aggregate amount of Current Liabilities as set forth on the June 30, 1998
Balance Sheets.
3.22 OPERATION OF THE BUSINESS. During the Interim Period, Endeavor, as
-------------------------
with respect to only the Business, and the Sellers have operated the Business in
the usual, regular and ordinary course in accordance with past practices and
operations, have preserved intact the present organization of the Business, and
have used all commercially reasonable efforts to keep available the services of
the present officers and employees of the Business and to preserve the Business'
goodwill and the Business' relationships with its, customers, suppliers and
others having business dealings with it.
3.23 FULL DISCLOSURE. No statement contained in (a) this Agreement, (b)
---------------
the Disclosure Letter, (c) any agreement to be delivered to Purchaser pursuant
to Article 2 hereof, or (d) any document, certificate or other writing delivered
to Purchaser pursuant to the provisions of this Agreement, taken as a whole,
upon execution contains or will contain any untrue statement of a material fact
or omits to state any material fact necessary, in the light of the circumstances
under which it was made, to make the statements therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants, as of the Execution Date, to Endeavor, QDS and
Telemedics as follows:
4.1 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
-20-
<PAGE>
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser has the requisite
------------------------------------
corporate power and authority to enter into this Agreement and to carry out its
respective obligations hereunder. The execution and delivery of this Agreement
by Purchaser and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Purchaser, and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Purchaser and constitutes
the legal, valid and binding obligation of Purchaser enforceable in accordance
with its terms. Subject to the approval of Bank of America, as further described
in Section 7.10 hereof, and which approval shall be obtained by Purchaser by the
Execution, Purchaser is not subject to or obligated under any provision of (a)
its Certificate of Incorporation or Bylaws, (b) any contract to which it is a
party or by which it is bound, (c) any license, franchise or permit, or (d) any
law, regulation, order, judgment or decree, which would be breached, violated or
defaulted (with or without due notice or lapse of time or both) or in respect of
which a right of termination or acceleration or any encumbrance on any of its
assets would be created by its execution and performance of this Agreement,
except (as to (b), (c) or (d) above) where such breach, violation or right which
would not individually, or in the aggregate, prevent or materially delay
Purchaser from performing its obligations under this Agreement.
4.3 QDS ACCOUNTS RECEIVABLE. Purchaser hereby represents and warrants
-----------------------
that it will collect the accounts receivable of QDS being sold to Purchaser by
QDS pursuant to the terms of this Agreement in accordance with the Purchaser's
existing business practices relating to the collection of accounts receivables.
5. ADDITIONAL AGREEMENTS.
5.1 EXPENSES. All fees and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such fees or expenses; provided, however, Endeavor shall be solely
responsible for and shall pay all fees incurred by the Sellers prior to and on
the Execution Date.
5.2 EMPLOYEES AND EMPLOYEE BENEFITS. Prior to or at the Execution,
-------------------------------
Purchaser may offer employment to some or all employees of the Sellers, in the
Purchaser's sole discretion (other than the employees listed on Schedule 5.2
------------
attached hereto which contains a list of all employees of the Sellers whom
Endeavor shall not be precluded from employing) upon such terms and conditions
as shall be determined by Purchaser in its sole discretion. The Sellers will
retain all of the employee benefit plans and pension plans currently maintained
by such Sellers as of the date of this Agreement, and Purchaser will not assume
any obligations under any such plans. The Sellers will indemnify , defend and
hold harmless Purchaser (and its directors, officers, employees and affiliates)
with respect to such employee benefit plans and pension plans for and against
any and all claims, actions, judgments or causes of action based upon or arising
out of or otherwise in respect of any such plan. All employees of the Sellers
hired by Purchaser shall be given full credit for all time worked for the
Sellers for purposes of determining their participation and vesting under the
employee benefit plans and programs of Purchaser applicable to such employees.
Unless prohibited by law, the Sellers shall provide to Purchaser all personnel
-21-
<PAGE>
records for the employees of the Sellers hired by Purchaser, including, without
limitation, names, social security numbers, dates of hire, dates of birth,
number of hours worked each year, and salary history. Endeavor hereby agrees not
to employ, directly or indirectly, for a period of 12 months after the Execution
Date, any Key Employee to whom Purchaser has offered employment prior to or on
the Execution Date and who decides not to accept employment with Purchaser;
provided, however that Purchaser and Endeavor hereby agree that Alva Teets may
be employed by Endeavor, Purchaser or any third party after a period of six
months from the Execution Date.
5.3 FURTHER ASSURANCES. Upon the reasonable request of any party to this
------------------
Agreement, each party agrees to take any and all actions, including, without
limitation, the execution of certificates, documents, or instruments necessary
or appropriate to give effect to the terms and conditions set forth in this
Agreement.
5.4 BULK SALES LAW. As an inducement to Purchaser to waive compliance with
--------------
the provisions of any applicable bulk sales or transfer laws, each Seller hereby
agrees that all of its debts, obligations and liabilities which are not
expressly assumed by Purchaser under this Agreement will be paid and discharged
by such Seller as and when they become due and payable in the ordinary course of
the Business. Endeavor and the Sellers, jointly and severally, further agree to
indemnify and hold Purchaser harmless from any and all liabilities incurred by
Purchaser by reason of or arising out of claims made by creditors with respect
to any non-compliance with any applicable bulk sales or transfer laws (except to
the extent such claims constitute Assumed Liabilities).
5.5 CORPORATE NAME CHANGES. On the Execution Date, immediately after the
----------------------
Execution hereof, QDS shall change its corporate name, at Endeavor's expense, to
another name which is not confusingly similar to "Quality Diagnostic Services,
Inc.," "QDS" or any similar name; provided, however, that Purchaser agrees that
QDS may operate under the trade names "Quality Diagnostic Services, Inc." and
"QDS" from the date of such name change through and until the Execution Date.
Endeavor and each Seller further agrees that after the Execution Date it shall
no longer use any of such names without the prior written consent of Purchaser
in each instance.
5.6 BONUS PLAN FOR FORMER ENDEAVOR AND/OR QDS EMPLOYEES. Purchaser shall
---------------------------------------------------
establish a phantom stock or incentive bonus plan (the "Bonus Plan") for its
employees and representatives after the Execution, based, in whole or in part,
on any increases in the value of the Endeavor common stock underlying the
Incentive Warrant and the terms and provisions of the Bonus Plan shall be
determined by the Purchaser, in its sole discretion; provided, however, that
Purchaser shall comply with the terms of the Incentive Warrant and all
applicable securities laws with respect to any restriction on the transfer of
the Incentive Warrant, shares of Endeavor common stock underlying the Incentive
Warrant or any interest therein.
5.7 OPERATIONS OF QDS AND TELEMEDICS. After the Execution, QDS and
--------------------------------
Telemedics agree to discontinue any or all businesses or operations, except for
the performance of any obligations QDS and/or Telemedics may have to Purchaser
pursuant to and in accordance with
-22-
<PAGE>
the terms of this Agreement or the Management Agreement, including obligations
with respect to Excluded Liabilities.
5.8 HART-SCOTT-RODINO. For purposes of determining whether the
-----------------
transactions contemplated by this Agreement are subject to the reporting and
waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), Endeavor and each Seller, jointly and severally,
represent and warrant that, as calculated in accordance with Rule (S) 801.11
under the HSR Act, 16 C.F.R. (S) 801.11, the total assets of the "ultimate
parent entity" of Endeavor and each Seller (as such term is defined in the HSR
Act) are less than $10,000,000.
5.9 STOCK PURCHASE AGREEMENT. Endeavor and Purchaser hereby agree that
------------------------
Purchaser shall invest in Endeavor, on the same financial terms as any
investment in Endeavor by HBO & Company ("HBOC"), $2,000,000, provided, however,
that if HBOC invests less than $10,000,000, Purchaser may elect to reduce its
investment to 20% of the amount actually invested by HBOC, and further provided
that Purchaser shall not be obligated to make such investment if the per share
price at which HBOC invests, multiplied by the number of outstanding shares of
Endeavor common stock, on a fully-diluted basis, immediately prior to such
investment is more than $250,000,000. Endeavor shall promptly notify Purchaser
of any such investment by HBOC, and the terms thereof, and the closing of
Purchaser's investment shall occur within 5 business days of such notice from
Endeavor to Purchaser. Endeavor shall use commercially reasonable efforts to
obtain the consent of Sirrom Capital Corporation and any other consents required
for such investment by Purchaser.
5.10 NOTICE OF EMPLOYEE'S TERMINATION. After the transition of the payroll
--------------------------------
from Endeavor and Sellers to Purchaser, if Endeavor so requests in writing and
identifies therein the employees of the Sellers hired by Purchaser pursuant to
this Agreement which have balances in their 401(k) accounts maintained by
Sellers or Endeavor as of the Execution Date, Purchaser shall inform Endeavor of
any termination of any such employee's employment with Purchaser within a
reasonable period of time after such termination.
5.11 CARD GUARD AGREEMENT. Endeavor, QDS and Telemedics hereby agree not to
--------------------
terminate, cancel, modify, alter or revise the Card Guard Agreement for a period
of 30 days following the Execution Date. The parties hereby acknowledge that
Purchaser shall be entering into separate negotiations with Card Guard with
respect to the Endeavor 2000 Software and cardiac event monitors and Endeavor,
QDS and Telemedics agree that they shall not directly or indirectly take any
action which would interfere with the course of such negotiations for such 30
day period.
5.12 FURTHER ACTION. Upon the terms and subject to the conditions of this
--------------
Agreement, each of Endeavor and the Sellers shall use all commercially
reasonable efforts to take or cause to be taken all actions and to do or cause
to be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
-23-
<PAGE>
6. INDEMNIFICATION.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------------------
warranties contained in Articles 3 and 4 of this Agreement shall survive the
Execution for a period of 18 months; provided, however, that the representations
and warranties contained in Sections 3.2, 3.12, 3.15 and 5.8 hereto shall
survive the Execution until the expiration of the applicable statute of
limitations therefor.
6.2 INDEMNIFICATION BY ENDEAVOR AND THE SELLERS. Subject to the provisions
-------------------------------------------
of this Article 6, Endeavor and the Sellers, jointly and severally, agree to
indemnify and hold harmless Purchaser and its shareholders, officers, directors,
affiliates, agents and employees from and against any and all damages, losses
and expenses sustained or incurred by any such party (whether as a result of
third party claims, demands, suits, causes of action, proceedings,
investigations, judgments, liabilities, or other otherwise) including, without
limitation, costs of investigation and defense, court costs and reasonable
attorneys fees (all of the foregoing being hereinafter referred to collectively
as "Losses"), with respect to or arising out of (a) any breach of any
representation or warranty of Endeavor or either Seller contained herein or in
any other agreement or instrument executed by Endeavor or either Seller in
connection herewith; (b) any breach of any covenant or agreement of Endeavor or
either Seller contained herein or in any other agreement or instrument executed
by Endeavor or either Seller in connection herewith; or (c) any Excluded
Liabilities (including, without limitation, any liabilities that becomes a
liability of Purchaser under any applicable bulk sales or transfer law, any
doctrine of de facto merger or successor liability, or otherwise by operation of
law).
6.3 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to indemnify,
----------------------------
defend and hold harmless each of Endeavor, QDS and Telemedics and their
respective shareholders, officers, directors, affiliates, agents and employees
from and against any and all Losses incurred or sustained by any of them with
respect to or arising out of (a) any breach of any representation, warranty,
covenant or agreement of Purchaser contained herein or in any other agreement or
instrument executed by Purchaser in connection herewith and (b) any Assumed
Liability. Notwithstanding anything in this Article 6 to the contrary, Purchaser
shall pay 50% of any severance pay or similar obligations set forth in (S) 6(a)
of the Sales Representative - Principal Agreement, incurred with respect to the
termination of any QDS independent sales representative, hired by Purchaser, in
connection with the transactions contemplated by this Agreement, provided,
--------
however, that Purchaser's aggregate liability pursuant to this last sentence of
- -------
Section 6.3 shall in no event exceed $75,000.00.
6.4 LIMITATION ON LIABILITY.
-----------------------
(a) Notwithstanding anything else contained herein to the contrary,
but subject to Section 6.4(c) hereof, no party hereto shall be entitled to
indemnification under the provisions of this Section 6:
-24-
<PAGE>
(i) unless such party shall have given written notice to the
appropriate indemnifying party setting forth its claim for indemnification
in reasonable detail within the time limit therefor set forth in Section
6.1 hereof; and
(ii) unless and until the aggregate amount of all Losses for
which such party is entitled to indemnification under this Article 6
exceeds $100,000, in which event only the Losses in excess of such amount
shall be recoverable (the "Indemnity Threshold"), provided, however, that
Purchaser's aggregate liability pursuant to the last sentence of Section
6.3 above shall not be subject to the Indemnity Threshold and shall not be
deemed to be a Loss for the purposes of calculating the Indemnity
Threshold.
(b) Notwithstanding anything contained herein to the contrary, the
maximum aggregate liability of the Sellers and Endeavor pursuant to this Article
6 shall be an amount equal to $1,500,000, plus the first $1,500,000 of any
Additional Purchase Price Payment required to be paid by Purchaser pursuant to
Section 1.8 hereof (the "Indemnity Cap"), and Purchaser shall have the right, as
its sole and exclusive remedy, to set-off against the first $1,500,000 of any
Additional Purchase Price Payment the amount of any Losses for which it is
entitled to indemnification pursuant to this Article 6.
(c) Notwithstanding anything contained herein to the contrary, the
following items shall not be subject to the Indemnity Threshold or the Indemnity
Cap, and Endeavor and the Sellers, jointly and severally, agree to indemnify and
hold harmless Purchaser and its shareholders, officers, directors, affiliates,
agents and employees from and against any and all damages, losses and expenses
sustained or incurred by any such party (whether as a result of third party
claims, demands, suits, causes of action, proceedings, investigations,
judgments, liabilities, or other otherwise) including, without limitation, costs
of investigation and defense, court costs and reasonable attorneys fees, with
respect to or arising out of (i) the lawsuit entitled QDS v. Harry A. Kopelman,
------------------------
MD, et al., file number E-61332 in the Superior Court of Fulton County, State of
- -----------
Georgia; (ii) any breach of the representation and warranty of Endeavor or the
Sellers set forth in Sections 3.21 and 5.8 hereof; (iii) any breach of the
representation and warranty of Jeffrey T. Arnold in the Arnold Side Letter, and
(iv) any Purchaser's Adjustments, as provided for in Section 1.9 hereof (the
foregoing being hereinafter referred to collectively as the "Fully Indemnified
Losses").
6.5 ADMINISTRATION OF THIRD PARTY CLAIMS.
------------------------------------
(a) Whenever any claim shall arise for indemnification under this
Article 6, the party entitled to indemnification (the "Indemnified Party") shall
promptly notify the other party or parties obligated to provide indemnification
under this Agreement (each an "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. In the event of any
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceeding by a person who is not a party to this Agreement (a
"Third Party Claim"), such notice shall also specify, if known, the amount or a
good faith estimate of the amount of the Losses arising therefrom.
-25-
<PAGE>
(b) The Indemnified Party shall not settle or compromise or
voluntarily enter into any binding agreement to settle or compromise, or consent
to entry of any judgment arising from, any such claim or proceeding except in
accordance with this Section 6.5. With respect to any Third Party Claim, the
Indemnifying Party shall undertake the defense thereof by representatives of its
own choosing reasonably satisfactory to the Indemnified Party. The Indemnified
Party or any other Party shall have the right to participate in any such defense
of a Third Party Claim with advisory counsel of its own choosing at its own
expense. Assuming they have received reasonably adequate advance notice of a
covered claim, in the event the Indemnifying Party, after two-thirds of the
period for the presentation of a defense against any such Third Party Claim,
fails to begin to diligently defend it (or at any time thereafter ceases to
diligently defend it), the Indemnified Party will have the right to undertake
the defense, compromise or settlement of such Third Party Claim on behalf of,
and for the account of, the Indemnifying Party, at the expense and risk of the
Indemnifying Party.
7. GENERAL PROVISIONS.
7.1 BROKERS. Each of Endeavor and the Sellers represents and warrants to
-------
Purchaser, and Purchaser represents and warrants to Endeavor and the Sellers
that no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement.
7.2 NOTICES.
-------
(a) All notices, consents, requests and other communications
hereunder shall be in writing and shall be sent by hand delivery, by certified
or registered mail (return-receipt requested), or by a recognized national
overnight courier service as set forth below:
If to Purchaser: Matria Healthcare, Inc.
1850 Parkway Place
12th Floor
Marietta, Georgia 30067
Attention: General Counsel
with a copy to: James L. Smith, III, Esq.
(which shall not Troutman Sanders LLP
constitute notice) 600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
If to Endeavor Endeavor Technologies, Inc.
or either Seller: 400 The Lenox Building
3399 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Chief Executive Officer
-26-
<PAGE>
with a copy to: Attention: Glenn W. Sturm, Esq.
(which shall not Nelson Mullins Riley & Scarborough, LLP
constitute notice) First Union Plaza
Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
(b) Notices delivered pursuant to Section 7.2(a) shall be deemed
given: (i) at the time delivered, if personally delivered; (ii) at the time
received, if mailed; and (iii) two business day after timely delivery to the
courier, if by overnight courier service.
(c) Any party hereto may change the address to which notice is to be
sent by written notice to the other party in accordance with this Section 7.2.
7.3 ENTIRE AGREEMENT. This Agreement, including all Exhibits and Schedules
----------------
hereto, the Disclosure Letter (all of which are incorporated herein by this
reference), and the Arnold Side Letter, contains the entire agreement and
understanding concerning the subject matter hereof between the parties hereto.
7.4 WAIVER; AMENDMENT. No waiver, termination or discharge of this
-----------------
Agreement, or any of the terms or provisions hereof, shall be binding upon any
party hereto unless confirmed in writing. No waiver by any party hereto of any
term or provision of this Agreement or of any default hereunder shall affect
such party's rights thereafter to enforce such term or provision or to exercise
any right or remedy in the event of any other default, whether or not similar.
This Agreement may not be modified or amended except by a writing executed by
all parties hereto.
7.5 SEVERABILITY. If any provision of this Agreement shall be held void,
------------
voidable, invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and, accordingly, the remaining provisions of this
Agreement shall remain in full force and effect as though such void, voidable,
invalid or inoperative provision had not been contained herein.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Georgia, without regard to the
principles of conflicts of law.
7.7 ASSIGNMENT. No party hereto may assign this Agreement, in whole or in
----------
part, without the prior written consent of the other parties hereto, and any
attempted assignment not in accordance herewith shall be null and void and of no
force or effect. Provided, however, that Purchaser may assign this Agreement, in
whole or in part, to a subsidiary of Purchaser, without the consent of the other
parties hereto, in which case Purchaser shall nonetheless remain liable for the
performance of all of its obligations hereunder.
7.8 BINDING EFFECT. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto and their respective successors and
permitted assigns.
-27-
<PAGE>
7.9 CUMULATIVE REMEDIES. All rights and remedies of each party hereto are
-------------------
cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
7.10 HEADINGS. The titles, captions and headings contained in this
--------
Agreement are inserted for convenience of reference only and are not intended to
be a part of or to affect in any way the meaning or interpretation of this
Agreement.
7.11 REFERENCE WITH AGREEMENT. Numbered or lettered articles, sections,
------------------------
paragraphs, subsections, Schedules and Exhibits herein contained refer to
articles, sections, paragraphs, subsections, Schedules and Exhibits of this
Agreement unless otherwise expressly stated. The words "herein," "hereof,"
"hereunder," "hereby," "this Agreement" and other similar references shall be
construed to mean and include this Agreement and all Exhibits and Schedules and
all amendments to any of them unless the context shall clearly indicate or
require otherwise.
7.12 INTERPRETATION. This Agreement shall not be construed more strictly
--------------
against any party hereto regardless of which party is responsible for its
preparation, it being agreed that this Agreement was fully negotiated by all
parties hereto.
7.13 DEFINITION OF KNOWLEDGE. Any reference in this Agreement or in any
-----------------------
certificate delivered pursuant hereto to a party's "Knowledge" (whether to "the
best of" such party's knowledge or other similar expressions relating to the
knowledge or awareness of any party) shall include all matters which any of such
party's officers or directors actually knew or should have known acting in their
capacity as an officer or director of such party.
7.14 NO THIRD PARTY BENEFICIARIES. There are no third party beneficiaries
----------------------------
of this Agreement and nothing else in this Agreement, express or implied, is
intended to or shall confer upon any person other than the parties hereto and
their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities.
7.15 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or
----------------------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute the same Agreement. Any signature page of any
such counterpart, or any electronic facsimile thereof, may be attached or
appended to any other counterpart to complete a fully executed counterpart of
this Agreement, and any telecopy or other facsimile transmission of any
signature shall be deemed an original and shall bind such party.
-28-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement under seal as of the Execution Date,
to be effective as of the Effective Date.
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
-------------------------------------
Title: Executive Vice President and Chief
-------------------------------------
Operating Officer
-------------------------------------
[CORPORATE SEAL]
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
-------------------------------------
Title: Chief Operating Officer
-------------------------------------
[CORPORATE SEAL]
QUALITY DIAGNOSTIC SERVICES, INC.
By: /s/ Blake Whitney
-------------------------------------
Title: President
-------------------------------------
[CORPORATE SEAL]
TELEMEDICS, INC.
By: /s/ Jeffrey T. Arnold
-------------------------------------
Title: Chief Executive Officer
-------------------------------------
[CORPORATE SEAL]
-29-
<PAGE>
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BY AND AMONG
WEBMD, INC.
AND
CERTIFIEDEMAIL.COM, INC.
AND
GARY B. "COURT" COURSEY, JR.
Dated as of December 31, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 PURCHASE OF ASSETS................................................... 1
1.1 Assets............................................................... 1
1.2 Assets Excluded...................................................... 4
1.3 Liabilities.......................................................... 4
1.4 Closing.............................................................. 5
ARTICLE 2 PURCHASE PRICE....................................................... 7
2.1 Purchase Price....................................................... 7
2.2 Payment of Purchase Price............................................ 7
2.3 Transfer Taxes and Filing Fees....................................... 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER............. 8
3.1 Organization and Good Standing....................................... 8
3.2 Authorization for Agreement.......................................... 8
3.3 Authority............................................................ 9
3.4 Capital Stock........................................................ 9
3.5 Voting Structure..................................................... 9
3.6 Financial Statements................................................. 9
3.7 Disclosure of Liabilities............................................ 9
3.8 Personal Property.................................................... 10
3.9 Owned Real Property.................................................. 11
3.10 Leasehold Interests.................................................. 12
3.11 Inventory............................................................ 13
3.12 Customers............................................................ 13
3.13 Financial Accounts................................................... 13
3.14 Accounts and Notes Receivable........................................ 14
3.15 Operating Contracts.................................................. 14
3.16 Computer Software; Other Intellectual Property....................... 14
3.17 Intangible Property.................................................. 16
3.18 Insurance............................................................ 17
3.19 Employees............................................................ 17
3.20 Benefit Plans........................................................ 17
3.21 Administrative Action and Litigation................................. 18
3.22 Tax Returns and Audits............................................... 19
3.23 Full Disclosure; Required Consents................................... 19
3.24 Environmental Matters................................................ 20
3.25 Outstanding Liabilities.............................................. 21
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.26 No Interest in Other Entities........................................ 21
3.27 No Material Occurrences.............................................. 21
3.28 Year 2000 Warranty................................................... 22
3.29 Investment........................................................... 22
3.30 Brokers' Fees........................................................ 23
3.31 Private Placement Memorandum......................................... 23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................... 23
4.1 Organization and Good Standing....................................... 23
4.2 Authorization for Agreement.......................................... 23
4.3 Legal Authority...................................................... 23
4.4 Valid and Binding Obligation......................................... 24
4.5 Accounts Receivable.................................................. 24
ARTICLE 5 ADDITIONAL PRE-CLOSING COVENANTS..................................... 24
5.1 Full Access; Due Diligence........................................... 24
5.2 Operation of the Business in Regular Course.......................... 25
5.3 Approvals............................................................ 25
5.4 Preservation of Assets............................................... 25
5.5 Preservation of Organization......................................... 25
5.6 Use of Property...................................................... 25
5.7 No Default........................................................... 25
5.8 Risk of Loss......................................................... 25
5.9 Notice of Developments............................................... 25
ARTICLE 6 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS...................... 26
6.1 Representations and Warranties True; Compliance with Agreement....... 26
6.2 Corporate Documents and Resolutions.................................. 26
6.3 No Material Change................................................... 26
6.4 Opinion of Counsel................................................... 26
6.5 Proceedings and Instruments Satisfactory............................. 27
ARTICLE 7 CONDITIONS PRECEDENT TO SELLER'S AND SHAREHOLDER'S OBLIGATIONS....... 27
7.1 Representations and Warranties True.................................. 27
ARTICLE 8 INDEMNIFICATION BY SELLER............................................ 27
8.1 Indemnification...................................................... 27
8.2 Notice and Payment................................................... 28
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 9 NONCOMPETITION AND NONDISCLOSURE..................................... 29
9.1 Noncompetition and Nondisclosure..................................... 29
9.2 Specific Performance................................................. 30
9.3 Reasonable Restraint................................................. 30
9.4 Severability......................................................... 30
9.5 Independent Covenants................................................ 31
9.6 Materiality.......................................................... 31
ARTICLE 10 TERMINATION AND ABANDONMENT.......................................... 31
ARTICLE 11 POST-CLOSING COVENANTS OF SELLER AND SHAREHOLDER..................... 32
11.1 Further Assurances................................................... 32
11.2 UCC Matters.......................................................... 32
11.3 Collection of Receivables............................................ 32
11.4 Retentionof Retained Business Records................................ 32
11.5 Corporate Name Changes............................................... 32
ARTICLE 12 MISCELLANEOUS........................................................ 33
12.1 Time is of the Essence............................................... 33
12.2 Governing Law........................................................ 33
12.3 Terms and Captions................................................... 33
12.4 Severability......................................................... 33
12.5 Notices.............................................................. 33
12.6 Counterparts......................................................... 34
12.7 Schedules and Exhibits............................................... 35
12.8 Survival............................................................. 35
12.9 Confidentiality...................................................... 35
12.10 Press Releases and Announcements..................................... 35
12.11 Binding Effect....................................................... 35
12.12 Assignment........................................................... 35
12.13 Entire Agreement; Modification of Agreement.......................... 36
12.14 Remedy at Law Inadequate............................................. 36
12.15 Remedies Cumulative.................................................. 36
12.16 Expenses............................................................. 36
12.17 No Third Party Beneficiaries......................................... 36
</TABLE>
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 31st day of December, 1998, by and among WebMD, Inc., a Georgia
corporation ("Purchaser"), certifiedemail.com, Inc., a Georgia corporation
("Seller") and Gary B. "Court" Coursey, Jr., an individual resident of Georgia
and the holder of all the voting stock of Seller ("Shareholder").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Seller has developed a proprietary system for certifying the
delivery of electronic mail via the internet (the "System"); and
WHEREAS, Seller is engaged in the business of marketing services
("Services") provided by the Seller using the System (the "Business"); and
WHEREAS, Shareholder has represented that he owns all of the issued
and outstanding shares of voting securities of Seller (the "Voting Shares"); and
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser, substantially all of the assets and goodwill of Seller as
hereinafter described upon the terms and conditions hereinafter set forth; and
WHEREAS, Purchaser and Seller desire that this Agreement shall set
forth their full and complete understanding of the terms and conditions under
which Seller shall sell and Purchaser shall purchase such assets and goodwill of
Seller;
NOW THEREFORE, for and in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 ASSETS.
Subject to the terms and conditions hereof, on the Closing Date (as
hereinafter defined) Seller and Shareholder shall sell, transfer, assign and
convey to Purchaser, and Purchaser shall purchase and acquire from Seller, all
of the following properties, assets, rights, contracts and businesses
(collectively, the "Assets") (but, except as set forth in Section 1.3, none of
the liabilities associated therewith) of Seller and Shareholder:
-1-
<PAGE>
(a) Personal Property. All of the furniture, fixtures, furnishings,
-----------------
machinery, equipment, computer hardware, peripherals and accessories, vehicles
(including motor vehicle titles and current registrations), technical bulletins,
product literature, office supplies and all other tangible personal property of
whatever type or description owned or leased by Seller or otherwise used in the
Business (the "Personal Property") and all attachments thereto and personal
property (including tools and spare parts) associated therewith including,
without limitation, those items listed on Schedule 1.1(a) attached hereto;
---------------
(b) Inventory. All right, title and interest in and to the inventory,
---------
materials, parts, work in progress, returned goods and other items used in or
arising out of the conduct of the Business including, without limitation, those
items set forth in Schedule 1.1(b) attached hereto;
---------------
(c) Customer Contracts. All right, title and interest in and to all
------------------
written and oral contracts and other agreements to provide e-mail services
("Customer Contracts") set forth in Schedule 1.1(c), attached hereto and marked
---------------
with an "*"; provided, however, that Purchaser is not assuming nor is obligated
to fulfill, by reason of this Agreement, any obligation, guarantee or
responsibility to any customer under the Customer Contracts or otherwise which
results from the performance or provision of any services or actions by Seller
or failure by Seller to provide any services or actions prior to the Closing
Date;
(d) Cash and Cash Equivalents All right, title and interest in and to all
-------------------------
cash of the Seller which is on hand as of the Closing Date including, without
limitation, cash in the accounts set forth in Schedule 1.1(d) attached hereto;
---------------
(e) Accounts and Receivables. All right, title and interest in and to all
------------------------
monies, sums and amounts held by or owed to the Seller in or in connection with
all accounts, accounts receivable, notes, notes receivable, instruments, drafts,
documents, chattel paper and other receivables and rights to the payment of
money or receipt of other benefits which remain uncollected or unreceived on the
Closing Date, whether or not evidenced by a writing or reflected in the
financial statements to be delivered by Seller to Purchaser pursuant to Section
3.6 hereof (the "Receivables"), including, without limitation, those
particularly set out in Schedule 1.1(e) attached hereto;
---------------
(f) Operating Contracts. All rights of Seller pursuant to employment
-------------------
agreements, nondisclosure agreements, confidentiality agreements, invention
assignment agreements, covenants not to compete, licenses, personal service
contracts, data processing contracts, joint venture or partnership agreements,
contracts with any labor organizations, supplier contracts, loan agreements,
bonds, mortgages, options to purchase land and other material contracts
("Operating Contracts") including, but not limited to, those set forth on
Schedule 1.1(f) attached hereto, but excluding those set forth on Schedule 1.2
- --------------- ------------
attached hereto; provided, however, that Purchaser is not assuming nor is
obligated to fulfill, by reason of this Agreement, any obligation, guarantee or
responsibility to any party under the Operating Contracts or otherwise which
results from the performance or provision of any services or actions by Seller
or failure by Seller to provide any services or actions;
-2-
<PAGE>
(g) Intellectual Property. All right, title and interest of Seller in and
---------------------
to any intellectual property including, without limitation:
(i) patents, patent applications, patent disclosures, and
improvements thereto, whether registered or unregistered, including, without
limitation, those described in Schedules 3.16.(a), 3.16(b), 3.16(d), 3.16(e),
----------------------------------------------
and 3.16(g);
- -----------
(ii) trademarks, service marks, logos, internet domain names, trade
names and corporate names, whether registered or unregistered, and registrations
and applications for registration thereof, including, without limitation, those
described in Schedules 3.16.(a), 3.16(b), 3.16(d), 3.16(e), and 3.16(g);
----------------------------------------------------------
(iii) copyrights, whether registered or unregistered, and
registration and applications for registration thereof, including, without
limitation, those described in Schedules 3.16.(a), 3.16(b), 3.16(d), 3.16(e),
----------------------------------------------
and 3.16(g);
- -----------
(iv) computer software (including any source or object codes thereof
or documentation relating thereto), data and documentation, including, without
limitation, those items described in Schedules 3.16.(a), 3.16(b), 3.16(d),
-------------------------------------
3.16(e), and 3.16(g);
- --------------------
(v) trade secrets and confidential business information, know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable work, financial, marketing and business data, pricing and
cost information, business, customer and supplier lists, including, without
limitation, those described in Schedules 3.16.(a), 3.16(b), 3.16(d), 3.16(e),
----------------------------------------------
and 3.16(g).
- -----------
The foregoing shall be collectively known as the "Intellectual Property."
(h) Intangible Property. Except as otherwise provided in this Agreement,
-------------------
all right, title and interest in all:
(i) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off and rights of recoupment
(including any such item relating to the payment of any federal, state or local
tax) arising in connection with the Business, including, without limitation,
those described in Schedule 1.1(h), attached hereto; and
---------------
(ii) franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies for use in connection with the Business,
including, without limitation, those described in Schedule 1.1(h).
---------------
(i) Other Assets. All other assets and rights relating to the Business
------------
not specifically enumerated or excluded herein, including but not limited to,
all records relating to products and customers of the Business since its
inception, copies of records and data maintained on computer systems, all other
transferable rights in and to intangible assets used or held for use in the
Business,
-3-
<PAGE>
including goodwill, all proceeds (including insurance policies and proceeds of
insurance) and products related to the Assets and the Business, all right, title
and interest to all books, ledgers, files, documents, correspondence, telephone
numbers, telephone directory advertising, all state unemployment and worker's
compensation reserve amounts and experience rates to the extent permitted or
required under the laws of the state of Georgia, reports and other printed
materials; provided, however, that Seller may retain possession of such books
and records that Seller is legally required to maintain, but shall keep such
records at its principal place of business and shall provide Purchaser
reasonable access thereto after the Closing Date.
1.2 ASSETS EXCLUDED.
Notwithstanding the foregoing, the Assets shall not include any of the
following: the corporate seals, certificates of incorporation, minute books,
stock books, tax returns, books of account or other records having to do with
the corporate organization of Seller; the rights which accrue or will accrue to
Seller under this Agreement; the rights to any of Seller's claims for any
federal, state, local, or foreign tax refunds; or the assets, properties or
rights set forth on Schedule 1.2, attached hereto.
------------
1.3 LIABILITIES.
Schedule 1.3 sets forth all of the mature and contingent liabilities of any
------------
nature whatsoever of Seller existing as of the date of this Agreement. As of the
Closing Date, Purchaser shall assume and agree to discharge only those
obligations, liabilities and duties of Seller for certain trade payables and
accrued expenses related to the Assets (which shall not exceed the current fair
market value of the related Assets and shall not include liabilities owed to
persons related to Seller or its officers) set forth in Schedule 1.3(a) attached
---------------
hereto (the "Liabilities"). Except as specifically provided in Schedule 1.3(a),
---------------
it is expressly understood and agreed between the parties hereto that:
(a) General Warranties of Title. The Assets shall be conveyed or assigned
---------------------------
by Seller to Purchaser, with general warranties of title, free and clear of any
and all liens, restrictions, easements, security interests, security agreements,
security deeds, claims and encumbrances (including leases), and Purchaser shall
not be deemed to have assumed or to have taken any Assets subject to, and Seller
shall be solely liable and responsible for satisfying and discharging in a
timely manner, all other liabilities and obligations of Seller, whether known or
unknown, mature or contingent.
(b) Seller's Breach under Contracts and Agreements. Purchaser shall not
----------------------------------------------
assume, and Seller shall remain liable for, all claims and liabilities, whether
arising on or before, or subsequent to Closing, resulting from Seller's or
Shareholder's breach, on or before Closing, of any covenant, condition or other
obligation required of Seller or Shareholder under any contract or agreement
including, without limitation, any contract or agreement to provide e-mail
services or tracking services.
(c) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 1.3, IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT PURCHASER SHALL NOT ASSUME AND IS NOT ASSUMING, NOR
SHALL PURCHASER BECOME LIABLE, OBLIGATED
-4-
<PAGE>
OR RESPONSIBLE FOR THE PAYMENT OF, ANY DEBTS, LIABILITIES OR OBLIGATIONS OR THE
PERFORMANCE OF ANY DUTIES OF SELLER, OF ANY KIND OR NATURE WHATSOEVER, WHETHER
NOW OR HEREAFTER ARISING AND WHETHER CONTINGENT OR LIQUIDATED IN AMOUNT,
INCLUDING, WITHOUT LIMITATION, ANY DEBTS, LIABILITIES, OBLIGATIONS OR DUTIES
ARISING OUT OF ACCOUNTS PAYABLE, TAX LIABILITIES, EMPLOYEE BENEFITS, CONTRACTS,
AGREEMENTS OR OTHER TYPES OF LIABILITIES OF SELLER OR RELATED TO THE OPERATION
OF THE BUSINESS.
1.4 CLOSING.
The closing (the "Closing") of all the transactions contemplated herein
shall take place not later than the 31st day of December, 1998 (the "Closing
Date") at 10:00 a.m., Atlanta, Georgia Time, at the offices of Nelson Mullins
Riley & Scarborough, L.L.P., First Union Plaza, 999 Peachtree Street, N.E.,
Suite 1400, Atlanta, Georgia 30309, or at such other time and place as the
parties shall mutually agree. Exclusive possession of the Assets shall be
delivered to Purchaser at Closing.
(a) Deliveries By Seller and Shareholder. At the Closing, Seller and
------------------------------------
Shareholder shall deliver to Purchaser:
(i) duly executed assignments, bills of sale, deeds, certificates
of title and other instruments of conveyance sufficient to transfer and vest in
Purchaser good and marketable title to the Assets, with general warranties of
title, free and clear of any and all liens, restrictions, easements, security
interests, security agreements, security deeds, claims and encumbrances
(including leases), except those liabilities specifically assumed by Purchaser
pursuant to Section 1.3 hereof, together with any consents, permits and
approvals that may be required of any third parties;
(ii) certificates executed by a duly authorized executive officer of
Seller and by Shareholder to the effect that all warranties and representations
of Seller and Shareholder contained in this Agreement are true and correct at
and as of the Closing and all conditions precedent to the obligations of
Purchaser to consummate the transactions contemplated herein, not otherwise
waived by Purchaser, have been fulfilled by Seller and Shareholder;
(iii) all consents to the assignment of any contracts or other
agreements which require such consents prior to sale, assignment or other
transfer of such contracts or other agreements;
(iv) a certificate of incumbency certified by Seller's secretary
together with certified copies, dated as of Closing, of the resolutions of
Shareholder and of the board of directors of Seller, unanimously approving and
authorizing this Agreement and the transactions contemplated hereby;
(v) true and correct copies, certified by Seller's secretary, of
the Articles of Incorporation and Bylaws of Seller;
-5-
<PAGE>
(vi) certificates, dated not more than ten (10) days prior to the
Closing Date, from Seller's state of incorporation and each state in which
Seller is qualified to conduct its Business evidencing the good standing of
Seller in each such state; and
(vii) an Escrow Agreement, substantially in the form attached hereto
as Exhibit A (the "Escrow Agreement"); and
---------
(viii) such other certificates or documents reasonably requested by
Purchaser.
(b) Deliveries by Purchaser. At the Closing Purchaser shall deliver to
-----------------------
Seller and Shareholder:
(i) the Purchase Price as provided in Article 2 hereof;
(ii) an Assumption Agreement, substantially in the form attached
hereto as Exhibit B;
----------
(iii) the Escrow Agreement; and
(iv) such other certificates or documents reasonably requested by
Seller.
(c) Original Contracts and Records. Simultaneously with the deliveries
------------------------------
required by Section 1.4(a) above, Seller and Shareholder shall also deliver
original counterparts of all of the agreements, contracts, commitments, leases,
plans, bids, quotations, proposals, instruments, computer programs and software,
data bases whether in the form of diskettes, computer tapes or otherwise,
related object and source codes, manuals and guidebooks, price books and price
lists, customer and subscriber lists, supplier lists, sales records, files,
correspondence, legal opinions, rulings issued by governmental entities, and
other documents, books, records, papers, files, office supplies and data
belonging to Seller or Shareholder which are part of the Assets, and all such
steps will be taken as may be required to put Purchaser in actual possession and
operating control of the Assets.
(d) Third Party Consents. Seller represents and warrants that no person
--------------------
other than Purchaser has any agreement, option, commitment or right to acquire
any of Seller's assets, properties or rights or interests therein.
(e) Further Assurances. Seller and Shareholder from time to time after
------------------
the Closing, at Purchaser's request, will execute, acknowledge and deliver to
Purchaser such other instruments of conveyance and transfer and will take such
other actions and execute and deliver such other documents, certifications and
further assurances as Purchaser may reasonably require in order to vest more
effectively in Purchaser, or to put Purchaser more fully in possession of, any
of the Assets. Each of the parties hereto will cooperate with the other and
execute and deliver to the other parties hereto such other instruments and
documents and take such other actions as may be
-6-
<PAGE>
reasonably requested from time to time by any other party hereto as necessary to
carry out, evidence and confirm the intended purposes of this Agreement.
ARTICLE 2
PURCHASE PRICE
2.1 PURCHASE PRICE.
(a) Subject to the Escrow Agreement, the purchase price for all of the
Assets (the "Purchase Price") shall be the assumption of the liabilities set
forth on Schedule 1.3(a) hereto and the issuance by Purchaser to Seller of
---------------
50,000 shares of Purchaser's Series D Common Stock (the "WebMD Shares") to be
delivered as provided in Section 2.2 herein. The WebMD Shares shall be held in
escrow and transferred to Seller's shareholders in accordance with the Escrow
Agreement in the percentages set forth on Schedule 2.1, and Seller shall take
------------
all action necessary to cause the WebMD Shares to be distributed in such manner.
The WebMD Shares will be restricted securities and shall be marked with
substantially the following legend:
"These securities have not been registered under the Securities
Act of 1933, as amended (the "1933 Act"), or under the provisions
of any applicable state securities laws, but have been acquired
by the registered holder hereof for purposes of investment and in
reliance on statutory exemptions under the 1933 Act, and under
any applicable state securities laws. These securities may not be
sold, pledged, transferred or assigned except in a transaction
which is exempt under provisions of the 1933 Act and any
applicable state securities laws or pursuant to an effective
registration statement; and in the case of an exemption, only if
the Company has received an opinion of counsel satisfactory to
the Company that such transaction does not require registration
of these securities."
Seller warrants that Schedule 2.1 contains a complete and accurate list of
------------
all holders of securities of Seller (together with the class and number of
securities held by each such holder).
(b) In connection with the issuance of any WebMD Shares to Seller or
Seller's shareholders, such parties will execute and deliver to Purchaser and
the other shareholders of Purchaser a joinder agreement to the Restated
Shareholders Agreement, dated as of October 18, 1996, as amended, among
Purchaser and Purchaser's shareholders named therein and attached hereto as
Exhibit C ("Shareholders Agreement"). The WebMD Shares shall be marked with a
- ---------
legend referencing the terms and conditions of the Shareholders Agreement.
2.2 PAYMENT OF PURCHASE PRICE.
At the Closing, Purchaser will deliver:
(a) to the Seller, no shares of Purchaser's Series D Common Stock; and
-7-
<PAGE>
(b) to the Escrow Agent, 50,000 shares of Purchaser's Series D Common
Stock (the "Escrow Amount") to be held by the Escrow Agent on the terms and
conditions as set forth in the Escrow Agreement.
2.3 TRANSFER TAXES AND FILING FEES.
Seller shall be responsible for and shall pay any and all costs and
expenses for taxes, fees, stamps, charges, and all documentary, recording or
filing fees payable in connection with the transfer of the Assets (collectively,
the "Fees").
Seller warrants that it has the financial resources to pay the Fees and
will not fail to pay the Fees after the Closing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
Seller and Shareholder hereby jointly and severally make each of the
following representations and warranties to Purchaser, each of which is true and
correct on the date hereof and will be true and correct on the Closing Date,
except as expressly disclosed herein, each of which shall be unaffected by any
investigation heretofore or hereafter made by Purchaser and each of which shall
survive Closing and the transactions contemplated hereby:
3.1 ORGANIZATION AND GOOD STANDING.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, and has the full power and
authority to own and lease its properties and to operate the Business in all
places where it does business. Seller's principal place of business is located
in Fulton County, Georgia, and has been so located since its incorporation.
3.2 AUTHORIZATION FOR AGREEMENT.
The execution, delivery and performance of this Agreement by Seller and
Shareholder and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of Seller, all requisite
corporate actions have been taken by Seller to carry out the terms of this
Agreement, and Seller has delivered to Purchaser a Secretary's Certificate which
evidences such corporate actions.
-8-
<PAGE>
3.3 AUTHORITY.
All of the Voting Shares are owned by Shareholder, and, except as listed on
Schedule 3.3 attached hereto, are free and clear of all liens, encumbrances and
- ------------
claims of every kind. Shareholder and Seller have the full legal right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby to the extent required. Neither the execution nor the
delivery of this Agreement nor the consummation of the transactions contemplated
conflicts or will conflict with or results or will result in a breach of
Seller's Articles of Incorporation, Bylaws, or the terms, conditions or
provisions of any undertaking to which Shareholder or Seller are parties or by
which Seller, Shareholder or Seller's Business or Assets are bound. This
Agreement constitutes the valid and binding obligation of Shareholder and
Seller, enforceable against each of them in accordance with its terms.
3.4 CAPITAL STOCK.
The authorized capital stock of Seller consists solely of 20 million
shares of common stock, no par value per share; 10 million shares are voting
shares designated as Class A Common Stock, of which 3.6 million shares are
issued and outstanding; and 10 million shares are nonvoting shares designated as
Class B Common Stock, of which 333,337 shares are issued and outstanding. Each
share of Seller's stock is duly and validly authorized and issued, fully paid
and non-assessable, and was not issued in violation of the preemptive rights of
any past or present shareholder. In addition, each share of Seller's stock has
been issued in compliance with all federal and state securities laws. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
Seller to issue any of its authorized but unissued capital stock except as
disclosed on Schedule 3.4 hereto.
------------
3.5 VOTING STRUCTURE.
Immediately upon execution of this Agreement, Shareholder will relinquish
all but one share of Shareholder's Class A Common Stock. Otherwise, no change in
voting structure or relative ownership of Seller is contemplated or will be made
after the date of this Agreement.
3.6 FINANCIAL STATEMENTS.
Shareholder and Seller have delivered to Purchaser copies of the financial
statements (collectively, the "Financial Statements") of Seller attached hereto
as Schedule 3.6.
------------
Except as noted in Schedule 3.6, such Financial Statements fairly present
------------
the financial condition and results of the operations of Seller as of the date
and for the periods indicated thereon.
3.7 DISCLOSURE OF LIABILITIES.
Shareholder and Seller have delivered to Purchaser an accurate list as of
the Balance Sheet Date, attached hereto as Schedule 1.3, of all liabilities of
------------
Seller, which are reflected in the most recent available Balance Sheet and all
liabilities incurred thereafter, whether incurred in the ordinary course of
business or otherwise which are not otherwise reflected in the Balance Sheet of
any kind,
-9-
<PAGE>
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, together with, in the case of those liabilities which
are not fixed, an estimate of the maximum amount which may be payable. For each
such liability for which the amount is not fixed or is contested, Shareholder
and Seller have provided the following information:
(a) a summary description of the liability together with the following:
(i) copies of all relevant documentation relating thereto;
(ii) amounts claimed and any other action or relief sought; and
(iii) name of claimant and all other parties to the claim, suit or
proceeding.
(b) the name of each court or agency before which such claim, suit or
proceeding is pending;
(c) the date such claim, suit or proceeding was instituted; and
(d) a reasonable best estimate by the Shareholder and Seller of the
maximum amount, if any, which is likely to become payable with respect to each
such liability.
Except as set forth on Schedule 1.3, Seller has no, and will not have as of
------------
the Closing Date any additional liabilities nor is there any basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand against Seller giving rise to any liabilities
which have not been disclosed on the most recent available Balance Sheet or
which have arisen since the Balance Sheet Date outside of the ordinary course of
business.
3.8 PERSONAL PROPERTY.
Schedule 1.1(a) contains an accurate and complete list and description as
---------------
of the Balance Sheet Date and as of the date hereof, of all personal property
owned or leased by Seller, including true and correct copies of leases for
equipment used in the operation of the Business of Seller and including an
indication as to which assets were formerly owned by business or personal
affiliates of Shareholder or Seller. Except as shown on Schedule 1.1(a), all of
---------------
the furniture, fixtures, furnishings, machinery, equipment, vehicles (including
motor vehicle titles and current registrations) and other tangible personal
property are in good working order and condition, ordinary wear and tear
excepted, free from defects (latent and patent), have been maintained in
accordance with normal industry practice, and are suitable for the purposes for
which they are presently used. All equipment leases for leased personalty set
forth on Schedule 1.1(a) are in full force and effect and constitute valid and
---------------
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
-10-
<PAGE>
3.9 OWNED REAL PROPERTY.
Schedule 3.9 contains an accurate and complete list of all real property
------------
owned by Seller as of the Balance Sheet Date and as of the date hereof (the
"Real Property"), together with all buildings and structures presently situated
or to be constructed thereon, rents, issues and profits thereof, all deferred or
unpaid items with respect thereto, all mineral rights on or underneath the Real
Property and all easements, appurtenances and rights appurtenant thereto or
otherwise arising in connection therewith. With respect to such Real Property:
(a) Good and Marketable Title. Seller has good and marketable title to
-------------------------
the Real Property, free and clear of any security interests, easements,
covenants, or other restrictions, except for (i) installments of special
assessments not yet delinquent and (ii) recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy, value, or the
marketability of title of the Real Property;
(b) Pending or Threatened Actions. There are no (i) pending or threatened
-----------------------------
condemnation proceedings related to the Real Property, (ii) pending or
threatened litigation or administrative actions relating to the Real Property,
or (iii) other matters adversely affecting the current use, occupancy, or value
thereof;
(c) Legal Description and Compliance with all Laws. The legal description
----------------------------------------------
for the Real Property contained in the deeds thereof describe such parcels fully
and adequately, the buildings and improvements are located within the boundary
lines of the described parcels of land, are not in violation of applicable
setback requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming use"
of "permitted non-conforming structure" classifications), and do not encroach on
any easement which may burden the land, the land does not serve any adjoining
property for any purpose inconsistent with the use of the land, the property is
not located within a flood plain or subject to any similar type restriction for
which any permits or licenses necessary to the use thereof have not been
obtained, and access to the property is provided by paved public right-of-way
with adequate curb cuts available;
(d) Governmental Approvals. All facilities, including all buildings and
----------------------
structures presently situated or to be constructed (the "Facilities") on the
Real Property, have received all approvals of governmental authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(e) Additional Leases or Agreements. There are no leases, subleases,
-------------------------------
licenses, concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the parcels of
Real Property;
(f) Options. There are no outstanding options or rights of first refusal
-------
to purchase the Real Property or any portion thereof or interest therein;
-11-
<PAGE>
(g) Possession. There are no other parties in possession of the Real
----------
Property or any portion thereof;
(h) Adequate Service. All Facilities located on the Real Property are
----------------
supplied with utilities and other services necessary for the operation of such
Facilities, including gas, electricity, water, telephone, sanitary sewer, and
storm sewer, all of which services are adequate in accordance with applicable
laws, ordinances, rules, and regulations and are provided via public road or via
permanent, irrevocable, appurtenant easements benefiting the Real Property; and
(i) Access. Each parcel of Real Property abuts on and has direct
------
vehicular access to a public road or access via permanent, irrevocable,
appurtenant easements benefiting the Real Property.
3.10 LEASEHOLD INTERESTS.
Schedule 3.10 contains an accurate and complete list of all leasehold
--------------
interests held by Seller as of the Balance Sheet Date and as of the date hereof
(the "Leasehold Property"), together with all buildings and structures presently
situated or to be constructed thereon, rents, issues and profits thereof, all
deferred or unpaid items with respect thereto, all mineral rights on or
underneath the Leasehold Property and all easements, appurtenances and rights
appurtenant thereto or otherwise arising in connection therewith granted under
the leasehold. Seller has delivered to Purchaser correct and complete copies of
the lease granting the leasehold interests in the Leasehold Property (the
"Leases"). With respect to each such Lease:
(a) Full Force and Effect. The Lease is legal, valid, binding,
---------------------
enforceable, and in full force and effect;
(b) Full Force and Effect after Closing. The Lease will continue to be
-----------------------------------
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the Closing;
(c) No Default or Breach. No party to the Lease is in breach or default,
--------------------
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or acceleration
thereunder;
(d) No Repudiation. No party to the Lease has repudiated any provision
--------------
thereof;
(e) No Disputes. There are no disputes, oral agreements, or forbearance
-----------
programs in effect for the Lease;
(f) No Assignment or Transfer. Seller has not assigned, transferred,
-------------------------
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
Leasehold Property;
(g) Government Approvals. All leased facilities, including all buildings
--------------------
and structures presently situated on or to be constructed on the Leasehold
Property (the "Leased Facilities"), leased thereunder have received all
approvals of governmental authorities (including licenses and permits)
-12-
<PAGE>
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations;
(h) Utilities and Service. All Leased Facilities thereunder are supplied
---------------------
with utilities and other services necessary for the operation of said
facilities; and
(i) Good and Marketable Title. The owner of the Leased Facilities has good
-------------------------
and marketable title to the parcel of real property, free and clear of any
security interest, easement, covenant, or other restriction, except for (i)
installments of special assessments not yet delinquent and (ii) recorded
easements, covenants, and other restrictions which do not impair the current
use, occupancy, or value, or the marketability of title, of the property subject
thereto.
3.11 INVENTORY.
Schedule 1.1(b) contains a complete and accurate list and description of
---------------
all inventory of Seller as of the date of this Agreement. Except as noted on
Schedule 1.1(b), the inventory is not obsolete, damaged or defective, has been
- ---------------
stored and maintained in accordance with normal industry practice and is
suitable for the purposes for which it is presently used.
3.12 CUSTOMERS.
Schedule 1.1(c) contains a complete and accurate list of all customers of
---------------
Seller as of the date of this Agreement. All such customers are under a written
contract with Seller to provide the Services. All Services to customers have
been sold and rendered pursuant to such contracts, and have been performed in
compliance with the laws, rules and regulations of and under appropriate
federal, state and local authorities, regulations and laws except to the extent
set forth on Schedule 1.1(c). In addition, Seller is not liable for any claims
---------------
or liabilities resulting from Seller's breach of any covenant, condition or
other obligation required of Seller under any contract or agreement to provide
Services. Shareholder and Seller have previously delivered to Purchaser copies
of all such customer contracts and Seller warrants that none of Seller's
customers have canceled or substantially reduced or are currently attempting or
threatening to cancel or substantially reduce service.
3.13 FINANCIAL ACCOUNTS.
Schedule 1.1(d) contains a complete and accurate list of all accounts of
---------------
the Seller and all other accounts used in the Business and a detailed
description of:
(a) the name of each financial institution in which the Seller has
accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
-13-
<PAGE>
(d) the name of each person authorized to draw on or have access thereto.
3.14 ACCOUNTS AND NOTES RECEIVABLE.
Schedule 1.1(e) contains a complete and accurate list of all Receivables of
---------------
Seller as of the Balance Sheet Date and as of the date hereof which list
includes, but is not limited to, receivables from and advances to employees and
Shareholder. On the Closing Date, Shareholder and Seller shall provide Purchaser
with an aging of all accounts and notes receivable showing amounts due in 30-day
aging categories. Except for amounts reserved against on the most recent Balance
Sheet or otherwise disclosed on Schedule 1.1(e), the accounts and notes
---------------
receivable will be fully collectible by Purchaser within 60 days of Closing,
without offset, recoupment, counterclaim, claim or diminution.
3.15 OPERATING CONTRACTS.
Schedule 1.1(f) contains a complete and accurate list of all Operating
---------------
Contracts as of the Balance Sheet Date and as of the date hereof. Shareholder
and Seller further warrant that each has delivered to Purchaser true copies of
such agreements. Except to the extent set forth on Schedule 1.1(f), Seller has
----------------
complied with all material commitments and obligations pertaining to it and is
not in material default under such Operating Contracts and no notice of default
has been received. The Seller is not a party to any contract, agreement or other
instrument or commitment except as set forth on Schedule 1.1(f).
---------------
3.16 COMPUTER SOFTWARE; OTHER INTELLECTUAL PROPERTY.
(a) Schedule 3.16(a) contains a complete and accurate list of the computer
----------------
software that is owned by Seller and used in its business (the "Owned
Software"), except for commercially available business systems, software
applications and other commercially available over-the-counter "shrink-wrap"
software that is generally used by Seller in the ordinary course of its business
(the "Business Software"). Except as set forth in Schedule 3.16(a), Seller has
----------------
exclusive rights and title to the Owned Software, free and clear of all claims,
including claims or rights of joint owners and employees, agents, consultants,
customers, licensees or any other parties who may have been involved in the
development, creation, marketing, maintenance, enhancement or licensing of such
computer software. Each employee, contract programmer, independent contractor,
nonemployee agent and person or other entity who has performed development or
computer programming services for Seller in connection with the Owned Software
has executed a confidentiality agreement in favor of Seller, and Seller has
obtained an assignment or license of, or otherwise owns, the intellectual
property resulting therefrom. Except as set forth in Schedule 3.16(a) and except
----------------
for commercially available "shrink-wrap" software, the Owned Software is not
dependent on any Licensed Software (as defined in Subsection 3.16(b) below) in
order to operate fully in the manner in which it is intended. No Owned Software
has been published or disclosed to any other parties except pursuant to
contracts requiring such other parties to keep the Owned Software confidential.
(For purposes of the preceding sentence, marketing materials that describe the
Owned Software and its functions
-14-
<PAGE>
in general shall not be deemed a publication or disclosure of the Owned
Software.) To the best of Seller's knowledge, no such other party has breached
any such obligation of confidentiality.
(b) Schedule 3.16(b) contains a complete and accurate list of all software
----------------
(other than the Business Software) of which Seller is a licensee or lessee or
that Seller otherwise has obtained the right to use (collectively, the "Licensed
Software"). Schedule 3.16(b) also (a) sets forth a list of all license fees,
----------------
rents, royalties or other charges that Seller is required or obligated to pay
with respect to Licensed Software and (b) a description of each license, lease
or other agreement applicable to the Licensed Software. Seller has the right and
license to use, sublicense, modify and copy Licensed Software necessary to
operate Seller's business, free and clear of any limitations or encumbrances.
Seller is in full compliance with all material provisions of each license, lease
or other agreement relating to the Licensed Software. Except as disclosed in
Schedule 3.16(b), none of the Licensed Software has been incorporated into or
- ----------------
made a part of any Owned Software. Seller has not published or disclosed any
Licensed Software to any other party except, in the case of Licensed Software
that Seller leases or markets to others, pursuant to contracts requiring such
other parties to keep the Licensed Software confidential. To the best of
Seller's knowledge, no party to whom Seller has disclosed Licensed Software has
breached such obligation of confidentiality.
(c) The Owned Software, the Licensed Software, and the Business Software
constitute all software used in Seller's business (the "Seller Software"). The
transactions contemplated herein will not cause a breach or default under any
licenses, leases or similar agreements relating to the Seller Software or impair
Seller's ability to use the Seller Software in the same manner as the Seller
Software is currently used or is contemplated to be used by Seller. Seller
neither has infringed nor is infringing any intellectual property rights of any
third party with respect to the Owned Software, and, to the best of Seller's
knowledge, no other person or entity is infringing any intellectual property
rights of Seller with respect to the Owned Software.
(d) Seller and, to the best of Seller's knowledge, each other party to any
licensing, leasing or similar arrangements under which Seller is the licensor or
lessor or has otherwise granted the right to use the Seller Software are in full
compliance therewith and are not in breach of their respective obligations with
respect thereto. Seller is not a party to any license, installation agreement,
maintenance agreement, data processing agreement, services agreement or other
agreement pursuant to which it is committed to perform software installation,
modifications, enhancements or services without payment or for payments that, in
the aggregate, are less than the cost to perform such installation,
modifications, enhancements or services. Except as disclosed on Schedule
--------
3.16(d), Seller has not granted any licenses or other rights and Seller has no
- -------
obligation to grant licenses or other rights with respect to the Seller
Software. Seller has complied in all material respects with its obligations to
its customers, licensees and lessees in respect of the Seller Software.
(e) Schedule 3.16(e) lists and separately identifies all agreements
----------------
pursuant to which Seller has granted marketing or brokering rights in the Seller
Software to third parties.
-15-
<PAGE>
(f) Seller has taken all reasonable and appropriate actions under the laws
of all applicable foreign jurisdictions, if any, where Seller has marketed or
licensed the Seller Software to protect its ownership interests in,
confidentiality rights of, and rights to market, license, modify or enhance, the
Seller Software.
(g) Schedule 3.16(g) hereto sets forth a complete and correct list and
----------------
summary description of all patents, patent applications, patent disclosures, and
improvements thereto, whether registered or unregistered, trademarks, service
marks, logos, internet domain names, trade names and corporate names, whether
registered or unregistered, and registrations and applications for registration
thereof, copyrights, whether registered or unregistered, and registration and
applications for registration thereof, together with a complete list of all
licenses granted by or to Seller with respect to any of the above. Seller has
protected by way of patent, trademark or copyright registration or application
or otherwise the property listed in Schedule 3.16(g) hereto to the extent
----------------
reasonably necessary for the conduct of its business as now conducted. Seller
validly owns or is validly licensed to use all inventions, processes, know-how,
formulas, patterns, designs, trade secrets and confidential information that are
used in the conduct of its business as now conducted. All such rights and all
rights listed in Schedule 3.16(g) hereto are valid and enforceable and are free
----------------
from any security interest, lien or encumbrance or any default on the part of
Seller, and are not now involved in any pending or, to the knowledge of Seller,
threatened interference proceeding. No option, license, sublicense or other
agreement has been granted in respect of any patent, trademark, brand name,
trade secret, confidential information, copyright or pending application
therefor listed in Schedule 3.16(g) hereto, except as noted in Schedule 3.16(g).
---------------- ----------------
Neither the Owned Software nor any of Seller's other owned intellectual property
infringes any patent, trademark, service mark, trade or company name, copyright
or application therefor or any other related technological right of any other
person. None of the rights of Seller described in this Section 3.16(g) will be
impaired in any way by the transactions provided for herein, and all of such
rights will be fully enforceable after the Closing Date without the consent or
agreement of any other party. Seller does not believe it is or will be necessary
to utilize any inventions of any of its employees made outside of their
employment by Seller.
(h) Seller has taken all reasonable actions to protect all trade secrets
and confidential information associated with the Business.
(i) The Intellectual Property is adequate for the operation of the
Business as currently conducted and as proposed to be conducted.
3.17 INTANGIBLE PROPERTY.
Schedule 1.1(h) contains a complete and accurate list and summary
---------------
description as of the Balance Sheet Date and as of the date hereof, of all
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off and rights of recoupment (including any
such item relating to the payment of any federal, state or local tax),
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances and similar rights obtained from governments and governmental agencies
owned or held by Seller, all of which are now valid, in
-16-
<PAGE>
good standing and in full force and effect. Except as set forth on Schedule
--------
1.1(h), such franchises, approvals, permits, licenses, orders, registrations,
- ------
certificates, variances and similar rights are adequate for the operation of
Seller's Business as presently constituted.
3.18 INSURANCE.
Schedule 3.18 contains a complete and accurate list as of the Balance Sheet
-------------
Date and as of the date hereof, of all insurance policies carried by Seller and
all insurance loss runs or workmen compensation claims received for the past two
(2) policy years. Seller has delivered complete copies of all policies currently
in effect. The insurance carried by Seller with respect to its properties,
assets and Business is with reputable insurers. Such insurance policies are
currently in full force and effect and shall remain in full force and effect
through the Closing Date. Seller's insurance has never been canceled and Seller
has never been denied coverage.
3.19 EMPLOYEES.
Schedule 3.19 contains a complete and accurate list of all officers,
-------------
directors and employees of Seller and the rate of compensation (and the portions
thereof attributable to salary, bonus and other compensation, respectively), job
title and date of employment as of the Balance Sheet Date and as of the date
hereof. Seller warrants that with respect to all employees, Seller is and has
been at all times in compliance with all federal, state and local laws, rules
and regulations with respect to employment, wages, hours and benefits. Seller is
not engaged in any unfair labor practices nor are any unfair labor practices or
other complaints against Seller filed with or threatened to be filed with or by
the National Labor Relations Board, Equal Employment Opportunity Commission,
Department of Labor or any similar agency or instrumentality of any state or
local government; and Seller has experienced no labor interruptions over the
past two years and considers its relationship with employees to be good.
3.20 BENEFIT PLANS.
Schedule 3.20 contains a complete and accurate list of all employee benefit
-------------
plans (the "Benefit Plans") of Seller, including employment agreements and any
other agreements containing "golden parachute" provisions, and deferred
compensation agreements, together with copies of such plans, agreements and any
trusts related thereto, and classifications of employees covered thereby as of
the Balance Sheet Date and as of the date hereof. With respect to such Benefit
Plans, Seller warrants:
(a) Except as described in Schedule 3.20, Seller does not have a pension,
-------------
profit sharing, deferred compensation, stock option, employee stock purchase or
other employee benefit plan or arrangement.
(b) Except as described in Schedule 3.20, all employee benefit plans are
-------------
in substantial compliance with all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other applicable federal,
state and local statutes, ordinances and regulations. All such plans that are
intended to qualify (the "Qualified Plans") under Section 401(a) of the Internal
-17-
<PAGE>
Revenue Code of 1986, as amended (the "Code"), have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are included as part of Schedule 3.20 hereof.
-------------
(c) Except as disclosed in Schedule 3.20, all reports and other documents
-------------
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, actuarial reports,
audits or tax returns) have been timely filed or distributed, and copies thereof
are included as part of Schedule 3.20 hereof.
-------------
(d) Neither Shareholder, any plan listed on Schedule 3.20, nor Seller has
--------------
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such plan listed in Schedule 3.20 has
-------------
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and Seller has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. Shareholder and Seller further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to qualify
under Section 401(a) of the Code without notice to and approval by the Internal
Revenue Service;
(ii) no plan listed in Schedule 3.20 subject to the provisions of
-------------
Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any plan listed in Schedule
--------
3.20;
- ----
(iv) Seller has not incurred liability under Section 4062 of ERISA;
and
(v) Except as otherwise noted on Schedule 3.20, Seller will
-------------
terminate the employee benefit plans identified on Schedule 3.20 prior to
-------------
Closing and Purchaser hereby consents to such termination.
3.21 ADMINISTRATIVE ACTION AND LITIGATION.
Except as set forth on Schedule 1.3:
------------
(i) Seller and Shareholder are not in default under any law or
regulation or under any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over Seller;
(ii) there are no charges, complaints, actions, suits, proceedings,
hearings, investigations, claims or demands pending or threatened against or
affecting Seller and Shareholder, at law or in equity by third parties, or
others, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it; and
-18-
<PAGE>
(iii) no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. Seller and Shareholder have conducted
and are conducting the Business in substantial compliance with requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
might adversely affect the operations, affairs, prospects, properties, assets,
profits or condition (financial or otherwise) of the Business, taken as a whole.
3.22 TAX RETURNS AND AUDITS.
Seller has timely filed all requisite federal, state and other tax returns
for all fiscal periods ending on or before the Balance Sheet Date. Seller has
currently paid when due all taxes levied and imposed in connection with the
operation of its Business, including, without limitation, applicable sales and
use taxes, social security taxes, business license taxes, federal and state
income taxes, employment taxes, federal and state withholding taxes,
unemployment taxes, workmen's compensation taxes, franchise taxes, property
taxes, ad valorem taxes and all similar taxes; except as set forth on Schedule
--------
1.3, there are no open years, examinations in progress or claims against it for
- ---
federal, state or other taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim, whether pending or threatened, for taxes has been received. The amounts
shown as accruals for taxes on the Financial Statements of Seller as of the
Balance Sheet Date are sufficient for the payment of all taxes of the kind
indicated (including penalties and interest) for all fiscal periods ended on or
before that date. Copies of any (a) tax examinations (b) extensions of statutory
limitations, and (c) the federal and local income tax returns and franchise tax
returns of Seller for its last two fiscal years, or such shorter period of time
as it shall have existed, are attached hereto as Schedule 3.22.
-------------
3.23 FULL DISCLOSURE; REQUIRED CONSENTS.
The certified copies of the Articles of Incorporation and Bylaws, both as
amended to date, of Seller and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents which are
included on Schedules attached hereto or which have been delivered to Purchaser
in connection with the transaction contemplated hereby are complete and correct.
Seller and any other party therein is not in default thereunder except as set
forth in the Schedules and documents attached to this Agreement. The rights and
benefits of Seller thereunder will not be adversely affected by the transactions
contemplated hereby and the execution of this Agreement or the attachments and
the performance of the obligations hereunder will not violate or result in a
breach or constitute a default under any of the terms or provisions of the
Articles of Incorporation and Bylaws, and leases, instruments, agreements,
licenses, permits, certificates or other documents. Except as set forth in
Schedule 3.23, none of such leases, instruments, agreements, contracts,
- -------------
licenses, permits, certificates or other documents requires notice to, or the
consent or approval of, any governmental agency or other third party to the
transactions contemplated to remain in full force and effect.
-19-
<PAGE>
3.24 ENVIRONMENTAL MATTERS.
Seller has obtained all permits, licenses and other authorizations which
are required in connection with the conduct of the Business under Regulations
relating to pollution or protection of the environment, including Regulations
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including without limitation ambient
air, surface water, groundwater, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
Seller and the Business are in full compliance with all the terms and
conditions of all required permits, licenses and authorizations, and are also in
full compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, Schedules and timetables contained in
those laws or contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder. During the period of Seller's ownership or lease of any Real
Property there have been no emissions, migrations, releases, discharges,
spillage or disposals in, on, at, under, adjacent to or affecting (or
potentially affecting) such Real Property or any neighboring properties.
Shareholder and Seller are not aware of, nor have Shareholder or Seller
nor any of Seller's subsidiaries received notice of, any past, present or future
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance or continued compliance
with those laws or any regulations, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, chemical, or industrial, toxic or
hazardous substance or waste.
There is no civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, investigation, or
proceeding pending or, to the best of its knowledge, threatened against Seller
in connection with the conduct of the Business relating in any way to the laws
referred to in this Article or any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved under such laws.
Seller agrees to provide reasonable cooperation to Purchaser in connection
with Purchaser's application for the transfer, renewal or issuance of any
permits, licenses, approvals or other authorizations or to satisfy any
regulatory requirements involving the Assets.
-20-
<PAGE>
3.25 OUTSTANDING LIABILITIES.
Except for the liabilities being assumed by Purchaser as set forth on
Schedule 1.3(a), Seller has paid or made arrangements for the payment of all
- ---------------
monies and similar indebtedness owed to any of its creditors in such a manner so
as to prevent Purchaser from incurring any liability for the payment thereof
and/or any such creditors from asserting a claim against the transactions
contemplated hereunder upon any alleged violation of the Bulk Sales Law
provisions of the State of Georgia. Seller and Shareholder acknowledge that
Purchaser, Seller and Shareholder have agreed to waive compliance with such Bulk
Sales Law; provided, however, that Purchaser may publish a notice of the sale of
the Assets in accordance therewith.
3.26 NO INTEREST IN OTHER ENTITIES.
Seller owns no shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any
association, partnership, joint venture or other legal entity. Seller's interest
in the Assets is held directly by Seller and not through any association,
partnership, joint venture or other legal entity.
3.27 NO MATERIAL OCCURRENCES.
Since the Balance Sheet Date, there has not been:
(a) any change in the financial condition, assets, liabilities
(contingent or otherwise), income or Business of Seller;
(b) any damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the properties or Business of Seller;
(c) any change in the authorized capital of Seller or in its securities
outstanding or any change in its ownership interests or any grant of any
options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in respect
of the capital stock or any direct or indirect redemption, purchase or other
acquisition of any if the capital stock of Seller;
(e) any increase in the compensation, bonus, sales commissions of fee
arrangement payable or to become payable by Seller to any of its officers,
directors, shareholders, employees, consultants or agents, or any payments made
to or for the benefit of Shareholder that were not normal and ordinary and
consistent with past practices of Seller;
(f) any work interruptions, labor grievances or claims filed, proposed
law or regulation or any event or condition of any character, materially
adversely affecting the Business or future prospects of Seller;
-21-
<PAGE>
(g) any sale or transfer, or any agreement to sell or transfer, any
assets, property or rights of Seller to any person, including, without
limitation, the Shareholder or their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to Seller, including, without limitation, any indebtedness or
obligation of any shareholder or any affiliate thereof;
(i) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, property or rights of
Seller or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(j) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets;
(k) any waiver of any material rights or claims of Seller;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which Seller is a party; or
(m) any transaction by Seller outside the ordinary course of its
Business.
3.28 YEAR 2000 WARRANTY.
Seller warrants that the occurrence in or use by the Purchaser of dates on
or after January 1, 2000 (the "Millennial Dates") will not have an adverse
effect on the performance of the Business purchased herein with respect to date-
dependent data, computations, output or other functions (including, without
limitation, calculating, computing or sequencing) and the Seller's Services and
Business will create, store and generate output data related to or including the
Millennial Dates without errors or omissions.
3.29 INVESTMENT.
Seller and each shareholder of Seller who will receive the WebMD Shares
shall deliver to Purchaser an acknowledgment that the WebMD Shares have not
been, and will not be, registered under the Securities Act of 1933, as amended,
or under any state securities laws and that the WebMD Shares are being offered
and sold are in reliance upon federal and state exemptions for transactions not
involving a public offering. Seller and each shareholder of Seller shall further
represent that (a) the WebMD Shares are being acquired solely for Seller's or
shareholder's own account for investment purposes, and not with a view to the
distribution thereof (except to the shareholders of Seller); (b) Seller and each
shareholder is a sophisticated investor with knowledge and experience in
business and financial matters; (c) Seller and each shareholder has received
certain information concerning Purchaser and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and risks
inherent in holding the WebMD Shares; (d) Seller and each shareholder is able to
bear the economic risk and lack of liquidity
-22-
<PAGE>
inherent in holding the WebMD Shares; and (f) Seller and each shareholder is an
accredited investor for the reasons set forth on Schedule 3.29 attached hereto.
-------------
3.30 BROKERS' FEES.
Shareholder and Seller have not engaged any broker or finder and shall
indemnify Purchaser against any and all claims for payment of brokerage
commissions or finder's fee in connection with the transactions contemplated
herein.
3.31 PRIVATE PLACEMENT MEMORANDUM.
Seller and Shareholder have not provided to any party the Private
Placement Memorandum of certifiedemail.com, Inc. dated January 21, 1998 (or any
portion thereof) for any reason, including, but not limited to, as an inducement
to invest in Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby warrants and represents to Seller, all of which
representations and warranties are true and correct as of the date hereof and
will be true and correct on the Closing Date, and shall survive Closing, as
follows:
4.1 ORGANIZATION AND GOOD STANDING.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, and has the full power and
authority to own and lease its properties and to operate its business in all
places where it does business. Purchaser's principal place of business is
located in Fulton County, Georgia, and has been so located since its
incorporation.
4.2 AUTHORIZATION FOR AGREEMENT.
The execution and delivery of this Agreement has been duly authorized by
the Board of Directors of Purchaser, all requisite corporate actions have been
taken by Purchaser to carry out the terms of this Agreement, and Purchaser has
delivered to Seller a Secretary's Certificate which evidences such corporate
actions.
4.3 LEGAL AUTHORITY.
Purchaser has the full legal right, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby to the extent
required hereby. Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated hereby conflicts or will conflict
with or results or will result in a breach of Purchaser's Articles of
-23-
<PAGE>
Incorporation, Bylaws, or the terms, conditions or provisions of any undertaking
to which Purchaser is a party or by which Purchaser or its business or assets
are bound.
4.4 VALID AND BINDING OBLIGATION.
This Agreement constitutes the valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
4.5 ACCOUNTS RECEIVABLE.
Purchaser hereby represents and warrants that it will attempt to collect
the accounts receivable of Seller being sold to Purchaser by Seller pursuant to
the terms of this Agreement in accordance with the Purchaser's existing business
practices relating to the collection of accounts receivables.
ARTICLE 5
ADDITIONAL PRE-CLOSING COVENANTS
The parties additionally agree as follows with respect to the period
between the execution of this Agreement and the Closing:
5.1 FULL ACCESS; DUE DILIGENCE.
Purchaser and its representatives may, at reasonable times, visit the
premises of Seller and inspect the Assets and have full access to all of the
books, properties, contracts, commitments and records of Seller for the purpose
of examining and conducting a prudent due diligence inquiry of the Business and
the Assets. Seller and its officers, employees and agents shall cooperate with
and assist in every respect Purchaser and its representatives in connection with
this inspection. Promptly after the execution of this Agreement, Seller shall
deliver to Purchaser a copy of all title insurance policies and other evidence
of Seller's ownership or leasehold interest in real property, together with
surveys, soil tests, and any other material report, study or documents regarding
the Assets that is in the possession of Seller or otherwise available to Seller.
5.2 OPERATION OF THE BUSINESS IN REGULAR COURSE.
Seller shall diligently proceed to conduct the Business in the ordinary
course and will take no action, embark on any course of inaction, or enter into
any transaction outside of the ordinary course of business. Without limiting the
foregoing, Seller shall not enter into any contract or commitment to sell or
lease any equipment, machinery, or other assets constituting the Assets or
engage in material transactions affecting the Assets without prior written
consent of Purchaser.
-24-
<PAGE>
5.3 APPROVALS.
Seller will use its best efforts to obtain any consents by any third party
or government authority or agency required or deemed desirable by Purchaser in
connection with the consummation of the transactions contemplated hereby.
5.4 PRESERVATION OF ASSETS.
Seller shall diligently preserve and maintain the Assets in the ordinary
course of business and in a manner consistent with prudent business practices.
5.5 PRESERVATION OF ORGANIZATION.
Seller shall use its best efforts to preserve Seller's business
organization intact, to keep available to Seller the present employees of Seller
and to preserve for Purchaser the present relationships of Seller with its
customers, suppliers and others having business relations with it.
5.6 USE OF PROPERTY.
All tangible property of Seller and real property used in the Business
will be used, operated, maintained and repaired in a careful and efficient
manner.
5.7 NO DEFAULT.
Seller shall not act or omit to do any act, or permit any act or omission
to act, which will cause a breach of any contract, permit, license, commitment
or obligation.
5.8 RISK OF LOSS.
Seller shall maintain in full force and effect all of its insurance
presently in effect and shall bear all risk of loss with respect to the Assets.
5.9 NOTICE OF DEVELOPMENTS.
Seller shall give prompt written notice to Purchaser of any material
developments affecting the Assets, liabilities, business, financial condition,
operations, results of operations, or future prospects of the Business. Each
party will give prompt notice to the other of any material development affecting
the ability of the parties to consummate the transactions contemplated hereby.
-25-
<PAGE>
ARTICLE 6
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Each and every obligation of Purchaser to be performed on the Closing Date
shall be subject to the satisfaction prior to or on the Closing Date of the
following conditions, unless waived in writing by Purchaser:
6.1 REPRESENTATIONS AND WARRANTIES TRUE; COMPLIANCE WITH AGREEMENT.
The representations and warranties of Shareholder and Seller in this
agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
and as of such Closing Date, and Seller and Shareholder shall have performed and
complied with all of their obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date, and
Purchaser shall receive a certificate to that effect as described in Section
1.4(a).
6.2 CORPORATE DOCUMENTS AND RESOLUTIONS.
Seller shall deliver or cause to be delivered to Purchaser those items set
forth in Section 1.4.
6.3 NO MATERIAL CHANGE.
The Assets shall be in substantially the same or superior condition as
existing on the date of this Agreement and not be adversely affected or
threatened to be affected in any way as a result of fire, explosion, earthquake,
disaster, accident, condemnation, any action or threatened action by the United
States or any governmental authority, flood, embargo, riot, civil disturbance,
uprising, activity of armed forces or act of God or public enemy. To the extent
any item of the Assets is damaged, destroyed, condemned or suffers a casualty
prior to the Closing Date, at Purchaser's option, the Purchase Price shall be
reduced by an appropriate amount.
6.4 OPINION OF COUNSEL.
Purchaser shall receive from counsel for Shareholder and Seller a written
opinion, dated as of the Closing Date, addressed to Purchaser in form and
substance satisfactory to Purchaser, in the form attached hereto as Exhibit D.
---------
6.5 PROCEEDINGS AND INSTRUMENTS SATISFACTORY.
All proceedings, corporate or otherwise, to be taken in connection with
the transactions contemplated by this Agreement and all appropriate documents
incident thereto shall be satisfactory in form and substance to Purchaser; and
Seller shall have made available to Purchaser for examination the originals or
true and correct copies of all records and documents which Purchaser may
reasonably request in connection with the transactions contemplated hereby.
-26-
<PAGE>
ARTICLE 7
CONDITIONS PRECEDENT TO SELLER'S AND SHAREHOLDER'S OBLIGATIONS
Each and every obligation of Seller and Shareholder to be performed on the
Closing Date shall be subject to the satisfaction prior to or on the Closing
Date of the following conditions, unless waived in writing by Seller:
7.1 REPRESENTATIONS AND WARRANTIES TRUE.
The representations and warranties of Purchaser in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of such
Closing Date, and Seller shall have received a certificate from an executive
officer of Purchaser to that effect.
ARTICLE 8
INDEMNIFICATION BY SELLER
8.1 INDEMNIFICATION.
Seller and Shareholder hereby agree to jointly and severally indemnify,
defend and hold harmless Purchaser and its officers, directors, employees,
agents, representatives, successors and assigns of, from, against, and in
respect of any and all loss, liability and expense resulting from:
(a) Any and all liens, restrictions, easements, security interests,
security agreements, security deeds, claims and encumbrances (including leases)
against any of the Assets, and all other liabilities and obligations of Seller,
whether known or unknown, mature or contingent to the extent such liabilities
and obligations are not to be expressly assumed by Purchaser pursuant to Section
1.3 hereof;
(b) Any misrepresentation, breach of representation or warranty, or
nonfulfillment of any obligation on the part of the Seller or Shareholder made
or given in or with respect to this Agreement, or from any misrepresentation in
or omission from any Schedule hereto or other instrument furnished or to be
furnished to Purchaser in connection with the transactions provided for in this
Agreement; and
(c) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including attorney, engineer, and
expert witness fees) incident to any of the foregoing provisions. Seller and
Shareholder hereby waive any and all contractual, statutory and other causes of
action, at law or in equity, which Seller or Shareholder have or may have now or
in the future against Purchaser arising out of or in any manner connected with
the foregoing.
-27-
<PAGE>
Without limiting the generality of the foregoing, Seller and Shareholder
agree that they will continue to defend at their own expense any pending actions
against Seller which are based on dealings prior to the Closing Date with
customers, suppliers and other parties, and Purchaser agrees to cooperate with
Seller and Shareholder in such matters.
8.2 NOTICE AND PAYMENT.
Purchaser shall give Seller and Shareholder written notice of any claim,
suit, liability or demand which gives rise to indemnification by Seller and
Shareholder pursuant to this Agreement (hereinafter referred to as "Purchaser's
Notice"). Such notice shall describe the claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the loss that has been or may be
sustained by Purchaser.
(a) Seller or Shareholder may elect to compromise or defend, at Seller's
or Shareholder's own expense and by Seller's or Shareholder's own counsel, any
matter involving the asserted liability of Purchaser so long as Seller or
Shareholder pursue the same diligently and in good faith. If Seller or
Shareholder undertake to compromise or defend such asserted liability, Seller or
Shareholder shall within 15 days (or sooner, if the nature of the asserted
liability so requires) notify Purchaser of their intent to do so, and Purchaser
shall cooperate, at the expense of Seller or Shareholder, in the compromise of,
or defense against, any such asserted liability. Notwithstanding the foregoing,
Purchaser shall have the right to participate in any matter through counsel of
its own choosing at its own expense; provided that Seller's or Shareholder's
counsel shall be lead counsel. After Seller or Shareholder have notified
Purchaser of their intention to undertake to defend or settle any such asserted
liability, and for so long as Seller or Shareholder diligently pursue such
defense, Seller and Shareholder shall not be liable for any additional legal
expenses incurred by Purchaser in connection with any defense or settlement of
such asserted liability, except to the extent such participation is requested by
Seller or Shareholder, in which event Purchaser shall be reimbursed by Seller or
Shareholder for reasonable additional legal expenses, out-of-pocket expenses and
allocable share of employee compensation incurred in connection with such
participation for any employee whose participation is so requested. If Seller or
Shareholder desire to accept a final and complete reasonable settlement of
asserted liability and Purchaser refuses to consent to such reasonable
settlement, then Seller's and Shareholder's liability under this Article 8 with
respect to such asserted liability shall be limited to the amount so offered in
settlement and Purchaser shall reimburse Seller or Shareholder for any
additional costs of defense which it subsequently incurs with respect to such
claim.
(b) If Seller or Shareholder do not undertake to defend such matter to
which Purchaser is entitled to indemnification hereunder, or fail to diligently
pursue such defense, Purchaser may undertake such defense through counsel of its
own choice, at the cost and expense of Seller or Shareholder, and Purchaser may
settle such matter, and Seller or Shareholder shall reimburse Purchaser for the
amount paid in such settlement and any other liabilities or expenses incurred by
Purchaser in connection therewith, provided, however, that Purchaser shall not
settle any such claim without the written consent of Seller and Shareholder,
which consent shall not be unreasonably withheld.
-28-
<PAGE>
(c) All sums paid by Purchaser for which Seller or Shareholder are
obligated to reimburse Purchaser under this Article 8 (together with interest
thereon from the date of Purchaser's payment of any amounts until paid in full)
shall be paid within ten days of demand with interest calculated at the maximum
rate allowed under Georgia law.
ARTICLE 9
NONCOMPETITION AND NONDISCLOSURE
9.1 NONCOMPETITION AND NONDISCLOSURE.
Shareholder and Seller agree that, for a period of two (2) years following
the Closing Date, they shall not, directly or indirectly, for themselves or for
or through Seller's present officers, directors, shareholders, or agents:
(a) Nonsolicitation of Customers. Solicit or attempt to solicit Customers
----------------------------
(as defined below), directly or indirectly, to induce or encourage them to
acquire or obtain from anyone other than the Purchaser, service competitive with
or substitute for any Service. For purposes of this Section, a "Customer" refers
to any person or group of persons with whom Seller or Shareholder has or had
direct material contact with regard to sales, delivery or support of the
Services, including prospective clients or customers;
(b) Nonsolicitation of Employees. Employ, induce, solicit for employment,
----------------------------
or assist others in employing, inducing or soliciting for employment any
individual who is at any time during such period an employee of the Purchaser
for the purpose of providing services that are the same or similar to the types
of services offered or engaged in by Seller, the Shareholder or the Purchaser as
of the date of this Agreement;
(c) Noncompetition. Engage directly or indirectly in any business which is
--------------
similar to Seller's Business, whether such engagement be as an employer,
officer, director, owner, investor, employee, partner or consultant.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Shareholder or Seller, its officers, directors or employees from
acquiring as an investment not more than one percent of the capital stock of a
competing business, whose stock is traded on a national securities exchange or
over-the-counter;
(d) Proprietary Information. Not disclose at any time now or in the
-----------------------
future, Seller's or Purchaser's proprietary information, trade secrets,
customers, or other confidential information, including, but not limited to,
nonpublic financial statements, price lists and pricing information, information
concerning costs, charges, operating procedures and results, marketing and
business plans, mailing lists, marketing research, whether in existence or
proposed, to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever.
-29-
<PAGE>
If the final judgment of a court of competent jurisdiction declares that
any term or provision of this Section 9.1 is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
9.2 SPECIFIC PERFORMANCE.
Each of the parties acknowledges and agrees that the Purchaser would be
damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the Purchaser shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in addition to any other remedy to which Purchaser may be
entitled, at law or equity.
9.3 REASONABLE RESTRAINT.
It is agreed between the parties that the foregoing covenants in this
Article 9 impose a reasonable restraint on Shareholder and Seller in light of
the activities and business of Shareholder and Seller as of the date of this
Agreement.
9.4 SEVERABILITY.
The covenants in this Article 9 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time, or territorial restrictions set forth herein are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
9.5 INDEPENDENT COVENANTS.
All of the covenants in this Article 9 shall be construed as an agreement
independent of any other provision of this Agreement, and the existence of any
claim or cause of action of Shareholder or Seller against Purchaser, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Purchaser of such covenants. It is specifically agreed that the
period of two years stated above, shall be computed by excluding from such
computation any time during which Shareholder or Seller are in violation of any
provision of this Article 9 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action Purchaser seeks to enforce the agreements and covenants of
Shareholder and Seller or
-30-
<PAGE>
in which any person contests the validity of such agreements and covenants or
their enforceability or seeks to avoid their performance or enforcement.
9.6 MATERIALITY.
Shareholder and Seller hereby agree that this Article 9 is a material and
substantial part of this transaction.
ARTICLE 10
TERMINATION AND ABANDONMENT
This Agreement may be terminated and abandoned on or prior to the Closing
Date as follows: (i) by mutual consent of all parties hereto; (ii) by Purchaser
if the conditions precedent contained in Article 6 hereof have not been
fulfilled or waived in writing on or prior to the Closing Date; (iii) by
Purchaser if Purchaser is not satisfied with the results of its continuing
business, legal and accounting due diligence regarding the Seller, Shareholder
or Business; or (iv) by Seller if the conditions precedent contained in Article
7 hereof have not been fulfilled or waived in writing on or prior to the Closing
Date. In the event of termination by any party as provided above, written notice
shall promptly be given to the other parties and each party shall pay its own
expenses incident to the preparation for the consummation of this Agreement and
the transactions contemplated hereby. A termination under the provisions of this
Article 10 shall not prejudice any claim for damages that any party may have
hereunder or at law or in equity.
ARTICLE 11
POST-CLOSING COVENANTS OF SELLER AND SHAREHOLDER
11.1 FURTHER ASSURANCES.
Seller shall execute and deliver or cause to be executed and delivered such
further instruments and take such other action as Purchaser may require to more
effectively carry out the transfer of the Assets and the consummation of the
matters contemplated by this Agreement.
11.2 UCC MATTERS.
From and after the Closing Date, Seller will promptly refer all inquiries
with respect to ownership of the Assets or the Business to Purchaser. In
addition, Seller will execute such documents and financing statements as
Purchaser may request from time to time to evidence transfer of the Assets to
Purchaser, including any necessary assignments of financing statements.
-31-
<PAGE>
11.3 COLLECTION OF RECEIVABLES.
After Closing, Purchaser shall have the sole right to collect and to
endorse with the name of Seller any checks received on account of any
receivables. If Seller receives payment from customers owing hereunder to
Purchaser, Seller will remit such payments to Purchaser within ten (10) days of
receipt thereof.
11.4 RETENTION OF RETAINED BUSINESS RECORDS.
Seller agrees that prior to the destruction of any business records which
deal with matters prior to the Closing Date and which are not transferred to
Purchaser pursuant to this Agreement, Seller will advise Purchaser, in writing,
of such intended destruction. If, within thirty (30) days after such notice,
Purchaser notifies Seller that Purchaser wishes to have such records preserved,
Seller will deliver such records to Purchaser, at Purchaser's expense.
11.5 CORPORATE NAME CHANGES.
On the Closing Date, Seller shall change its corporate name, at Purchaser's
expense, to another name which is not similar to "certifiedemail.com, Inc.,"
"certifiedemail" or any other name which is likely to cause confusion with
"certifiedmail.com, Inc." or "certifiedemail." Seller further agrees that after
the Closing Date, it shall no longer use any of such names without the prior
written consent of Purchaser in each instance.
ARTICLE 12
MISCELLANEOUS
12.1 TIME IS OF THE ESSENCE.
Time is of the essence of this Agreement.
12.2 GOVERNING LAW.
This Agreement shall be governed, construed and enforced in accordance with
the laws of the State of Georgia notwithstanding principles of conflicts of
laws.
12.3 TERMS AND CAPTIONS.
The term "Agreement" as used herein, as well as the terms "herein,"
"hereof," "hereunder" and the like shall mean this Agreement in its entirety and
all Schedules and Exhibits attached hereto and made a part hereof. The captions
and section headings hereof are for reference and convenience only and do not
enter into or become part of the context. All pronouns, singular and plural,
masculine, feminine or neuter, shall mean and include the person, entity, firm,
or corporation to which they relate as the context may require.
-32-
<PAGE>
12.4 SEVERABILITY.
In the event that any term, covenant, condition, agreement, section or
provision hereof shall be deemed invalid or unenforceable by a court of
competent and final jurisdiction, this Agreement shall not terminate or be
deemed void or voidable, but shall continue in full force and effect and there
shall be substituted for such stricken provision a like but legal and
enforceable provision which most nearly accomplishes the intention of the
parties hereto.
12.5 NOTICES.
All notices, requests, demands, and other communications shall be deemed to
have been duly given if in writing and sent by hand or reliable overnight
delivery, telecopier (receipt confirmed) or certified or registered mail,
postage prepaid, to the appropriate address indicated below or to such other
address as may be given in a notice sent to the other parties hereto:
If to Purchaser:
WebMD, Inc.
400 The Lenox Building
3399 Peachtree Road, NE
Atlanta, Georgia 30326
Telephone: (404) 479-7600
Telecopier: (404) 479-7651
Attention: Chief Executive Officer
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
Atlanta, Georgia 30309
Telephone: (404) 817-6000
Telecopier: (404) 817-6050
Attention: James Walker IV, Esq.
If to Seller and/or Shareholder:
certifiedemail.com, Inc.
2870 Peachtree Road, Suite 414
Atlanta, Georgia 30305
Telephone: (404) ________
Telecopier: (404) 705-5836
Attention: Mr. Gary B. "Court" Coursey
-33-
<PAGE>
with a copy to:
The Law Offices of Kirby Turnage
999 Peachtree Street, N.E.
Suite 1700
Atlanta, Georgia 30309
Attention: Kirby Turnage, Esq.
12.6 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
12.7 SCHEDULES AND EXHIBITS.
Each Schedule and Exhibit referred to in this Agreement is hereby
incorporated by reference and made an integral part hereof, and may be referred
to in this Agreement and any other related instrument or document without being
attached thereto.
12.8 SURVIVAL.
All representations, warranties, covenants and agreements contained in
this Agreement and in any document delivered or to be delivered pursuant to this
Agreement shall survive Closing and the consummation of the transactions
contemplated herein, notwithstanding any investigation or examination made by or
on behalf of any of the parties.
12.9 CONFIDENTIALITY.
Whether or not the transactions contemplated herein are consummated, the
parties hereto agree to keep confidential any and all information and data with
respect to another party which it received as a result of any investigation or
disclosure made in connection with this Agreement and which is not otherwise
available to third parties; provided, however, that each party shall be
permitted to disclose any such information or data (a) to the extent such party
believes that such disclosure is reasonably required by applicable law or
regulation, and (b) as is necessary to obtain consents to the transactions
contemplated hereby. In the event the transactions contemplated by this
Agreement are not consummated, each party shall return all documents, work
papers, financial statements and other materials and information obtained from
another party, or its agents, pursuant to this Agreement.
12.10 PRESS RELEASES AND ANNOUNCEMENTS.
No party shall issue any press release or announcement or make any other
public disclosure relating to the subject matter of this Agreement prior to the
Closing Date without the prior written approval of the other Party, which
consent shall not be unreasonably withheld; provided, however, that any party
may make any public disclosure it believes in good faith is required by law or
-34-
<PAGE>
regulation, in which case, the disclosing party will advise the other party
prior to making the disclosure.
12.11 BINDING EFFECT.
This Agreement shall be binding upon and shall inure to the benefit or
detriment of the parties hereto and their respective heirs, personal
representatives, permitted successors and assigns.
12.12 ASSIGNMENT.
No party may assign any of its rights, duties or obligations under this
agreement without the prior written consent of the other parties and any attempt
to do so shall be null and void and of no force and effect upon the non-
consenting party.
12.13 ENTIRE AGREEMENT; MODIFICATION OF AGREEMENT.
This Agreement embodies the entire agreement of the parties relating to
the subject matter and supersedes all prior oral or written agreements between
the parties with respect to said subject matter. No amendment or modification of
this Agreement shall be valid or binding upon the parties unless made in writing
and signed by each of the parties.
12.14 REMEDY AT LAW INADEQUATE.
Shareholder and Seller hereby acknowledge and agree that, upon any actual
or threatened breach of any of the provisions of this Agreement, Purchaser will
suffer irreparable damages and its remedy at law will be inadequate, and
Purchaser and its successors and assigns shall be entitled to injunctive or
other equitable relief in addition to any other remedy it may have for a breach
of such provisions.
12.15 REMEDIES CUMULATIVE.
All remedies, rights, powers and privileges conferred hereunder upon the
parties, unless otherwise provided, shall be cumulative and not restricted to
those provided by law.
12.16 EXPENSES.
Each party shall pay its own expenses in connection with the preparation
of this Agreement and the consummation of the transactions contemplated hereby.
12.17 NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement is intended to create a benefit in favor of, or
an obligation to, any person or entity not a party to this Agreement.
-35-
<PAGE>
IN WITNESS WHEREOF, Shareholder has executed this Agreement and Seller and
Purchaser have caused their duly authorized officers to execute this Agreement,
under seal, all as of the day and year first above written.
"SELLER"
certifiedemail.com, Inc.,
a Georgia corporation
By: /s/ Gary B. "Court" Coursey, Jr.
--------------------------------
Its: President
--------------------------------
[CORPORATE SEAL]
"SHAREHOLDER"
/s/ Gary B. "Court" Coursey, Jr.
-------------------------------------
Gary B. "Court" Coursey, Jr.
"PURCHASER"
WebMD, Inc., a Georgia corporation
By: /s/ W. Michael Heekin
--------------------------------
Its: Executive Vice President
--------------------------------
[CORPORATE SEAL]
-36-
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ENDEAVOR TECHNOLOGIES, INC.
ARTICLE I
The name of the Corporation is Endeavor Technologies, Inc.
ARTICLE II
The total number of shares of all classes which the Corporation has the
authority to issue is 107,000,000, of which: (i) 75,000,000 shares of stock are
designated as Common Stock (without designation as to series); (ii) 3,000,000
shares are designated as Common Stock Series B; (iii) 1,500,000 shares are
designated as Common Stock Series C; (iv) 15,000,000 shares are designated as
Common Stock Series D; (v) 2,500,000 shares are designated as Common Stock
Series E; and (vi) 10,000,000 shares are designated as Preferred Stock. The
designations, voting powers, preferences, relative rights, qualifications,
limitations and restrictions of or on each class and series of stock are as
follows:
A. Common Stock
The Corporation's authorized and issued shares of Common Stock Series A are
hereby renamed "Common Stock," without designation as to series. The Corporation
is authorized to issue 75,000,000 shares of Common Stock, without par value per
share. Each share of Common Stock shall be entitled to one vote.
The Corporation is authorized to issue 3,000,000 shares of Common Stock
Series B, without par value per share. The Common Stock Series B shall have
rights that are identical to that of the Common Stock, except that (i) shares of
Common Stock Series B shall have no voting rights except as may be otherwise
required by the Georgia Business Corporation Code, as amended (the "Act"); and
(ii) in the event of any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, holders of each share of Common
Stock Series B, Common Stock Series C and Common Stock Series E shall be
entitled to be paid first out of the assets of the Corporation available for
distribution to holders of the Corporation's capital stock of all classes or
series, before any sums shall be paid or any assets distributed among the
holders of the shares of Common Stock or Common Stock Series D, in an amount
equal to $0.285714 per share of Common Stock Series B.
The Corporation is authorized to issue 1,500,000 shares of Common Stock
Series C, without par value per share. The Common Stock Series C shall have
rights that are identical to that of the Common Stock, except that (i) shares of
Common Stock Series C shall have no voting rights except as may be otherwise
required by the Act; and (ii) in the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, holders of each
share of Common Stock Series C, Common Stock Series B and Common Stock Series E
shall be entitled to be paid first out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock of all
classes or series, before any sums shall be paid or any assets distributed among
the holders of shares of
<PAGE>
Common Stock or Common Stock Series D, in an amount equal to $1.00 per share of
Common Stock Series C.
The Corporation is authorized to issue 15,000,000 shares of Common Stock
Series D, without par value per share. The Common Stock Series D shall have
rights that are identical to that of the Common Stock, except that shares of
Common Stock Series D shall have no voting rights except as may be otherwise
required by the Act.
The Corporation is authorized to issue 2,500,000 shares of Common Stock
Series E, without par value per share. The Common Stock Series E shall have
rights that are identical to that of the Common Stock, except that (i) shares of
Common Stock Series E shall have no voting rights except as may be otherwise
required by the Act; and (ii) in the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, holders of each
share of Common Stock Series E, Common Stock Series C and Common Stock Series B
shall be entitled to be paid first out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock of all
classes or series, before any sums shall be paid or any assets distributed among
the holders of shares of Common Stock or Common Stock Series D, in an amount
equal to $1.00 per share of Common Stock Series E.
If the assets of the Corporation are insufficient to permit the payment in
full to the holders of the Common Stock Series B, Series C and Series E of the
amounts distributable to such holders upon the liquidation, dissolution or
winding-up of the Corporation, then the assets of the Corporation available for
such distribution shall be distributed ratably among the holders of the Common
Stock Series B, Common Stock Series C and Common Stock Series E based on the
relative liquidation preferences of the Common Stock Series B, Common Stock
Series C and Common Stock Series E. For purposes of effecting such ratable
distribution between the Common Stock Series B, Common Stock Series C and Common
Stock Series E, each share of Common Stock Series B will be entitled to
$0.285714 per each $1.00 to be distributed to each share of Common Stock Series
C or Common Stock Series E.
Whenever a distribution provided for herein shall be paid in property other
than cash, the value of such property shall be its fair market value as
determined in good faith by the Board of Directors of the Corporation.
Holders of Common Stock, whether with or without designation as to series,
shall be entitled to receive such dividends and other distributions in cash,
stock or property of the Corporation as may be declared by the Board of
Directors from time to time out of funds of the Corporation legally available
therefor.
Immediately prior to the closing of an Initial Public Offering, each issued
and outstanding share of Common Stock Series B, Common Stock Series C, Common
Stock Series D and Common Stock Series E will become and be, without further act
by the holders of any Common Stock of the Corporation, whether with or without
designation as to series, automatically converted into one share of Common
Stock, without designation as to series, and the Board of Directors of the
Corporation may thereafter at its election file Articles of Amendment to the
Articles of Incorporation without further vote or action by the holders of any
Common Stock of the Corporation, whether with or without designation as to
series, confirming the elimination of the series designations of Common Stock,
which amendment shall amend and restate the first sentence of Article II of the
Corporation's Amended and Restated Articles of Incorporation to read in full as
follows:
2
<PAGE>
"The total number of shares of stock of all classes which the
Corporation has the authority to issue is 85,000,000, of which
75,000,000 shares are designated as Common Stock and of which
10,000,000 shares are designated as Preferred Stock."
and shall amend and restate Section A of Article II of the Corporation's
Articles of Incorporation to read in full as follows:
"The Corporation is authorized to issue 75,000,000 shares of Common
Stock without par value per share. Each share of Common Stock shall be
entitled to one vote."
The term "Initial Public Offering" means the offer and sale by the
Corporation of its equity securities in a transaction underwritten by an
investment banking firm following the completion of which (i) such equity
securities will be listed for trading on any national securities exchange or
(ii) there will be at least two market makers who are making a market in such
equity securities through the Nasdaq National Market System.
B. Preferred Stock
In addition to the Common Stock, the Corporation shall have the authority,
exercisable by its Board of Directors, to issue up to 10,000,000 shares of
Preferred Stock, any part or all of which shares of Preferred Stock may be
established and designated from time to time by the Board of Directors by filing
an amendment to these Amended and Restated Articles of Incorporation, which
shall be effective without shareholder action, in accordance with the
appropriate provisions of the Act, and any amendment or supplement thereto (a
"Preferred Stock Designation"), in such series and with such preferences,
limitations and relative rights as may be determined by the Board of Directors.
The number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of a majority of the votes of the Common Stock, without a vote of the
holders of the shares of Preferred Stock, or of any series thereof, unless a
vote of any such holders is required by law or pursuant to the Preferred Stock
Designation or Preferred Stock Designations establishing the series of Preferred
Stock.
ARTICLE III
The corporation shall have not more than 15 directors, and the number of
directors shall be set by the Board of Directors as set forth in the
Corporation's Bylaws. The Board of Directors shall be divided into three classes
to be known as Class I, Class II and Class III, which shall be as nearly equal
in number as possible. Except in case of death, resignation, disqualification or
removal for cause, each director shall serve for a term ending on the date of
the third annual meeting of shareholders following the annual meeting at which
the director was elected; provided, however, that each initial director in Class
-------- -------
I shall hold office until the first annual meeting of shareholders after his
election; each initial director in Class II shall hold office until the second
annual meeting of shareholders after his election; and each initial director in
Class III shall hold office until the third annual meeting of shareholders after
his election. Despite the expiration of a director's term, he shall continue to
serve until his successor, if there is to be any, has been elected and
qualified. In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such an
increase or decrease shall be apportioned among the three classes of directors
so that the three classes remain as nearly equal in size as possible; provided,
--------
however, that there shall be no classification of additional directors elected
- -------
by the Board of Directors until the next meeting of shareholders called for the
purposes of electing directors, at which meeting the terms of all such
additional directors shall expire, and such additional directors positions, if
3
<PAGE>
they are to be continued, shall be apportioned among the classes of directors
and nominees therefor shall be submitted to the shareholders for their vote. Any
vacancy occurring on the Board of Directors, including a vacancy resulting from
an increase in the number of directors, may only be filled by the affirmative
vote of the remaining directors even if the remaining directors constitute less
than a quorum of the Board of Directors.
ARTICLE IV
No director of the Corporation shall be personally liable for monetary
damages to the Corporation or its shareholders for breach of the duty of care or
any other duty as a director, except that such liability shall not be eliminated
for:
(i) any appropriation, in violation of the director's duties, of any
business opportunity of the corporation;
(ii) acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) liability under Section 14-2-832 (or any successor provision or
redesignation thereof) of the Act; and
(iv) any transaction from which the director received an improper
personal benefit.
If at any time the Act shall have been amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
each director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Act, as so amended, without further action by the
shareholders, unless the provisions of the Act, as amended, require further
action by the shareholders. Any repeal or modification of the foregoing
provisions of this Article IV shall not adversely affect the elimination or
limitation of liability or alleged liability pursuant hereto of any director of
the Corporation for or with respect to any alleged act or omission of the
director occurring prior to such repeal or modification.
ARTICLE V
All actions by the shareholders shall be taken at a meeting, with prior
notice which complies with the notice provisions of the Corporation's Bylaws,
and with a vote of the holders of the outstanding stock of each voting group
entitled to vote thereon.
ARTICLE VI
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the Corporation, the Board of
Directors, committees of the Board of Directors and individual directors, in
addition to considering the effects of any action on the Corporation or its
shareholders, may consider the interests of the employees, customers, suppliers
and creditors of the Corporation and its subsidiaries, the communities in which
offices or other establishments of the Corporation and its subsidiaries are
located and all other factors such directors consider pertinent; provided,
however, that any such provision shall be deemed solely to grant discretionary
authority to directors and shall not be deemed to provide to any constituency
any right to be considered.
4
<PAGE>
ARTICLE VII
The mailing address of the principal office of the Corporation is 400 The
Lenox Building, 3399 Peachtree Road, NE, Atlanta, Georgia 30326.
All amendments contained herein were duly adopted and approved by the Board
of Directors of the Corporation and were duly approved by the shareholders of
the Corporation in accordance with the provisions of Section 14-2-1003 of the
Act.
IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated
Articles of Incorporation to be executed by its duly authorized officer as of
the 12th day of August, 1998.
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
---------------------
Its: Chief Operating Officer
-----------------------
5
<PAGE>
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ENDEAVOR TECHNOLOGIES, INC.
I.
The name of the corporation is "ENDEAVOR TECHNOLOGIES, INC." (the
"Corporation").
II.
Effective the date hereof, Article One of the Amended and Restated Articles
of Incorporation of the Corporation is amended by deleting Article One in its
entirety and substituting therefor the following:
"The name of the corporation is WebMD, Inc."
III.
The amendment contained herein was duly adopted at a meeting of the Board
of Directors held on August 16, 1998. Pursuant to Section 14-2-1002 of the
Georgia Business Corporation Code, shareholder action with respect to the
amendment was not required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by its duly authorized officer this 17th day of August, 1998.
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
-------------------------------------
Its: Chief Operating Officer
---------------------------------
<PAGE>
CERTIFICATE REGARDING
REQUEST FOR PUBLICATION OF
NOTICE OF CHANGE OF CORPORATE NAME
The undersigned officer of ENDEAVOR TECHNOLOGIES, INC. (the "Corporation"),
a Georgia corporation, does hereby verify that a request for publication of a
notice of intent to file articles of amendment to change the name of the
Corporation and payment therefor has been made as required by Section 14-2-
1006.1 of the Official Code of Georgia Annotated.
IN WITNESS WHEREOF, the undersigned does hereby set his hand this 17th day
of August, 1998.
By: /s/ W. Michael Heekin
-------------------------------------
Its: Chief Operating Officer
--------------------------------
<PAGE>
EXHIBIT 3.3
ARTICLES OF AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF WEBMD, INC.
In accordance with Section 14-2-1006 of the Georgia Business Corporation
Code (the "Code"), WebMD, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is WebMD, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted by the
Board of Directors:
RESOLVED, THAT ARTICLE II.B OF THE AMENDED AND RESTATED ARTICLES
OF INCORPORATION ARE HEREBY AMENDED AND RESTATED AS FOLLOWS: "THE
CORPORATION IS AUTHORIZED TO ISSUE 1,600,000 SHARES OF SERIES A
CONVERTIBLE PREFERRED STOCK, WITHOUT PAR VALUE PER SHARE (THE "SERIES
A PREFERRED STOCK"). THE SERIES A PREFERRED STOCK SHALL HAVE THE
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS SET FORTH ON EXHIBIT A TO
---------
THIS RESOLUTION.
3. The "Exhibit A" referenced in the foregoing resolution is included in
---------
these Articles of Amendment and is the same "Exhibit A" as is attached
---------
hereto.
4. The foregoing resolution containing the amendment was duly adopted on
August 16, 1998, by the Corporation's Board of Directors in accordance
with the provisions of Section 14-2-1002 of the Code.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be signed
by the undersigned duly authorized officer, this 24th day of August, 1998.
WEBMD, INC.
By: /s/ W. Michael Heekin
----------------------------------------
Chief Operating Officer
----------------------------------------
________________________________________
<PAGE>
EXHIBIT A
---------
DESIGNATIONS OF PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF
SERIES A PREFERRED STOCK OF WEBMD, INC.
For the purposes of these Designations, the following terms shall have
the meanings specified:
"Any Common Stock" shall mean the Corporation's common stock, with or
without series designation.
"Articles of Incorporation" shall mean the Amended and Restated
Articles of Incorporation of the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the voting common stock, without designation
as to series and without par value per share, of the Corporation.
"Conversion Price" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Rate" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Preferred Stock is convertible pursuant to Section (d) of these
Designations.
"Corporation" shall mean WebMD, Inc., a Georgia corporation.
"Designations" shall mean the terms, preferences, limitations and
relative rights of the Preferred Stock established hereby and set forth
hereinafter.
"Initial Public Offering" shall have the meaning provided in the
Articles of Incorporation.
"Invested Amount" per share of Preferred Stock shall mean $15.00 (as
adjusted pursuant to Section (d)(5) hereof after the Original Issue Date).
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Preferred Director" shall have the meaning provided in Section (c)
hereof.
<PAGE>
"Preferred Stock" shall mean the 1,600,000 shares of Series A Preferred
Stock, without par value per share, hereby designated.
"Original Issue Date" shall mean the date on which shares of Preferred
Stock are first issued by the Corporation pursuant to that certain Investment
Agreement dated on or about August 24, 1998, by and among the Corporation and
HBO & Company of Georgia, a Delaware corporation, pursuant to which the initial
issuance of shares of Preferred Stock is to occur.
"Securities Act" shall mean the federal Securities Act of 1933, as
amended.
The Designations granted to and imposed upon the Preferred Stock are as
follows:
(a) Dividend Rights. The holders of Preferred Stock shall not be
---------------
entitled to receive dividends; provided, however, that no dividend shall be paid
on or declared and set apart for any share of Any Common Stock for any period
unless at the same time an equal dividend for the same dividend period shall be
paid on or declared and set apart for each share of Preferred Stock based on the
number of Conversion Shares into which each share is then convertible. Dividends
on shares of capital stock of the Corporation shall be payable only out of funds
legally available therefor.
(b) Liquidation Rights. In the event of the liquidation, dissolution
------------------
or winding up for any reason, including, without limitation, bankruptcy, of the
Corporation or any of the Corporation's subsidiaries, the assets of which
constitute all or substantially all the assets of the business of the
Corporation and its subsidiaries taken as a whole (a "Liquidation"), the holders
of the outstanding shares of Preferred Stock shall, at their election, be
entitled to receive in exchange for and in redemption of each share of their
Preferred Stock, prior and in preference to the holders of any capital stock
ranking junior to Preferred Stock by reason of their ownership thereof, from any
funds legally available for distribution to shareholders that portion of such
funds or proceeds equal to a fraction,
(1) the numerator of which is the number of Conversion Shares to
which the holder of such share of Preferred Stock would be entitled by
virtue of converting such share; and
(2) the denominator of which is the aggregate of the number of
Conversion Shares, shares of Any Common Stock outstanding, and all
other shares of outstanding capital stock of any series the holders of
which are entitled to participate in the proceeds of a Liquidation;
provided, however, that, notwithstanding the foregoing, the amount payable to
such holder of a share of Preferred Stock in the event of a Liquidation of the
Corporation, as provided above, shall not be less than, and shall be increased
if necessary (with sums payable to holders of shares of any other
A-2
<PAGE>
capital stock to be reduced ratably per share as necessary) to equal, the
Invested Amount plus declared but unpaid dividends payable with respect to such
Preferred Stock.
To the extent necessary, the Corporation shall cause such actions to be
taken by any of its subsidiaries so as to enable the proceeds of a Liquidation
to be distributed to the holders of shares of Preferred Stock in accordance with
this Section (b). All the preferential amounts to be paid to the holders of
Preferred Stock under this Section (b) shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of shares of Any
Common Stock or any class or series of stock of the Corporation ranking junior
to Preferred Stock in connection with a Liquidation as to which this Section (b)
applies. If the assets or surplus funds to be distributed to the holders of
Preferred Stock are insufficient to permit the payment to such holders of the
full amounts payable to such holders, the assets and surplus funds legally
available for distribution shall be distributed ratably among the holders of
Preferred Stock in proportion to the full amount each such holder is otherwise
entitled to receive.
(c) Voting Rights. Except as set forth specifically below with respect to
-------------
the election of directors, the Preferred Stock shall be non-voting; provided,
however, that, in the event the Corporation fails to close the Initial Public
Offering on or before the date that is one hundred eighty (180) days following
the Original Issue Date, each holder of a share of Preferred Stock shall
thereafter automatically be entitled to the number of votes equal to the number
of Conversion Shares into which such share of Preferred Stock would be
convertible under the circumstances described in Section (d) hereof on the
record date for the vote or consent of shareholders, and shall otherwise have
voting rights and powers equal to the voting rights and powers of the Common
Stock; provided, however, that the holders of Preferred Stock shall vote
together as a single class to elect one (1) member of the Board of Directors
(the "Preferred Director"); provided, further, that the holders of Preferred
Stock shall have no voting rights with regard to the election of the other
members of the Board of Directors. Each holder of a share of Preferred Stock
shall be entitled to receive the same prior notice of any shareholders' meeting
as provided to the holders of Common Stock in accordance with the Bylaws, as
well as prior notice of all shareholder actions to be taken by legally available
means in lieu of a meeting, and shall vote with holders of the Common Stock upon
any matter submitted to a vote of shareholders, except those matters required by
law, or by the terms hereof, to be submitted to a class vote of the holders of
Preferred Stock. Fractional votes shall not, however, be permitted, and any
fractions shall be disregarded in computing voting rights.
(d) Conversion. The holders of Preferred Stock shall have conversion
----------
rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
---------------
(A) For purposes of this Section (d), the shares of Preferred
Stock shall be convertible, at the times and under the conditions
described in this Section (d) hereafter, at the rate (the "Conversion
Rate") of one share of Preferred Stock to
A-3
<PAGE>
the number of shares of Common Stock that equals the quotient
obtained by dividing the Invested Amount by the Conversion Price
(defined hereinafter). Thus, the number of shares of Common Stock to
which a holder of Preferred Stock shall be entitled upon any
conversion provided for in this Section (d) shall be the product
obtained by multiplying the Conversion Rate by the number of shares of
Preferred Stock being converted. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of the surrender of the shares of Preferred Stock to be converted in
accordance with the procedures described in Subsection (d)(4) below.
The "Conversion Price" shall be equal to the Invested Amount, except
as otherwise adjusted as provided hereafter in this Section (d). The
initial Conversion Rate shall be one share of Preferred Stock for one
share of Common Stock.
(B) No fractional shares of Common Stock shall be issued upon
conversion of Preferred Stock, and any shares of Preferred Stock
surrendered for conversion that would otherwise result in a fractional
share of Common Stock shall be redeemed at the then effective
Conversion Price per share, payable as promptly as possible when funds
are legally available therefor.
(2) Optional. Each share of Preferred Stock shall be convertible, at
--------
the option of the holder thereof, at any time after the date of issuance of
such share, in whole or in part, at the office of the Corporation or any
transfer agent for the Preferred Stock, into Common Stock at the then
effective Conversion Rate.
(3) Automatic.
---------
(A) Should the holders of at least a majority of the then
outstanding shares of Preferred Stock so elect, by delivery of written
notice or notices to the Corporation, each and every outstanding share
of Preferred Stock held by all holders of Preferred Stock (whether or
not so electing) shall automatically be converted into Common Stock at
the then effective Conversion Rate. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of receipt of the last written notice described above necessary to
effect such request by a majority of holders. Such conversion shall be
automatic, without need for any further action by the holders of
shares of Preferred Stock and regardless of whether the certificates
representing such shares are surrendered to the Corporation or its
transfer agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such
shares of Preferred Stock so converted are surrendered to the
Corporation in accordance with the procedures described in Subsection
(d)(4) below. Upon the conversion of Preferred Stock pursuant to this
Subsection (d)(3)(A), the Corporation shall promptly send written
notice thereof, by registered or certified mail, return receipt
requested and postage prepaid, by hand
A-4
<PAGE>
delivery or by overnight delivery, to each holder of record of
Preferred Stock at his or its address then shown on the records of the
Corporation, which notice shall state that certificates evidencing
shares of Preferred Stock must be surrendered at the office of the
Corporation (or of its transfer agent for the Common Stock, if
applicable) in the manner described in Subsection (d)(4) below.
(B) The Corporation shall notify each holder of Preferred Stock
at least ninety (90) days prior to the anticipated effective date of a
registration statement filed by the Corporation under the Securities
Act covering an Initial Public Offering.; provided that, in the event
the Corporation contemplates that such registration statement will
become effective at any time during the ninety (90)-day period
following the Original Issue Date, the Corporation shall provide such
notice to each holder of Preferred Stock at least ten (10) days prior
to such effective date. Upon the closing of, but effective immediately
prior to, the first sale in an Initial Public Offering, each and every
share of outstanding Preferred Stock held by all holders of Preferred
Stock shall automatically be converted into Common Stock at the then
effective Conversion Rate. Such conversion shall be automatic, without
need for any further action by the holders of shares of Preferred
Stock and regardless of whether the certificates representing such
shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
such conversion unless certificates evidencing such shares of
Preferred Stock so converted are surrendered to the Corporation in
accordance with the procedures described in Subsection (d)(4) below.
Upon the conversion of Preferred Stock pursuant to this Subsection
(d)(3)(B), the Corporation shall promptly send written notice thereof,
by registered or certified mail, return receipt requested and postage
prepaid, by hand delivery or by overnight delivery, to each holder of
record of Preferred Stock at his or its address then shown on the
records of the Corporation, which notice shall state that certificates
evidencing shares of Preferred Stock must be surrendered at the office
of the Corporation (or of its transfer agent for the Common Stock, if
applicable) in the manner described in Subsection (d)(4) below.
(4) Mechanics of Conversion. Before any holder of Preferred Stock
-----------------------
shall be entitled to receive certificates representing the shares of Common
Stock into which shares of Preferred Stock are converted in accordance with
Subsections (d)(2) or (d)(3) above, such holder shall surrender the
certificate or certificates for such shares of Preferred Stock, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such
office of the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued, if different from the
name shown on the books and records of the Corporation (the "Conversion
Notice"). The Conversion Notice shall also contain such representations as
may reasonably be required by the Corporation to the effect that the shares
to be received upon conversion are not being acquired and will not be
transferred in any way that might violate
A-5
<PAGE>
the then applicable securities laws. The Corporation shall, as soon as
practicable thereafter and in no event later than thirty (30) days after
the delivery of said certificates, issue and deliver at such office to such
holder of Preferred Stock, or to the nominee or nominees of such holder as
provided in the Conversion Notice, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. The person or persons entitled to receive the shares of Common
Stock issuable upon a conversion pursuant to Subsections (d)(2) or (d)(3)
above shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of the effective date of conversion
specified in such section. All certificates issued upon the exercise or
occurrence of the conversion shall contain a legend governing restrictions
upon such shares imposed by law or agreement of the holder or his or its
predecessors.
(5) Adjustment for Subdivisions or Combinations of Common Stock. In
-----------------------------------------------------------
the event the Corporation at any time, or from time to time, after the
Original Issue Date effects a subdivision or combination of the outstanding
Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of the
outstanding Preferred Stock, then and in each such event the Invested
Amount (and therefore, the Conversion Price and the corresponding
Conversion Rate) shall be decreased or increased proportionately.
(6) Adjustments for Dividends, Distributions and Other Common Stock
---------------------------------------------------------------
Equivalents. In the event that the Corporation at any time, or from time to
-----------
time, after the Original Issue Date shall make or issue, or fix a record
date to determine the holders of Any Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of Any Common
Stock or other securities or rights convertible into or entitling the
holder thereof to receive additional shares of Any Common Stock (such other
securities or rights being hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder of such
Common Stock Equivalents or the additional shares of Any Common Stock, and
without a proportionate and corresponding dividend or other distribution to
holders of Preferred Stock, then and in each such event the maximum number
of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for subsequent adjustment of such
number) of the type of Any Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed, for purposes of this Subsection (d)(6),
to be issued and outstanding as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business
on such record date. In each such event the Conversion Price shall be
decreased as of the time of such issuance or, in the event such a record
date shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price by a fraction,
(A) the numerator of which shall be the total number of shares
of Any Common Stock issued and outstanding or deemed to be issued and
outstanding (as
A-6
<PAGE>
provided below) immediately prior to the time of such issuance or the
close of business on such record date; and
(B) the denominator of which shall be the total number of shares
of Any Common Stock (i) issued and outstanding or deemed pursuant to
the terms hereof to be issued and outstanding, as provided below (not
including any shares described in clause (ii) immediately below),
immediately prior to the time of such issuance or the close of
business on such record date, plus (ii) the number of shares of Any
Common Stock issuable in payment of such dividend or distribution or
upon conversion or exercise of such Common Stock Equivalents;
provided, however, that (i) if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Price (and the corresponding
Conversion Rate) shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price (and the
corresponding Conversion Rate) shall be adjusted pursuant to this
Subsection (d)(6) as of the time of actual payment of such dividend or
distribution; or (ii) if such Common Stock Equivalents provide, with the
passage of time or otherwise, for any decrease in the number of shares of
Any Common Stock issuable upon conversion or exercise thereof (or upon the
occurrence of a record date with respect thereto), the Conversion Price
(and the corresponding Conversion Rate) computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such decrease
becoming effective, be recomputed to reflect such decrease insofar as it
affects the rights of conversion or exercise of the Common Stock
Equivalents then outstanding; or (iii) upon the expiration of any rights of
conversion or exercise under any unexercised Common Stock Equivalents, the
Conversion Price (and the corresponding Conversion Rate) computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon
such expiration, be recomputed as if the only additional shares of Any
Common Stock issued were the shares of such stock, if any, actually issued
upon the conversion or exercise of such Common Stock Equivalents; or (iv)
in the event of issuance of Common Stock Equivalents that expire by their
terms not more than sixty (60) days after the date of issuance thereof, no
adjustments of the Conversion Price (or the corresponding Conversion Rate)
shall be made until the expiration or exercise of all such Common Stock
Equivalents, whereupon the adjustment otherwise required by this Subsection
(d)(6) shall be made in the manner provided herein. For purposes of this
Subsection (d)(6), Any Common Stock deemed issued and outstanding shall
include shares of Common Stock into which the then outstanding shares of
Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and shares of Any Common Stock that
could be obtained through the exercise or conversion of all other rights,
options, and convertible securities on the day immediately preceding the
given date.
A-7
<PAGE>
(7) Adjustment of Conversion Rate for Diluting Issues. Except as
-------------------------------------------------
otherwise provided in this Subsection (d)(7), in the event, and each time
as, the Corporation sells or issues shares of Any Common Stock or Common
Stock Equivalents following the Original Issue Date, at a per share
consideration (as defined below) less than the Conversion Price then in
effect, then the Conversion Price shall be adjusted as provided in this
Subsection (d)(7), and the Conversion Rate shall be appropriately adjusted.
For purposes of the foregoing, the per share consideration with respect to
the sale or issuance of a share of Any Common Stock shall be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale
or issuance of Common Stock Equivalents that are convertible into or
exchangeable for Any Common Stock without further consideration, the per
share consideration shall be determined by dividing the maximum number of
shares (as set forth in the instrument relating thereto without regard to
any provisions contained therein for subsequent adjustment of such number)
of Any Common Stock issuable with respect to such Common Stock Equivalents
into the aggregate consideration received by the Corporation upon the sale
or issuance of such Common Stock Equivalents. With respect to the issuance
of Common Stock Equivalents, the per share consideration shall be
determined by dividing the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained
therein for subsequent adjustment of such number) of Any Common Stock
issuable with respect to such Common Stock Equivalents into the aggregate
consideration received by the Corporation upon the sale or issuance of such
Common Stock Equivalents plus the total consideration receivable by the
Corporation upon the conversion or exercise of such Common Stock
Equivalents. The issuance of shares of Any Common Stock or Common Stock
Equivalents for no consideration shall be deemed to be an issuance of
shares of Any Common Stock at a per share consideration of $.01. In
connection with the sale or issuance of Common Stock and/or Common Stock
Equivalents for non-cash consideration, the amount of consideration shall
be determined by the Board of Directors in good faith.
As used herein, "Additional Shares of Common Stock" shall mean, with
respect to such adjustments to be made to the Conversion Price and the
Conversion Rate, either shares of Any Common Stock issued subsequent to the
Original Issue Date, or, with respect to the issuance of Common Stock
Equivalents, the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of Any Common Stock issuable in
exchange for, upon conversion of, or upon exercise of such Common Stock
Equivalents.
(A) Upon each issuance of Any Common Stock for a per share
consideration less than the Conversion Price as in effect on the date
of such issuance, the Conversion Price as in effect on such date shall
be adjusted by multiplying it by a fraction:
(i) the numerator of which shall be the number of
A-8
<PAGE>
shares of Any Common Stock deemed to be outstanding (as defined
below) immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of shares of Any Common
Stock that the aggregate net consideration received by the
Corporation for the total number of such Additional Shares of
Common Stock so issued would purchase at the Conversion Price
then in effect; and
(ii) the denominator of which shall be the number of shares
of Any Common Stock deemed to be outstanding (as defined below)
immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of shares of Any Common Stock so
issued.
For the purposes of this Subsection (d)(7)(A), the number of shares of Any
Common Stock deemed to be outstanding as of a given date shall be the sum
of (i) the number of shares of Any Common Stock actually outstanding, (ii)
the number of shares of Any Common Stock into which the then outstanding
shares of Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and (iii) the number of shares of Any
Common Stock that could be obtained through the exercise or conversion of
all other rights, options and convertible securities on the day immediately
preceding the given date.
(B) Upon each issuance of Common Stock Equivalents that are
exchangeable without further consideration into Common Stock, for a
per share consideration less than the Conversion Price as in effect on
the date of such issuance, the Conversion Price shall be adjusted as
provided in paragraph (A) of this Subsection (d)(7) on the basis that
the Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of the Common Stock Equivalents, and
the aggregate consideration received by the Corporation for such
Common Stock Equivalents shall be deemed to have been received for
such Additional Shares of Common Stock.
(C) Upon each issuance of Common Stock Equivalents other than
those described in paragraph (B) of this Subsection (d)(7) for a per
share consideration less than the Conversion Price as in effect on the
date of such issuance, the Conversion Price shall be adjusted as
provided in paragraph (A) of this Subsection (d)(7) on the basis that
the Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of such Common Stock Equivalents, and
the aggregate consideration received and receivable by the Corporation
on conversion or exercise of such Common Stock Equivalents shall be
deemed to have been received for such Additional Shares of Common
Stock.
A-9
<PAGE>
(D) Once any Additional Shares of Common Stock have been treated
as having been issued for the purpose of this Subsection (d)(7), they
shall be treated as issued and outstanding shares of Any Common Stock
whenever any subsequent calculations must be made pursuant hereto;
provided that on the expiration of any options, warrants or rights to
purchase Additional Shares of Common Stock, the termination of any
rights to convert or exchange for Additional Shares of Common Stock,
or the expiration of any options or rights related to such convertible
or exchangeable securities on account of which an adjustment in the
Conversion Price has been made previously pursuant to this Subsection
(d)(7), such Conversion Price shall forthwith be readjusted to the
Conversion Price as would have obtained had the adjustment made upon
the issuance of such options, warrants, rights, securities or options
or rights related to such securities been made upon the basis of the
issuance of only the number of shares of Any Common Stock actually
issued upon the exercise of such options, warrants or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
(E) The foregoing notwithstanding, no adjustment of the
Conversion Price and the Conversion Rate shall be made pursuant to
this Subsection (d)(7) as a result of the issuance of :
(i) any shares of Common Stock upon the conversion of
shares of Preferred Stock;
(ii) securities of the Corporation offered to the
public pursuant to an effective registration statement under
the Securities Act;
(iii) the Corporation's securities pursuant to the
acquisition by the Corporation of any product, technology,
know-how or another corporation by merger, purchase of all
or substantially all of the assets, or any other
reorganization whereby the Corporation owns over fifty
percent (50%) of the voting power of such corporation;
(iv) any shares of Common Stock pursuant to which the
Conversion Price and the Conversion Rate are adjusted under
Subsection (5) or (6) of this Section (d);
(v) any shares of Any Common Stock issued at any time
following the Original Issue Date pursuant to options,
warrants or rights granted either before or after the
Original Issue Date to purchase shares of such series of Any
Common Stock, less the number of any such options, warrants
or rights that are repurchased by the Corporation, are
canceled or expire, in each case in favor of
A-10
<PAGE>
employees, directors, officers or consultants of the
Corporation or any subsidiary thereof pursuant to a stock
option plan or agreement approved by the Board of Directors;
provided, however, that such stock options thereunder, if
granted after the Original Issue Date, are granted at a
conversion or exercise price that the Board of Directors
determines in good faith is not less than the fair market
value of the securities into which they are exercisable as
of the date of grant;
(vi) any shares of Any Common Stock issued pursuant
to the exchange, conversion or exercise of any Common Stock
Equivalents that have previously been incorporated into
computations hereunder on the date when such Common Stock
Equivalents were issued;
(vii) up to 134,000 shares of Preferred Stock to be
purchased by Matria Healthcare, Inc. at a price of no less
than $15.00 per share and, for no additional consideration,
a warrant for the purchase of up to 60,000 shares of
Preferred Stock, as well as the issuance of any Conversion
Shares resulting from the conversion or exercise of the
same; or
(viii) up to 300,000 shares of Common Stock Series D of
the Corporation at any time following the Closing Date
pursuant to options to purchase shares of such stock in
favor of employees or consultants of the Corporation or any
subsidiary thereof pursuant to bona fide commitments made by
the Corporation prior to July 1, 1998.
(8) De Minimis Adjustments. No adjustment to the Conversion Price
----------------------
(and, thereby, the Conversion Rate) shall be made if such adjustment would
result in a change in the Conversion Price of less than $.01. Any
adjustment of less than $.01 that is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment
that, on a cumulative basis, amounts to an adjustment of $.01 or more in
the Conversion Price.
(9) No Impairment. Except as provided in Section (e) hereof, the
-------------
Corporation shall not, by amendment of the Articles of Incorporation or the
Bylaws or through any reorganization, 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 Corporation, but shall
at all times in good faith assist in the carrying out of all the provisions
of this Section (d) 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 Stock against impairment.
A-11
<PAGE>
(10) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
(d), the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and cause independent
public accountants selected by the Corporation to verify such computation
and prepare and furnish to each holder of Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Price and the Conversion Rate at that time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property that at
that time would be received upon the conversion of Preferred Stock.
(11) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any series or class of securities
other than Preferred Stock for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, any
Common Stock Equivalents or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
or property, or to receive any other right, the Corporation shall mail to
each holder of Preferred Stock, at least twenty (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 rights, and
the amount and character of such dividend, distribution or rights.
(12) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall be
insufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, the Corporation shall take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(e) Protective Provisions. In addition to any other rights provided by
---------------------
law, so long as any shares of Preferred Stock are then outstanding, except where
the vote or written consent of the holders of a greater number of shares is
required by law or by another provision of the Articles of Incorporation,
without first obtaining the affirmative vote or written consent of the holders
of a majority of the total number of shares of Preferred Stock outstanding,
voting together as a single class, the Corporation shall not, and shall cause
its subsidiaries not to:
A-12
<PAGE>
(1) amend or repeal any provision of, or add any provision to, the
Articles of Incorporation or the Bylaws, or file any certificate of
designations, preferences, limitations and relative rights of any series or
class of preferred stock, if such action would alter or change the
preferences, rights, privileges or powers of, or restrictions provided for
the benefit of holders of Preferred Stock;
(2) create or authorize the creation of any additional series or
class of shares of stock, or increase the authorized amount of any series
or class of capital stock, unless the same ranks junior to the Preferred
Stock as to dividends and the distribution of assets on the liquidation,
dissolution or winding up of the Corporation; regardless of whether any
such creation, authorization or increase shall be by means of amendment to
the Articles of Incorporation, or by merger, consolidation or otherwise;
(3) increase or decrease the authorized number of shares of the
Preferred Stock;
(4) take any action that would alter or change the preferences,
rights, privileges or powers of, or restrictions provided for the benefit
of holders of Preferred Stock in one or more of the ways set forth in
Section 14-2-1004(a) of the Code;
(5) purchase, redeem or otherwise acquire for value any shares of any
class of its capital stock or cause or permit any employee stock ownership
plan, including any Employee Stock Ownership Plan as defined in (S)
4975(e)(7) of the Internal Revenue Code of 1986, as amended, to purchase
shares of any class of its capital stock, except pursuant to a stock option
or employee stock ownership plans or restricted stock agreements, or in
exercise of any right of first refusal of the Corporation upon a proposed
transfer that is, in each case, in existence on the Original Issue Date;
provided, however that such restriction shall not apply in the event that
either (i) the holders of Preferred Stock are permitted to participate in
such purchase, redemption or acquisition, each such holder being entitled
to sell some or all of his or its pro rata portion of such capital stock
based on the number of Conversion Shares held by such holder in proportion
to the sum of the number of Conversion Shares and the number of shares of
Any Common Stock then issued or issuable on a fully diluted basis, or (ii)
such purchase, redemption or acquisition has received the prior affirmative
vote or written consent of the holders of a majority of the total number of
shares of Preferred Stock outstanding, voting together as a single class;
or
(6) amend the provisions of this Section (e).
(f) Notices. Any notice required by the provisions hereof to be given to
-------
the holders of shares of Preferred Stock shall be deemed given on the third
business day following (and not including) the date on which such notice is
deposited in the United States Mail, first-class, postage prepaid, and addressed
to each holder of record at his address appearing on the books of the
Corporation. Notice by any other means shall not be deemed effective until
actually received.
A-13
<PAGE>
EXHIBIT 3.4
ARTICLES OF AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF WEBMD, INC.
In accordance with Section 14-2-1006 of the Georgia Business Corporation
Code (the "Code"), WebMD, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is WebMD, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted by the
Board of Directors:
RESOLVED, THAT ARTICLE II.B OF THE AMENDED AND RESTATED ARTICLES
OF INCORPORATION IS HEREBY AMENDED BY ADDING THE FOLLOWING PROVISIONS
TO THE END THEREOF: "THE CORPORATION IS AUTHORIZED TO ISSUE 3,400,000
SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK, WITHOUT PAR VALUE PER
SHARE (THE "SERIES B PREFERRED STOCK"). THE SERIES B PREFERRED STOCK
SHALL HAVE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS SET FORTH
ON EXHIBIT F TO THIS RESOLUTION."
---------
3. The "Exhibit F" referenced in the foregoing resolution is included in
---------
these Articles of Amendment and is the same "Exhibit A" as is attached
---------
hereto.
4. The foregoing resolution containing the amendment was duly adopted on
December 31, 1998, by the Corporation's Board of Directors in
accordance with the provisions of Section 14-2-1002 of the Code.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be signed
by the undersigned duly authorized officer, this 12th day of January, 1999.
WEBMD, INC.
By: /s/ W. Michael Heekin
---------------------
EVP and Secretary
<PAGE>
Exhibit A
---------
DESIGNATIONS OF PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF
SERIES B PREFERRED STOCK OF WEBMD, INC.
For the purposes of these Designations, the following terms shall have the
meanings specified:
"Any Common Stock" shall mean the Corporation's common stock, with or
without series designation.
"Articles of Incorporation" shall mean the Amended and Restated Articles of
Incorporation of the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the voting common stock, without designation as
to series and without par value per share, of the Corporation.
"Conversion Price" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Rate" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which each
share of Series B Preferred Stock is convertible pursuant to Section (d) of
these Designations.
"Corporation" shall mean WebMD, Inc., a Georgia corporation.
"Designations" shall mean the terms, preferences, limitations and relative
rights of the Series B Preferred Stock established hereby and set forth
hereinafter.
"Initial Public Offering" shall have the meaning provided in the Articles
of Incorporation.
"Invested Amount" per share of Series B Preferred Stock shall mean the per
share issue price for any share of Series B Preferred Stock as designated in the
agreement with the Corporation pursuant to which such share is issued (as
adjusted pursuant to Section (d)(5) hereof after the Original Issue Date).
"Liquidation" shall have the meaning provided in Section (b) hereof.
-2-
<PAGE>
"Series B Preferred Stock" shall mean the 3,400,000 shares of Series B
Preferred Stock, without par value per share, hereby designated.
"Original Issue Date" shall mean, with respect to each share of Series B
Preferred Stock, the date on which such share of Series B Preferred Stock is
first issued by the Corporation.
"Securities Act" shall mean the federal Securities Act of 1933, as amended.
The Designations granted to and imposed upon the Series B Preferred Stock
are as follows:
(a) Dividend Rights. The holders of Series B Preferred Stock shall not be
--- ---------------
entitled to receive dividends; provided, however, that no dividend shall be paid
on or declared and set apart for any share of Any Common Stock for any period
unless at the same time an equal dividend for the same dividend period shall be
paid on or declared and set apart for each share of Series B Preferred Stock
based on the number of Conversion Shares into which each share is then
convertible. No dividends shall be paid with respect to the Series B Preferred
Stock unless and until dividends have been declared and paid on the
Corporation's Series A Preferred Stock in accordance with the Series A Preferred
Stock Designations of Preferences, Limitations and Relative Rights. Dividends
on shares of capital stock of the Corporation shall be payable only out of funds
legally available therefor.
(b) Liquidation Rights. In the event of the liquidation, dissolution or
--- ------------------
winding up for any reason, including, without limitation, bankruptcy, of the
Corporation or any of the Corporation's subsidiaries, the assets of which
constitute all or substantially all the assets of the business of the
Corporation and its subsidiaries taken as a whole or such events specified in
the next sentence (each such event referred to as a "Liquidation"), the holders
of the outstanding shares of Series B Preferred Stock shall, at their election,
be entitled to receive in exchange for and in redemption of each share of their
Series B Preferred Stock, and on a parity with the holders of any capital stock
ranking pari passu to the Series B Preferred Stock by reason of their ownership
thereof, from any funds or assets legally available for distribution to
shareholders that portion of such funds, proceeds or assets in an amount equal
to a fraction,
(1) the numerator of which is the number of Conversion Shares to which the
holder of such share of Series B Preferred Stock would be entitled by
virtue of converting such share; and
(2) the denominator of which is the aggregate of the number of Conversion
Shares, shares of Any Common Stock outstanding, and all other shares
of outstanding capital stock of any series the holders of which are
entitled to participate in the proceeds of a Liquidation;
-3-
<PAGE>
provided, however, that, notwithstanding the foregoing, the amount payable to
such holder of a share of Series B Preferred Stock in the event of a Liquidation
of the Corporation, as provided above, shall not be less than, and shall be
increased if necessary (with sums payable to holders of shares of any other
capital stock to be reduced ratably per share as necessary) to equal, the
Invested Amount plus declared but unpaid dividends payable with respect to such
Series B Preferred Stock; provided further, however, that no amount shall be
paid with respect to the Series B Preferred Stock until the holders of the
Corporation's Series A Preferred Stock have been paid in full all amounts owed
upon a Liquidation to the holders of Series A Preferred Stock in accordance with
the Series A Preferred Stock Designation of Preferences, Limitations and
Relative Rights. A Liquidation shall also be deemed to have occurred upon (i)
the acquisition of the Corporation by another entity by means of any transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the Corporation's
shareholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 50% of
the voting power of the surviving or continuing entity, or (ii) a sale,
conveyance or disposition of all or substantially all of the assets of the
Corporation unless the Corporation's shareholders immediately prior to such
transaction will, as a result of such sale, conveyance or disposition hold (by
virtue of securities issued as consideration for such sale, conveyance or
disposition) at least 50% of the voting power of the purchasing entity, or (iii)
the effectuation by the Corporation or its stockholders of a transaction or
series of related transactions that results in the Corporation's shareholders
immediately prior to such transaction not holding (by virtue of such shares or
securities issued solely with respect thereto) at least 50% of the voting power
of the Corporation.
To the extent necessary, the Corporation shall cause such actions to be
taken by any of its subsidiaries so as to enable the proceeds of a Liquidation
to be distributed to the holders of shares of Series B Preferred Stock in
accordance with this Section (b). All the preferential amounts to be paid to
the holders of Series B Preferred Stock under this Section (b) shall be paid or
set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of any assets of the Corporation to, the holders
of shares of Any Common Stock or any class or series of stock of the Corporation
ranking junior to Series B Preferred Stock in connection with a Liquidation as
to which this Section (b) applies. If the assets or surplus funds to be
distributed to the holders of Series B Preferred Stock are insufficient to
permit the payment to such holders of the full amounts payable to such holders,
the assets and surplus funds legally available for distribution shall be
distributed ratably among the holders of Series B Preferred Stock in proportion
to the full amount each such holder is otherwise entitled to receive.
(c) Voting Rights. The Series B Preferred Stock shall be non-voting;
--- -------------
provided, however, that, in the event the Corporation fails to close the Initial
Public Offering on or before the date that is three hundred sixty-five (365)
days following the Original Issue Date, each holder of a share of Series B
Preferred Stock shall thereafter automatically be entitled to the number of
votes equal to the number of Conversion Shares into which such share of Series B
Preferred Stock would be convertible under the circumstances described in
Section (d) hereof on the record date for the vote or consent
-4-
<PAGE>
of shareholders, and shall otherwise have voting rights and powers equal to the
voting rights and powers of the Common Stock. Fractional votes shall not,
however, be permitted, and any fractions shall be disregarded in computing
voting rights.
(d) Conversion. The holders of Series B Preferred Stock shall have
--- ----------
conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
--- ---------------
(A) For purposes of this Section (d), the shares of Series B
Preferred Stock shall be convertible, at the times and under the
conditions described in this Section (d) hereafter, at the rate (the
"Conversion Rate") of one share of Series B Preferred Stock to the
number of shares of Common Stock that equals the quotient obtained by
dividing the Invested Amount by the Conversion Price (defined
hereinafter). Thus, the number of shares of Common Stock to which a
holder of Series B Preferred Stock shall be entitled upon any
conversion provided for in this Section (d) shall be the product
obtained by multiplying the Conversion Rate by the number of shares of
Series B Preferred Stock being converted. Such conversion shall be
deemed to have been made immediately prior to the close of business on
the date of the surrender of the shares of Series B Preferred Stock to
be converted in accordance with the procedures described in Subsection
(d)(4) below. The "Conversion Price" shall be equal to the Invested
Amount, except as otherwise adjusted as provided hereafter in this
Section (d). The initial Conversion Rate shall be one share of Series
B Preferred Stock for one share of Common Stock.
(B) No fractional shares of Common Stock shall be issued upon
conversion of Series B Preferred Stock, and any shares of Series B
Preferred Stock surrendered for conversion that would otherwise result
in a fractional share of Common Stock shall be redeemed in cash at the
then effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(2) Optional. Subject to Subsection (d)(3) below, each share of Series
--- --------
B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the anniversary of the date of issuance of such
share, in whole or in part, at the office of the Corporation or any
transfer agent for the Series B Preferred Stock, into Common Stock at the
then effective Conversion Rate.
(3) Automatic.
--- ---------
(A) Should the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock so elect, by delivery
of written notice or notices to the Corporation, each and every
outstanding
-5-
<PAGE>
share of Series B Preferred Stock held by all holders of Series B
Preferred Stock (whether or not so electing) shall automatically be
converted into Common Stock at the then effective Conversion Rate.
Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of receipt of the last written
notice described above necessary to effect such request by a majority
of holders. Such conversion shall be automatic, without need for any
further action by the holders of shares of Series B Preferred Stock
and regardless of whether the certificates representing such shares
are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of Series B
Preferred Stock so converted are surrendered to the Corporation in
accordance with the procedures described in Subsection (d)(4) below.
Upon the conversion of Series B Preferred Stock pursuant to this
Subsection (d)(3)(A), the Corporation shall promptly send written
notice thereof, by registered or certified mail, return receipt
requested and postage prepaid, by hand delivery or by overnight
delivery, to each holder of record of Series B Preferred Stock at his
or its address then shown on the records of the Corporation, which
notice shall state that certificates evidencing shares of Series B
Preferred Stock must be surrendered at the office of the Corporation
(or of its transfer agent for the Common Stock, if applicable) in the
manner described in Subsection (d)(4) below.
(B) The Corporation shall notify each holder of Series B
Preferred Stock at least ninety (90) days prior to the anticipated
effective date of a registration statement filed by the Corporation
under the Securities Act covering an Initial Public Offering; provided
that, in the event the Corporation contemplates that such registration
statement will become effective at any time during the ninety (90)-day
period following the Original Issue Date, the Corporation shall
provide such notice to each holder of Series B Preferred Stock at
least ten (10) days prior to such effective date. Upon the closing of,
but effective immediately prior to, the first sale in an Initial
Public Offering, each and every share of outstanding Series B
Preferred Stock held by all holders of Series B Preferred Stock shall
automatically be converted into Common Stock at the then effective
Conversion Rate. Such conversion shall be automatic, without need for
any further action by the holders of shares of Series B Preferred
Stock and regardless of whether the certificates representing such
shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
such conversion unless certificates evidencing such shares of Series B
Preferred Stock so converted are surrendered to the Corporation in
accordance with the procedures described in Subsection (d)(4) below.
Upon the conversion of Series B Preferred Stock pursuant to this
Subsection (d)(3)(B), the
-6-
<PAGE>
Corporation shall promptly send written notice thereof, by registered
or certified mail, return receipt requested and postage prepaid, by
hand delivery or by overnight delivery, to each holder of record of
Series B Preferred Stock at his or its address then shown on the
records of the Corporation, which notice shall state that certificates
evidencing shares of Series B Preferred Stock must be surrendered at
the office of the Corporation (or of its transfer agent for the Common
Stock, if applicable) in the manner described in Subsection (d)(4)
below.
(4) Mechanics of Conversion. Before any holder of Series B Preferred
--- -----------------------
Stock shall be entitled to receive certificates representing the shares of
Common Stock into which shares of Series B Preferred Stock are converted in
accordance with Subsections (d)(2) or (d)(3) above, such holder shall
surrender the certificate or certificates for such shares of Series B
Preferred Stock, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series B Preferred Stock, and shall give written
notice to the Corporation at such office of the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to
be issued, if different from the name shown on the books and records of the
Corporation (the "Conversion Notice"). The Conversion Notice shall also
contain such representations as may reasonably be required by the
Corporation to the effect that the shares to be received upon conversion
are not being acquired and will not be transferred in any way that might
violate the then applicable securities laws. The Corporation shall, as soon
as practicable thereafter and in no event later than thirty (30) days after
the delivery of said certificates, issue and deliver at such office to such
holder of Series B Preferred Stock, or to the nominee or nominees of such
holder as provided in the Conversion Notice, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled as aforesaid. The person or persons entitled to receive the shares
of Common Stock issuable upon a conversion pursuant to Subsections (d)(2)
or (d)(3) above shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of the effective date of
conversion specified in such section. All certificates issued upon the
exercise or occurrence of the conversion shall contain a legend governing
restrictions upon such shares imposed by law or agreement of the holder or
his or its predecessors.
(5) Adjustment for Subdivisions or Combinations of Common Stock. In
--- -----------------------------------------------------------
the event the Corporation at any time, or from time to time, after the
Original Issue Date effects a subdivision or combination of the outstanding
Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of the
outstanding Series B Preferred Stock, then and in each such event the
Invested Amount (and therefore, the Conversion Price and the corresponding
Conversion Rate) shall be decreased or increased proportionately.
-7-
<PAGE>
(6) Adjustments for Dividends, Distributions and Other Common Stock
--- ---------------------------------------------------------------
Equivalents. In the event that the Corporation at any time, or from time
-----------
to time, after the Original Issue Date shall make or issue, or fix a record
date to determine the holders of Any Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of Any Common
Stock or other securities or rights convertible or exercisable into or
otherwise entitling the holder thereof, directly or indirectly, to receive
additional shares of Any Common Stock (such other securities or rights
being hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder of such Common Stock
Equivalents or the additional shares of Any Common Stock, and without a
proportionate and corresponding dividend or other distribution to holders
of Series B Preferred Stock, then and in each such event the maximum number
of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for subsequent adjustment of such
number) of the type of Any Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed, for purposes of this Subsection (d)(6),
to be issued and outstanding as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business
on such record date. In each such event the Conversion Price shall be
decreased as of the time of such issuance or, in the event such a record
date shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price by a fraction,
(A) the numerator of which shall be the total number of shares of
Any Common Stock issued and outstanding or deemed to be issued and
outstanding (as provided below) immediately prior to the time of such
issuance or the close of business on such record date; and
(B) the denominator of which shall be the total number of shares
of Any Common Stock (i) issued and outstanding or deemed pursuant to
the terms hereof to be issued and outstanding, as provided below (not
including any shares described in clause (ii) immediately below),
immediately prior to the time of such issuance or the close of
business on such record date, plus (ii) the number of shares of Any
Common Stock issuable in payment of such dividend or distribution or
upon conversion or exercise of such Common Stock Equivalents;
provided, however, that (i) if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Price (and the corresponding
Conversion Rate) shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price (and the
corresponding Conversion Rate) shall be adjusted pursuant to this
Subsection (d)(6) as of the time of actual payment of such dividend or
distribution; or (ii) if such Common Stock Equivalents provide, with the
passage of time or otherwise, for any decrease in the number of shares of
Any Common Stock issuable upon conversion or exercise thereof (or upon the
-8-
<PAGE>
occurrence of a record date with respect thereto), the Conversion Price
(and the corresponding Conversion Rate) computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such decrease
becoming effective, be recomputed to reflect such decrease insofar as it
affects the rights of conversion or exercise of the Common Stock
Equivalents then outstanding; or (iii) upon the expiration of any rights of
conversion or exercise under any unexercised Common Stock Equivalents, the
Conversion Price (and the corresponding Conversion Rate) computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon
such expiration, be recomputed as if the only additional shares of Any
Common Stock issued were the shares of such stock, if any, actually issued
upon the conversion or exercise of such Common Stock Equivalents; or (iv)
in the event of issuance of Common Stock Equivalents that expire by their
terms not more than sixty (60) days after the date of issuance thereof, no
adjustments of the Conversion Price (or the corresponding Conversion Rate)
shall be made until the expiration or exercise of all such Common Stock
Equivalents, whereupon the adjustment otherwise required by this Subsection
(d)(6) shall be made in the manner provided herein. For purposes of this
Subsection (d)(6), Any Common Stock deemed issued and outstanding shall
include shares of Common Stock into which the then outstanding shares of
Series B Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and shares of Any Common Stock that
could be obtained through the exercise or conversion of all other rights,
options, and convertible securities on the day immediately preceding the
given date.
(7) Adjustment of Conversion Rate for Diluting Issues. Except as
--- -------------------------------------------------
otherwise provided in this Subsection (d)(7), in the event, and each time
as, the Corporation sells or issues shares of Any Common Stock or Common
Stock Equivalents following the Original Issue Date, at a per share
consideration (as defined below) less than the Conversion Price then in
effect, then the Conversion Price shall be adjusted as provided in this
Subsection (d)(7), and the Conversion Rate shall be appropriately adjusted.
For purposes of the foregoing, the per share consideration with respect to
the sale or issuance of a share of Any Common Stock shall be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale
or issuance of Common Stock Equivalents that are convertible or exercisable
into or exchangeable for Any Common Stock without further consideration,
the per share consideration shall be determined by dividing the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for subsequent adjustment of
such number) of Any Common Stock issuable, directly or indirectly, with
respect to such Common Stock Equivalents into the aggregate consideration
received by the Corporation upon the sale or issuance of such Common Stock
Equivalents. With respect to the issuance of Common Stock Equivalents, the
per share consideration shall be determined by dividing the maximum number
of shares (as
-9-
<PAGE>
set forth in the instrument relating thereto without regard to any
provisions contained therein for subsequent adjustment of such number) of
Any Common Stock issuable with respect to such Common Stock Equivalents
into the aggregate consideration received by the Corporation upon the sale
or issuance of such Common Stock Equivalents plus the total consideration
receivable by the Corporation upon the conversion or exercise of such
Common Stock Equivalents. The issuance of shares of Any Common Stock or
Common Stock Equivalents for no consideration shall be deemed to be an
issuance of shares of Any Common Stock at a per share consideration of
$.01. In connection with the sale or issuance of Common Stock and/or Common
Stock Equivalents for non-cash consideration, the amount of consideration
shall be determined by the Board of Directors in good faith.
As used herein, "Additional Shares of Common Stock" shall mean, with
respect to such adjustments to be made to the Conversion Price and the
Conversion Rate, either shares of Any Common Stock issued subsequent to the
Original Issue Date, or, with respect to the issuance of Common Stock
Equivalents, the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of Any Common Stock issuable in
exchange for, upon conversion of, or upon exercise of such Common Stock
Equivalents.
(A) Upon each issuance of Any Common Stock for a per share
consideration less than the Conversion Price as in effect on the date
of such issuance, the Conversion Price as in effect on such date shall
be adjusted by multiplying it by a fraction:
(i) the numerator of which shall be the number of shares of
Any Common Stock deemed to be outstanding (as defined below)
immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of shares of Any Common Stock that
the aggregate net consideration received by the Corporation for
the total number of such Additional Shares of Common Stock so
issued would purchase at the Conversion Price then in effect; and
(ii) the denominator of which shall be the number of shares
of Any Common Stock deemed to be outstanding (as defined below)
immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of shares of Any Common Stock so
issued.
For the purposes of this Subsection (d)(7)(A), the number of shares of Any
Common Stock deemed to be outstanding as of a given date shall be the sum
of (i) the number of shares of Any Common Stock actually outstanding, (ii)
the number
-10-
<PAGE>
of shares of Any Common Stock into which the then outstanding shares of
Series B Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and (iii) the number of shares of Any
Common Stock that could be obtained through the exercise or conversion of
all other rights, options and convertible securities on the day immediately
preceding the given date.
(B) Upon each issuance of Common Stock Equivalents that are
exchangeable without further consideration into Common Stock, for a
per share consideration less than the Conversion Price as in effect on
the date of such issuance, the Conversion Price shall be adjusted as
provided in paragraph (A) of this Subsection (d)(7) on the basis that
the Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of the Common Stock Equivalents, and
the aggregate consideration received by the Corporation for such
Common Stock Equivalents shall be deemed to have been received for
such Additional Shares of Common Stock.
(C) Upon each issuance of Common Stock Equivalents other than
those described in paragraph (B) of this Subsection (d)(7) for a per
share consideration less than the Conversion Price as in effect on the
date of such issuance, the Conversion Price shall be adjusted as
provided in paragraph (A) of this Subsection (d)(7) on the basis that
the Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of such Common Stock Equivalents, and
the aggregate consideration received and receivable by the Corporation
on conversion or exercise of such Common Stock Equivalents shall be
deemed to have been received for such Additional Shares of Common
Stock.
(D) Once any Additional Shares of Common Stock have been treated
as having been issued for the purpose of this Subsection (d)(7), they
shall be treated as issued and outstanding shares of Any Common Stock
whenever any subsequent calculations must be made pursuant hereto;
provided that on the expiration of any options, warrants or rights to
purchase Additional Shares of Common Stock, the termination of any
rights to convert or exchange for Additional Shares of Common Stock,
or the expiration of any options or rights related to such convertible
or exchangeable securities on account of which an adjustment in the
Conversion Price has been made previously pursuant to this Subsection
(d)(7), such Conversion Price shall forthwith be readjusted to the
Conversion Price as would have obtained had the adjustment made upon
the issuance of such options, warrants, rights, securities or options
or rights related to such securities been made upon the basis of the
issuance of only the number of shares of Any Common Stock actually
issued upon the exercise of such options, warrants or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights
-11-
<PAGE>
related to such securities.
(E) The foregoing notwithstanding, no adjustment of the
Conversion Price and the Conversion Rate shall be made pursuant to
this Subsection (d)(7) as a result of the issuance of:
(i) any shares of Common Stock upon the conversion of shares
of Series B Preferred Stock;
(ii) securities of the Corporation offered to the public
pursuant to an effective registration statement under the
Securities Act;
(iii) the Corporation's securities pursuant to the
acquisition by the Corporation of any product, technology, know-
how or another corporation by merger, purchase of all or
substantially all of the securities or assets, or any other
reorganization whereby the Corporation owns over fifty percent
(50%) of the voting power of such corporation;
(iv) any shares of Common Stock pursuant to which the
Conversion Price and the Conversion Rate are adjusted under
Subsection (5) or (6) of this Section (d);
(v) any shares of Any Common Stock issued at any time
following the Original Issue Date pursuant to options, warrants
or rights granted either before or after the Original Issue Date
to purchase shares of such series of Any Common Stock, less the
number of any such options, warrants or rights that are
repurchased by the Corporation, are canceled or expire, in each
case in favor of employees, directors, officers or consultants of
the Corporation or any subsidiary thereof pursuant to a stock
option plan or agreement approved by the Board of Directors;
provided, however, that such stock options thereunder, if granted
after the Original Issue Date, are granted at a conversion or
exercise price that the Board of Directors determines in good
faith is not less than the fair market value of the securities
into which they are exercisable as of the date of grant; or
(vi) any shares of Any Common Stock issued pursuant to the
exchange, conversion or exercise of any Common Stock Equivalents
that have previously been incorporated into computations
hereunder on the date when
-12-
<PAGE>
such Common Stock Equivalents were issued.
(8) De Minimis Adjustments. No adjustment to the Conversion Price
--- ----------------------
(and, thereby, the Conversion Rate) shall be made if such adjustment would
result in a change in the Conversion Price of less than $.01. Any
adjustment of less than $.01 that is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment
that, on a cumulative basis, amounts to an adjustment of $.01 or more in
the Conversion Price.
(9) No Impairment. Except as provided in Section (e) hereof, the
--- -------------
Corporation shall not, by amendment of the Articles of Incorporation or the
Bylaws or through any reorganization, 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 Corporation, but shall
at all times in good faith assist in the carrying out of all the provisions
of this Section (d) 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 Series B Preferred Stock against impairment.
(10) Certificate as to Adjustments. Upon the occurrence of each
---- -----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
(d), the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and cause independent
public accountants selected by the Corporation to verify such computation
and prepare and furnish to each holder of Series B Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of
Series B Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii)
the Conversion Price and the Conversion Rate at that time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property that at that time would be received upon the conversion of Series
B Preferred Stock.
(11) Notices of Record Date. In the event of any taking by the
---- ----------------------
Corporation of a record of the holders of any series or class of securities
other than Series B Preferred Stock for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, any Common Stock Equivalents or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series B Preferred Stock, at least twenty (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 rights, and the amount and character of such dividend,
distribution or rights.
-13-
<PAGE>
(12) Reservation of Stock Issuable Upon Conversion. The Corporation
---- ---------------------------------------------
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series B Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series B Preferred Stock;
and if at any time the number of authorized but unissued shares of Common
Stock shall be insufficient to effect the conversion of all then
outstanding shares of the Series B Preferred Stock, the Corporation shall
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(e) Protective Provisions. In addition to any other rights provided by law,
--- ---------------------
so long as any shares of Series B Preferred Stock are then outstanding, except
where the vote or written consent of the holders of a greater number of shares
is required by law or by another provision of the Articles of Incorporation,
without first obtaining the affirmative vote or written consent of the holders
of a majority of the total number of shares of Series B Preferred Stock
outstanding, voting together as a single class, the Corporation shall not, and
shall cause its subsidiaries not to:
(1) amend or repeal any provision of, or add any provision to, the
Articles of Incorporation or the Bylaws, or file any certificate of
designations, preferences, limitations and relative rights of any series or
class of preferred stock, if such action would alter or change the
preferences, rights, privileges or powers of, or restrictions provided for
the benefit of holders of Series B Preferred Stock;
(2) create or authorize the creation of any additional series or class
of shares of stock, or increase the authorized amount of any series or
class of capital stock, unless the same ranks junior or pari passu to the
Series B Preferred Stock as to dividends and the distribution of assets
upon a Liquidation of the Corporation; regardless of whether any such
creation, authorization or increase shall be by means of amendment to the
Articles of Incorporation, or by merger, consolidation or otherwise;
(3) increase or decrease the authorized number of shares of the Series B
Preferred Stock;
(4) take any action that would alter or change the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of
holders of Series B Preferred Stock in one or more of the ways set forth in
Section 14-2-1004(a) of the Code;
(5) purchase, redeem or otherwise acquire for value any shares of any
class of its capital stock or cause or permit any employee stock ownership
plan, including any Employee Stock Ownership Plan as defined in (S)
4975(e)(7) of
-14-
<PAGE>
the Internal Revenue Code of 1986, as amended, to purchase shares of any
class of its capital stock, except pursuant to a stock option or employee
stock ownership plans or restricted stock agreements, or in exercise of any
right of first refusal of the Corporation upon a proposed transfer that is,
in each case, in existence on the Original Issue Date; provided, however
that such restriction shall not apply in the event that either (i) the
holders of Series B Preferred Stock are permitted to participate in such
purchase, redemption or acquisition, each such holder being entitled to
sell some or all of his or its pro rata portion of such capital stock based
on the number of Conversion Shares held by such holder in proportion to the
sum of the number of Conversion Shares and the number of shares of Any
Common Stock then issued or issuable on a fully diluted basis, or (ii) such
purchase, redemption or acquisition has received the prior affirmative vote
or written consent of the holders of a majority of the total number of
shares of Series B Preferred Stock outstanding, voting together as a single
class; or
(6) amend the provisions of this Section (e);
provided, however, that the Corporation may amend the Corporation's Series
A Preferred Stock to provide for a Liquidation as defined herein.
(f) Notices. Any notice required by the provisions hereof to be given to
-------
the holders of shares of Series B Preferred Stock shall be deemed given on the
third business day following (and not including) the date on which such notice
is deposited in the United States Mail, first-class, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation. Notice by any other means shall not be deemed effective until
actually received.
-15-
<PAGE>
EXHIBIT 3.5
ARTICLES OF AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF WEBMD, INC.
In accordance with Section 14-2-1006 of the Georgia Business Corporation
Code (the "Code"), WebMD, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is WebMD, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted by the
Board of Directors:
RESOLVED, THAT ARTICLE II.B OF THE AMENDED AND RESTATED ARTICLES
OF INCORPORATION IS HEREBY AMENDED BY ADDING THE FOLLOWING PROVISIONS
TO THE END THEREOF: "THE CORPORATION IS AUTHORIZED TO ISSUE 2,000,000
SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK, WITHOUT PAR VALUE PER
SHARE (THE "SERIES C PREFERRED STOCK"). THE SERIES C PREFERRED STOCK
SHALL HAVE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS SET FORTH
ON EXHIBIT G TO THIS RESOLUTION."
---------
3. The "Exhibit G" referenced in the foregoing resolution is included in
---------
these Articles of Amendment and is the same "Exhibit A" as is attached
---------
hereto.
4. The foregoing resolution containing the amendment was duly adopted on
January 14, 1999, by the Corporation's Board of Directors in
accordance with the provisions of Section 14-2-1002 of the Code.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be signed
by the undersigned duly authorized officer, this 22nd day of January, 1999.
WEBMD, INC.
By: /s/ Jeffrey T. Arnold
--------------------------------
Name (print): Jeffrey T. Arnold
----------------------
Title: Chairman and Chief Executive Officer
-----------------------------
<PAGE>
Exhibit A
---------
DESIGNATIONS OF PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF
SERIES C PREFERRED STOCK OF WEBMD, INC.
For the purposes of these Designations, the following terms shall have the
meanings specified:
"Any Common Stock" shall mean the Corporation's common stock, with or
without series designation.
"Articles of Incorporation" shall mean the Amended and Restated Articles of
Incorporation of the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the voting common stock, without designation as
to series and without par value per share, of the Corporation.
"Conversion Price" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Rate" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which each
share of Series C Preferred Stock is convertible pursuant to Section (d) of
these Designations.
"Corporation" shall mean WebMD, Inc., a Georgia corporation.
"Designations" shall mean the terms, preferences, limitations and relative
rights of the Series C Preferred Stock established hereby and set forth
hereinafter.
"Initial Public Offering" shall have the meaning provided in the Articles
of Incorporation.
"Invested Amount" per share of Series C Preferred Stock shall mean the per
share issue price for any share of Series C Preferred Stock as designated in the
agreement with the Corporation pursuant to which such share is issued (as
adjusted pursuant to Section (d)(5) hereof after the Original Issue Date).
-2-
<PAGE>
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Series C Preferred Stock" shall mean the 2,000,000 shares of Series C
Preferred Stock, without par value per share, hereby designated.
"Original Issue Date" shall mean, with respect to each share of Series C
Preferred Stock, the date on which such share of Series C Preferred Stock is
first issued by the Corporation.
"Securities Act" shall mean the federal Securities Act of 1933, as amended.
The Designations granted to and imposed upon the Series C Preferred Stock
are as follows:
(a) Dividend Rights. The holders of Series C Preferred Stock shall not be
---------------
entitled to receive dividends; provided, however, that no dividend shall be paid
on or declared and set apart for any share of Any Common Stock for any period
unless at the same time an equal dividend for the same dividend period shall be
paid on or declared and set apart for each share of Series C Preferred Stock
based on the number of Conversion Shares into which each share is then
convertible. No dividends shall be paid with respect to the Series C Preferred
Stock unless and until dividends have been declared and paid on the
Corporation's Series A Preferred Stock in accordance with the Series A Preferred
Stock Designations of Preferences, Limitations and Relative Rights. Dividends
on shares of capital stock of the Corporation shall be payable only out of funds
legally available therefor.
(b) Liquidation Rights. In the event of the liquidation, dissolution or
------------------
winding up for any reason, including, without limitation, bankruptcy, of the
Corporation or any of the Corporation's subsidiaries, the assets of which
constitute all or substantially all the assets of the business of the
Corporation and its subsidiaries taken as a whole or such events specified in
the next sentence (each such event referred to as a "Liquidation"), the holders
of the outstanding shares of Series C Preferred Stock shall, at their election,
be entitled to receive in exchange for and in redemption of each share of their
Series C Preferred Stock, and on a parity with the holders of any capital stock
ranking pari passu to the Series C Preferred Stock by reason of their ownership
thereof, from any funds or assets legally available for distribution to
shareholders that portion of such funds, proceeds or assets in an amount equal
to a fraction,
(1) the numerator of which is the number of Conversion Shares to which
the holder of such share of Series C Preferred Stock would be entitled by
virtue of converting such share; and
(2) the denominator of which is the aggregate of the number of
Conversion Shares, shares of Any Common Stock outstanding, and all other
shares of outstanding capital stock of any series the holders of which are
entitled to participate in the proceeds of a Liquidation;
-3-
<PAGE>
provided, however, that, notwithstanding the foregoing, the amount payable to
such holder of a share of Series C Preferred Stock in the event of a Liquidation
of the Corporation, as provided above, shall not be less than, and shall be
increased if necessary (with sums payable to holders of shares of any other
capital stock to be reduced ratably per share as necessary) to equal, the
Invested Amount plus declared but unpaid dividends payable with respect to such
Series C Preferred Stock; provided further, however, that no amount shall be
paid with respect to the Series C Preferred Stock until the holders of the
Corporation's Series A Preferred Stock have been paid in full all amounts owed
upon a Liquidation to the holders of Series A Preferred Stock in accordance with
the Series A Preferred Stock Designation of Preferences, Limitations and
Relative Rights. A Liquidation shall also be deemed to have occurred upon (i)
the acquisition of the Corporation by another entity by means of any transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the Corporation's
shareholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 50% of
the voting power of the surviving or continuing entity, or (ii) a sale,
conveyance or disposition of all or substantially all of the assets of the
Corporation unless the Corporation's shareholders immediately prior to such
transaction will, as a result of such sale, conveyance or disposition hold (by
virtue of securities issued as consideration for such sale, conveyance or
disposition) at least 50% of the voting power of the purchasing entity, or (iii)
the effectuation by the Corporation or its stockholders of a transaction or
series of related transactions that results in the Corporation's shareholders
immediately prior to such transaction not holding (by virtue of such shares or
securities issued solely with respect thereto) at least 50% of the voting power
of the Corporation.
To the extent necessary, the Corporation shall cause such actions to be
taken by any of its subsidiaries so as to enable the proceeds of a Liquidation
to be distributed to the holders of shares of Series C Preferred Stock in
accordance with this Section (b). All the preferential amounts to be paid to
the holders of Series C Preferred Stock under this Section (b) shall be paid or
set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of any assets of the Corporation to, the holders
of shares of Any Common Stock or any class or series of stock of the Corporation
ranking junior to Series C Preferred Stock in connection with a Liquidation as
to which this Section (b) applies. If the assets or surplus funds to be
distributed to the holders of Series C Preferred Stock are insufficient to
permit the payment to such holders of the full amounts payable to such holders,
the assets and surplus funds legally available for distribution shall be
distributed ratably among the holders of Series C Preferred Stock in proportion
to the full amount each such holder is otherwise entitled to receive.
(c) Voting Rights. The Series C Preferred Stock shall be non-voting;
-------------
provided, however, that, in the event the Corporation fails to close the Initial
Public Offering on or before the date that is three hundred sixty-five (365)
days following the Original Issue Date, each holder of a share of Series C
Preferred Stock shall thereafter automatically be entitled to the number of
votes equal to the number of Conversion Shares into which such share of Series C
Preferred Stock would be convertible under the
-4-
<PAGE>
circumstances described in Section (d) hereof on the record date for the vote or
consent of shareholders, and shall otherwise have voting rights and powers equal
to the voting rights and powers of the Common Stock. Fractional votes shall not,
however, be permitted, and any fractions shall be disregarded in computing
voting rights.
(c) Conversion. The holders of Series C Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
---------------
(A) For purposes of this Section (d), the shares of Series C
Preferred Stock shall be convertible, at the times and under the
conditions described in this Section (d) hereafter, at the rate (the
"Conversion Rate") of one share of Series C Preferred Stock to the
number of shares of Common Stock that equals the quotient obtained by
dividing the Invested Amount by the Conversion Price (defined
hereinafter). Thus, the number of shares of Common Stock to which a
holder of Series C Preferred Stock shall be entitled upon any
conversion provided for in this Section (d) shall be the product
obtained by multiplying the Conversion Rate by the number of shares of
Series C Preferred Stock being converted. Such conversion shall be
deemed to have been made immediately prior to the close of business on
the date of the surrender of the shares of Series C Preferred Stock to
be converted in accordance with the procedures described in Subsection
(d)(4) below. The "Conversion Price" shall be equal to the Invested
Amount, except as otherwise adjusted as provided hereafter in this
Section (d). The initial Conversion Rate shall be one share of Series
C Preferred Stock for one share of Common Stock.
(B) No fractional shares of Common Stock shall be issued upon
conversion of Series C Preferred Stock, and any shares of Series C
Preferred Stock surrendered for conversion that would otherwise result
in a fractional share of Common Stock shall be redeemed in cash at the
then effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(2) Optional. Subject to Subsection (d)(3) below, each share of
--------
Series C Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the anniversary of the date of issuance of such
share, in whole or in part, at the office of the Corporation or any
transfer agent for the Series C Preferred Stock, into Common Stock at the
then effective Conversion Rate.
(3) Automatic.
---------
(A) Should the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock so elect, by delivery
of
-5-
<PAGE>
written notice or notices to the Corporation, each and every
outstanding share of Series C Preferred Stock held by all holders of
Series C Preferred Stock (whether or not so electing) shall
automatically be converted into Common Stock at the then effective
Conversion Rate. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of receipt of
the last written notice described above necessary to effect such
request by a majority of holders. Such conversion shall be automatic,
without need for any further action by the holders of shares of Series
C Preferred Stock and regardless of whether the certificates
representing such shares are surrendered to the Corporation or its
transfer agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing such
shares of Series C Preferred Stock so converted are surrendered to the
Corporation in accordance with the procedures described in Subsection
(d)(4) below. Upon the conversion of Series C Preferred Stock pursuant
to this Subsection (d)(3)(A), the Corporation shall promptly send
written notice thereof, by registered or certified mail, return
receipt requested and postage prepaid, by hand delivery or by
overnight delivery, to each holder of record of Series C Preferred
Stock at his or its address then shown on the records of the
Corporation, which notice shall state that certificates evidencing
shares of Series C Preferred Stock must be surrendered at the office
of the Corporation (or of its transfer agent for the Common Stock, if
applicable) in the manner described in Subsection (d)(4) below.
(B) The Corporation shall notify each holder of Series C
Preferred Stock at least ninety (90) days prior to the anticipated
effective date of a registration statement filed by the Corporation
under the Securities Act covering an Initial Public Offering; provided
that, in the event the Corporation contemplates that such registration
statement will become effective at any time during the ninety (90)-day
period following the Original Issue Date, the Corporation shall
provide such notice to each holder of Series C Preferred Stock at
least ten (10) days prior to such effective date. Upon the closing of,
but effective immediately prior to, the first sale in an Initial
Public Offering, each and every share of outstanding Series C
Preferred Stock held by all holders of Series C Preferred Stock shall
automatically be converted into Common Stock at the then effective
Conversion Rate. Such conversion shall be automatic, without need for
any further action by the holders of shares of Series C Preferred
Stock and regardless of whether the certificates representing such
shares are surrendered to the Corporation or its transfer agent;
provided, however, that the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
such conversion unless certificates evidencing such shares of Series C
Preferred Stock so converted are surrendered to the Corporation in
accordance with the procedures described in Subsection (d)(4) below.
Upon the conversion of
-6-
<PAGE>
Series C Preferred Stock pursuant to this Subsection (d)(3)(B), the
Corporation shall promptly send written notice thereof, by registered
or certified mail, return receipt requested and postage prepaid, by
hand delivery or by overnight delivery, to each holder of record of
Series C Preferred Stock at his or its address then shown on the
records of the Corporation, which notice shall state that certificates
evidencing shares of Series C Preferred Stock must be surrendered at
the office of the Corporation (or of its transfer agent for the Common
Stock, if applicable) in the manner described in Subsection (d)(4)
below.
(4) Mechanics of Conversion. Before any holder of Series C Preferred
-----------------------
Stock shall be entitled to receive certificates representing the shares of
Common Stock into which shares of Series C Preferred Stock are converted in
accordance with Subsections (d)(2) or (d)(3) above, such holder shall
surrender the certificate or certificates for such shares of Series C
Preferred Stock, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series C Preferred Stock, and shall give written
notice to the Corporation at such office of the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to
be issued, if different from the name shown on the books and records of the
Corporation (the "Conversion Notice"). The Conversion Notice shall also
contain such representations as may reasonably be required by the
Corporation to the effect that the shares to be received upon conversion
are not being acquired and will not be transferred in any way that might
violate the then applicable securities laws. The Corporation shall, as soon
as practicable thereafter and in no event later than thirty (30) days after
the delivery of said certificates, issue and deliver at such office to such
holder of Series C Preferred Stock, or to the nominee or nominees of such
holder as provided in the Conversion Notice, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled as aforesaid. The person or persons entitled to receive the shares
of Common Stock issuable upon a conversion pursuant to Subsections (d)(2)
or (d)(3) above shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of the effective date of
conversion specified in such section. All certificates issued upon the
exercise or occurrence of the conversion shall contain a legend governing
restrictions upon such shares imposed by law or agreement of the holder or
his or its predecessors.
(5) Adjustment for Subdivisions or Combinations of Common Stock. In
-----------------------------------------------------------
the event the Corporation at any time, or from time to time, after the
Original Issue Date effects a subdivision or combination of the outstanding
Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of the
outstanding Series C Preferred Stock, then and in each such event the
Invested Amount (and therefore, the Conversion Price and the corresponding
Conversion Rate) shall be decreased or increased proportionately.
-7-
<PAGE>
(6) Adjustments for Dividends, Distributions and Other Common Stock
---------------------------------------------------------------
Equivalents. In the event that the Corporation at any time, or from time
-----------
to time, after the Original Issue Date shall make or issue, or fix a record
date to determine the holders of Any Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of Any Common
Stock or other securities or rights convertible or exercisable into or
otherwise entitling the holder thereof, directly or indirectly, to receive
additional shares of Any Common Stock (such other securities or rights
being hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder of such Common Stock
Equivalents or the additional shares of Any Common Stock, and without a
proportionate and corresponding dividend or other distribution to holders
of Series C Preferred Stock, then and in each such event the maximum number
of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for subsequent adjustment of such
number) of the type of Any Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed, for purposes of this Subsection (d)(6),
to be issued and outstanding as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business
on such record date. In each such event the Conversion Price shall be
decreased as of the time of such issuance or, in the event such a record
date shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price by a fraction,
(A) the numerator of which shall be the total number of shares of
Any Common Stock issued and outstanding or deemed to be issued and
outstanding (as provided below) immediately prior to the time of such
issuance or the close of business on such record date; and
(B) the denominator of which shall be the total number of shares
of Any Common Stock (i) issued and outstanding or deemed pursuant to
the terms hereof to be issued and outstanding, as provided below (not
including any shares described in clause (ii) immediately below),
immediately prior to the time of such issuance or the close of
business on such record date, plus (ii) the number of shares of Any
Common Stock issuable in payment of such dividend or distribution or
upon conversion or exercise of such Common Stock Equivalents;
provided, however, that (i) if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Price (and the corresponding
Conversion Rate) shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price (and the
corresponding Conversion Rate) shall be adjusted pursuant to this
Subsection (d)(6) as of the time of actual payment of such dividend or
distribution; or (ii) if such Common Stock Equivalents provide, with the
passage of time or otherwise, for any decrease in the number of shares of
Any Common Stock issuable upon conversion or exercise thereof (or upon the
-8-
<PAGE>
occurrence of a record date with respect thereto), the Conversion Price
(and the corresponding Conversion Rate) computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such decrease
becoming effective, be recomputed to reflect such decrease insofar as it
affects the rights of conversion or exercise of the Common Stock
Equivalents then outstanding; or (iii) upon the expiration of any rights of
conversion or exercise under any unexercised Common Stock Equivalents, the
Conversion Price (and the corresponding Conversion Rate) computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon
such expiration, be recomputed as if the only additional shares of Any
Common Stock issued were the shares of such stock, if any, actually issued
upon the conversion or exercise of such Common Stock Equivalents; or (iv)
in the event of issuance of Common Stock Equivalents that expire by their
terms not more than sixty (60) days after the date of issuance thereof, no
adjustments of the Conversion Price (or the corresponding Conversion Rate)
shall be made until the expiration or exercise of all such Common Stock
Equivalents, whereupon the adjustment otherwise required by this Subsection
(d)(6) shall be made in the manner provided herein. For purposes of this
Subsection (d)(6), Any Common Stock deemed issued and outstanding shall
include shares of Common Stock into which the then outstanding shares of
Series C Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and shares of Any Common Stock that
could be obtained through the exercise or conversion of all other rights,
options, and convertible securities on the day immediately preceding the
given date.
(7) Adjustment of Conversion Rate for Diluting Issues. Except as
-------------------------------------------------
otherwise provided in this Subsection (d)(7), in the event, and each time
as, the Corporation sells or issues shares of Any Common Stock or Common
Stock Equivalents following the Original Issue Date, at a per share
consideration (as defined below) less than the Conversion Price then in
effect, then the Conversion Price shall be adjusted as provided in this
Subsection (d)(7), and the Conversion Rate shall be appropriately adjusted.
For purposes of the foregoing, the per share consideration with respect to
the sale or issuance of a share of Any Common Stock shall be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale
or issuance of Common Stock Equivalents that are convertible or exercisable
into or exchangeable for Any Common Stock without further consideration,
the per share consideration shall be determined by dividing the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for subsequent adjustment of
such number) of Any Common Stock issuable, directly or indirectly, with
respect to such Common Stock Equivalents into the aggregate consideration
received by the Corporation upon the sale or issuance of such Common Stock
Equivalents. With respect to the issuance of Common Stock Equivalents, the
per share consideration shall be determined by dividing the maximum number
of shares (as
-9-
<PAGE>
set forth in the instrument relating thereto without regard to any
provisions contained therein for subsequent adjustment of such number) of
Any Common Stock issuable with respect to such Common Stock Equivalents
into the aggregate consideration received by the Corporation upon the sale
or issuance of such Common Stock Equivalents plus the total consideration
receivable by the Corporation upon the conversion or exercise of such
Common Stock Equivalents. The issuance of shares of Any Common Stock or
Common Stock Equivalents for no consideration shall be deemed to be an
issuance of shares of Any Common Stock at a per share consideration of
$.01. In connection with the sale or issuance of Common Stock and/or Common
Stock Equivalents for non-cash consideration, the amount of consideration
shall be determined by the Board of Directors in good faith.
As used herein, "Additional Shares of Common Stock" shall mean, with
respect to such adjustments to be made to the Conversion Price and the
Conversion Rate, either shares of Any Common Stock issued subsequent to the
Original Issue Date, or, with respect to the issuance of Common Stock
Equivalents, the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of Any Common Stock issuable in
exchange for, upon conversion of, or upon exercise of such Common Stock
Equivalents.
(A) Upon each issuance of Any Common Stock for a per share
consideration less than the Conversion Price as in effect on the date
of such issuance, the Conversion Price as in effect on such date shall
be adjusted by multiplying it by a fraction:
(i) the numerator of which shall be the number of shares of
Any Common Stock deemed to be outstanding (as defined below)
immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of shares of Any Common Stock that
the aggregate net consideration received by the Corporation for
the total number of such Additional Shares of Common Stock so
issued would purchase at the Conversion Price then in effect; and
(ii) the denominator of which shall be the number of shares
of Any Common Stock deemed to be outstanding (as defined below)
immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of shares of Any Common Stock so
issued.
For the purposes of this Subsection (d)(7)(A), the number of shares of Any
Common Stock deemed to be outstanding as of a given date shall be the sum
of (i) the number of shares of Any Common Stock actually outstanding, (ii)
the number
-10-
<PAGE>
of shares of Any Common Stock into which the then outstanding shares of
Series C Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and (iii) the number of shares of Any
Common Stock that could be obtained through the exercise or conversion of
all other rights, options and convertible securities on the day immediately
preceding the given date.
(B) Upon each issuance of Common Stock Equivalents that are
exchangeable without further consideration into Common Stock, for a
per share consideration less than the Conversion Price as in effect on
the date of such issuance, the Conversion Price shall be adjusted as
provided in paragraph (A) of this Subsection (d)(7) on the basis that
the Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of the Common Stock Equivalents, and
the aggregate consideration received by the Corporation for such
Common Stock Equivalents shall be deemed to have been received for
such Additional Shares of Common Stock.
(C) Upon each issuance of Common Stock Equivalents other than
those described in paragraph (B) of this Subsection (d)(7) for a per
share consideration less than the Conversion Price as in effect on the
date of such issuance, the Conversion Price shall be adjusted as
provided in paragraph (A) of this Subsection (d)(7) on the basis that
the Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of such Common Stock Equivalents, and
the aggregate consideration received and receivable by the Corporation
on conversion or exercise of such Common Stock Equivalents shall be
deemed to have been received for such Additional Shares of Common
Stock.
(D) Once any Additional Shares of Common Stock have been treated
as having been issued for the purpose of this Subsection (d)(7), they
shall be treated as issued and outstanding shares of Any Common Stock
whenever any subsequent calculations must be made pursuant hereto;
provided that on the expiration of any options, warrants or rights to
purchase Additional Shares of Common Stock, the termination of any
rights to convert or exchange for Additional Shares of Common Stock,
or the expiration of any options or rights related to such convertible
or exchangeable securities on account of which an adjustment in the
Conversion Price has been made previously pursuant to this Subsection
(d)(7), such Conversion Price shall forthwith be readjusted to the
Conversion Price as would have obtained had the adjustment made upon
the issuance of such options, warrants, rights, securities or options
or rights related to such securities been made upon the basis of the
issuance of only the number of shares of Any Common Stock actually
issued upon the exercise of such options, warrants or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights
-11-
<PAGE>
related to such securities.
(E) The foregoing notwithstanding, no adjustment of the
Conversion Price and the Conversion Rate shall be made pursuant to
this Subsection (d)(7) as a result of the issuance of:
(i) any shares of Common Stock upon the conversion of
shares of Series C Preferred Stock;
(ii) securities of the Corporation offered to the public
pursuant to an effective registration statement under the
Securities Act;
(iii) the Corporation's securities pursuant to the
acquisition by the Corporation of any product, technology, know-
how or another corporation by merger, purchase of all or
substantially all of the securities or assets, or any other
reorganization whereby the Corporation owns over fifty percent
(50%) of the voting power of such corporation;
(iv) any shares of Common Stock pursuant to which the
Conversion Price and the Conversion Rate are adjusted under
Subsection (5) or (6) of this Section (d);
(v) any shares of Any Common Stock issued at any time
following the Original Issue Date pursuant to options, warrants
or rights granted either before or after the Original Issue Date
to purchase shares of such series of Any Common Stock, less the
number of any such options, warrants or rights that are
repurchased by the Corporation, are canceled or expire, in each
case in favor of employees, directors, officers or consultants of
the Corporation or any subsidiary thereof pursuant to a stock
option plan or agreement approved by the Board of Directors;
provided, however, that such stock options thereunder, if granted
after the Original Issue Date, are granted at a conversion or
exercise price that the Board of Directors determines in good
faith is not less than the fair market value of the securities
into which they are exercisable as of the date of grant; or
(vi) any shares of Any Common Stock issued pursuant to the
exchange, conversion or exercise of any Common Stock Equivalents
that have previously been incorporated into computations
hereunder on the date when
-12-
<PAGE>
such Common Stock Equivalents were issued.
(8) De Minimis Adjustments. No adjustment to the Conversion Price
----------------------
(and, thereby, the Conversion Rate) shall be made if such adjustment would
result in a change in the Conversion Price of less than $.01. Any
adjustment of less than $.01 that is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment
that, on a cumulative basis, amounts to an adjustment of $.01 or more in
the Conversion Price.
(9) No Impairment. Except as provided in Section (e) hereof, the
-------------
Corporation shall not, by amendment of the Articles of Incorporation or the
Bylaws or through any reorganization, 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 Corporation, but shall
at all times in good faith assist in the carrying out of all the provisions
of this Section (d) 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 Series C Preferred Stock against impairment.
(10) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section
(d), the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and cause independent
public accountants selected by the Corporation to verify such computation
and prepare and furnish to each holder of Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of
Series C Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii)
the Conversion Price and the Conversion Rate at that time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property that at that time would be received upon the conversion of Series
C Preferred Stock.
(11) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any series or class of securities
other than Series C Preferred Stock for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, any Common Stock Equivalents or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series C Preferred Stock, at least twenty (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 rights, and the amount and character of such dividend,
distribution or rights.
-13-
<PAGE>
(12) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series C Preferred Stock;
and if at any time the number of authorized but unissued shares of Common
Stock shall be insufficient to effect the conversion of all then
outstanding shares of the Series C Preferred Stock, the Corporation shall
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(e) Protective Provisions. In addition to any other rights provided by
---------------------
law, so long as any shares of Series C Preferred Stock are then outstanding,
except where the vote or written consent of the holders of a greater number of
shares is required by law or by another provision of the Articles of
Incorporation, without first obtaining the affirmative vote or written consent
of the holders of a majority of the total number of shares of Series C Preferred
Stock outstanding, voting together as a single class, the Corporation shall not,
and shall cause its subsidiaries not to:
(1) amend or repeal any provision of, or add any provision to, the
Articles of Incorporation or the Bylaws, or file any certificate of
designations, preferences, limitations and relative rights of any series or
class of preferred stock, if such action would alter or change the
preferences, rights, privileges or powers of, or restrictions provided for
the benefit of holders of Series C Preferred Stock;
(2) create or authorize the creation of any additional series or
class of shares of stock, or increase the authorized amount of any series
or class of capital stock, unless the same ranks junior or pari passu to
the Series C Preferred Stock as to dividends and the distribution of assets
upon a Liquidation of the Corporation; regardless of whether any such
creation, authorization or increase shall be by means of amendment to the
Articles of Incorporation, or by merger, consolidation or otherwise;
(3) increase or decrease the authorized number of shares of the
Series C Preferred Stock;
(4) take any action that would alter or change the preferences,
rights, privileges or powers of, or restrictions provided for the benefit
of holders of Series C Preferred Stock in one or more of the ways set forth
in Section 14-2-1004(a) of the Code;
(5) purchase, redeem or otherwise acquire for value any shares of any
class of its capital stock or cause or permit any employee stock ownership
plan, including any Employee Stock Ownership Plan as defined in (S)
4975(e)(7) of
-14-
<PAGE>
the Internal Revenue Code of 1986, as amended, to purchase shares of any
class of its capital stock, except pursuant to a stock option or employee
stock ownership plans or restricted stock agreements, or in exercise of any
right of first refusal of the Corporation upon a proposed transfer that is,
in each case, in existence on the Original Issue Date; provided, however
that such restriction shall not apply in the event that either (i) the
holders of Series C Preferred Stock are permitted to participate in such
purchase, redemption or acquisition, each such holder being entitled to
sell some or all of his or its pro rata portion of such capital stock based
on the number of Conversion Shares held by such holder in proportion to the
sum of the number of Conversion Shares and the number of shares of Any
Common Stock then issued or issuable on a fully diluted basis, or (ii) such
purchase, redemption or acquisition has received the prior affirmative vote
or written consent of the holders of a majority of the total number of
shares of Series C Preferred Stock outstanding, voting together as a single
class; or
(6) amend the provisions of this Section (e);
provided, however, that the Corporation may amend the Corporation's Series
A Preferred Stock to provide for a Liquidation as defined herein.
(f) Notices. Any notice required by the provisions hereof to be given to
-------
the holders of shares of Series C Preferred Stock shall be deemed given on the
third business day following (and not including) the date on which such notice
is deposited in the United States Mail, first-class, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation. Notice by any other means shall not be deemed effective until
actually received.
-15-
<PAGE>
EXHIBIT 3.6
AMENDED AND RESTATED BYLAWS
OF
WEBMD, INC.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
WEBMD, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE.................................................................. 1
1.1 Registered Office and Agent..................................... 1
1.2 Principal Office................................................ 1
1.3 Other Offices................................................... 1
ARTICLE TWO.................................................................. 1
2.1 Place of Meetings............................................... 1
2.2 Annual Meetings................................................. 1
2.3 Special Meetings................................................ 2
2.4 Notice of Meetings.............................................. 2
2.5 Waiver of Notice................................................ 2
2.6 Voting Group; Quorum; Vote Required to Act...................... 2
2.7 Voting of Shares................................................ 3
2.8 Proxies......................................................... 3
2.9 Presiding Officer............................................... 3
2.10 Adjournments.................................................... 3
2.11 Conduct of the Meeting.......................................... 4
2.12 Matters Considered at Annual Meetings........................... 4
ARTICLE THREE................................................................ 5
3.1 General Powers.................................................. 5
3.2 Number, Election and Term of Office............................. 5
3.3 Removal of Directors............................................ 5
3.4 Vacancies....................................................... 5
3.5 Compensation.................................................... 6
3.6 Committees of the Board of Directors............................ 6
3.7 Qualification of Directors...................................... 6
3.8 Certain Nomination Requirements................................. 6
ARTICLE FOUR................................................................. 7
4.1 Regular Meetings................................................ 7
4.2 Special Meetings................................................ 7
4.3 Place of Meetings............................................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.4 Notice of Meetings............................................. 7
4.5 Quorum......................................................... 8
4.6 Vote Required for Action....................................... 8
4.7 Participation by Conference Telephone.......................... 8
4.8 Action by Directors Without a Meeting.......................... 8
4.9 Adjournments................................................... 8
4.10 Waiver of Notice............................................... 8
ARTICLE FIVE................................................................ 9
5.1 Offices........................................................ 9
5.2 Term........................................................... 9
5.3 Compensation................................................... 9
5.4 Removal........................................................ 9
5.5 Chairman of the Board.......................................... 9
5.6 President...................................................... 10
5.7 Vice Presidents................................................ 10
5.8 Secretary...................................................... 10
5.9 Treasurer...................................................... 10
ARTICLE SIX................................................................. 11
ARTICLE SEVEN............................................................... 11
7.1 Share Certificates............................................. 11
7.2 Rights of Corporation with Respect to Registered Owners........ 11
7.3 Transfers of Shares............................................ 11
7.4 Duty of Corporation to Register Transfer....................... 11
7.5 Lost, Stolen, or Destroyed Certificates........................ 12
7.6 Fixing of Record Date.......................................... 12
7.7 Record Date if None Fixed...................................... 12
ARTICLE EIGHT............................................................... 12
8.1 Indemnification of Directors................................... 12
8.2 Indemnification of Others...................................... 13
8.3 Other Organizations............................................ 13
8.4 Determination.................................................. 13
8.5 Advances....................................................... 14
8.6 Non-Exclusivity................................................ 14
8.7 Insurance...................................................... 14
8.8 Notice......................................................... 14
8.9 Security....................................................... 14
8.10 Amendment...................................................... 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.11 Agreements..................................................... 15
8.12 Continuing Benefits............................................ 15
8.13 Successors..................................................... 15
8.14 Severability................................................... 15
8.15 Additional Indemnification..................................... 15
ARTICLE NINE................................................................ 16
9.1 Inspection of Books and Records................................ 16
9.2 Fiscal Year.................................................... 16
9.3 Corporate Seal................................................. 16
9.4 Annual Statements.............................................. 16
9.5 Notice......................................................... 16
ARTICLE TEN................................................................. 17
</TABLE>
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
WEBMD, INC.
References in these Amended and Restated Bylaws (the "Bylaws") to "Articles
of Incorporation" are to the Amended and Restated Articles of Incorporation of
WEBMD, INC., a Georgia corporation (the "Corporation"), as amended and restated
from time to time (the "Articles").
All of these Bylaws are subject to contrary provisions, if any, of the
Articles (including provisions designating the preferences, limitations, and
relative rights of any class or series of shares), the Georgia Business
Corporation Code (the "Code"), and other applicable law, as in effect on and
after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
ARTICLE ONE
OFFICE
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
---------------------------
registered office and shall have a registered agent whose business office is the
same as the registered office.
1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be at
----------------
the place designated in the Corporation's annual registration with the Georgia
Secretary of State.
1.3 OTHER OFFICES. In addition to its registered office and principal
-------------
office, the Corporation may have offices at other locations either in or outside
the State of Georgia.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Meetings of the Corporation's shareholders may be
-----------------
held at any location inside or outside the State of Georgia designated by the
Board of Directors or any other person or persons who properly call the meeting,
or if the Board of Directors or such other person or persons do not specify a
location, at the Corporation's principal office.
2.2 ANNUAL MEETINGS. The Corporation shall hold an annual meeting of
---------------
shareholders, at a time determined by the Board of Directors, to elect directors
and to transact any business that
<PAGE>
properly may come before the meeting. The annual meeting may be combined with
any other meeting of shareholders, whether annual or special.
2.3 SPECIAL MEETINGS. Special meetings of shareholders of one or more
----------------
classes or series of the Corporation's shares may be called at any time by the
Board of Directors, the Chairman of the Board, or the Chief Executive Officer,
and shall be called by the Corporation upon the written request (in compliance
with applicable requirements of the Code) of the holders of shares representing
twenty-five percent (25%) or more of the votes entitled to be cast on each issue
proposed to be considered at the special meeting; provided, however, that at any
time the Corporation has more than 100 beneficial owners (as defined in Section
14-2-1110 of the Code) of its shares, such written request must be made by the
holders of a majority of such votes. The business that may be transacted at any
special meeting of shareholders shall be limited to that proposed in the notice
of the special meeting given in accordance with Section 2.4 (including related
or incidental matters that may be necessary or appropriate to effectuate the
proposed business).
2.4 NOTICE OF MEETINGS. In accordance with Section 9.5 and subject to
------------------
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting. The
notice of an annual meeting need not state the purpose of the meeting unless
these Bylaws require otherwise. The notice of a special meeting shall state the
purpose for which the meeting is called. If an annual or special shareholders'
meeting is adjourned to a different date, time, or location, the Corporation
shall give shareholders notice of the new date, time, or location of the
adjourned meeting, unless a quorum of shareholders was present at the meeting
and information regarding the adjournment was announced before the meeting was
adjourned; provided, however, that if a new record date is or must be fixed in
-------- -------
accordance with Section 7.6, the Corporation must give notice of the adjourned
meeting to all shareholders of record as of the new record date who are entitled
to vote at the adjourned meeting.
2.5 WAIVER OF NOTICE. A shareholder may waive any notice required by the
----------------
Code, the Articles, or these Bylaws, before or after the date and time of the
matter to which the notice relates, by delivering to the Corporation a written
waiver of notice signed by the shareholder entitled to the notice. In addition,
a shareholder's attendance at a meeting shall be (a) a waiver of objection to
lack of notice or defective notice of the meeting unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) a waiver of objection to consideration of a particular
matter at the meeting that is not within the purpose stated in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented. Except as otherwise required by the Code, neither the purpose of nor
the business transacted at the meeting need be specified in any waiver.
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT. (a) Unless otherwise
------------------------------------------
required by the Code or the Articles, all classes or series of the Corporation's
shares entitled to vote generally on a matter shall for that purpose be
considered a single voting group (a "Voting Group"). If either the Articles or
the Code requires separate voting by two or more Voting
2
<PAGE>
Groups on a matter, action on that matter is taken only when voted upon by each
such Voting Group separately. At all meetings of shareholders, any Voting Group
entitled to vote on a matter may take action on the matter only if a quorum of
that Voting Group exists at the meeting, and if a quorum exists, the Voting
Group may take action on the matter notwithstanding the absence of a quorum of
any other Voting Group that may be entitled to vote separately on the matter.
Unless the Articles, these Bylaws, or the Code provides otherwise, the presence
(in person or by proxy) of shares representing a majority of votes entitled to
be cast on a matter by a Voting Group shall constitute a quorum of that Voting
Group with regard to that matter. Once a share is present at any meeting other
than solely to object to holding the meeting or transacting business at the
meeting, the share shall be deemed present for quorum purposes for the remainder
of the meeting and for any adjournments of that meeting, unless a new record
date for the adjourned meeting is or must be set pursuant to Section 7.6 of
these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles, a provision of these Bylaws that has been adopted
pursuant to Section 14-2-1021 of the Code (or any successor provision), or the
Code requires a greater number of affirmative votes.
2.7 VOTING OF SHARES. Unless otherwise required by the Code or the
----------------
Articles, each outstanding share of any class or series having voting rights
shall be entitled to one vote on each matter that is submitted to a vote of
shareholders.
2.8 PROXIES. A shareholder entitled to vote on a matter may vote in
-------
person or by proxy pursuant to an appointment executed in writing by the
shareholder or by his attorney-in-fact. An appointment of a proxy shall be
valid for 11 months from the date of its execution, unless a longer or shorter
period is expressly stated in the proxy.
2.9 PRESIDING OFFICER. Except as otherwise provided in this Section 2.9,
-----------------
the Chairman of the Board, and in his absence or disability the Chief Operating
Officer shall preside at every shareholders' meeting (and any adjournment
thereof) as its chairman, if either of them is present and willing to serve. If
neither the Chairman of the Board nor the Chief Operating Officer is present and
willing to serve as chairman of the meeting, and if the Chairman of the Board
has not designated another person who is present and willing to serve, then a
majority of the Corporation's directors present at the meeting shall be entitled
to designate a person to serve as chairman. If no director of the Corporation
is present at the meeting or if a majority of the directors who are present
cannot be established, then a chairman of the meeting shall be selected by a
majority vote of (a) the shares present at the meeting that would be entitled to
vote in an election of directors, or (b) if no such shares are present at the
meeting, then the shares present at the meeting comprising the Voting Group with
the largest number of shares present at the meeting and entitled to vote on a
matter properly proposed to be considered at the meeting. The chairman of the
meeting may designate other persons to assist with the meeting.
2.10 ADJOURNMENTS. At any meeting of shareholders (including an adjourned
------------
meeting), a majority of shares of any Voting Group present and entitled to vote
at the meeting (whether or
3
<PAGE>
not those shares constitute a quorum) may adjourn the meeting, but only with
respect to that Voting Group, to reconvene at a specific time and place. If more
than one Voting Group is present and entitled to vote on a matter at the
meeting, then the meeting may be continued with respect to any such Voting Group
that does not vote to adjourn as provided above, and such Voting Group may
proceed to vote on any matter to which it is otherwise entitled; provided,
--------
however, that if (a) more than one Voting Group is required to take action on a
- -------
matter at the meeting and (b) any one of those Voting Groups votes to adjourn
the meeting (in accordance with the preceding sentence), then the action shall
not be deemed to have been taken until the requisite vote of any adjourned
Voting Group is obtained at its reconvened meeting. The only business that may
be transacted at any reconvened meeting is business that could have been
transacted at the meeting that was adjourned, unless further notice of the
adjourned meeting has been given in compliance with the requirements for a
special meeting that specifies the additional purpose or purposes for which the
meeting is called. Nothing contained in this Section 2.10 shall be deemed or
otherwise construed to limit any lawful authority of the chairman of a meeting
to adjourn the meeting.
2.11 CONDUCT OF THE MEETING. At any meeting of shareholders, the chairman
----------------------
of the meeting shall be entitled to establish the rules of order governing the
conduct of business at the meeting.
2.12 MATTERS CONSIDERED AT ANNUAL MEETINGS. Notwithstanding anything to
-------------------------------------
the contrary in these Bylaws, the only business that may be conducted at an
annual meeting of shareholders shall be business brought before the meeting (a)
by or at the direction of the Board of Directors prior to the meeting, (b) by or
at the direction of the Chairman of the Board or the Chief Operating Officer, or
(c) by a shareholder of the Corporation who is entitled to vote with respect to
the business and who complies with the notice procedures set forth in this
Section 2.12. For business to be brought properly before an annual meeting by a
shareholder, the shareholder must have given timely notice of the business in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered or mailed to and received at the principal office of
the Corporation not less than sixty (60) nor more than ninety (90) days prior to
the first anniversary of the previous year's annual meeting. A shareholder's
notice to the Secretary shall set forth a brief description of each matter of
business the shareholder proposes to bring before the meeting and the reasons
for conducting that business at the meeting; the name, as it appears on the
Corporation's books, and address of the shareholder proposing the business; the
series or class and number of shares of the Corporation's capital stock that are
beneficially owned by the shareholder; and any material interest of the
shareholder in the proposed business. The chairman of the meeting shall have the
discretion to declare to the meeting that any business proposed by a shareholder
to be considered at the meeting is out of order and that such business shall not
be transacted at the meeting if (i) the chairman concludes that the matter has
been proposed in a manner inconsistent with this Section 2.12 or (ii) the
chairman concludes that the subject matter of the proposed business is
inappropriate for consideration by the shareholders at the meeting.
4
<PAGE>
ARTICLE THREE
BOARD OF DIRECTORS
3.1 GENERAL POWERS. All corporate powers shall be exercised by or under
--------------
the authority of, and the business and affairs of the Corporation shall be
managed by, the Board of Directors, subject to any limitation set forth in the
Articles, in bylaws approved by the shareholders, or in agreements among all the
shareholders that are otherwise lawful.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. Except as otherwise provided in
-----------------------------------
the Articles, the Board of Directors shall consist of a maximum of fifteen
members. The Board of Directors shall have the authority to change the number of
directors from time to time by resolution so long as the number of directors
does not exceed fifteen; provided, however, that no decrease in the number of
directors (if more than one director is elected by a resolution of the Board of
Directors or the shareholders) shall have the effect of shortening the term of
an incumbent director. The Board of Directors shall be divided into three
classes to be known as Class I, Class II, and Class III, which shall be as
nearly equal in number as possible. Except in the case of death, resignation,
disqualification, or removal for cause, each director shall serve for a term
ending on the date of the third annual meeting of shareholders following the
annual meeting at which the director was elected; provided, however, that each
initial director in Class I shall hold office until the first annual meeting of
shareholders after his election; each initial director in Class II shall hold
office until the second annual meeting of shareholders after his election; and
each initial director in Class III shall hold office until the third annual
meeting of shareholders after his election. Despite the expiration of a
director's term, such director shall continue to serve until his or her
successor, if there is to be any, has been elected and has qualified. In the
event of any increase or decrease in the authorized number of directors, the
newly created or eliminated directorships resulting from such an increase or
decrease shall be apportioned among the three classes of directors so that the
three classes remain as nearly equal in size as possible; provided, however,
that there shall be no classification of additional directors elected by the
Board of Directors until the next meeting of shareholders called for the
purposes of electing directors, at which meeting the terms of all such
additional directors shall expire, and such additional directors positions, if
they are to be continued, shall be apportioned among the classes of directors
and nominees therefor shall be submitted to the shareholders for their vote.
3.3 REMOVAL OF DIRECTORS. The entire Board of Directors or any individual
--------------------
director may be removed with cause by the shareholders, provided that directors
elected by a particular Voting Group may be removed only by the shareholders in
that Voting Group. Removal action may be taken only at a shareholders' meeting
for which notice of the removal action has been given, and a director may be
removed only by the holders of a majority of the votes entitled to be cast. If
any removed director is a member of any committee of the Board of Directors, he
shall cease to be a member of that committee when he ceases to be a director. A
removed director's successor, if any, may be elected at the same meeting to
serve the unexpired term.
3.4 VACANCIES. A vacancy in the Board of Directors may result from the
---------
death, resignation, disqualification, or removal of any director, or from an
increase in the number of
5
<PAGE>
directors. Any vacancy occurring on the Board of Directors, including a vacancy
resulting from an increase in the number of directors, may only be filled by the
affirmative vote of the remaining directors, even if the remaining directors
constitute less than a quorum of the Board of Directors; provided, however, that
if the vacant office was held by a director elected by a particular Voting
Group, only the holders of shares of that Voting Group or the remaining
directors elected by that Voting Group shall be entitled to fill the vacancy;
provided further, however, that if the vacant office was held by a director
elected by a particular Voting Group and there is no remaining director elected
by that Voting Group, the other remaining directors or director (elected by
another Voting Group or Groups) may fill the vacancy during an interim period
before the shareholders of the vacated director's Voting Group act to fill the
vacancy. A director elected to fill a vacancy shall hold office only until the
next election of directors by the shareholders.
3.5 COMPENSATION. Directors may receive such compensation for their
------------
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities other
than that of director and receive compensation for services rendered in those
other capacities.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may
------------------------------------
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution establishing the committee or in any other resolution of the Board of
Directors specifying, enlarging, or limiting the authority of the committee. Any
such committee, to the extent provided by resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
business and affairs of the Corporation, except that a committee shall have no
authority with respect to (1) amending the Articles or these Bylaws; (2)
adopting a plan of merger or consolidation; (3) the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Corporation; and (4) a voluntary dissolution of the Corporation or a revocation
thereof. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors. A
majority of each committee may determine its action and may fix the time and
places of its meetings, unless otherwise provided by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
3.7 QUALIFICATION OF DIRECTORS. No person elected to serve as a director
--------------------------
of the Corporation shall assume office and begin serving unless and until duly
qualified to serve, as determined by reference to the Code, the Articles, and
any further eligibility requirements established in these Bylaws.
3.8 CERTAIN NOMINATION REQUIREMENTS. No person may be nominated for
-------------------------------
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a
6
<PAGE>
shareholder of the Corporation who is entitled to vote for the election of the
nominee at the subject meeting, and the nominating shareholder has furnished
written notice to the Secretary of the Corporation, at the Corporation's
principal office, provided, however, that if at any time the number of
beneficial owners (as defined in Section 14-2-1110 of the Code) of the shares of
the Corporation exceeds 100, then such notice shall be delivered to the
Secretary of the Corporation at the Corporation's principal office not less than
sixty (60) nor more than ninety (90) days prior to the first anniversary of the
previous year's annual meeting, and such notice shall (i) set forth with respect
to the person to be nominated his or her name, age, business and residence
addresses, principal business or occupation during the past five years, any
affiliation with or material interest in the Corporation or any transaction
involving the Corporation, and any affiliation with or material interest in any
person or entity having an interest materially adverse to the Corporation, and
(ii) shall be accompanied by the sworn or certified statement of the shareholder
that the nominee has consented to being nominated and that the shareholder
believes the nominee will stand for election and will serve if elected; or (c)
(i) the person is nominated to replace a person previously identified as a
proposed nominee (in accordance with the provisions of subpart (b) of this
Section 3.8) who has since become unable or unwilling to be nominated or to
serve if elected, (ii) the shareholder who furnished such previous
identification makes the replacement nomination and delivers to the Secretary of
the Corporation (at the time of or prior to making the replacement nomination)
an affidavit or other sworn statement affirming that the shareholder had no
reason to believe the original nominee would be so unable or unwilling, and
(iii) such shareholder also furnishes in writing to the Secretary of the
Corporation (at the time of or prior to making the replacement nomination) the
same type of information about the replacement nominee as required by subpart
(b) of this Section 3.8 to have been furnished about the original nominee. The
chairman of any meeting of shareholders at which one or more directors are to be
elected, for good cause shown and with proper regard for the orderly conduct of
business at the meeting, may waive in whole or in part the operation of this
Section 3.8.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS. A regular meeting of the Board of Directors shall
----------------
be held in conjunction with each annual meeting of shareholders. In addition,
the Board of Directors may, by prior resolution, hold regular meetings at other
times.
4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
----------------
called by or at the request of the Chairman of the Board, the Chief Operating
Officer, or the majority of directors in office at that time.
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place in
-----------------
or outside the State of Georgia that the Board of Directors may establish from
time to time.
4.4 NOTICE OF MEETINGS. Directors need not be provided with notice of
------------------
any regular meeting of the Board of Directors. Unless waived in accordance with
Section 4.10, the
7
<PAGE>
Corporation shall give at least one day notice to each director of the date,
time, and place of each special meeting. Notice of a meeting shall be deemed to
have been given to any director in attendance at any prior meeting at which the
date, time, and place of the subsequent meeting was announced.
4.5 QUORUM. At meetings of the Board of Directors, a majority of the
------
directors then in office shall constitute a quorum for the transaction of
business.
4.6 VOTE REQUIRED FOR ACTION. If a quorum is present when a vote is
------------------------
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles, or these Bylaws. A director who is
present at a meeting of the Board of Directors when corporate action is taken is
deemed to have assented to the action taken unless (a) he objects at the
beginning of the meeting (or promptly upon his arrival) to holding the meeting
or transacting business at such meeting; (b) his dissent or abstention from the
action taken is entered in the minutes of the meeting; or (c) he delivers
written notice of his dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a director who votes in favor of the action taken.
4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
-------------------------------------
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
-------------------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterpart, and shall have the same force and effect as a unanimous vote of the
Board of Directors at a duly convened meeting.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not a
------------
quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give notice
to the directors of the reconvened meeting or of the business to be transacted,
other than by announcement at the meeting that was adjourned, unless a quorum
was not present at the meeting that was adjourned, in which case notice shall be
given to directors in the same manner as for a special meeting. At any such
reconvened meeting at which a quorum is present, any business may be transacted
that could have been transacted at the meeting that was adjourned.
4.10 WAIVER OF NOTICE. A director may waive any notice required by the
----------------
Code, the Articles, or these Bylaws before or after the date and time of the
matter to which the notice relates, by a written waiver signed by the director
and delivered to the Corporation for inclusion
8
<PAGE>
in the minutes or filing with the corporate records. Attendance by a director at
a meeting shall constitute waiver of notice of the meeting, except where a
director at the beginning of the meeting (or promptly upon his arrival) objects
to holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
OFFICERS
5.1 OFFICES. The officers of the Corporation shall consist of a
-------
President, a Secretary, and a Treasurer, each of whom shall be elected or
appointed by the Board of Directors. The Board of Directors may also elect a
Chairman of the Board and a Vice Chairman of the Board from among its members.
The Board of Directors from time to time may create and establish the duties of
other offices and may elect or appoint, or authorize specific senior officers to
appoint, the persons who shall hold such other offices, including one or more
Vice Presidents (including Executive Vice Presidents, Senior Vice Presidents,
Assistant Vice Presidents, and the like), one or more Assistant Secretaries, and
one or more Assistant Treasurers. Whether or not so provided by the Board of
Directors, the Chairman of the Board may appoint one or more Assistant
Secretaries and one or more Assistant Treasurers. Any two or more offices may be
held by the same person.
5.2 TERM. Each officer shall serve at the pleasure of the Board of
----
Directors (or, if appointed by a senior officer pursuant to this Article Five,
at the pleasure of the Board of Directors or any senior officer authorized to
have appointed the officer) until his death, resignation, or removal, or until
his replacement is elected or appointed in accordance with this Article Five.
5.3 COMPENSATION. The compensation of all officers of the Corporation
------------
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 REMOVAL. All officers (regardless of how elected or appointed)
-------
may be removed, with or without cause, by the Board of Directors, and any
officer appointed by another officer may also be removed, with or without cause,
by any senior officer authorized to have appointed the officer to be removed.
Removal will be without prejudice to the contract rights, if any, of the person
removed, but shall be effective notwithstanding any damage claim that may result
from infringement of such contract rights.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board (if there be
---------------------
one) shall preside at and serve as chairman of meetings of the shareholders and
of the Board of Directors (unless another person is selected under Section 2.9
to act as chairman). Unless otherwise provided in these Bylaws or by the Board
of Directors, the Chairman of the Board shall be the Chief Executive Officer of
the Corporation, shall be charged with the general and active management of the
business of the Corporation, shall see that all orders and resolutions of the
9
<PAGE>
Board of Directors are carried into effect, and shall have the authority to
select and appoint employees and agents of the Corporation. The Chairman of the
Board shall perform other duties and have other authority as may from time to
time be delegated by the Board of Directors.
5.6 PRESIDENT. Unless otherwise provided in these Bylaws or by
---------
resolution of the Board of Directors, the President shall be the Chief Executive
Officer of the Corporation, shall be charged with the general and active
management of the business of the Corporation, shall see that all orders and
resolutions of the Board of Directors are carried into effect, shall have the
authority to select and appoint employees and agents of the Corporation, and
shall, in the absence or disability of the Chairman of the Board, perform the
duties and exercise the powers of the Chairman of the Board. The President shall
perform any other duties and have any other authority as may be delegated from
time to time by the Board of Directors, and shall be subject to the limitations
fixed from time to time by the Board of Directors.
5.7 VICE PRESIDENTS. The Vice President (if there be one) shall, in
---------------
the absence or disability of the President, or at the direction of the
President, perform the duties and exercise the powers of the President, whether
the duties and powers are specified in these Bylaws or otherwise. If the
Corporation has more than one Vice President, the one designated by the Board of
Directors or the Chief Executive Officer (in that order of precedence) shall act
in the event of the absence or disability of the Chief Executive Officer. Vice
Presidents shall perform any other duties and have any other authority as from
time to time may be delegated by the Board of Directors or the Chief Executive
Officer.
5.8 SECRETARY. The Secretary shall be responsible for preparing
---------
minutes of the meetings of shareholders, directors, and committees of directors
and for authenticating records of the Corporation. The Secretary or any
Assistant Secretary shall have authority to give all notices required by law or
these Bylaws. The Secretary shall be responsible for the custody of the
corporate books, records, contracts, and other documents. The Secretary or any
Assistant Secretary may affix the corporate seal to any lawfully executed
documents requiring it, may attest to the signature of any officer of the
Corporation, and shall sign any instrument that requires the Secretary's
signature. The Secretary or any Assistant Secretary shall perform any other
duties and have any other authority as from time to time may be delegated by the
Board of Directors or the Chief Executive Officer.
5.9 TREASURER. Unless otherwise provided in these Bylaws or by
---------
resolution of the Board of Directors, the Treasurer shall be the Chief Financial
Officer of the Corporation and shall be responsible for the custody of all funds
and securities belonging to the Corporation and for the receipt, deposit, or
disbursement of these funds and securities under the direction of the Board of
Directors. The Treasurer shall cause full and true accounts of all receipts and
disbursements to be maintained and shall make reports of these receipts and
disbursements to the Board of Directors and Chief Executive Officer upon
request. The Treasurer or Assistant Treasurer shall perform any other duties and
have any other authority as from time to time may be delegated by the Board of
Directors or the Chief Executive Officer.
10
<PAGE>
ARTICLE SIX
DISTRIBUTIONS AND DIVIDENDS
Unless the Articles provide otherwise, the Board of Directors, from
time to time in its discretion, may authorize or declare distributions or share
dividends in accordance with the Code.
ARTICLE SEVEN
SHARES
7.1 SHARE CERTIFICATES. The interest of each shareholder in the
------------------
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of Directors
from time to time may adopt in accordance with the Code. Share certificates
shall be in registered form and shall indicate the date of issue, the name of
the Corporation, that the Corporation is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
designation of the series, if any, represented by the certificate. Each
certificate shall be signed by the President or a Vice President (or in lieu
thereof, by the Chairman of the Board or Chief Executive Officer, if there be
one) and may be signed by the Secretary or an Assistant Secretary; provided,
--------
however, that where the certificate is signed (either manually or by facsimile)
- -------
by a transfer agent, or registered by a registrar, the signatures of those
officers may be facsimiles.
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior
-------------------------------------------------------
to due presentation for transfer of registration of its shares, the Corporation
may treat the registered owner of the shares (or the beneficial owner of the
shares to the extent of any rights granted by a nominee certificate on file with
the Corporation pursuant to any procedure that may be established by the
Corporation in accordance with the Code) as the person exclusively entitled to
vote the shares, to receive any dividend or other distribution with respect to
the shares, and for all other purposes; and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in the shares on the
part of any other person, whether or not it has express or other notice of such
a claim or interest, except as otherwise provided by law.
7.3 TRANSFERS OF SHARES. Transfers of shares shall be made upon the
-------------------
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen, or
destroyed, the provisions of Section 7.5 of these Bylaws shall have been
complied with.
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of
----------------------------------------
the provisions of Section 7.3 of these Bylaws, the Corporation is under a duty
to register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons; (b)
11
<PAGE>
reasonable assurance is given that each required endorsement is genuine and
effective; (c) the Corporation has no duty to inquire into adverse claims or has
discharged any such duty; (d) any applicable law relating to the collection of
taxes has been complied with; (e) the transfer is in fact rightful or is to a
bona fide purchaser; and (f) the transfer is in compliance with applicable
provisions of any transfer restrictions of which the Corporation shall have
notice.
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a
---------------------------------------
share certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 FIXING OF RECORD DATE. For the purpose of determining shareholders
---------------------
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may not
be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to vote
separately on a matter at a meeting. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting, unless the Board of Directors shall fix a new record
date for the reconvened meeting, which it must do if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
7.7 RECORD DATE IF NONE FIXED. If no record date is fixed as provided
-------------------------
in Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
ARTICLE EIGHT
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify and
----------------------------
hold harmless any person (an "Indemnified Person") who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
whether formal or informal, including any action or suit by or in the right of
the Corporation (for purposes of this Article Eight, collectively, a
"Proceeding") because he is or was a director of the Corporation, against any
judgment, settlement, penalty, fine, or reasonable expenses (including, but not
limited to, attorneys' fees and
12
<PAGE>
disbursements, court costs, and expert witness fees) incurred with respect to
the Proceeding (for purposes of this Article Eight, a "Liability"), if he acted
in a manner he believed in good faith to be in or not opposed to the best
interests of the Corporation, and, in the case of any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful; provided, however, that
no indemnification shall be made for any Liability for which, under the Code,
indemnification may not be authorized by action of the Board of Directors, the
shareholders, or otherwise, including, but not limited to, any Liability of a
director to the Corporation for: (a) any appropriation by a director, in
violation of the director's duties, of any business opportunity of the
corporation; (b) any acts or omissions of a director that involve intentional
misconduct or a knowing violation of law; (c) the types of liability set forth
in Code Section 14-2-832; or (d) any transaction from which the director
received an improper personal benefit. Indemnification in connection with a
Proceeding brought by or in the right of the Corporation is limited to
reasonable expenses incurred in connection with the Proceeding.
8.2 INDEMNIFICATION OF OTHERS. The Board of Directors shall have the
--------------------------
power to cause the Corporation to provide to officers, employees, and agents of
the Corporation all or any part of the right to indemnification and other rights
of the type provided under Sections 8.1, 8.5, and 8.11 of this Article Eight
(subject to the conditions, limitations, and obligations specified in those
sections) upon a resolution to that effect identifying officers, employees, or
agents (by position or name) to be indemnified and specifying the particular
rights provided, which may be different for each of the persons identified. Each
officer, employee, or agent of the Corporation so identified shall be an
"Indemnified Person" for purposes of the provisions of this Article Eight.
8.3 OTHER ORGANIZATIONS. The Board of Directors shall provide to
-------------------
each director, and the Board of Directors shall have the power to cause the
Corporation to provide to any director, officer, employee, or agent of the
Corporation who is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise
all or any part of the right to indemnification and other rights of the type
provided under Sections 8.1, 8.5, and 8.11 of this Article Eight (subject to the
conditions, limitations, and obligations specified in those sections) upon a
resolution to that effect identifying the persons to be identified and
specifying the particular rights provided, which may be different for each of
the persons identified. Each person so identified shall be an "Indemnified
Person" for purposes of the provisions of this Article Eight.
8.4 DETERMINATION. Notwithstanding any judgment, order, settlement,
-------------
conviction, or plea in any Proceeding, an Indemnified Person shall be entitled
to indemnification as provided in Section 8.1 if a determination that such
Indemnified Person is entitled to such indemnification shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
are not at the time parties to the Proceeding; (b) if a quorum cannot be
obtained under (a) above, by majority vote of a committee duly designated by the
Board of Directors (in which designated directors who are parties may
participate), consisting solely of two or more directors who are not at the time
parties to the Proceeding; (c) in a written opinion by special legal counsel
selected as required by the Code; or (d) by the shareholders; provided, however,
-------- -------
that shares owned by or voted under the control of directors who are at the time
parties to the Proceeding may not be voted on the determination.
13
<PAGE>
8.5 ADVANCES. To the extent the Corporation has funds reasonably
--------
available to be used for this purpose, expenses (including, but not limited to,
attorneys' fees and disbursements, court costs, and expert witness fees)
incurred by the Indemnified Person in defending any Proceeding of the kind
described in Section 8.1 (or in Sections 8.2 or 8.3, if the Board of Directors
has specified that advancement of expenses be made available to such Indemnified
Person) shall be paid by the Corporation in advance of the final disposition of
such Proceeding as set forth herein. The Corporation shall promptly pay the
amount of such expenses to the Indemnified Person, but in no event later than 10
days following the Indemnified Person's delivery to the Corporation of a written
request for an advance pursuant to this Section 8.5, together with a reasonable
accounting of such expenses; provided, however, that the Indemnified Person
-------- -------
shall furnish the Corporation a written affirmation of his good faith belief
that he has met the standard of conduct set forth in the Code and a written
undertaking and agreement to repay to the Corporation any advances made pursuant
to this Section 8.5 if it shall be determined that the Indemnified Person is not
entitled to be indemnified by the Corporation for such amounts. The Corporation
may make the advances contemplated by this Section 8.5 regardless of the
Indemnified Person's financial ability to make repayment. Any advances and
undertakings to repay pursuant to this Section 8.5 may be unsecured and interest
free.
8.6 NON-EXCLUSIVITY. Subject to any applicable limitation imposed by
---------------
the Code or the Articles, the indemnification and advancement of expenses
provided by or granted pursuant to this Article Eight shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any provision of the Articles, or
any Bylaw, resolution, or agreement specifically or in general terms approved or
ratified by the affirmative vote of holders of a majority of the shares entitled
to be voted thereon.
8.7 INSURANCE. The Corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a capacity,
is also or was also serving at the request of the Corporation as a director,
officer, trustee, partner, employee, or agent of any corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, against any
Liability that may be asserted against him or incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article Eight.
8.8 NOTICE. If the Corporation indemnifies or advances expenses to a
------
director under any of Sections 14-2-851 through 14-2-854 of the Code (or any
equivalent provision of these Bylaws) in connection with a Proceeding by or in
the right of the Corporation, the Corporation shall, to the extent required by
Section 14-2-1621 or any other applicable provision of the Code, report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
8.9 SECURITY. The Corporation may designate certain of its assets as
--------
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification
14
<PAGE>
agreement or plan of indemnification adopted and entered into in accordance with
the provisions of this Article Eight, as the Board of Directors deems
appropriate.
8.10 AMENDMENT. Any amendment to this Article Eight that limits or
---------
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions occurring after such amendment and after delivery of notice of such
amendment to the Indemnified Person so affected (collectively, "Post Amendment
Events"). Any Indemnified Person shall, as to any Proceeding based on actions,
events, or omissions occurring prior to the date of receipt of such notice, be
entitled to the right of indemnification, advancement of expenses, and other
rights under this Article Eight to the same extent as if such provisions had
continued as part of the Bylaws of the Corporation without such amendment. This
Section 8.10 cannot be altered, amended, or repealed in a manner effective as to
any Indemnified Person (except as to Post Amendment Events) without the prior
written consent of such Indemnified Person.
8.11 AGREEMENTS. The provisions of this Article Eight shall be deemed
----------
to constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
8.12 CONTINUING BENEFITS. The rights of indemnification and
-------------------
advancement of expenses permitted or authorized by this Article Eight shall,
unless otherwise provided when such rights are granted or conferred, continue as
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of such
person.
8.13 SUCCESSORS. For purposes of this Article Eight, the term
----------
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation, or otherwise, and any such successor
shall be liable to the persons indemnified under this Article Eight on the same
terms and conditions and to the same extent as this Corporation.
8.14 SEVERABILITY. Each of the Sections of this Article Eight, and
------------
each of the clauses set forth herein, shall be deemed separate and independent,
and should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.15 ADDITIONAL INDEMNIFICATION. In addition to the specific
--------------------------
indemnification rights set forth herein, the Corporation shall indemnify each of
its directors and such of its officers as have been designated by the Board of
Directors to the full extent permitted by action of the Board of
15
<PAGE>
Directors without shareholder approval under the Code or other laws of the State
of Georgia as in effect from time to time.
ARTICLE NINE
MISCELLANEOUS
9.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall
-------------------------------
have the power to determine which accounts, books, and records of the
Corporation shall be available for shareholders to inspect or copy, except for
those books and records required by the Code to be made available upon
compliance by a shareholder with applicable requirements, and shall have the
power to fix reasonable rules and regulations (including confidentiality
restrictions and procedures) not in conflict with applicable law for the
inspection and copying of accounts, books, and records that by law or by
determination of the Board of Directors are made available. Unless required by
the Code or otherwise provided by the Board of Directors, a shareholder of the
Corporation holding less than two percent of the total shares of the Corporation
then outstanding shall have no right to inspect the books and records of the
Corporation.
9.2 FISCAL YEAR. The Board of Directors is authorized to fix the
-----------
fiscal year of the Corporation and to change the fiscal year from time to time
as it deems appropriate. Unless otherwise provided by resolution of the Board of
Directors, the fiscal year of the Corporation shall be the calendar year and
shall end on December 31 of each calendar year.
9.3 CORPORATE SEAL. The corporate seal will be in such form as the
--------------
Board of Directors may from time to time determine or authorize an officer to
determine. The Board of Directors may authorize the use of one or more facsimile
forms of the corporate seal. The corporate seal need not be used unless its use
is required by law, by these Bylaws, or by the Articles.
9.4 ANNUAL STATEMENTS. Not later than four months after the close
------------------
of each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement, in such form and with
such information as the Code may require.
9.5 Notice. (a) Whenever these Bylaws require notice to be given to
------
any shareholder or to any director, the notice may be given by mail, in person,
by courier delivery, by telephone, or by telecopier, telegraph, or similar
electronic means. Notice may be given to any director by electronic mail,
provided that the director has approved the use of such means of transmission as
an acceptable form of service of notice to such director. Electronic mail shall
be deemed an acceptable form of notice upon receipt by a director unless such
director indicates otherwise. Whenever notice is given to a shareholder or
director by mail, the notice shall be sent by
16
<PAGE>
depositing the notice in a post office or letter box in a postage-prepaid,
sealed envelope addressed to the shareholder or director at his or her address
as it appears on the books of the Corporation. Any such written notice given by
mail shall be effective: (i) if given to shareholders, at the time the same is
deposited in the United States mail; and (ii) in all other cases, at the
earliest of (x) when received or when delivered, properly addressed, to the
addressee's last known principal place of business or residence, (y) five days
after its deposit in the mail, as evidenced by the postmark, if mailed with
first-class postage prepaid and correctly addressed, or (z) on the date shown on
the return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee. Whenever
notice is given to a shareholder or director by any means other than mail, the
notice shall be deemed given when received.
(b) In calculating time periods for notice, when a period of time
measured in days, weeks, months, years, or other measurement of time is
prescribed for the exercise of any privilege or the discharge of any duty, the
first day shall not be counted but the last day shall be counted.
ARTICLE TEN
AMENDMENTS
Except as otherwise provided under the Code, the Board of Directors
shall have the power to alter, amend, or repeal these Bylaws or adopt new
Bylaws. Any Bylaws adopted by the Board of Directors may be altered, amended, or
repealed, and new Bylaws adopted, by the shareholders. The shareholders may
prescribe in adopting any Bylaw or Bylaws that the Bylaw or Bylaws so adopted
shall not be altered, amended, or repealed by the Board of Directors.
17
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE WARRANT
----------------------
This Stock Purchase Warrant ("Warrant") is issued this 29th day of August,
1997, by ENDEAVOR TECHNOLOGIES, INC., a Georgia corporation (the "Company"), to
SIRROM CAPITAL CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION
and any subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM CAPITAL
-------------------------
CORPORATION making a loan to the Company in an amount of Four Million and
no/100ths Dollars ($4,000,000) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related loan agreement of even date
herewith (the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 557,490 shares of the Company's Common
Stock, Series D (the "Common Stock"), which the Company represents to equal 5%
of the shares of capital stock outstanding on the date hereof, calculated on a
fully diluted basis and assuming exercise of this Warrant ("Base Amount"),
provided that in the event that any portion of the indebtedness evidenced by the
Note is outstanding on the following dates, the Base Amount shall be increased
to the corresponding number set forth below:
DATE BASE AMOUNT
----------------------- -----------------------------------
August 31, 1999 676,105 shares, which the Company
represents to equal 6% of the
shares of the Company's capital
stock outstanding on the date
hereof calculated on a fully
diluted basis after exercise of
this Warrant
August 31, 2000 797,270 shares, which the Company
represents to equal 7% of the
shares of the Company's capital
stock outstanding on the date
hereof calculated on a fully
diluted basis after exercise of
this Warrant
August 31, 2001 921,070 shares, which the Company
represents to equal 8% of the
shares of the Company 's capital
stock outstanding on the date
hereof calculated on a fully
diluted basis after exercise of
this Warrant
In the event the Company fails to either (i) raise and receive an
additional One Million Dollars ($1,000,000) of equity, or (ii) prepay One
Million Dollars ($1,000,000) in principal amount of the Note, on or prior to
August 31, 1998, then the Base Amount automatically shall be increased by 1%.
Such increase automatically shall be effective on September 1, 1998, and the
number of shares of Common Stock described above shall be increased to reflect
such Base
<PAGE>
Amount. In addition, if such Base Amount is increased, the number of
Shares and the applicable percentages set forth above with respect to the years
August 1, 1999, August 1, 2000 and August 1, 2001 shall be increased to 7%, 8%
and 9%, respectively, to reflect the increase in such Base Amount.
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time from the date hereof until August 1, 2002.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
--------------
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but only
--------
on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if fewer
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 1100 Lake Hearn Drive, #370, Atlanta, Georgia
30342 or such other address as the Company shall designate in a written notice
to the Holder hereof, together with this Warrant and payment to the Company of
the aggregate Exercise Price of the Shares so purchased. The Exercise Price
shall be payable, at the option of the Holder, (i) by certified or bank check,
(ii) by the surrender of the Note or portion thereof having an outstanding
principal balance equal to the aggregate Exercise Price or (iii) by the
surrender of a portion of this Warrant where the Shares subject to the portion
of this Warrant that is surrendered have a fair market value equal to the
aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a certificate
or certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to fewer than all of the Shares,
the Holder shall be entitled to receive a new Warrant covering the number of
Shares in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The Company
covenants and agrees that it will pay when due any and all state and federal
issue taxes which may be payable in respect of the issuance of this Warrant or
the issuance of any Shares upon exercise of this Warrant.
3A. COVENANTS WITH RESPECT TO INCENTIVE STOCK OPTIONS. The Company shall
-------------------------------------------------
not grant any options, warrants, rights (including conversion or pre-emptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock; provided, however, that the Company shall be
entitled to grant stock options or awards to purchase Common Stock of the
Company to full-time employees or independent sales representatives (including
independent contractors deemed important by the Company to the success of the
Company) of the Company for incentive based compensation purposes. The amount
of any such future options or awards which may be granted by the Company for
incentive based compensation purposes shall not in the aggregate exceed 7.5% of
the fully diluted Common
2
<PAGE>
Stock outstanding at any time. Any such options or awards of capital stock for
purposes of incentive based compensation to full-time employees or independent
sales representatives (including independent contractors deemed important by the
Company to the success of the Company) shall be granted or sold at a price not
less than the fair market value of such Common Stock at the time of such grant
or sale.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
------------------------
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be sold or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable
Blue Sky Laws, or (ii) an option of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company and its counsel, that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws (the Company hereby acknowledges that Farris,
Warfield & Kanaday, PLC is acceptable counsel). Transfer of the shares
issued upon the exercise of this Warrant shall be restricted in the same
manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER
THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH
SECURITIES ACTS AND SUCH APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
THIS WARRANT HAS BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973,"
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH
IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER SUCH ACT.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of this Warrant and any shares of Common
Stock issued upon exercise hereof with applicable federal and state
securities laws.
3
<PAGE>
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights,
if any, with respect thereto or to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the exercise of
this Warrant such number of authorized but unissued shares of Common Stock
as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell any shares
of the Company's capital stock at a price per share below the fair market
value of such shares, without the prior written consent of the Holder
hereof. In the absence of an established public market for the shares of
stock sold by the Company, fair market value shall be established by the
Company's board of directors in a commercially reasonable manner. The basis
for determination shall be provided in writing to the Holder hereof. In the
event that the Company sells shares of the Company's capital stock in
violation of this Section 4(c), the number of shares issuable upon exercise
of this Warrant shall be equal to the product obtained by multiplying the
number of shares issuable pursuant to this Warrant prior to such sale by
the quotient obtained by dividing (i) the fair market value of the shares
issued in violation of this Section 4(c) by (ii) the price at which such
shares were sold.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
-------------------
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
------------------------------------------------------------------
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive notice of
------------------
and be entitled to attend or may send a representative to attend all meetings of
the Company's Board of Directors in a non-voting observation capacity and shall
receive a copy of all correspondence and information delivered to the Company's
Board of Directors, from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full. (If at
4
<PAGE>
any time there are multiple Holders, they may by majority vote based upon the
respective number of shares of Common Stock purchasable in connection with
exercise of their warrants, designate a single representative to attend meetings
of the Board of Directors.)
8. ADJUSTMENT UPON CHANGES IN STOCK.
--------------------------------
(a) If all or any portion of this Warrant shall be exercised subsequent
to any stock split, stock dividend, recapitalization, combination of shares
of the Company, or other similar event, occurring after the date hereof,
then the Holder exercising this Warrant shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of shares
which such Holder would have received if this Warrant had been exercised
immediately prior to such stock split, stock dividend, recapitalization,
combination of shares, or other similar event. If any adjustment under this
Section 8(a), would create a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares subject to
this Warrant shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant to this
Section 8(a), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated.
(b) If all or any portion of this Warrant shall be exercised subsequent
to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event,
occurring after the date hereof, as a result of which shares of Common
Stock shall be changed into the same or a different number of shares of the
same or another class or classes of securities of the Company or another
entity, or the holders of Common Stock are entitled to receive cash or
other property, then the Holder exercising this Warrant shall receive, for
the aggregate price paid upon such exercise, the aggregate number and class
of shares, cash or other property which such Holder would have received if
this Warrant had been exercised immediately prior to such merger,
consolidation, exchange of shares, separation, reorganization or
liquidation, or other similar event. If any adjustment under this Section
8(b) would create a fractional share of Common Stock or a right to acquire
a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares subject to this Warrant shall be the
next higher number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this Section 8(b), the Company shall
forthwith notify the Holder or Holders of this Warrant of such adjustment,
setting forth in reasonable detail the event requiring the adjustment and
the method by which such adjustment was calculated.
9. PUT AGREEMENT.
-------------
(a) The Company hereby irrevocably grants and issues to Holder the
right and option to sell to Company (the "Put") this Warrant for a period
of 30 days after August
5
<PAGE>
1, 2002, at a purchase price (the "Purchase Price") equal to the Fair
Market Value (as hereinafter defined) of the shares of Common Stock
issuable to Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder, in cash or certified or
cashier's check, the Purchase Price in exchange for the delivery to the
Company of this Warrant within thirty (30) days of the receipt of written
notice, addressed as set forth in Section 3 hereto, from the Holder of its
intention to exercise the Put.
(c) The Fair Market Value of the shares of Common Stock of the Company
issuable pursuant to this Warrant shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a recognized
professional association of business appraisers. The two appraisers shall
determine the value of the shares of Common Stock which would be issued
upon the exercise of the Warrant, assuming that the sale would be between
a willing buyer and a willing seller, both of whom have full knowledge of
the financial and other affairs of the Company, and neither of whom is
under any compulsion to sell or to buy.
(ii) If the higher of the two appraisals is not more than 10%
more than the lower of the appraisals, the Fair Market Value shall be the
average of the two appraisals. If the higher of the two appraisals is 10%
or more than the lower of the two appraisals, then a third appraiser
shall be appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall appoint the
third appraiser. The third appraiser, regardless of whom appoints him or
her, shall have the same qualifications as the first two appraisers.
(iii) The Fair Market Value after the appointment of the third
appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid one-
half by the Company and one-half by the Holder.
10. REGISTRATION.
------------
(a) The Company and the holders of the Shares agree that if at any time
after the date hereof the Company shall propose to file a registration
statement with respect to any of its Common Stock on a form suitable for a
secondary offering, it will give notice in writing to such effect to the
registered holder(s) of the Shares at least thirty (30) days prior to such
filing, and, at the written request of any such registered holder, made
within ten (10) days after the receipt of such notice, will include therein
at the Company's cost and expense (including the fees and expenses of a
single law firm serving as counsel to such holder(s), but excluding
underwriting discounts,
6
<PAGE>
commissions and filing fees attributable to the Shares included therein)
such of the Shares as such holder(s) shall request; provided, however, that
if the offering being registered by the Company is underwritten and if the
representative of the underwriters certifies in writing that the inclusion
therein of the Shares would materially and adversely affect the sale of the
securities to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities
so included to be apportioned pro rata among all selling shareholders
according to the total amount of securities entitled to be included therein
owned by each selling shareholder, but in no event shall the total amount
of Shares included in the offering be less than the number of securities
included in the offering by any other single selling shareholder unless all
of the Shares are included in the offering).
(b) Whenever the Company undertakes to effect the registration of any
of the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement covering such Shares and use
its best efforts to cause such registration statement to be declared
effective by the Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when all Shares
covered by the registration statement have been sold or (B) two hundred
seventy (270) days from the effective date of the registration statement;
provided, that before filing a registration statement or prospectus or
any amendment or supplements thereto, the Company will furnish to each
Holder of Shares covered by such registration statement and the
underwriters, if any, copies of all such documents proposed to be filed
(excluding exhibits, unless any such person shall specifically request
exhibits), which documents will be subject to the review of such Holders
and underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any supplement
thereto (including any documents incorporated by reference therein) with
the Commission if (A) the underwriters, if any, shall reasonably objet to
such filing or (B) information in such registration statement or
prospectus concerning a particular selling Holder has changed and such
Holder or the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the period
referred to in Section 10(b)(i) and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement, and cause the prospectus to be supplemented by
any required prospectus supplement, and as so supplemented to be filed with
the Commission pursuant to Rule 424 under the Securities Act.
7
<PAGE>
(iii) Furnish to the selling Holder(s) such numbers of copies of
such registration statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of the Shares
owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and things
which may be reasonably necessary or advisable to enable such selling
Holder to consummate the disposition of the Shares owned by such Holder, in
such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to
transact business or to file a general consent to service of process in any
such states or jurisdictions.
(v) Promptly notify each selling Holder of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Shares, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and take
all such other actions as the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Shares (including,
without limitation, effecting a stock split or a combination of shares).
(viii) Make available for inspection by any selling Holder or any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
selling Holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the officers,
directors, employees and independent accountants of the Company to supply
all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement.
8
<PAGE>
(ix) Promptly notify the selling Holder(s) and the underwriters,
if any, of the following events and (if requested by any such person)
confirm such notification in writing: (A) the filing of the prospectus or
any prospectus supplement and the registration statement and any
amendment or post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment thereto, the
declaration of the effectiveness of such documents, (B) any requests by
the Commission for amendments or supplements to the registration
statement or the prospectus or for additional information, (C) the
issuance or threat of issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose and (D) the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the
initiation or threat of initiation of any proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such order,
if entered.
(xi) Cooperate with the selling Holder(s) and the underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing the Shares to be sold and not bearing any restrictive
legends, and enable such Shares to be in such lots and registered in such
names as the underwriters may request at least two (2) business days
prior to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not later than the
effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement and
any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) and the underwriters, if any, with respect to the
Shares and the registration statement as are customarily made by issuers
in primary underwritten offerings; (B) use its best efforts to obtain
"cold comfort" letters and updates thereof from the Company's independent
certified public accountants addressed to the selling Holders and the
underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters by
underwriters in connection with primary underwritten offerings; (C)
delivery such documents and certificates as may be reasonably requested
(1) by the holders of a majority of the Shares being sold, and (2) by the
underwriters, if any, to evidence compliance with clause (A) above and
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company; and (D) obtain opinions of
counsel to the Company and updates thereof (which counsel and which
opinions shall be reasonably satisfactory to the underwriters, if any),
covering the matters customarily covered in opinions requested in
underwritten offerings and such other
9
<PAGE>
matters as may be reasonably requested by the selling Holders and
underwriters or their counsel. Such counsel shall also state that no
facts have come to the attention of such counsel which cause them to
believe that such registration statement, the prospectus contained
therein, or any amendment or supplement thereto, as of their respective
effective or issue dates, contains any untrue statement of any material
fact or omits to state any material fact necessary to make the statements
therein not misleading (except that no statement need be made with
respect to any financial statements, notes thereto or other financial
data or other expertized material contained therein). If for any reason
the Company's counsel is unable to give such opinion, the company shall
so notify the Holders of the Shares and shall use its best efforts to
remove expeditiously all impediments to the rendering of such opinion.
(xiv) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commissions, and make generally available to
its security holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45) days
after the end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any fiscal quarter
in which the Shares are sold to underwriters in a firm or best efforts
underwritten offering, or (B) if not sold to underwriters in such an
offering, beginning with the first month of the first fiscal quarter of
the Company commencing after the effective date of the registration
statement, which statements shall cover such twelve-month periods.
(c) After the date hereof, the Company shall not grant to any holder of
securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holders pursuant to this Warrant
without the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with respect to
each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement. If
any registration statement including any of the Shares if filed, then the
Company shall indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter within the
meaning of the Securities Act) from any loss, claim, damage or liability
arising out of, based upon or in any way relating to any untrue statement
of a material fact contained in such registration statement or any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such registration
statement; and such holder shall indemnify the Company (and each of its
officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for
10
<PAGE>
the Company and each person, if any, who controls such underwriter within
the meaning of the Securities Act) and each other such holder against any
loss, claim, damage or liability arising from any such statement or
omission which was made in reliance upon information furnished in writing
to the Company by such holder of the Shares expressly for use in connection
with such registration statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed
to be issued and outstanding.
11. CERTAIN NOTICES. In case at any time the Company shall propose to:
---------------
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or make
any special dividend or other distribution to the holders of its Common
Stock;
(c) offer for subscription to the holders of any of its Common Stock any
additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of the
affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or securities
convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least twenty
(20) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place. Any notice
required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
11
<PAGE>
12. RIGHTS OF CO-SALE.
-----------------
(a) Co-Sale Right. None of the holders of Common Stock who are involved
-------------
in the management of the Company ("Management Shareholder") shall enter
into any transaction that would result in the sale by such Management
Shareholder of any Common Stock now or hereafter owned by it, unless prior
to such sale such Management Shareholder shall give notice to Holder of its
intention to effect such sale in order that Holder may exercise its rights
under this Section 12 as hereinafter described. Such notice shall set forth
(i) the number of shares to be sold by such Management Shareholder, (ii)
the principal terms of the sale, including the price at which the shares
are intended to be sold, and (iii) an offer by such Management Shareholder
to use such Management Shareholder's best efforts to cause to be included
with the shares to be sold by such Management Shareholder in the sale, on a
share-by-share basis and on the same terms and conditions, the Shares
issuable or issued to Holder pursuant this Warrant.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such offer
--------------------------
in writing within a period of ten (10) days from the date of receipt of the
notice, then such Management Shareholder shall thereafter be free for a
period of ninety (90) days to sell the number of shares specified in such
notice, at a price no greater than the price set forth in such notice and
on otherwise no more favorable terms to such Management Shareholder than as
set forth in such notice, without any further obligation to Holder in
connection with such sale. In the event that such Management Shareholder
fails to consummate such sale within such ninety-day period, the shares
specified in such notice shall continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer in
---------------------------
writing within ten (10) day period, such acceptance shall be irrevocable
unless such Management Shareholder shall be unable to cause to be included
in his sale the number of Shares of stock held by Holder and set forth in
the written acceptance. In that event, such Management Shareholder and
Holder shall participate in the sale equally, with such Management
Shareholder and Holder each selling half the total number of such shares to
be sold in the sale.
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and section
----------------------------
headings are for convenience only and shall not be construed as amplifying or
limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
------
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or three (3) business days after the date of mailing (or
the next business day after delivery to
12
<PAGE>
such courier service), as the case may be, shall be the date of such notice,
election or demand. For the purposes of this Warrant:
The Address of Holder Sirrom Capital Corporation
is: Suite 200
500 Church Street
Nashville, TN 37219
Attention: Kathy Harris
Telecopy No. 615/726-1208
with a copy to: Farris, Warfield & Kanaday, PLC
Suite 1900
424 Church Street
Nashville, TN 37219
Attention: A. Stuart Campbell, Esq.
Telecopy No. 615/726-3185
The Address of Company Endeavor Technologies, Inc.
is: 1100 Lake Hearn Drive, #370
Atlanta, Georgia 30342
Attention: Jeffrey T. Arnold
Telecopy No. 404/705-0749
with a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
Atlanta, Georgia 30309
Attention: Glenn W. Sturm, Esq.
Telecopy No. 404/817-6050
15. SEVERABILITY. If any provisions(s) of this Warrant or the
------------
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
----------------
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
----------------------------
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
13
<PAGE>
18. COUNTERPARTS. This Warrant may be executed in any number of
------------
counterparts and by different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
19. JURISDICTION AND VENUE. The Company hereby consents to the
----------------------
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
20. EQUITY PARTICIPATION. This Warrant is issued in connection with the
--------------------
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. (S) 47-24-101, et seq. and that
------
equity participation be permitted under said statutes and not constitute
interest on the Note. If under any circumstances whatsoever, fulfillment of any
obligation of this Warrant, the Loan Agreement, or any other agreement or
document executed in connection with the Loan Agreement, shall violate the
lawful limit of any applicable usury statute or any other applicable law with
regard to obligations of like character and amount, then the obligation to be
fulfilled shall be reduced to such lawful limit, such that in no event shall
there occur, under this Warrant, the Loan Agreement, or any other document or
instrument executed in connection with the Loan Agreement, any violation of such
lawful limit, but such obligation shall be fulfilled to the lawful limit. If any
sum is collected in excess of the lawful limit, such excess shall be applied to
reduce the principal amount of the Note.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
COMPANY: ENDEAVOR TECHNOLOGIES, INC.,
-------
a Georgia corporation
By: /s/ Jeffrey T. Arnold
-------------------------------------
Title:Chairman/Chief Executive Officer
----------------------------------
HOLDER: SIRROM CAPITAL CORPORATION, a Tennessee
------
corporation
By: /s/ Kathy Harris
-------------------------------------
Title:Vice President
----------------------------------
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Warrant to be executed as of the date first above written for the purpose of
agreeing to the terms and conditions of Section 12 hereof.
MANAGEMENT
----------
SHAREHOLDER: /s/ Jeffrey T. Arnold
----------- -----------------------
JEFFREY T. ARNOLD
15
<PAGE>
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of the 15th day
of December, 1997, is by and between Endeavor Technologies, Inc., a Georgia
corporation (the "Company"), Premiere Technologies, Inc., a Georgia corporation
("Premiere"), and each other Participating Shareholder designated by the Company
and signing in the space provided at the end of this Agreement.
WITNESSETH:
WHEREAS, Premiere is the holder of 1,100,000 issued and outstanding shares
of Series E Common Stock, without par value, subject to possible adjustment,
which shares were acquired pursuant to that certain Investor's Agreement dated
as of the date hereof between the Company and Premiere (the "Investor's
Agreement"); and
WHEREAS, pursuant to the Investor's Agreement, the Company has issued and
delivered to Premiere a Warrant for the purchase of up to 1,000,000 additional
shares of Series E Common Stock, subject to possible adjustment as provided in
the Warrant; and
WHEREAS, the Articles of Incorporation of the Company, as amended, provide
that each share of Series E Common Stock will become and be identical to one
share of Series A Common Stock, whereupon all such shares of the Company will be
known as "Common Stock" without any series designation, in the event of an
"Initial Public Offering" as defined therein;
WHEREAS, Premiere and the Company desire to evidence their agreement
regarding certain matters related to such shares of Common Stock;
NOW, THEREFORE, in consideration of the mutual agreements and promises
herein contained and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Premiere and the Company, intending to be
legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Estimated Offering Price" means an estimate of the gross proceeds, before
underwriting discounts and commissions, reasonably obtainable from the sale of
Registrable Stock in an Underwritten Public Offering, as determined by either
the Board of Directors of
<PAGE>
the Company or an underwriter of national reputation reasonably acceptable to
the Company, based upon the highest closing price or bid price, as the case may
be, during the 30-day period preceding the applicable date of determination in
the principal trading market for the Common Stock, or, if there shall be no
active trading market for the Common Stock, based on all other relevant
considerations.
"Participating Shareholder" means each Person who holds Participating Stock
as shown at the end of this Agreement, each direct or successive transferee who
acquires all (but not less than all) of the shares of Participating Stock
previously held by such Person and agrees to be bound by the terms of this
Agreement pursuant to a form of undertaking acceptable to the Company, and any
other holder of Participating Stock who the Company, in its discretion, agrees
to designate as a "Participating Shareholder" for purposes of this Agreement. A
"majority in interest" of all or specific Participating Shareholders shall mean
Participating Shareholders holding shares of Participating Stock (considered as
a single class for such purpose) constituting a majority of the shares of
Participating Stock held by all such Participating Shareholders.
"Participating Stock" means the shares of Series B, Series C, Series D, and
Series E Common Stock, no par value, of the Company issued and outstanding from
time to time, and any other class or series of stock hereafter created or newly
designated by the Company, or, following the occurrence of a Primary Offering,
the issued and outstanding shares of Common Stock, without series designation,
which such shares of Series B, Series C, Series D, and Series E Common Stock
will be and become, and into which or for which the shares of such other class
or series may be converted or exchanged.
"Person" means any natural person or any corporation, partnership, trust or
other legal entity.
"Primary Offering" means an Initial Public Offering as defined in the
Company's Articles of Incorporation, as amended, upon the execution date of this
Agreement, to wit "the offer and sale by the Corporation of its equity
securities in a transaction underwritten by an investment banking firm following
the completion of which (i) such equity securities are listed for trading on any
national securities exchange or (ii) there are at least two market makers who
are making a market in such equity securities through the Nasdaq National Market
System.
"Registrable Stock" means shares of Common Stock. Notwithstanding anything
to the contrary in this Agreement, the only securities that the Company shall be
required to register pursuant to this Agreement shall be shares of Common Stock.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing the filing of a registration statement in
compliance with the Securities Act, and the declaration or order by the
Commission of the effectiveness of such registration statement.
"Secondary Offering" means an Underwritten Public Offering by the Company,
including an offering effected pursuant to Section 2.1 hereof, but not including
a Primary Offering.
2
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Series E Common Stock" means the Series E Common Stock, no par value, of
the Company.
"Underwritten Public Offering" means a public offering of Common Stock for
cash which is offered and sold in a registered transaction on a firm commitment
underwritten basis through one or more underwriters, all pursuant to an
underwriting agreement between the Company and such underwriters.
ARTICLE II
REGISTRATION RIGHTS
2.1 Demand Registration Rights. At any one (1) time at least six (6)
months after the completion of a Primary Offering, upon notice from a majority
in interest of all Participating Shareholders requesting registration of
Participating Stock collectively having an Estimated Offering Price of at least
ten million dollars (U.S. $10,000,000) (the "Request Notice"), the Company
agrees to:
(i) promptly give written notice of the proposed registration,
qualification or compliance (the "Notice of Proposed Registration")
to all other Participating Shareholders so they have an opportunity
to consider joining in such notice, which they may do at their
election within three (3) weeks after receipt of the Notice of
Proposed Registration;
(ii) use its reasonable efforts to prepare and file a registration
statement covering the Participating Stock so requested to be
registered within ninety (90) days after such Request Notice is first
received; and
(iii) use its reasonable efforts to effect, as soon as practicable, all
such registrations, qualifications and compliances (including,
without limitation, the execution of an undertaking to file post-
effective amendments, appropriate qualifications under the applicable
blue sky or other state securities laws and appropriate compliance
with exemptive regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution
of all or such portion of such requesting Participating Shareholders'
shares of Participating Stock as is specified in the Request Notice,
together with such other Registrable Stock as the Company may elect
to include in such transaction.
3
<PAGE>
2.1.1 Underwriting. The right of each Participating Shareholder to
registration pursuant to Section 2.1 shall be conditioned upon such
Participating Shareholder's participation in the Underwritten Public Offering
and the inclusion of such Participating Shareholder's Participating Stock in the
Underwritten Public Offering to the extent provided herein. The requesting
Participating Shareholders shall include in the Request Notice the name of the
managing underwriter, if any, whom a majority in interest of such requesting
Participating Shareholders would propose to employ in connection with the public
offering proposed to be made pursuant to the registration requested; provided
that if the Board of Directors of the Company reasonably objects to the managing
underwriter proposed by the requesting Participating Shareholders, the
requesting Participating Shareholders shall propose another managing underwriter
that is reasonably acceptable to the Board of Directors of the Company. The
Company shall include in the Notice or Proposed Registration the name of such
underwriter to be employed, if then determined.
2.1.2 Limitation. Notwithstanding any other provision of this Agreement,
if in connection with an Underwritten Public Offering initiated by the
Participating Shareholders as contemplated by this Section 2.1, the managing
underwriter advises the Company that marketing factors warrant a limitation of
the number of shares to be underwritten, then the number of shares of
Registrable Stock that may be included in the registration and underwriting
shall be allocated among all holders of Registrable Stock (including the
Company) in proportion, as nearly as practical, to the respective number of
Registrable Stock that were proposed to be sold in the registration and
underwriting. No Registrable Stock excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
2.1.3 Postponement of Registration. The Company shall be entitled to
postpone for a reasonable period of time (but, except as otherwise provided in
this Agreement, not exceeding one hundred eighty (180) days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 2.1 if the Company determines, in good faith and in the
exercise of its reasonable judgment, that such action would interfere with any
material financing, acquisition, corporate reorganization or other transaction
involving the Company then pending or contemplated.
2.1.4 Time Factors. The Company shall additionally be entitled to
postpone the filing of any registration statement otherwise required to be
prepared and filed by it pursuant to this Section 2.1 so that no registration
under this Section 2.1 occurs within six (6) months after the effective date of
any other registration statement filed by the Company or within three (3) months
after the completion of the sale of all securities included in any other
registration statement filed by the Company.
2.1.5 Withdrawal. If a limitation under Section 2.1.2 or a postponement
under Section 2.1.3 or Section 2.1.4 is unacceptable, a majority in interest of
the Participating Shareholders who requested the registration may withdraw such
request for registration by giving written notice to the Company within thirty
(30) days after receipt of notice of such limitation or postponement. In the
event of such withdrawal, such request shall not be counted for purposes of
Section 2.1 hereof.
4
<PAGE>
2.1.6 Non-Effected Registrations. If a registration statement requested
pursuant to this Section 2.1 does not become effective within twelve (12) months
after the initial filing thereof as a result of any reason other than a material
adverse development in the business or condition (financial or other) of the
Company or other acts or matters within the control of the Company, or if such
registration statement is abandoned or withdrawn at the request of a majority in
interest of the Participating Shareholders who requested such registration,
then, unless the Participating Shareholders who requested such registration,
promptly upon receipt of a request therefor, supported by an invoice setting
forth the expenses in reasonable detail, reimburse the Company for the
registration expenses in respect of such registration statement, the Company
shall be deemed to have satisfied its obligation pursuant to this Section 2.1.
2.1.7 Sales by the Company or Other Persons. The Company shall be entitled
to include in any registration statement referred to in this Section 2.1 shares
of Common Stock to be sold by the Company for its own account or other then
existing shareholders for their own account.
2.1.8 Other Conditions. Notwithstanding anything in this Agreement to the
contrary:
(i) the Company shall not be required to register Participating Stock
pursuant to this Section 2.1 unless the Estimated Offering Price for
all shares of Registrable Stock, including, without limitation, any
to be sold for the account of the Company and all other then
existing shareholders of the Company, changes so as to be less than
ten million dollars (U.S. $10,000,000) at any time prior to
completion of the registration and underwriting;
(ii) the Company shall not be required to file a registration statement
requested pursuant to this Section 2.1 on any date which shall be
after the last day of a fiscal year of the Company and prior to the
date on which the Company's audited financial statements for such
fiscal year are first available; and
(iii) the Company shall not be obligated to take any action to effect any
registration, qualification or compliance pursuant to Section 2.1 in
any particular jurisdiction in which the Company would be required
to execute a general consent to service of process or to register as
a dealer or to cause any officer or employee of the Company to
register as a salesman in effecting such registration, qualification
or compliance.
2.2 Piggyback Registration. If at any time or from time to time after
the date hereof, the Company determines to register any of its Common Stock in
any Underwritten Public Offering for its own account (excluding a Primary
Offering, excluding a Secondary Offering initiated at the request of the
Participating Shareholders pursuant to Section 2.1, and excluding an offering
that is registered on Commission Forms S-4 and S-8 or another form not available
for registering the Participating Stock of the Participating Shareholders), then
the Company will:
5
<PAGE>
(i) promptly give to each Participating Shareholder written notice thereof
("Notice of Proposed Registration"); and
(ii) use its reasonable efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), and in
any Underwritten Public Offering involved therein, all the
Participating Stock specified in any written request or requests by
Participating Shareholders ("Notice of Participating") received by the
Company within three (3) weeks after such Notice of Proposed
Registration is given.
2.2.1 Underwriting. The right of each Participating Shareholder to
registration pursuant to Section 2.2 shall be conditioned upon such
Participating Shareholder's participation in the Underwritten Public
Offering and the inclusion of such Participating Shareholder's
Participating Stock in the Underwritten Public Offering to the extent
provided herein.
2.2.2 Limitation. Notwithstanding any other provision of this
Agreement to the contrary, if, in connection with an Underwritten Public
Offering initiated by the Company as contemplated by this Section 2.2, the
managing underwriter advises the Company that marketing factors warrant a
limitation of the number of shares to be underwritten, then the number of
shares of Registrable Stock that may be included in the registration and
underwriting shall be allocated first to the Company, and only then to the
holders of Registrable Stock other than the Company, such allocation to
such others to be in proportion, as nearly as practical, to the respective
number of Registrable Stock that such holders have requested to sell in the
registration and underwriting. No Registrable Stock excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
2.2.3 Termination of Registration by Company. Notwithstanding any
other provision of this Agreement, at any time before or after the filing
or a registration statement that is subject to Section 2.2 hereof, the
Company may, in its sole discretion, abandon or terminate such registration
without the consent of any Participating Shareholder.
2.2.4 Form of Registration. The Company shall not be required to
include Registrable Stock in the securities covered by a registration
statement on any form which limits the amount of securities which may be
registered by the issuer and/or selling security holders, if, and to the
extent that such inclusion would make the use of such form unavailable, so
long as no other shares are to be included in such securities for the
account of any Person other than the Company.
2.2.5 Termination of Piggyback Rights. Notwithstanding anything in
this Agreement to the contrary, this Section 2.2 shall not apply to any
registration initiated more than three (3) years after the Company has
completed a Primary Offering, or after such time as the Company has given
the Participating Shareholders a Notice of Proposed Registration in
connection with four (4) separate registrations in which the
6
<PAGE>
Participating Shareholders were entitled to include Participating Stock,
whichever is later.
2.3 Standstill. In connection with a Primary Offering, and in connection
with each Secondary Offering pursuant to a registration statement for which a
Participating Shareholder is or may be eligible to include Participating Stock
pursuant to this Agreement, each Participating Shareholder shall refrain from
selling any Registrable Stock not included in such registration during the
period of distribution of securities by such underwriters pursuant to such
registration and the period in which the underwriting syndicate participates in
the after market; provided, however, that unless the managing underwriter shall
determine that so to do would be detrimental to such offering, each
Participating Shareholder shall, in any event, be entitled to sell its
Registrable Stock in connection with such registration commencing ninety (90)
days after the effective date of such registration statement.
2.4 Registration Expenses. All expenses of any registrations permitted
pursuant to this Agreement and of all other offerings by the Company (including,
but not limited to, the expenses of any interim audit required by any
underwriters, any qualifications under the blue sky or other state securities
laws, compliance with governmental requirements of preparing and filing any
post-effective amendments required for the lawful distribution of any securities
to the public in connection with registration, of supplying prospectuses,
offering circulars or other documents, but excluding underwriting discounts and
selling commissions applicable to the sale of the Registrable Stock and fees and
expenses of counsel employed by the Participating Shareholders) will be paid by
the Company to the fullest extent permitted by applicable government
authorities.
2.5 Registration Procedures. In the case of such registration,
qualification or compliance effected by the Company pursuant to Article II in
which Participating Stock is included, the Company will, at its expense:
(a) prepare and file with the Commission a registration statement
with respect to the Registrable Stock, and use its reasonable efforts to
cause such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale thereof, not to
exceed nine (9) months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
Registrable Stock, not to exceed nine (9) months; and
(c) use its reasonable efforts to register or qualify the Registrable
Stock covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such Participating Shareholders may
reasonably request in writing within twenty (20) days following the
original filing of such registration statement; provided, however, that in
the case of an Underwritten Public Offering, the managing
7
<PAGE>
underwriter shall advise the Company with respect to blue sky qualification
and related matters.
2.6 Related Registration Matters. The Company will use its reasonable
efforts to enter into an underwriting agreement in connection with any
registration subject to the provisions of Article II hereof in which any
Participating Stock is included, which agreement shall contain such terms,
provisions and agreements as are customary and appropriate for such
registration. All Participating Shareholders proposing to distribute their
securities through such Underwritten Public Offering (together with the Company
and any other then existing shareholders distributing their securities through
such underwriting) shall likewise enter into such underwriting agreement. In
connection with any Underwritten Public Offering in which any Participating
Stock is included, to the extent not provided in the underwriting agreement
related to such offering, the Company shall use its reasonable efforts to:
(a) List the Common Stock included in such offering on any national
securities exchange on which the Common Stock is approved for listing;
(b) Engage a bank or other company to act as transfer agent and
registrar for the Common Stock, unless the Company has already engaged a
transfer agent and registrar;
(c) Cause customary opinions of counsel, comfort letters of
accountants and other appropriate documents to be delivered by
representatives of the company; and
(d) As soon as practicable after the effective date of the
registration statement, and, in any event, within 16 months thereafter,
make "generally available to its securities holders" (within the meaning of
Rule 158 under the Securities Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Securities Act and covering a
period of at least 12 consecutive months beginning after the effective date
of the registration statement.
2.7 Indemnification and Contribution.
(a) In the case of each registration effected by the Company pursuant
to this Agreement in which any Participating Stock is included, the Company
(sometimes referred to as the "Indemnifying Person") agrees to indemnify
and hold harmless such Participating Shareholder, its officers and
partners, each underwriter of the shares of Common Stock so registered and
each Person who controls any such underwriter (sometimes referred to
individually as an "Indemnified Person") within the meaning of Section 15
of the Securities Act, against any and all losses, claims, damages or
liabilities to which they or any of them may become subject under the
Securities Act or any other statute or common law, including any amount
paid in settlement of any litigation, commenced or threatened, if such
settlement is effected with the written consent of the Company, and to
reimburse them for any reasonable legal or other reasonable expenses
incurred by them in connection with the investigation of any claims and
defense of any actions (subject to subsection (c) of this Section 2.7),
insofar as any
8
<PAGE>
such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto,
or in any Blue Sky application, or 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; provided, however, that,
notwithstanding the foregoing, the Company may agree to indemnify each such
underwriter and Person who so controls such underwriter to such other
extent as the Company and such underwriter shall agree; and provided
further, however, that the indemnification agreement contained in this
subsection (a) shall not (i) apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company in writing by a
Participating Shareholder or such underwriter claiming rights of
indemnification pursuant to this Section 2.7 for use in connection with the
preparation of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any such amendment
thereof or supplement thereto; (ii) inure to the benefit of any underwriter
(or to the benefit of any Person controlling such underwriter) from whom
the Person asserting any such losses, claims, damages, expenses or
liabilities purchased the securities which are the subject thereof, if such
underwriter failed to send or give a copy of the final prospectus, as then
amended or supplemented, to such Person and if the untrue statement or
omission alleged had been corrected in such final prospectus; or (iii)
inure to the benefit of any Person to the extent such Person's claim for
indemnification hereunder arises out of or is based on any violation of
such Person of applicable law.
(b) In the case of each registration effected by the Company pursuant
to this Agreement in which any Participating Stock is included, the
Participating Shareholders holding such Participating Stock shall be
obligated, and shall cause each underwriter of the shares of Common Stock
to be registered on behalf of such Person (sometimes referred to
individually as an "Indemnifying Person") to be obligated, in the same
manner and to the same extent as set forth in subsection (a) of this
Section 2.7, to indemnify and hold harmless the Company and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act, its directors and officers (sometimes referred to
individually as an "Indemnified Person"), with respect to any untrue
statement or alleged untrue statement in, or omission or alleged omission
from, such registration statement or any post-effective amendment thereof
or any preliminary prospectus or final prospectus (as amended or
supplemented, if amended or supplemented as aforesaid) contained in such
registration statement, if such statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Company
by such Indemnifying Person for use in connection with the preparation of
such registration statement or any preliminary prospectus or final
prospectus contained in such registration statement or any such amendment
thereof or supplement thereto.
9
<PAGE>
(c) Each Indemnified Person pursuant to this Section 2.7 will,
promptly after its receipt of written notice of the commencement of any
action against such Indemnified Person in respect of which indemnity may be
sought from an Indemnifying Person under this Section 2.7, notify the
Indemnifying Person in writing of the commencement thereof and undertake to
provide such reasonable cooperation as may be sought by the Indemnifying
Person for the defense or other resolution of such action. The omission of
any Indemnified Person so to notify an Indemnifying Person of the
commencement of any such action shall relieve the Indemnifying Person from
any liability in respect of such action which it may have to such
Indemnified Person on account of the indemnity agreement contained in this
Section 2.7, but shall not relieve the Indemnifying Person from any other
liability which it may have to such Indemnified Person. If any such action
shall be brought against any Indemnified Person and it shall notify an
Indemnifying Person of the commencement thereof, the Indemnifying Person
shall be entitled to participate therein and, to the extent it may desire,
jointly with any other Indemnifying Persons similarly notified, to assume
the defense thereof with counsel reasonably satisfactory to such
Indemnified Person, and after notice from the Indemnifying Person to such
Indemnified Person of its election so to assume the defense thereof, the
Indemnifying Person will not be liable to such Indemnified Person under
this Section 2.7 for any legal or other expenses subsequently incurred by
such Indemnified Person in connection with the defense thereof other than
reasonable costs of investigation unless (i) the Indemnified Person shall
have employed counsel in an action in which the indemnified party and
indemnifying party are both defendants and there is a conflict of interest
between such parties that would prevent counsel from adequately
representing both parties, (ii) the Indemnifying Person shall not have
employed counsel satisfactory within the exercise of reasonable judgment of
the Indemnified Person to represent the Indemnified Person within
reasonable time after the notice of the commencement of the action or (iii)
the Indemnifying Person has authorized the employment of counsel for the
Indemnified Person at the expense of the Indemnifying Person. The
undertaking contained in this Section 2.7 shall be in addition to any
liabilities which the Indemnifying Person may have pursuant to law.
2.8 Information Provided by Participating Shareholders. Each Participating
Shareholder requesting Participating Stock to be included in any registration
shall furnish to the Company such information regarding such Participating
Shareholder and the distribution proposed by such Participating Shareholder as
the Company may request and as shall be reasonably required in connection with
any registration, qualification or compliance referred to in Article II.
ARTICLE III
MISCELLANEOUS
3.1 Remedies. Each party hereto acknowledges that a remedy at law for any
breach or attempted breach of this Agreement will be inadequate, agrees that
each other party hereto shall be entitled to specific performance and injunctive
and other equitable relief in case of any
10
<PAGE>
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
3.2 Amendment. This Agreement may be amended from time to time by an
instrument in writing signed by the Company and a majority in interest of the
Participating Shareholders.
3.3 Notices. Any notice, request, reply instruction or other communication
(herein severally and collectively called "notice") in this Agreement provided
or permitted to be given to the Company or to any Participating Shareholder must
be given in writing and may be given or served by depositing the same in the
United States mail, in certified or registered form postage fully prepaid,
addressed to the party or parties to be notified, with return postage fully
requested, or by delivering the same in person to such party or parties. Notice
deposited in the United States mail, mailed in the manner hereinabove described,
shall be effective upon deposit. Notice given in any other manner shall be
effective only if and when received by the party to be notified.
3.4 Governing Law. This Agreement shall be subject to and governed by the
laws of the State of Georgia.
3.5 Jurisdiction. Actions to enforce or interpret the provisions of this
Agreement shall be filed in a state court of the State of Georgia or a federal
district court of the Northern District of Georgia. Each party irrevocably
waives any objection it may have to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding so brought
has been brought in an inconvenient forum and further waives the right to object
that such court does not have jurisdiction over such party. No party shall bring
a suit, action or proceeding in respect of this Agreement in any other
jurisdiction than as aforesaid.
3.6 Successors and Assigns. The rights and obligations of the Company
hereunder shall be binding upon and inure to the benefit of the Company, its
successors and assigns. The rights and obligations of the Participating
Shareholders hereunder shall be binding upon and inure to the benefit of only
such further Persons as may qualify as Participating Shareholders hereunder.
3.7 Invalid Provisions. Should any portion of this Agreement be adjudged
or held to be invalid, unenforceable or void, such holding shall not have the
effect of invalidating or voiding the remainder of this Agreement and the
parties hereby agree that the portion so held invalid, unenforceable or void
shall, if possible, be deemed amended or reduced in scope, or to otherwise be
stricken from this Agreement to the extent required for the purposes of validity
and enforcement thereof.
3.8 Section Headings. The section and paragraph headings contained herein
are for reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
11
<PAGE>
3.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute only one
instrument.
3.10 Adjustments. In the event the Company declares a stock split, stock
dividend or other distribution of capital stock in respect of, or issue capital
stock in replacement of or exchange for, shares of Common Stock, such shares
shall be subject to this Agreement and the provisions of this Agreement
providing for calculations based on the number of shares of Common Stock shall
include the shares issued in respect of the Common Stock.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf and its corporate seal to be hereunto affixed by its duly authorized
officers and the stockholders have caused this Agreement to be executed by the
appropriate authorized person, as of the day and year first above written.
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
-----------------------
Chief Operating Officer
12
<PAGE>
PARTICIPATING SHAREHOLDERS:
PREMIERE TECHNOLOGIES, INC.
By: /s/ Patrick G. Jones
-----------------------------------
Patrick G. Jones, Senior Vice President
---------------------------------------
By: ___________________________________
_______________________________________
By: ___________________________________
_______________________________________
By: ___________________________________
_______________________________________
By: ___________________________________
_______________________________________
By: ___________________________________
_______________________________________
By: ___________________________________
_______________________________________
By: ___________________________________
13
<PAGE>
EXHIBIT 10.4
SUBLEASE AGREEMENT
------------------
THIS SUBLEASE AGREEMENT (this "Sublease') is made and entered into as of
the 15 day of December, 1997, by and between PREMIERE COMMUNICATIONS, INC., a
Florida corporation, (the "Sublandlord") and ENDEAVOR TECHNOLOGIES, INC., a
Georgia corporation (the "Subtenant"), to be effective as of the "Commencement
Date", as hereinafter defined.
WITNESSETH:
-----------
WHEREAS, Sublandlord, by Agreement of Lease dated March 3, 1997, (the
"Master Lease"), leased from Corporate Property Investors (the "Landlord') the
entire 4th floor comprising 20,838 rentable square feet (the "Premises"), along
with additional space on other floors, of that certain building commonly known
as the Lenox Building, located at 3399 Peachtree Road, N.E., Atlanta, Georgia
(the "Building"), such Premises being more particularly described on Exhibit B
to the Master Lease (a copy of which Master Lease is attached hereto as Exhibit
-------
"A" and made a part hereof); and
- ---
WHEREAS, Subtenant desires to sublease the Premises on the terms and
conditions set forth below;
NOW THEREFORE, for and in consideration of the sum of TEN and NO/100
Dollars, the mutual promises set forth below, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1. Premises; Term
--------------
Sublandlord hereby subleases to Subtenant, and Subtenant hereby subleases
from Sublandlord, the Premises for a term (the 'Sublease Term") commencing on
the date (the "Commencement Date') which is the earlier of (i) the date of
occupancy agreed to by Sublandlord and Subtenant, or (ii) February 1, 1998, and
ending on the date which is two (2) years from such date (the "Expiration Date")
unless sooner terminated according to the terms hereof.
2. Subordination
-------------
This Sublease is hereby expressly made subject and subordinate to the
Master Lease and shall be upon the same terms, covenants and conditions provided
in the Master Lease as applicable to the Premises (except such as by their
nature are inapplicable to or inconsistent with this Sublease). Subtenant
acknowledges that its possession and use of the Premises shall at all times. be
subject to the rights of Landlord set forth in the Master Lease. Sublandlord
shall have no liability to Subtenant for any acts of the Landlord pursuant to
the Master Lease. The provisions of the Master Lease pertaining to the Premises
are deemed included herein and made a part hereof ("Sublandlord" being
substituted for "Landlord" and "Subtenant" being substituted for "Tenant"),
except that Subtenant's obligations for each subject addressed in this Sublease,
including rental obligations, are limited to the terms of this Sublease.
3. Obligations-Under Master Lease
------------------------------
For the purposes of this Sublease only, Subtenant hereby assumes all of the
responsibilities and obligations to be performed on the part of Sublandlord as
tenant under the Master Lease with respect to the Premises for the entire
Sublease Term (other than the obligations to pay rent and additional rent and
other
-1-
<PAGE>
amounts which are governed by this Sublease). Such undertaking shall in no way
relieve Sublandlord of its obligations under the Master Lease. Both Sublandlord
and Subtenant covenant and agree not to do, permit or allow any act which would
violate or constitute a breach of or a default under the Master Lease. Upon any
breach by Subtenant of any of the terms, covenants, or agreements to be
performed or observed under this Sublease by Subtenant, Sublandlord may exercise
any of the rights given to the Landlord under the Master Lease, subject to the
limitations thereof and hereof, and the exercise thereof shall not be in
derogation of, but shall be in addition to any other remedies available to
Sublandlord, hereunder or under law or equity.
4. Termination
-----------
A. Termination of Master Lease
---------------------------
In the event the Master Lease is terminated pursuant to its terms prior to
the expiration of the term of this Sublease, this Sublease shall automatically
cease and terminate as of the date upon which the Master Lease is terminated.
Upon any such termination of the Master Lease, all rent due hereunder shall be
prorated from the first day of the month of termination, and neither p shall
have any further obligation or liability to the other arising out of this
Sublease ex for the payment by Subtenant of such amounts of rent as so prorated
and any other amounts accrued as of the date of termination, and except for
rights or obligations that had accrued prior to the effective date of the
termination of this Sublease. To the extent that Sublandlord has over (30)
days' notice of such termination, Sublandlord agrees to give Subtenant
reasonable notice at least thirty (30) days prior to any such termination date.
B. Other Termination
-----------------
In the event of termination of that certain Equipment Lease between
Sublandlord and Subtenant dated of even date herewith (the "Equipment Lease") or
that certain Co-Marketing and Integration Agreement between Sublandlord and
Subtenant dated of even date herewith (the "Co-Marketing Agreement"), either
party hereto, provided it is not responsible for a default causing such
termination, shall have the right to terminate this Sublease upon written notice
to the other party, which termination shall be effective on the date on which
such other agreement terminates, unless the parties may agree to another
effective date. In the event of such termination on, Subtenant shall surrender
the Premises to Sublandlord in the manner described in the Master Lease, and
neither party shall have any further rights or obligations under this Sublease,
except for rights or obligations that had accrued prior to the effective date of
the term on of this Sublease.
5. Rent
----
A. Base Rent for Premises
----------------------
Subtenant shall pay Sublandlord as the annual base rent (the "Base Rent")
for the Premises during the Sublease Term the sum of Four Hundred Thirty, Seven
Thousand Five Hundred Ninety Eight Dollars ($437,598.00) payable in advance in
equal monthly installments of Thirty Six Thousand Four Hundred Sixty Six and
501100 ($36,466.50) beginning on the Commencement Date and continuing on the day
ten (10) days in advance of each payment to be made under the Master Lease
(recognizing that payments due under the Master Lease a re due in advance on the
first day of the month) during the Sublease Term ("Due Date"), and continuing
each and every month thereafter, without demand, deduction, set-off or abatement
whatsoever, said payments of Base Rent to be made directly to Sublandlord at the
address of Sublandlord set forth herein. Appropriate prorations shall be made
in the event the Commencement Date is not a Due Date or in the event that the
Sublease terminates prior to a Due Date.
-2-
<PAGE>
B. Additional Rent for Premises
----------------------------
Subtenant shall also pay Sublandlord, as additional rent, as and when the
same shall become due and payable under the provisions of the Master Lease all
costs and expenses including, without limitation, all taxes and assessments, all
insurance costs and repair costs pertaining specifically to the Premises or
prorated in the event the same applies to the entire leasehold interest of
Sublandlord under the Master Lease due under the Master Lease for each year
during the Sublease Term (collectively, the "Additional Rent"). Sublandlord
agrees to provide Subtenant with an invoice and the corresponding bill from the
Landlord for the Additional Rent.
C. Late Charge
-----------
Any rental amounts not paid when due shall bear interest at the rate of one
and one-half percent (1.5%) per month until paid.
6. Condition of Premises
---------------------
Subtenant represents that it has made a thorough examination and inspection
of the Premises and is familiar with the condition of such property, and
Subtenant agrees to accept the Premises in their "as is" condition, as of the
date of this Sublease. Except as provided in the Co-Marketing Agreement,
Subtenant agrees that it enters into this Sublease without any representations
or warranties by Sublandlord, its agents, representatives, servants or employees
or any other person, as to the condition or use by Subtenant of the Premises.
7. Exclusion from Master Lease
---------------------------
The following Articles or Sections of the Master Lease are expressly
excluded from this Sublease and shall not apply to Subtenant: any renewal
options, or options to lease additional space in the Building, or rights of
first refusal with regard to space in the Building. Subtenant acknowledges and
agrees the such rights are personal to Sublandlord and that Subtenant shall have
no rights to exercise such options and renewals, if any, contained in the Master
Lease.
8. Services, Utilities, Maintenance and airs
-----------------------------------------
Subtenant acknowledges and agrees that Sublandlord shall provide, only via
the Landlord, maintenance or repair of the Premises, utilities or r services
described as being provided by the Landlord in the Master Lease. Subtenant
agrees that, in cooperation with the Sublandlord, it shall look solely to the
Landlord and not to Sublandlord for the rendition of all such services and the
performance of all obligations required to be furnished and performed in the
Premises. Subtenant shall receive directly from the Landlord all services and
utilities and the performance of all obligations which the Landlord is required
to provide in and for the benefit of the Premises, and Sublandlord shall have no
liability whatsoever in event that Landlord fails to furnish or perform any such
services or obligations during the Sublease Term. However, Sublandlord agrees
to cooperate with Subtenant in good faith, in dealings with and notices to
Landlord regarding services, utilities, maintenance and repair of the Premises.
9. Additional Services
-------------------
Subtenant covenants and agrees to pay any fees and expenses assessed by
Landlord pursuant to the Master Lease resulting from Subtenant's use and
occupancy of the Premises. In addition, if other services
-3-
<PAGE>
not provided by Landlord (the "Other Services") are obtained for the joint
benefit of Subtenant and Sublandlord, as mutually agreed to by the parties, the
parties shall share the cost of such services on a fair and equitable basis. If
Other Services are desired, solely for the benefit of Subtenant, Subtenant shall
bear all of such costs, and Sublandlord agrees to cooperate with Subtenant, to
the extent reasonably requested, in obtaining such Other Services, provided same
are at no cost to Sublandlord.
10. Use of Premises
---------------
Subtenant shall use the Premises only for the "Permitted Use' as defined in
the Master Lease, and shall not use the Premises for any use or purpose which
would violate the Master Lease. Subtenant shall not change its use of the
Premises without the prior written consent of the Sublandlord, in its reasonable
discretion and Landlord, in the manner provided in the Master Lease. During the
Sublease Term, Subtenant agrees to assume any responsibility previously borne by
Sublandlord in its capacity as tenant under the Master Lease regarding the
Occupational Safety Health Act, the Americans with Disabilities Act, and the
legal use or adaptability of the Premises and the compliance thereof to all
applicable laws and regulations enforced during the Sublease Term.
11. Alterations
-----------
Subtenant shall make no alterations, additions, installations or
improvements of any kind ("Alterations") to the Premises without the prior
written consent of Landlord (in accordance with the Master Lease) and
Sublandlord, in its reasonable discretion. Except as provided in the Co-
Marketing Agreement, any Alterations made to the Premises With consent shall be
at the sole cost and expense of Subtenant, and Subtenant agrees to restore the
Premises to their original condition at its sole cost if so requested by
Sublandlord or Landlord at the end of the Sublease Term. Any and all approved
Alterations shall be made in conformity with the applicable terms and conditions
of the Master Lease. Subtenant shall submit is proposed Alterations,
simultaneously to Landlord and Sublandlord for consent, subject to the
provisions of the Master Lease.
12. Assignment and Subletting
-------------------------
A. Consent Required
----------------
Subtenant shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet, or otherwise transfer or encumber all or any part of
Subtenant's interest in this Sublease or the Premises without the prior written
consent of the Landlord (in accordance with the apple provisions of the Master
Lease) and Sublandlord, in Sublandlord's reasonable discretion. Any attempted
assignment, transfer, mortgage, encumbrance or subletting without such consent
shall be void, and shall constitute a breach of this Sublease.
B. No Release
----------
Regardless of any consent by Sublandlord, no subletting or assignment shall
release Subtenant of Subtenant's obligation, or alter the primary liability of
Subtenant to pay the Base Rent, Additional Rent, and to perform all other
obligations to be performed by Subtenant hereunder. The acceptance of rent by
Sublandlord from any other person shall not be deemed a waiver by Sublandlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Subtenant or any successor of Subtenant in the
performance of any of the terms hereof, Sublandlord may proceed directly against
Subtenant without the necessity of exhausting remedies against said assignee or
such additional sublessee.
-4-
<PAGE>
C. Fees
----
In the event Subtenant shall assign or sublet the Premises or request the
consent of Sublandlord to any assignment or subletting, or if Subtenant shall
request the consent of Sublandlord for any act that Subtenant proposes to do,
then Subtenant shall reimburse Sublandlord for any fees Sublandlord is required
to pay as tenant pursuant to the Master Lease, by reason of such act.
13. Consents and Approvals
----------------------
Sublandlord shall not be liable for any damages if Sublandlord withholds or
delays any consent or approval requested by Subtenant, and as to any consent or
approval which the Sublandlord has agreed in writing not to unreasonably
withhold or delay, Subtenant shall have only the remedy of specific performance
or injunction.
14. Indemnity
---------
Subtenant shall indemnify and hold harmless Sublandlord and the Landlord
from and against any and all claims arising from Subtenant's use of the
Premises, or from the conduct of Subtenant's business or from any activity, work
or thing done, permitted or suffered by Subtenant in or about the Premises or
elsewhere, except to the extent resulting from a material breach of
Sublandlord's obligations under the Co-Marketing Agreement, and shall further
indemnify and hold harmless the Sublandlord and the Landlord from and against
any all claims arising from any breach or default in the performance of any
obligation on Subtenant's part to be performed under the terms of this Sublease,
or arising from any negligence of Subtenant or any of Subtenant's agents,
contractors, or employees, (excluding Sublandlord to the extent it is a
contractor of Subtenant under the Co-Marketing Agreement), and from and against
all costs, attorneys' fees, expenses and liabilities incurred in the defense of
any such claim or any action or proceeding brought thereon. Subtenant agrees
that should any action or proceeding be brought against Sublandlord or the
Landlord by reason of any such claim, upon notice from Sublandlord or the
Landlord, Subtenant shall defend the same at Subtenant's expense by counsel
reasonably satisfactory to Sublandlord.
Subtenant, as a material part of the consideration to Sublandlord, hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises arising from Subtenant's use of the Premises, subject to the terms
of the Equipment Lease as to damages to property addressed therein, and
Subtenant hereby waives all claims in respect thereof against Sublandlord.
Subtenant hereby agrees that Sublandlord shall not be liable for injury to
Subtenant's business or any loss of income, therefrom or for damage to the
goods, wares, merchandise or other property of Subtenant, Subtenant's
shareholders, employees, invitees, customers; or any other person in or about
the Premises, nor shall Sublandlord be liable for injury to any person including
Subtenant's shareholders, employees, agents or contractors, whether such damage
or injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause whether the said damage or injury results from
conditions arising upon the Premises or upon portions of the Building, or from
other sources or places, and regardless of whether the cause of such damage or
injury or the means of repairing the same is inaccessible to Subtenant.
Sublandlord shall not be liable for any damages arising from any act, omission
or neglect of the Landlord or any tenant of the Building.
-5-
<PAGE>
15. Insurance
---------
Sublandlord shall have no obligation to provide insurance or perform any
repair, replacement, or any other requirement imposed upon the Landlord as
landlord pursuant to the Master Lease in the event of damage to all of or any
part of the Building. However, Sublandlord agrees to keep in place, for the
Premises, such policies of insurance as are required of it as tenant pursuant to
the Master Lease. Subtenant shall obtain and maintain insurance policies
identical to those required to be maintained by Sublandlord as tenant pursuant
to the Master Lease (but only with regard to the Premises herein described and
not the entirety of the premises leased pursuant to the Master Lease), and
Sublandlord and Landlord shall be named as additional insureds. Subtenant
acknowledges and agrees that the Landlord and Sublandlord shall not be
responsible or liable to Subtenant for any loss or damage at the Premises.
16. Estoppel Certificate
--------------------
A. Requirements
------------
Subtenant shall, at any time, upon not less than ten (10) days' prior
written notice from Sublandlord, execute, acknowledge and deliver to Sublandlord
a statement in writing (i) certifying that this Sublease is unmodified and in
full force and effect (or, if modified, stating the nature of such modification
and certifying that this Sublease, as so modified, is in full force and effect)
and the extent to which the rent and other charges are paid in advance, if any;
and (ii) acknowledging that there are not, to Subtenant's knowledge, any uncured
defaults on the part of Sublandlord hereunder, or specifying such defaults if
any are claimed. Any such statement may be conclusively relied upon by any
prospective assignee or mortgagees of the Premises.
B. Failure to Comply
-----------------
Subtenant's failure to provide such statement within such times shall be a
default by Subtenant under this Sublease, and shall be conclusive upon Subtenant
(i) that this Sublease is in full force and effect, without modification except
as may be represented by Sublandlord; (ii) that there are no uncured defaults in
the performance by Sublandlord or Landlord; and (iii) that not more than one
month's rent has been paid in advance.
17. Eminent Domain
--------------
In the event of any condemnation of the Premises, all awards and
compensation, or proceeds payable to Sublandlord pursuant to the Master Lease
shall be the property of Sublandlord. No part of any condemnation awards,
compensation or proceeds shall be payable to Subtenant.
18. Rules and Regulations
---------------------
Subtenant shall faithfully observe and comply with all rules and
regulations described in or annexed to the Master Lease, as amended from time to
time.
19. Tax on Tenant's Personal Property
---------------------------------
Subtenant shall pay all taxes levied or assessed upon Subtenant's personal
property and shall deliver satisfactory evidence of such payment to Sublandlord,
if requested.
-6-
<PAGE>
20. Right to Additional Space
-------------------------
Subtenant acknowledges that it shall have no rights under this Sublease to
lease any other space in the Building.
21. Option to Extend
----------------
If Subtenant and Sublandlord mutually agree (and Landlord consents),
Subtenant shall have the option to renew this Sublease for one (1) additional
one-year period under the same terms and conditions as this Sublease, except
that the Base Rent to be paid hereunder shall be adjusted upward by the amount
of the increase under the Master Lease, if any.
22. Arbitration
-----------
Any dispute arising out of this Sublease shall, at the option of either
party, be settled by arbitration. Within ten (10) days after either party shall
have requested arbitration in writing, the parties shall agree on an impartial
arbitrator, and failing agreement, he shall be selected by the American
Arbitration Association at the request of either party. The arbitration shall
be conducted in accordance with the then current rules of commercial arbitration
of the American Arbitration Association, and judgment upon the award granted by
the arbitrator may be entered in any court having jurisdiction thereof. Fees,
costs and expenses of the arbitrator shall be borne by the party against whom
the arbitration shall be determined, or in such proportions as the arbitrator
shall designate.
23. Abatement of Rent
-----------------
Subtenant shall receive no abatement of any rent due under this Sublease
for any part of the Sublease Term.
24. Severability
------------
The invalidity of any provision of this Sublease as determined by a court
of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
25. Time of Essence
---------------
Time is of the essence of this Sublease.
26. Captions
--------
Captions of Articles or subdivisions thereof are not a part hereof and are
intended for reference purposes.
27. Notices
-------
All notices or demands given or required to be given hereunder shall be in
writing and shall be sent by hand delivery, overnight courier, or by certified
or registered mail, return receipt requested, addressed to the parties'
addresses set forth below or to each other address as either party may specify
in writing in accordance with this notice provision. Any such notice so given
shall be deemed given and shall be effective on the day of its receipt by the
respective party.
-7-
<PAGE>
PRIOR TO OCCUPANCY:
- ------------------
Sublandlord: Premiere Communications, Inc.
-----------
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Patrick G. Jones
with a copy to:
Premiere Communications, Inc.
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Julianne F. Vaio
Subtenant: Endeavor Technologies, Inc.
---------
1100 Lake Hearn Drive, Suite 370
Atlanta, Georgia 30342-1524
Attention: W. Michael Heekin
AFTER OCCUPANCY:
- ---------------
Sublandlord: Premiere Communications, Inc.
-----------
3399 Peachtree Road, N.E.
Lenox Building, Suite 700
Atlanta, Georgia 30326
Attention: Patrick G. Jones
with a copy to:
Premiere Communications, Inc.
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Julianne F. Vaio
Subtenant: Endeavor Technologies; Inc.
---------
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: W. Michael Heekin
28. Brokers
-------
Subtenant warrants and represents to Sublandlord that it has dealt with no
broker or real estate agent or made no agreement or created any liability with
respect to this Sublease and/or the Premises or in connection with the payment
of brokerage or other commissions to anyone, and Subtenant hereby agrees to
indemnify, defend and hold Sublandlord harmless from and against all liability,
cost, or expense arising out
-8-
<PAGE>
of the claims of any other broker or real estate agent claiming by, through or
under Subtenant for a commission in connection with this Sublease and/or the
transaction contemplated by this Sublease.
Sublandlord warrants and represents to Subtenant that it has dealt with no
broker or real estate agent or made no agreement or created any liability with
respect to this Sublease and/or the Premises or in connection with the payment
of brokerage or other commissions to anyone, and Sublandlord hereby agrees to
indemnify, defend and hold Subtenant harmless from and against all liability,
cost, or expense rising out of the claims of any other broker or real estate
agent claiming by, through or under Sublandlord for a commission in connection
with this Sublease and/or the transaction contemplated by this Sublease.
29. Consents Required
-----------------
This Sublease is expressly conditioned upon the written consent of the
Landlord. Upon execution of this Sublease, Sublandlord will promptly request
such written consent. If such consent has not been received by Sublandlord
within (30) days from the date of hereof, then, at the option of either party,
upon written notice to the other at anytime after such 30-day period, this
Sublease shall be deemed canceled, null and void and of no further force and
effect, and neither party shall have any claim of any kind or nature against the
other provided such notice is sent before the Landlord's written consent is
delivered to Sublandlord. In no event shall Sublandlord be obligated to deliver
possession of the Premises to Subtenant until date upon which Sublandlord
notifies Subtenant that it has received the written consent of the Landlord.
30. Condition of Premises on Termination
------------------------------------
Upon the expiration or other termination of the term of this Sublease,
Subtenant covenants and agrees that it shall quit and surrender the Premises in
the condition required pursuant to the terms of the Master Lease, shall remove
all Subtenant's Personal property therefrom (except such items, including,
without limitation, such fixtures, equipment, improvements and Alterations,
which are required to remain a part of the Premises pursuant to the Master
Lease), and shall make any repairs or restorations required by reason of each
removal to put the Premises in the condition required pursuant to the Master
Lease.
31. Waivers
-------
No waiver by Sublandlord of any provision hereof shall be deemed a waiver
of any provision hereof or of any subsequent breach by Subtenant of the same or
any provision. The consent or approval by Sublandlord of any act shall not be
deemed to render unnecessary obtaining subsequent consent or approval from
Sublandlord or any subsequent act by Subtenant. The acceptance of rent
hereunder by Sublandlord shall not be a waiver of any preceding breach by
Subtenant of any provision hereof, regardless of knowledge by Sublandlord of
such preceding breach at the time of acceptance of each rent.
32. Recording
---------
Subtenant shall not record this Sublease, and such recordation shall, at
the option of Sublandlord, constitute a non-curable default of Subtenant
hereunder.
33. Holding Over
------------
Subtenant shall have no right to hold over at the Premises beyond the
Expiration Date or earlier termination of this Sublease. If Subtenant remains
in possession after the expiration or earlier termination of the Sublease Term
without the express written consent of Sublandlord, such occupancy shall, at the
-9-
<PAGE>
Sublandlord's option, be deemed an act of trespass, and Subtenant shall pay as
liquidated damages (and not as rent) an amount equal to three times the Base
Rent in effect at the time for the expiration or termination of this Sublease,
prorated on a daily basis for each such day of continued occupancy, plus all
other charges payable hereunder. In the event of any such holdover, Subtenant
shall also pay as liquidated damages (and not as rent) all amounts payable by
Sublandlord to Landlord incurred as a result of such holdover, including but not
limited to all amounts payable by Sublandlord to the Landlord pursuant to the
Master Lease as a result of such continued occupancy by Subtenant. Nothing
herein shall be deemed to limit Sublandlord's rights to forcibly evict
Subtenant, or any other rights or remedies available to Sublandlord. No receipt
of money by Sublandlord form Subtenant after expiration or termination of this
Sublease shall reinstate or extend this Sublease.
34. Cumulative Remedies
-------------------
No remedy or election Hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
35. Covenants and Conditions
------------------------
Each provision of this Sublease performable by Subtenant shall be deemed
both a covenant and a condition.
36. Choice of Law
-------------
This Sublease shall be governed by the laws of the State of Georgia.
37. Attorneys' Fees
---------------
In the event Sublandlord, without any fault on its part, is a party to any
litigation commenced by or against Subtenant or by or against any parties in
possession of the Premises or any part thereof claiming under Subtenant,
Subtenant shall pay, as additional rent, all costs including, without implied
limitation, reasonably attorneys' fees incurred by or imposed by or upon
Sublandlord in connection with such litigation, and the costs of enforcement of
this Sublease against Subtenant.
38. Sublandlord's Access
--------------------
Sublandlord and its agents shall have the right to enter the Premises at
reasonable times, upon reasonable notice to Subtenant, for the purpose of
inspecting the same, showing the same to prospective assignees, lenders or
lessees, all without undue interruption to Subtenant's business. In addition,
Sublandlord shall have the right to enter the Premises to perform such actions
as are required of it as tenant pursuant to the Master Lease. Notwithstanding
the foregoing, without notice, Sublandlord shall have the right to enter the
Premises to repair, maintain, inspect or otherwise deal with any equipment in or
improvements to the Premises necessary for Sublandlord to operate in the
remainder of the office space covered by the Master Lease, including, without
limitation, repair or additions of wiring to riser space between floors of the
Building. Subject to the above, and provided Subtenant is not in default
hereunder or under the Master Lease, Sublandlord covenants that Subtenant shall
have the right to possession and quiet enjoyment of the Premises during the term
of this Sublease.
-10-
<PAGE>
39. Security Deposit
----------------
Upon the execution of this Sublease, Subtenant shall pay to Sublandlord the
sum of $0.00 as security for Subtenant's performance of its obligations under
----
this Sublease. Upon termination of this Sublease, provided Subtenant is not
then in default of any of the terms hereof, the security deposit shall be
returned to Subtenant, without interest, less any amounts due Sublandlord upon
termination.
40. Corporate Authority
-------------------
Each individual executing this Sublease on behalf of Subtenant or
Sublandlord represents and warrants that he is duly authorized to execute and
deliver this Sublease on behalf of such party.
41. Amendments
----------
This Sublease may be modified only in writing, signed by the parties in
interest at the time of the modification.
42. Landlord's Liability
--------------------
Subtenant acknowledges and agrees to the following with respect to the
Landlord:
A. In the event of a sale or transfer of all or any portion of the
Building or any undivided interest therein, or in the event of the making of a
lease of all or substantially all of the Building, or in the event of a sale or
transfer of the Landlord's fee or leasehold estate, the grantor, transferor or
lessor, as the case may be, shall thereafter be entirely relieved of all terms,
covenants and obligations thereafter to be performed by Landlord under the
Master Lease and this Sublease to the extent of the interest or portion so sold,
transferred or leased. Upon the termination of any such lease, the lessor
thereunder shall become and remain liable as Landlord hereunder only so long as
there shall not be made another such lease.
B. Subtenant agrees that it has no direct rights to Landlord, but if it
did, that it shall look solely to the estate and property of Landlord in the
Building and the land constituting the "Building Parcel", as such term is
defined in the Master Lease (subject of prior rights, if any, of holders of
superior interests) for the collection of any judgment (or other judicial
process requiring the payment of money by Landlord in the event of any default
or breach by Landlord with respect to any of the terms, covenants and conditions
of this Lease to be observed or performed by Landlord; and no other assets of
Landlord or any Person (as defined in the Master Lease) having any interest in
Landlord shall be subject to levy, execution or other procedures for the
satisfaction of Subtenant's remedies.
C. Corporate Property Investors is the designation of the Trustees under
a Declaration of Trust dated June 24, 1971, as amended, and neither the
shareholders nor the Trustee, officers, employees or agents of the Trust created
thereby shall be liable hereunder and, subject to Section 6.2B of the Master
Lease, all persons shall look solely to the trust estate for the payment of any
c hereunder or for the performance hereof.
[remainder of this page intentionally left blank]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
SUBLANDLORD:
-----------
Signed, sealed and delivered PREMIERE COMMUNICATIONS, INC.,
this 15th day of December, 1997, a Florida corporation
in the presence of:
/s/ Wade H. Stribling By: /s/ Patrick G. Jones
- -------------------------------- -----------------------------
Witness
Title: Senior Vice President
--------------------------
/s/ Pamela Callon Evans
- --------------------------------
Notary Public
My Commission Expires
9-14-2000
- --------------------------------
[NOTARIAL SEAL] [CORPORATE SEAL]
SUBTENANT:
---------
Signed, sealed and delivered ENDEAVOR TECHNOLOGIES, INC.,
this 15th day of December, 1997, a Georgia corporation
in the presence of:
/s/ Wade H. Stribling By: /s/ W. Michael Heekin
- -------------------------------- -----------------------------
Witness
Title: Chief Operating Officer
--------------------------
/s/ Sherry D. Hall
- --------------------------------
Notary Public
My Commission Expires
Notary Public, Fulton County, Georgia
- -------------------------------------
My Commission Expires October 23, 2000
- --------------------------------------
[NOTARIAL SEAL] [CORPORATE SEAL]
[consent of Landlord on following page]
-12-
<PAGE>
CONSENT OF LANDLORD
-------------------
Corporate Property Investors, as Landlord under the Master Lease, hereby
consents to the within Sublease by Endeavor Technologies, Inc., pursuant to
Article 7.2(c) of the Master Lease and further acknowledges that any right to
terminate the Master Lease by virtue of the granting of this Sublease is hereby
waived.
LANDLORD:
CORPORATE PROPERTY INVESTORS, a
Massachusetts business trust
Dated: December 16, 1997 By: /s/
----------------- ---------------------------------
Title:______________________________
-13-
<PAGE>
EXHIBIT A
MASTER LEASE
(SEE ATTACHED)
-14-
<PAGE>
Leasepgs.LB as of 3/3/97
Premier.LB
AGREEMENT OF LEASE
BETWEEN
CORPORATE PROPERTY INVESTORS
AND
PREMIERE COMMUNICATIONS, INC.
15
<PAGE>
AGREEMENT OF LEASE made as of , 1996 between CORPORATE
PROPERTY INVESTORS, a Massachusetts business trust, having its principal place
of business at 3 Dag Hammarskjold Plaza (305 East 47th Street), New York, N. Y.
l00l7 (Landlord) and Premiere Communications, Inc., a Georgia Corporation,
having its principal place of business at 3399 Peachtree Road, N.E., Atlanta,
Georgia (Tenant).
R E C I T A L
- - - - - - -
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord, the Premises, located in the Building known as The Lenox Building,
3399 Peachtree Road, N.E., Atlanta, Georgia 30326, for the Term commencing on
the Commencement Date, subject to the terms, covenants, conditions and
provisions of this Lease. If the Commencement Date is not the first day of a
month, Rent for the month in which the Commencement Date occurs shall be
prorated to the end of the month, the first full monthly installment of Rent
shall be due on the first day of the next month and after the expiration of the
number of years in the Term, the Term shall expire on the last day of the same
month in which the Commencement Date occurred.
ARTICLE l. DEFINITIONS
Whenever used in this Lease, the following terms shall have the meanings
indicated below.
Premises - Suite No. 300 and 400, Third (3rd) and as
Fourth (4th) Floors - shown on Exhibit B
Term - Seven (7) years, expiring on August 31,
2004
Commencement Date - September 1, 1997
Size of the Premises - 40,886 square feet of rentable floor space
Tenant's Pro Rata Share - 11.17 percent
Fixed Rent - $858,606.00 per year from September 1,
1997 through March 31, 2001;
$899,492.00 per year from April 1, 2001
through August 31, 2004.
Guarantor - None
Broker - Tramell Crow Company, 3101 Tower Creek
Parkway, Suite 400, Atlanta, Georgia 30339
Permitted Use - Only for executive, administrative and/or
general office use.
Security Deposit - None, except that Tenant shall deposit
with Landlord the first (1st) months'
Fixed Rent, upon execution and delivery of
this Lease.
16
<PAGE>
Additional Rent - All amounts, except Fixed Rent, payable by Tenant
under Articles 3, 5, 7 and 9 of this Lease.
Affiliate - Any Person which controls or is controlled by the
Person in question or is controlled by the same
Persons which shall then control the Person in
question and any Person which is a member with
the Person in question in a relationship of joint
venture, partnership or other form of business
association; the term "control" means, with
respect to a corporation, the ownership of stock
possessing, or the right to exercise, at least
twenty-five (25%) percent of the total combined
voting power of all classes of the controlled
corporation, issued, outstanding and entitled to
vote for the election of directors, whether such
ownership be direct ownership or indirect
ownership through control of another corporation
or corporations.
Auxiliary Areas - The Entry Plaza, the Lobby Court, the Loop System
and the Promenade, as shown on Exhibit A.
Building - The Lenox Building
Atlanta, Georgia, as shown on
Exhibit A.
Building Parcel - The area designated as such on
Exhibit A.
Entry Plaza - The area designated as such on
Exhibit A.
Event of Default - As defined in Section 9.1
Governmental Authority - The United States, the State of Georgia, the City
of Atlanta, and any political subdivision thereof
or any local public or quasi-public authority,
agency, department, commission, board, bureau or
instrumentality of any of them including, with
respect to matters pertaining to insurance,
boards of fire underwriters to the extent they
have power to impose conditions on the issuance
of policies or the coverage thereof.
Governmental Requirements - Any law, ordinance, code, order, rule or
regulation of any Governmental Authority.
Landlord - The party named as Landlord herein until a sale,
transfer or lease, and thereafter the Person or
Persons who shall, for the time being, be liable
for the obligations of Landlord under the
provisions of Section 6.2 of this Lease.
Landlord's Additional Work - None.
17
<PAGE>
Landlord's Standard Work - None.
Landlord's Work - None
Lobby Court - The area designated as such on
Exhibit A.
Loop System - The area designated as such on
Exhibit A.
Necessary Approvals - Any permit, license, certificate or approval or
other evidence of compliance with any requirement
necessary to the lawful occupancy of the Premises
and the issuance of the insurance required to be
carried hereunder for the Permitted Uses.
Operating Costs - As defined in Section 3.2 H.
Parking Garage - The decked parking structure located on the
Building Parcel, as shown on Exhibit A.
Person - A natural person, firm, partnership, association
or corporation, as the case may be.
Promenade - The area designated as such on
Exhibit A.
Rent - The Fixed Rent and the Additional Rent.
Standard Building Hours - 8:00 AM to 6:00 PM Monday
and Days through Friday and 8:00 AM to 1:00 PM on
Saturdays, or any combination thereof of days and
hours selected by Landlord but in no event to
exceed 55 hours in the aggregate from Monday
through Saturday. Standard Building Hours and
Days shall be deemed to exclude holidays, curfews
or other restricted days designated as such by
Governmental Authority.
Taxes - As defined in Section 3.2 D.
Tenant Improvement - As set forth in Exhibit C.
Agreement
Tenant's Plan - As defined in the Tenant Improvement Agreement.
Exhibit A - Site Plan
Exhibit B - Floor Plan
Exhibit C - None
Exhibit D - Parking Space Exhibit
Exhibit E - Commencement Date and Ratification of Lease
Agreement.
18
<PAGE>
Exhibit F - Cleaning Schedule
Exhibit G - Building Rules and Regulations
ARTICLE 2. CONSTRUCTION - COMMENCEMENT DATE
Section 2.l Preparation of the Premises.
---------------------------
(A) Landlord shall perform Landlord's Work, as set forth in the Tenant
Improvement Agreement annexed hereto as Exhibit C. Tenant agrees to comply with
all of the terms and provisions of the Tenant Improvement Agreement.
(B) Landlord shall not be required to commence Landlord's Work unless
(i) the parties shall have agreed upon the cost of Landlord's Additional Work,
and (ii) said cost, less Landlord's Allowance, as defined in the Tenant
Improvement Agreement, is paid to Landlord.
(C) Landlord shall give Tenant ten (10) days' written notice of the
anticipated date of substantial completion of Landlord's Work, and Tenant shall
have the right during said ten-day period to enter into the Premises for the
purpose of installing its personal property and equipment and otherwise
preparing the Premises for its occupancy. During said ten-day period, (i)
neither Tenant nor its agents or employees shall interfere with Landlord's Work
or with any other work being done by Landlord and Landlord's agents and
employees in other parts of the Building, (ii) Tenant shall comply with all
reasonable rules and regulations promulgated by Landlord, its agents or
employees, (iii) the labor employed by Tenant shall be harmonious and compatible
with the labor employed by Landlord in the Building, it being agreed that if in
Landlord's judgment such labor is incompatible, Tenant shall forthwith upon
Landlord's demand withdraw Tenant's labor from the Premises, (iv) Tenant shall
procure and deliver to Landlord workmen's compensation, public liability,
property damage and such other insurance policies, in such amounts, as shall be
reasonably acceptable to Landlord in connection with the preparation work being
done by Tenant in the Premises, and shall cause Landlord to be named as an
insured thereunder, and (v) all the terms, provisions and agreements of this
Lease, except for the obligation to pay Rent, shall apply.
Section 2.2 Commencement Date.
-----------------
(A) The Term of this Lease shall commence on the date that Landlord
notifies Tenant that it has substantially completed Landlord's Work. Within ten
(10) days after the Commencement Date, Landlord's representative and Tenant's
representative shall jointly examine the Premises and shall compile a list of
any remaining items of work which Landlord may be obligated to complete ("punch
list items"). The taking of possession of the Premises by Tenant shall be
deemed an acceptance of the Premises and an acknowledgement that Landlord's Work
has been substantially completed, but Landlord shall thereafter complete the
punch list items.
(B) If Tenant takes possession of the Premises prior to the Commencement
Date, Tenant's obligation to pay Rent hereunder and to observe and perform all
other conditions and agreements hereunder shall commence on such earlier date of
possession, but the Term of the Lease shall not be affected thereby.
(C) In the event that substantial completion of Landlord's Work is
delayed by reason of delays caused or occasioned by Tenant, then at Landlord's
option the Term of this Lease shall commence on the date that this Lease would
have commenced had not the completion of Landlord's Work been so delayed by
Tenant (or as reasonably determined by Landlord) or such occurrence shall
constitute a default on the part of Tenant hereunder entitling Landlord to
exercise all rights and remedies provided for herein in the event of Tenant's
default.
19
<PAGE>
(D) Landlord's Work shall be deemed to have been substantially completed
when the Premises may be lawfully occupied and the heating, ventilation, air
conditioning, mechanical and elevator systems serving the Premises are operable.
(E) Tenant shall, upon the demand of Landlord, promptly execute,
acknowledge and deliver to Landlord an instrument substantially similar to that
annexed hereto as Exhibit E, confirming the dates of commencement and expiration
of the Term of this Lease and such other matters as are set forth on Exhibit E.
Section 2.3 Ownership of Improvements.
-------------------------
All installations, alterations, additions, improvements and fixtures now
or at any time hereafter attached to or located upon the Premises, made or
installed by either party, shall be the property of Landlord and shall, unless
Landlord otherwise elects by giving Tenant notice at least thirty (30) days
prior to the expiration or sooner termination of the Term, remain upon and be
surrendered with the Premises at the expiration or sooner termination of the
Term. None of the foregoing shall be deemed to include any of Tenant's
furniture and personal property which is removable without damage to the
Premises.
ARTICLE 3. RENT
Section 3.l Payment.
-------
All Rent shall be paid in the 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, at the address of Landlord set forth in this Lease or at
such other place as Landlord in writing may designate, without any set-off or
deduction whatsoever and without any prior demand therefor. Tenant shall pay
the annual Fixed Rent in equal monthly installments in advance on the first day
of each calendar month included in the Term. Unless another time shall be
herein expressly provided, Additional Rent shall be due and payable on demand or
together with the next succeeding installment of Fixed Rent, whichever shall
first occur. For any portion of a calendar month included at the beginning or
end of the Term, Tenant shall pay l/30th of each monthly installment of Rent for
each day of such portion, payable in advance at the beginning of such portion.
Section 3.2 Additional Rent.
---------------
(A) Tenant shall pay to Landlord, as Additional Rent, Tenant's Pro Rata
Share of Taxes which in any calendar year exceed the actual Taxes for the 1997
calendar year. Said amount shall be prorated if the Commencement Date does not
coincide with the beginning or the expiration date does not coincide with the
end of a calendar year.
(B) Commencing on the Commencement Date, Tenant shall pay, with each
monthly installment of Fixed Rent, one-twelfth (1/12) of the amount reasonably
estimated by Landlord to be due as Tenant's Pro Rata Share of excess Taxes for
the following calendar year. If Taxes for the following calendar year are not
known, monthly installments shall be based on the current calendar year with
immediate adjustment as soon as said Taxes become known. If at the time any
Taxes or installments thereof are required to be paid the total amount of
Tenant's monthly payments on account of excess Taxes are insufficient to pay
Tenant's Pro Rata Share thereof, Tenant shall pay such deficiency within five
(5) days after demand therefor. If any payment on account of excess Taxes shall
be due for the calendar year in which the Commencement Date occurs, Tenant shall
pay said amount to Landlord within thirty (30) days following Landlord's demand
therefor.
(C) Should any taxing authority impose any separate additional taxes on
the value of any improvements made by Tenant, or include machinery, equipment,
fixtures, inventory or other personal property or assets of Tenant, then Tenant
20
<PAGE>
shall pay the entire tax attributable to such items. Tenant shall pay any
sales, use, occupancy, value added (if the value added is not in lieu of Taxes
as described in Section 3.2D) or similar tax hereafter levied or imposed in
connection with the Fixed or Additional Rent payable by Tenant.
(D) The term Taxes shall mean (i) the total amount of Taxes payable with
respect to the Building and the Building Parcel and all improvements thereon,
including the Parking Garage, plus (ii) one-quarter (1/4) of the total amount of
Taxes payable with respect to or attributable to the Auxiliary Areas. Taxes
shall include all real estate taxes, assessments, water and sewer rents and
other governmental impositions and charges of every kind and nature whatsoever,
extraordinary as well as ordinary, foreseeable and unforeseeable, including any
and all fees or expenses incurred in connection with the institution,
prosecution, conduct and maintenance of negotiations, settlements, actions or
proceedings with respect to the amount of any Taxes, and each and every
installment thereof which shall or may during the Term of this Lease be levied,
assessed, imposed, become due and payable or a lien upon or arise in connection
with the use, occupancy or possession of or grow due or payable out of or for,
the Building, the Parking Garage, the land constituting the Building Parcel or
any part thereof or improvements thereon, and the Auxiliary Areas or any part
thereof or improvements thereon, but excluding, however, any of the foregoing
relating to any charge which is measured by the consumption by the actual user
of the item or service for which the charge is made. A Tax bill or copy thereof
submitted by Landlord to Tenant shall be conclusive evidence of the amount of
Taxes or installments thereof.
(E) Nothing herein contained shall be construed to include as part of
the Taxes described in Section 3.2 D any inheritance, estate, succession,
transfer, gift, franchise, corporation income or profit tax or capital levy that
is or may be imposed upon Landlord; provided, however, that if, at any time
during the Term, the method of taxation prevailing at the time of the execution
of this Lease shall be altered so that in lieu of or as a substitute for the
whole or any part of the Taxes now levied, assessed or imposed on real estate as
such, there shall be levied, assessed or imposed (i) a tax on the rents received
from real estate, or (ii) a license fee measured by the rents receivable by
Landlord for the Building or the Parking Garage or any portion thereof or (iii)
a tax or license fee imposed on Landlord which is otherwise measured by or
based, in whole or in part, upon the Building or the Parking Garage or any
portion thereof or (iv) any other tax or levy imposed in lieu of or as a
supplement to Taxes which are in existence as of the date of the execution of
this Lease, then the same shall be included in the determination of Tenant's Pro
Rata Share of excess Taxes, computed as if the amount of such tax or fee so
payable were that due if the Building, the Parking Garage, the Building Parcel
and Auxiliary Areas were the only property of Landlord subject thereto.
(F) In the event Landlord shall obtain a Tax refund as a result of tax
reduction proceedings, then, after the final conclusion of all appeals or other
remedies, Tenant shall, provided Tenant is not then in default, be entitled to
its Pro Rata Share of the net refund obtained, based upon any amount paid by
Tenant which is the subject of the refund. As used herein, the term "net
refund" means the refund plus interest thereon, if any, paid by the Governmental
Authority less appraisal, administrative, engineering, expert testimony,
attorney, printing and filing fees and all other costs and expenses of the
proceeding. Tenant shall not have the right to institute or participate in any
such proceedings, it being understood that the commencement, maintenance,
settlement, or conduct thereof shall be in the sole discretion of Landlord.
(G) Tenant shall pay to Landlord, as Additional Rent, Tenant's Pro Rata
Share of Operating Costs which in any calendar year exceed the actual Operating
Costs for the 1997 calendar year. Said amount shall be pro-rated if the
Commencement Date does not coincide with the beginning or the expiration date
does not coincide with the end of a calendar year. As soon as practicable after
the end of the calendar year in which the Commencement Date occurs, Landlord
shall notify Tenant as to the amount, if any, payable by Tenant as its Pro Rata
21
<PAGE>
Share of excess Operating Costs, and Tenant shall pay said amount to Landlord
within thirty (30) days thereafter. Commencing with the next calendar year and
for each succeeding calendar year (or portion thereof) during the Term of this
Lease, Tenant shall pay its Pro Rata Share of excess Operating Costs, as
reasonably estimated by Landlord, in equal monthly installments along with
Tenant's monthly installments of Fixed Rent. Estimates of Operating Costs shall
be revised annually by Landlord.
(H) The term Operating Costs shall mean (i) the total cost and expense
incurred by Landlord in operating and maintaining the Building and the land
constituting the Building Parcel and all improvements thereon, specifically
excluding the Parking Garage, plus (ii) one-quarter (1/4) of the total cost and
expense incurred by Landlord in operating and maintaining the Auxiliary Areas.
Operating Costs shall include, without limitation, costs for: (i) operation,
maintenance and repair of the Building and Auxiliary Areas, including the
equipment and machinery used in conjunction therewith and the costs of
inspection and depreciation thereof; (ii) maintenance, repair and replacement of
paved areas, curbs, walkways, landscaping, drainage and other outdoor facilities
on the Building Parcel and Entry Plaza; (iii) painting and redecorating; (iv)
security services and the regulation of automobile and pedestrian traffic; (v)
insurance, including, without limitation, public liability, property damage,
sign, casualty and rent insurance; (vi) utilities, including ordinary usage of
electricity, heat, air conditioning, ventilation, domestic water and sewer
facilities in tenant areas; (vii) refuse collection and removal; (viii)
janitorial and cleaning services, including ordinary cleaning of tenant areas
and janitorial supplies and equipment; (ix) sanitary control and extermination;
(x) capital improvements made to the Building and/or Auxiliary Areas which can
reasonably be expected to reduce Operating Costs, as well as capital
improvements made in order to comply with any statutes, rules, regulations or
directives hereafter promulgated by any Governmental Authority relating to
energy, conservation, public safety or security, as amortized by Landlord over
the useful life of the improvements; (xi) personnel to implement all of the
aforementioned, including fringe benefits and workmen's compensation insurance
covering such personnel; (xii) contractual management fees and other expenses
directly related to the on-site management of the Building and Auxiliary Areas;
and (xiii) other similar costs of the type incurred in the operation of
comparable properties.
(I) Not later than one hundred eighty (180) days after the end of each
calendar year, Landlord shall furnish to Tenant a statement showing in
reasonable detail the information necessary for the calculation and
determination of Landlord's actual Operating Costs. If the total of all monthly
charges paid by Tenant on account of excess Operating Costs during such calendar
year shall be less than Tenant's Pro Rata Share thereof for such calendar year,
as shown by such statement, Tenant shall pay to Landlord the difference within
thirty (30) days after receipt of such statement.
Section 3.3 Late Payments.
-------------
From and after the due date of any payment of Rent, interest shall accrue
thereon at the rate of the lesser of 1 1/2% per month or the maximum rate
permitted by law.
ARTICLE 4. COMMON AREAS
Section 4.l Common Areas. Landlord hereby grants to Tenant a non-
------------
exclusive license to use (a) the hallways, elevators, lobby and other public
conveniences of the Building, (b) such other areas in or adjoining the Building
as may from time to time be designated by Landlord for use in common by Landlord
and the tenants of the Building, and (c) the Auxiliary Areas, individually and
collectively referred to as "common areas". Except for the Auxiliary Areas and
such other areas as may be specifically designated by Landlord, Tenant shall
have no rights whatsoever with respect to the use of adjacent property now or
hereafter owned or operated by Landlord.
22
<PAGE>
(A) No schedule, exhibit, plan, drawing, rendering, brochure, or the
like shall be deemed to create a warranty, representation or agreement on the
part of Landlord that the Building or common areas will be or will continue to
be exactly as indicated thereon. Landlord reserves the right to (i) increase,
reduce or change the number, type, size, location, elevation, nature and use of
any of the common areas and (ii) to make changes, additions, alterations, or
improvements in or to the Building and common areas. Except as herein provided,
Tenant shall have no rights with respect to the land or improvements below
exterior floor slab level or above the interior surface of the finished ceiling
of the Premises or air rights or any easements, in, on, about, below or above
the Premises. This Lease grants no parking rights to Tenant. Such rights, if
any, shall be created and governed by a separate written agreement.
(B) The common areas shall be subject to such reasonable rules and
regulations as Landlord may, from time to time, adopt. Landlord reserves the
right to close all or any portion of the common areas for the minimum length of
time as may, in the opinion of Landlord's counsel, be legally sufficient to
prevent a dedication thereof or the accrual of any rights of the public therein,
and to do and perform such other acts in and to the common areas as in the use
of Landlord's good business judgment will improve the use thereof.
ARTICLE 5. UTILITIES - SERVICES
Section 5.1 Electricity. Landlord will furnish electricity to the
-----------
Premises, subject to the restrictions and limitations herein set forth. Except
as otherwise provided herein, the furnishing of electricity shall be included in
Operating Costs.
Section 5.2 Other Utilities. Except for electricity, domestic water and
---------------
sewer services as provided herein and included in Operating Costs, Tenant shall
be solely responsible and shall pay separately for all charges for telephone and
for any other utilities used in the Premises.
Section 5.3 Practices. The following practices shall apply in
---------
connection with Landlord's obligation to furnish electricity and in connection
with Tenant's use thereof:
(A) Electricity shall be made available to Tenant during Standard
Building Hours and Days.
(B) Subject to Section 5.10 and paragraph (C) of this Section 5.3, it is
understood that Tenant shall use electricity only during Standard Building Hours
and Days, only for Building standard lighting and ordinary office equipment, and
not in excess of 5.0 watts per square foot of floor space.
(C) Landlord or Landlord's consultants shall have the right to inspect
the Premises in order to determine whether Tenant's use of electricity deviates
from or exceeds the conditions herein set forth. Each such inspection shall be
conducted in such a manner as to minimize interference with Tenant's operations
at the Premises. If Tenant's use of electricity deviates from or exceeds the
conditions set forth in this Lease, Tenant shall reimburse Landlord for the cost
of such inspection and Landlord shall have the right to require Tenant to pay,
from the date the condition first exists, the costs of excess electricity
consumption, as reasonably estimated by Landlord or Landlord's consultants or as
determined based on the consumption shown on an electric metering device
installed by Landlord at Tenant's expense, and/or to require Tenant to provide,
at Tenant's expense, all remedial action or equipment required to conform
Tenant's installations and operations to the conditions set forth in this Lease.
Any such charges payable by Tenant shall be deemed Additional Rent, payable to
Landlord within ten (10) days after demand.
23
<PAGE>
Section 5.4 Elevator Service.
----------------
Landlord shall furnish elevator facilities during Standard Building
Hours and Days and at other times as reasonably required to provide access to
the Premises. Landlord may designate hours of use and elevators in the Building
for use for shipping and delivery, and Tenant agrees to use (and to cause any
Persons claiming through or under Tenant to use) only the elevator or elevators
so designated for all shipments and deliveries.
Section 5.5 Heat. When necessary, Landlord shall furnish heat to the
----
Premises during Standard Building Hours and Days.
Section 5.6 Air Conditioning. During the Term of this Lease, Landlord
----------------
shall furnish to the Premises (i) conditioned air at reasonable temperatures and
pressures and in reasonable volumes and velocities during Standard Building
Hours and Days, when considered necessary by Landlord for the comfortable
occupancy of the Premises, and (ii) mechanical ventilation during Standard
Business Hours and Days when conditioned air or heat is not being furnished.
Landlord shall not be responsible if the normal operation of the Building
air conditioning or heating systems shall fail to provide heat or conditioned
air at reasonable temperatures and pressures or in reasonable volumes or
velocities in any portions of the Premises (a) if any machinery or equipment
installed by or on behalf of Tenant or any Person claiming through or under
Tenant, shall have an electrical load in excess of the electric load
per square foot of floor space of the Premises for which the HVAC system was
designed, or by reason of a human occupancy factor in excess of one person per
100 square feet of floor space or (b) because of any rearrangement of
partitioning or other alterations made or performed by or on behalf of Tenant or
any Person claiming through or under Tenant. Whenever the air conditioning or
heating systems are in operation, Tenant shall cause all windows in the Premises
to be kept closed and cause all window blinds in the Premises to be kept down.
Tenant shall cooperate fully with Landlord and abide by all regulations and
requirements which Landlord may reasonably prescribe for the proper functioning
and protection of the ventilation, air conditioning and heating systems.
In the event the Premises shall contain a supplemental air conditioning
unit(s) (the "AC Unit"), Tenant shall, at its sole cost and expense, be
responsible for all maintenance, repair and replacement of the AC Unit. Tenant
shall throughout the Term of this Lease, maintain with a responsible company,
approved by Landlord, a service contract for the AC Unit.
Section 5.7 Cleaning.
--------
Landlord shall cause the Premises, (excluding any portions thereof
used for the storage, preparation, service or consumption of food or beverages)
to be cleaned and shall cause Tenant's ordinary office waste paper refuse to be
removed, all at regular intervals, in accordance with standards and practices
adopted from time to time by Landlord for the Building. Tenant understands that
the cost of ordinary cleaning is included in Operating Costs. Tenant shall pay
as Additional Rent, within five days after Landlord's billing, Landlord's
regularly established rates or, if there are no such rates, at reasonable rates,
for the removal of any of Tenant's refuse or rubbish other than ordinary office
waste paper refuse, and Tenant, at Tenant's expense, shall cause all portions of
the Premises used for the storage, preparation, service or consumption of food
or beverages to be cleaned daily and to be regularly exterminated against
infestation by vermin or insects.
Section 5.8 Water. Landlord shall furnish Tenant with domestic water
-----
for ordinary lavatory or drinking purposes and Tenant understands that the cost
of domestic water service is included in Operating Costs. If Tenant requires or
consumes water for any purpose in addition to ordinary lavatory and drinking
purposes, Tenant shall pay as Additional Rent the cost thereof as reasonably
estimated by Landlord, or Landlord may install, at Tenant's expense, hot and
cold
24
<PAGE>
water meters and thereby measure Tenant's consumption of water for all purposes.
Tenant shall keep any such meters and installation equipment in good working
order and repair, at Tenant's expense, and shall pay for water consumed as shown
on said meters and sewer charges thereon, as and when bills are rendered.
Section 5.9 Directory. Tenant shall be allotted Tenant's Pro Rata Share
---------
of the number of directory lines on the Building directory. The Building
directory shall list only the names of Persons who occupy the Premises in
compliance with this Lease.
Section 5.10 Extra Services. If Tenant requests Landlord to furnish or
--------------
uses any electricity, elevator services, heat, conditioned air, mechanical
ventilation, cleaning, water or other services during hours or days other than
Standard Building Hours and Days, Tenant shall pay as Additional Rent, for such
services at the standard rates then fixed by Landlord for the Building or, if no
such rates are then fixed, at reasonable rates. Landlord shall not be required
to furnish any such services during such periods unless Landlord has received
reasonable advance notice from Tenant and Landlord is able to provide same.
Section 5.11 Interruption of Services. Landlord reserves the right to
------------------------
temporarily stop any service or facility provided by Landlord when necessary by
reason of construction in other parts of the Building, accident or emergency, or
for repairs, alterations, replacements or improvements, which, in Landlord's
judgment, are desirable or necessary, or required to be made by Landlord or
Tenant pursuant to this Lease, until said repairs, alterations, replacements or
improvements shall have been completed. The exercise of such right by Landlord
shall not 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. Landlord shall prosecute such work
with continuity, diligence and dispatch and shall not be liable to any extent to
Tenant if any of said services or facilities is interrupted or otherwise
impaired.
Section 5.12 Security. Landlord reserves the right to lock all
--------
entrances to the Building at such times, other than Standard Building Hours, as
Landlord may deem advisable for the protection of the Building and its
occupants. Persons entering or leaving the Building at times when it is locked
may be required to sign the Building register, and the lobby attendant, if any,
may refuse to admit to the Building, while it is so locked, any person not
displaying satisfactory identification evidencing his or her right of access to
the Building. Landlord assumes no responsibility and shall not be liable for
any damages resulting from an error with respect to such identification, or from
admission to the Building of any unauthorized individual.
ARTICLE 6. LANDLORD'S ADDITIONAL COVENANTS
Section 6.1 Repairs by Landlord. Landlord shall keep the exterior,
-------------------
foundations, finish, downspouts, gutters, and roof of the Building and the
Building's plumbing, electrical, heating, ventilating, elevator and air
conditioning systems (except the components of such systems which exclusively
serve or operate within the Premises) in good order, condition and repair and
shall make necessary structural repairs to the exterior walls of the Building,
the dividing walls between the Premises and adjoining space occupied or to be
occupied by others, and the load-bearing walls and load-bearing columns, if any,
within the Premises; provided that Landlord shall not be obligated hereby to do
any work required to be done because of any damage caused by any act, misuse,
omission or negligence of Tenant and its invitees or licensees, their respective
officers, agents and employees or their visitors. Landlord shall not be
required to commence any such repair until after notice from Tenant that the
same is necessary, which notice, except in the case of an emergency, shall be in
writing and shall allow Landlord a reasonable time in which to commence such
repair.
25
<PAGE>
Section 6.2 Landlord's Liability.
--------------------
(A) In the event of a sale or transfer of all or any portion of the
Building or any undivided interest therein, or in the event of the making of a
lease of all or substantially all of the Building, or in the event of a sale or
transfer of the Landlord's fee or leasehold estate, the grantor, transferor or
lessor, as the case may be, shall thereafter be entirely relieved of all terms,
covenants and obligations thereafter to be performed by Landlord under this
Lease to the extent of the interest or portion so sold, transferred or leased;
provided that (i) any amount then due and payable to Tenant or for which
Landlord or the then grantor, transferor or lessor would otherwise then be
liable to pay to Tenant (it being understood that the owner of an undivided
interest in the fee or any such lease shall be liable only for his or its
proportionate share of such amount) shall be paid to Tenant, (ii) the interest
of the grantor, transferor or lessor, as Landlord, in any funds then in the
hands of Landlord or the then grantor, transferor or lessor in which Tenant has
an interest, shall be turned over, subject to such interest, to the then
grantee, transferee or lessee, and (iii) notice of such sale, transfer or lease
shall be delivered to Tenant. Upon the termination of any such lease, the
lessor thereunder shall become and remain liable as Landlord hereunder only so
long as there shall not be made another such lease.
(B) Tenant agrees that it shall look solely to the estate and property
of Landlord in the Building and the land constituting the Building Parcel
(subject to prior rights, if any, of holders of superior interests) for the
collection of any judgment (or other judicial process) requiring the payment of
money by Landlord in the event of any default or breach by Landlord with respect
to any of the terms, covenants and conditions of this Lease to be observed or
performed by Landlord; and no other assets of Landlord or any Person having any
interest in Landlord shall be subject to levy, execution or other procedures for
the satisfaction of Tenant's remedies.
(C) Corporate Property Investors is the designation of the Trustees
under a Declaration of Trust dated June 24, 1971, as amended, and neither the
shareholders nor the Trustees, officers, employees or agents of the Trust
created thereby shall be liable hereunder and, subject to Section 6.2B, all
persons shall look solely to the trust estate for the payment of any claims
hereunder or for the performance hereof.
ARTICLE 7. TENANT'S ADDITIONAL COVENANTS
Section 7.1 Affirmative Covenants.
---------------------
Tenant covenants that at all times during the Term Tenant, at its sole
cost and expense, shall:
(A) Use the Premises only for the Permitted Use and for no other purpose
and in no event shall Tenant permit the use of the Premises in violation of any
Governmental Requirements;
(B) Take good care of the Premises and the fixtures therein and make all
improvements, repairs and replacements to the Premises not required to be made
by Landlord as and when needed to preserve the Premises in good working order
and condition, except that Tenant shall not be required to make any structural
repairs or structural replacements to the Premises unless necessitated by the
acts or omissions of Tenant or any Persons claiming through or under Tenant, or
by the use or occupancy or manner of use or occupancy of the Premises by Tenant
or any such Person. All repairs and replacements made by or on behalf of Tenant
or any Person claiming through or under Tenant shall be at least equal in
quality and class to the original work or installation.
(C) Make all repairs, alterations, additions or replacements to the
Premises, including appurtenances, equipment, facilities and fixtures therein,
26
<PAGE>
arising out of Tenant's use or occupancy of the Premises necessary to satisfy
any Governmental Requirement; and otherwise comply with the orders and
regulations of any Governmental Authority.
(D) Pay promptly when due the cost of any work in or to the Premises, so
that the Premises and Building shall, at all times, be free of liens for labor
and materials; procure all Necessary Approvals before undertaking such work; do
all such work in a good and workmanlike manner acceptable to Landlord, employing
materials of good quality; comply with any Governmental Requirement relating
thereto. Tenant shall not, at any time prior to or during the Term, directly or
indirectly employ, or permit the employment of, any contractor, mechanic or
laborer in the Premises if such employment will interfere or cause conflict with
other contractors, mechanics, or laborers engaged in the construction,
maintenance or operation of the Building by Landlord, Tenant or others. In the
event of any such interference or conflict, Tenant, upon demand of Landlord,
shall cause all contractors, mechanics or laborers causing such interference or
conflict to leave the Building immediately.
(E) Indemnify and save Landlord harmless of and from all loss, cost,
liability, damage and expense, including, but not limited to, reasonable counsel
fees, penalties and fines, incurred in connection with or arising from (i) any
default by Tenant in the observance or performance of any of the terms,
covenants or conditions of this Lease on Tenant's part to be observed or
performed, or (ii) the use or occupancy or manner of use or occupancy of the
Building or Premises by Tenant or any Person claiming through or under Tenant,
or (iii) any acts, omissions or negligence of Tenant or any such Person, or the
contractors, agents, servants, employees, visitors or licensees of Tenant or any
such Person, in or about the Premises or the Building either prior to, during or
after the expiration of the Term, or (iv) any claims by any Persons by reason of
injury to persons or damage to property occasioned by any use, occupancy, act,
omission or negligence referred to herein.
(F) Maintain with responsible companies approved by Landlord (i)
comprehensive liability insurance, with contractual liability endorsement
covering the matters set forth in paragraph E above, against all claims, demands
or actions for injury to or death of person and damage to property, to the limit
of not less than $3,000,000 per occurrence and/or in the aggregate, arising
from, related to, or in any way connected with Tenant's use or occupancy of the
Premises, or caused by actions or omissions of Tenant, its agents, servants and
contractors, which insurance shall name Landlord and its agents as additional
insureds; and (ii) fire insurance, with such extended coverage, vandalism,
malicious mischief and sprinkler leakage endorsements attached as Landlord
reasonably may, from time to time, require, covering all trade fixtures and
equipment, furniture, furnishings, improvements or betterments installed or made
by Tenant in, on or about the Premises to the extent of at least 80% of their
replacement value, without deduction for depreciation, but in any event in an
amount sufficient to prevent Tenant from becoming a co-insurer under provisions
of applicable policies. Tenant's insurance shall be in form satisfactory to
Landlord and shall provide that it shall not be subject to cancellation,
termination or change except after at least ten (10) days' prior written notice
to Landlord. All policies required pursuant to this paragraph F or duly
executed certificates for the same shall be deposited with Landlord not less
than ten (10) days prior to the day Tenant is expected to take occupancy and any
renewals of said policies not less than fifteen (15) days prior to the
expiration of the term of such coverage. Landlord and Tenant mutually agree
that with respect to any loss which is covered by insurance then being carried
by them respectively, or required to be carried, or as to any coverage which
Landlord agrees need not be carried, the party suffering a loss releases the
other of and from any and all claims with respect to such loss; and they further
mutually agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof.
(G) Landlord and its agents and employees shall not be liable for, and
Tenant waives all claims for, loss or damage to person or property sustained by
27
<PAGE>
Tenant resulting from any accident or occurrence (unless caused by the
negligence of Landlord, its agents, servants or employees other than accidents
or occurrences against which Tenant is insured) in or upon the Premises or the
Building, including, but not limited to, claims for damage resulting from: (i)
equipment or appurtenances becoming out of repair; (ii) injury occasioned by
wind; (iii) any defect in or failure of plumbing, heating, air conditioning or
ventilation equipment, electric wiring, gas, water, steam or other pipes,
stairs, porches, railings or walks; (iv) broken glass; (v) the backing up of any
pipe or downspout; (vi) the bursting, leaking or running of any pipe, drain or
tank in, upon or about the Building or the Premises; (vii) the escape of steam
or hot water; (viii) water, snow or ice upon or coming through the roof or
windows, walks or otherwise; (ix) the falling of any fixture, plaster, concrete,
glass, metal, tile or stucco; and (x) any act, omission or negligence of other
occupants of the Building.
(H) Permit Landlord and its agents to have access in and about the
Premises including, without limitation, the right (i) to enter the Premises to
examine the Premises and/or to perform any obligation of Landlord under this
Lease or any other lease to which Landlord is party and/or to exercise any right
or remedy reserved to Landlord in this Lease; (ii) to erect, install, use and
maintain in concealed locations columns, beams, pipes, ducts and conduits in and
through the Premises; (iii) to exhibit the Premises to others; (iv) to make such
repairs, alterations, improvements or additions, or to perform such maintenance
as Landlord may deem necessary or desirable; and (v) to take all materials into
and upon the Premises that may be required in connection with any such
decorations, repairs, alterations, improvements, additions or maintenance. All
parts (except surfaces facing the interior of the Premises) of all walls,
windows and doors bounding the Premises (including exterior Building walls, core
corridor walls, doors and entrances), all balconies, terraces and roofs adjacent
to the Premises, all space in or adjacent to the Premises used for shafts,
stairways, chutes, pipes, conduits, ducts, fan rooms, mechanical facilities,
service closets and other Building facilities, and the use thereof, as well as
access thereto through the Premises for the purposes of operation, maintenance,
alteration and repair, are hereby reserved to Landlord. Landlord also reserves
the right at any time to change the arrangement or location of entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets and other
public parts of the Building, provided any such change does not permanently and
unreasonably obstruct Tenant's access to the Premises. The exercise by Landlord
or its agents of any right reserved to Landlord in this paragraph shall not
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.
(I) Pay on demand Landlord's expenses, including reasonable attorneys'
fees, resulting from the breach by Tenant of, or incurred in enforcing any
obligation of Tenant under this Lease, or in curing any default by Tenant
hereunder.
(J) Forthwith cause to be discharged of record, by payment, bonding or
otherwise, any mechanic's lien at any time filed against the Premises or the
Building for any work, labor, services or materials claimed to have been
performed at or furnished to the Premises for or on behalf of Tenant or anyone
holding the Premises through or under Tenant. Nothing contained in this Lease
shall be construed as a consent on the part of Landlord to subject Landlord's
estate in the Premises to any lien or liability under applicable law.
(K) Upon the expiration or other termination of the Term, quit and
surrender the Premises to Landlord, broom clean, in good order and condition,
ordinary wear and tear and casualty covered by Landlord's insurance excepted,
and at Tenant's expense, remove all property of Tenant and each alteration,
addition or improvement made by Tenant as to which Landlord shall have made the
election provided for in Section 2.3 hereof. Tenant shall repair all damages to
the Premises caused by such removal and restore the Premises to the same
condition as existed prior to the installation of the items so removed. Any
improvements
28
<PAGE>
or installations required to be but not so removed shall be deemed to have been
abandoned by Tenant and may be retained or disposed of, as Landlord shall
desire. However, Tenant shall be responsible for the cost of removal and
disposal and for restoration of the Premises.
(L) This Lease is and all of Tenant's rights hereunder are subject and
subordinate to any mortgages, security deeds or deeds of trust (collectively,
Mortgages) that now exist or may hereafter be placed upon the Building, the
Building Parcel or any part thereof and all advances made under any such
Mortgages and the interest thereon and all renewals, replacements, amendments,
modifications, consolidations and extensions thereof. If any mortgagee succeeds
to Landlord's interest under this Lease by foreclosure or otherwise, Tenant will
attorn to such mortgagee and will recognize such mortgagee as Tenant's landlord
under this Lease. Tenant shall execute and deliver, in recordable form,
whatever instruments may be required to acknowledge or further effectuate the
provisions of this paragraph. This Lease shall also be subject and subordinate
to any ground or underlying (including operating) lease that may hereafter be
placed on the Building Parcel or the Building and all renewals, replacements,
modifications and extensions thereof, and Tenant shall attorn to the lessee
thereunder and recognize such lessee as Tenant's landlord under this Lease.
However, termination of any such lease shall not result in the termination of
this Lease nor of Tenant's obligations hereunder.
(M) Conform and cause its employees to conform to all reasonable rules
and regulations promulgated by Landlord for the management and use of the
Building and Auxiliary Areas. Such rules and regulations shall be uniform and
shall not discriminate against Tenant or its employees.
Section 7.2 Negative Covenants.
------------------
Tenant covenants at all times during the Term and such further time as
Tenant occupies the Premises or any part thereof:
(A) Tenant shall not use or occupy, or permit the use or occupancy of,
the Premises or any part thereof for any purpose other than for office purposes,
nor in any manner which shall adversely affect any services furnished by
Landlord to Tenant or to any other occupant of the Building. Tenant shall not
injure, overload, deface or otherwise harm the Premises or any part thereof or
any equipment or installation therein.
(B) Tenant shall not make or perform, or permit the making or
performance of, any alterations, subdivisions, installations, decorations,
improvements, additions or other physical changes in or about the Premises,
including those necessary to satisfy any Governmental Requirement (referred to
collectively as "alterations"), without Landlord's prior consent. Landlord
agrees not unreasonably to withhold its consent to any nonstructural alterations
proposed to be made by Tenant to adapt the Premises for Tenant's business
purposes. All alterations shall be made at Tenant's sole cost and expense and
at such time and in such manner as Landlord may, from time to time, designate;
alterations shall be made only by contractors or mechanics approved by Landlord,
such approval not unreasonably to be withheld; all business machines and
mechanical equipment shall be placed and maintained by Tenant in settings
sufficient to absorb and prevent vibration, noise and annoyance to other
occupants of the Building; Tenant shall submit to Landlord detailed plans and
specifications for each proposed alteration and shall not commence any such
alteration without first obtaining Landlord's approval of such plans and
specifications; all permits, approvals and certificates required by all
Governmental Authorities shall be timely obtained by Tenant and submitted to
Landlord; notwithstanding Landlord's approval of plans and specifications for
any alteration, alterations shall be made and performed in full compliance with
all Governmental Requirements; all materials and equipment to be incorporated in
the Premises as a result of all alterations shall be new and first quality; no
such materials or equipment shall be subject to any lien, encumbrance, chattel
mortgage or title retention or security agreement. In the event the cost of an
29
<PAGE>
alteration exceeds the amount of three monthly installments of Fixed Rent,
Landlord shall have the right to require Tenant to obtain performance and labor
and material payment bonds from surety companies and in such forms as Landlord
shall require in amounts at least equal to the cost of the proposed work.
(C) Not to assign, sell, mortgage, pledge, or in any manner transfer
this Lease or any interest therein, or sublet the Premises or parts thereof or
grant "desk space" privileges or any concession. A transfer or change in the
ownership of Tenant's or the Guarantor's stock or a change in the composition of
any noncorporate Tenant without, in either case, a legitimate business purposes
shall, unless such stock is publicly traded, be deemed an assignment. Consent
by Landlord to an assignment, subletting, concession or license shall not be
construed to relieve Tenant from obtaining the express consent of Landlord to
any further assignment or subletting or to the granting of any concession or
license for the use of any part of the Premises; nor shall the collection of
Rent by Landlord from any assignee, subtenant or other occupant, after default
by Tenant, be deemed a waiver of this covenant or the acceptance of the
assignee, subtenant or occupant as Tenant or a release of Tenant from the
further performance by Tenant of the covenants of this Lease on Tenant's part to
be performed.
Tenant may, in writing, request Landlord's consent to an assignment of
this Lease or a subletting of all (but not less than all) of the Premises
provided however, that (i) the proposed assignee or subtenant is not then (a) an
existing tenant or an Affiliate of an existing tenant in the Building or (b) a
person with whom Landlord is then negotiating, or has entered into negotiations
within the six months prior to Tenant's request for Landlord's consent, for
space in the Building and (ii) the rental rate for any subletting is no less
than the then going market rental rate (including Fixed Rent and Additional
Rent) for space in the Building which Landlord is then offering to Lease. Such
request shall include the name of the proposed assignee or subtenant, a copy of
the proposed instruments relating to the transaction, certified financial
statements of the proposed assignee or subtenant and its officers, directors and
stockholders, and such information as to the financial responsibility, business
and standing of the proposed assignee or subtenant as Landlord may reasonably
require. Upon receipt of such request and information from Tenant, Landlord
shall have the right, to be exercised in writing within thirty (30) days after
such receipt, to terminate this Lease, as of the date set forth in Landlord's
notice of its exercise of such right, which date of termination shall be not
less than sixty (60) nor more than one hundred twenty (120) days following the
service of Landlord's notice.
(i) In the event Landlord shall exercise such cancellation right,
Tenant shall surrender possession of the Premises on the date set forth in such
notice in accordance with the provisions of this Lease relating to surrender of
the Premises at the expiration of the Term. In no event shall the Premises be
subdivided or partially sublet nor any request made for permission to do so.
(ii) In the event that Landlord shall not exercise its right to cancel
this Lease as above provided, Landlord's consent to such request shall not be
unreasonably withheld, provided such sublease or assignment is effected by a
legal document in form and substance satisfactory to Landlord, and subparagraph
(iii) of this paragraph shall apply with respect to possible adjustment of
rentals. In no event shall any assignment or subletting to which Landlord may
have consented relieve Tenant from its obligations to perform all of the terms,
covenants and conditions of this Lease on its part to be performed.
(iii) If under an assignment or sublease consented to by Landlord the
rent, additional rent, other charges, and/or other consideration, money or thing
of value payable thereunder or payable in connection with the transaction exceed
the Rent provided in this Lease, Tenant or, at Landlord's option, the sublessee
or assignee shall pay said excess rent or other consideration to Landlord as
Additional Rent hereunder as and when the same becomes due under said assignment
or sublease.
30
<PAGE>
(iv) If Tenant is a corporation, Tenant shall have the right, without
the consent of Landlord, to assign its interest in this Lease to a parent or
wholly owned subsidiary of Tenant or any corporation which is a successor to
Tenant either by merger or consolidation, or in connection with a public
offering of Tenant's stock, provided that the successor shall have a tangible
net worth, determined in accordance with accepted accounting standards, at least
equal to the tangible net worth of Tenant at the time of the transaction.
However, no such assignment shall be valid unless within ten (10) days prior to
the effective date thereof Tenant shall deliver to Landlord (a) a duplicate
original instrument of assignment, in form and substance satisfactory to
Landlord, duly executed by Tenant, (b) an instrument in form and substance
satisfactory to Landlord, duly executed by the assignee, in which such assignee
shall assume observance and performance of and agree to be personally bound by,
all of the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed and (c) evidence of compliance with the conditions of
this paragraph.
(D) Tenant shall have no right to affix any sign to the Premises or its
windows, or to any part of the common area or the Building unless and until the
sign has been approved by Landlord. Landlord shall have the right, at Tenant's
expense, to remove any sign affixed by Tenant prior to such approval.
(E) Not to obstruct or encumber or use the common areas for any purpose
other than ingress and egress to and from the Premises. Tenant shall not commit
or allow to be committed any waste upon the Premises, or any public or private
nuisance or other act or thing which disturbs the quiet enjoyment of any other
tenant in the Building.
ARTICLE 8. DESTRUCTION: CONDEMNATION
Section 8.1 Fire or Other Casualty.
----------------------
(A) Tenant shall give prompt notice to Landlord in case of fire or other
damage to the Premises or the Building.
(B) If the Premises or the Building shall be damaged by fire or other
casualty, Landlord, at Landlord's expense, but only to the extent of the net
insurance proceeds available for such purpose, shall repair such damage.
However, Landlord shall have no obligation to repair any damage to, or to
replace, Tenant's leasehold improvements or betterments, furniture, furnishings,
decorations or any other installations made by Tenant. If the Premises shall be
rendered untenantable by reason of any such damage, the Fixed Rent only shall
abate for the period from the date of such damage to the date when such damage
shall have been repaired by Landlord, and if only a part of the Premises shall
be so rendered untenantable, the Fixed Rent for such period shall abate in the
proportion which the part of the Premises rendered untenantable bears to the
total Premises. However, if, prior to the date when all of such damage shall
have been repaired by Landlord, any part of the Premises so damaged shall be
rendered tenantable and shall be used or occupied by Tenant or Persons claiming
through or under Tenant, then the amount by which the Fixed Rent shall abate
shall be equitably apportioned for the period from the date of any such use or
occupancy to the date when Landlord shall have repaired all such damage.
Notwithstanding the foregoing provisions of this paragraph, if prior to or
during the Term, (i) the Premises shall be rendered wholly untenantable by fire
or other casualty and Landlord shall decide not to restore the Premises, or (ii)
the Building shall be so damaged by fire or other casualty that, in Landlord's
opinion, substantial alteration, demolition, or reconstruction of the Building
shall be required (whether or not the Premises shall have been rendered
untenantable), then, in either of such events, Landlord, at Landlord's option,
may give to Tenant, within ninety (90) days after such fire or other casualty, a
five (5) day notice of termination and, if such notice is given, this Lease and
the Term hereof shall come to an end (whether or not said Term shall have
commenced) upon the expiration of said five (5) days with the same effect as if
the date of expiration of said five (5) days were the expiration date of this
31
<PAGE>
Lease. In such event, the Rent shall be apportioned as of such date and any
prepaid portion of Rent for any period after such date shall be refunded to
Tenant.
(C) If this Lease shall not be terminated as above provided, Landlord
shall, at its expense, repair or restore the Premises with reasonable diligence
and dispatch to the condition obtaining immediately prior to the casualty,
except that Landlord shall not be required to repair or restore any of Tenant's
furniture, furnishings, decorations or any installations or alterations, as
defined in paragraph 7.2B, made by Tenant. All insurance proceeds payable to
Tenant for such items shall be held in trust by Tenant and upon the completion
by Landlord of repair or restoration, Tenant shall prepare the Premises for
occupancy by Tenant in the manner obtaining immediately prior to the damage or
destruction, in accordance with the provisions of paragraph 7.2B.
Section 8.2 Eminent Domain.
--------------
(A) If all or substantially all of the Building or the Premises shall be
acquired or condemned by eminent domain for any public or quasi-public use or
purpose, then this Lease and all rights of Tenant shall terminate as of the date
of title vesting in such proceeding.
(B) If part of the Building shall be acquired or condemned by eminent
domain for any public or quasi-public use or purpose, and such acquisition shall
affect a portion of the Premises or the access to same, then Landlord shall have
the option (i) to terminate this Lease as of the date of title vesting or (ii)
to repair and alter the Building, including the area leased to Tenant, and this
Lease shall not be affected thereby, except for proportional reduction of the
Fixed Rent if the leased area shall be diminished by such vesting.
(C) In case of any taking or condemnation, whether or not the Term of
this Lease shall terminate, the entire award shall be the property of Landlord,
and Tenant hereby assigns to Landlord all its right, title and interest in and
to any such award. However, Tenant shall be entitled to claim, prove and
receive in the condemnation proceeding such awards as may be allowed for
fixtures and other equipment installed by Tenant, relocation and loss of Lease,
but only if such awards shall be made by the condemnation court in addition to
the award made by it for the land and the Building or part thereof so taken.
(D) In the case of any taking or condemnation, the current Fixed Rent
and Additional Rent shall be apportioned as of the date of vesting of title and,
if the Term of this Lease shall not have been terminated as of said date, Tenant
shall be entitled to a pro rata reduction in the Fixed Rent payable hereunder
based on the proportion which the floor area so taken bears to the entire floor
area of the Premises immediately prior to such taking.
(E) If this Lease is not terminated pursuant to the provisions of this
Section 8.2, Landlord shall, at its expense, but only to the extent of an
equitable proportion of the net award or other compensation (after deducting
legal and all other fees in connection with obtaining said award) for the
portion of the Building taken or conveyed (excluding any award for land), make
such repairs of alterations as are in Landlord's reasonable judgment necessary
to constitute the Building a complete architectural and tenantable unit.
ARTICLE 9. DEFAULTS AND REMEDIES
Section 9.1 Default. The occurrence, at any time prior to or during the
-------
Term, of any one of the following events shall constitute an "Event of Default":
32
<PAGE>
(A) If Tenant shall default in the payment when due of any installment
of Fixed Rent or in the payment when due of any Additional Rent, and such
default shall continue for a period of ten (10) days after notice by Landlord to
Tenant of such default; or
(B) If Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed and Tenant shall fail to remedy such default within twenty (20)
days after notice by Landlord to Tenant of such default; or if such default is
not capable of being cured within said twenty (20) day period, then if Tenant
shall fail to commence the cure within said period or shall not thereafter
diligently prosecute to completion all steps necessary to remedy such default;
or if the Premises shall become vacant, deserted or abandoned; or if Tenant
shall assign or sublet the Premises in violation of Section 7.2 C.
Upon the occurrence of any one or more such Events of Default, Landlord
may, at any time thereafter, give Tenant a five (5) day notice of termination of
this Lease and, in the event such notice is given, this Lease and the Term shall
come to an end (whether or not the Term shall have commenced) upon the
expiration of said five (5) days with the same effect as if the date of
expiration of said five (5) days were the expiration date of this Lease, but
Tenant shall remain liable for damages as herein provided.
Section 9.2 Remedies of Landlord.
--------------------
(A) If this Lease shall have been terminated, or if Tenant shall default
in the payment of Rent or in the observance of any other term, condition or
covenant and such default is continuing, then, in any of such events, Landlord
may without notice, institute, in accordance with the laws and service of
process requirements of the State of Georgia, dispossess or unlawful detainer
proceedings, dispossess Tenant or other occupants of the Premises, and remove
their effects and hold the Premises as if this Lease had not been made. Nothing
herein shall be deemed to require Landlord to give the notices herein provided
for prior to the commencement of a dispossess or unlawful detainer proceeding
for non-payment of Rent or a plenary action for the recovery of Rent on account
of any default in the payment of Rent, it being intended that such notices are
for the sole purpose of creating a conditional limitation hereunder pursuant to
which this Lease shall terminate and Tenant shall become a holdover Tenant.
(B) In case of any such default, re-entry, expiration and/or dispossess
or unlawful detainer proceedings or otherwise, in addition to any other remedy
now or hereafter available to Landlord, (i) the Rent shall become due thereupon
and be paid up to the time of such re-entry, dispossess and/or expiration; (ii)
Landlord may relet the Premises or any part thereof for a term which may be
less than or exceed the period which would otherwise have constituted the
balance of the Term, and may grant concessions of free rent; and (iii) Tenant or
the legal representative of Tenant shall also pay Landlord, as damages for the
failure of Tenant to observe and perform Tenant's covenants herein contained,
for each month of the period which would otherwise have constituted the balance
of the Term, any deficiency between (x) the sum of (a) one monthly installment
of Fixed Rent and (b) any Additional Rent that would have been payable for the
month in question but for such re-entry or termination and (y) the net amount,
if any, of the rents collected on account of the lease or leases of the Premises
for each month of the period which would otherwise have constituted the balance
of the Term. The reasonable refusal or failure of Landlord to relet the
Premises or any part thereof shall not release or affect Tenant's liability for
damages provided Landlord shall have made the same effort and on the same terms
to relet the Premises as with respect to other vacant space in the Building;
however, Landlord shall not be required to prefer the reletting of the Premises
over any other space in the Building. In computing such damages there shall be
added to the said deficiency all expenses actually incurred by Landlord in
connection with the reletting, including court costs, attorneys' fees and
disbursements, the cost of alterations for a new tenant, brokerage fees, and the
cost of putting the Premises in good order and otherwise preparing same for
reletting. Damages shall
33
<PAGE>
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 the rights of Landlord to collect the deficiency for any
subsequent or prior month by a similar proceeding. Landlord, at Landlord's
option, may make such alterations, repairs, replacements and/or decorations in
the Premises as Landlord considers advisable for the purpose of reletting the
Premises; and the making of such alterations and/or decorations shall not
release Tenant from liability hereunder as aforesaid.
(C) In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Landlord 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 Landlord from any other
remedy.
Section 9.3 Landlord's Right to Cure Defaults.
---------------------------------
Landlord may cure, after notice of default is served, any default by Tenant
under this Lease; and whenever Landlord so elects, all costs and expenses
incurred by Landlord in curing a default, including, without limitation,
reasonable attorneys' fees, together with interest on the amount of costs and
expenses so incurred at the rate provided in Section 3.3 hereof, shall be paid
by Tenant to Landlord on demand as Additional Rent.
Section 9.4 Waiver of Default. No consent or waiver, express or
-----------------
implied, by Landlord or Tenant to or of any breach of any covenant, condition or
duty of the other shall be construed as a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty of the other, unless
in writing signed by the party against whom such waiver is sought.
Section 9.5 Security Deposit. Tenant has deposited with Landlord the
----------------
Security Deposit as security for the punctual performance by Tenant of each and
every obligation of Tenant under this Lease. In the event of any default by
Tenant, Landlord may apply or retain all or any part of the security to cure the
default or to reimburse Landlord for any sum which Landlord may spend by reason
of the default. In the case of every such application or retention, Tenant
shall, on demand, pay to Landlord the sum so applied or retained, which sum
shall be added to the Security Deposit so that the same shall be restored to its
original amount. If at the end of the Term Tenant shall not be in default under
this Lease, the Security Deposit, or any balance thereof, shall be returned to
Tenant within thirty (30) days. If Landlord shall sell the Building or shall
lease the Building, in either case subject to this Lease, or shall otherwise
assign or dispose of this Lease, Landlord may assign and turn over the Security
Deposit or any balance thereof to Landlord's grantee, lessee or assignee, and
Tenant hereby releases and relieves Landlord from any and all liability for the
return of said deposit and shall look solely to said grantee, lessee or
assignee; it being expressly agreed that this provision shall apply to each and
every sale, conveyance or lease of the Building or assignment or disposition of
this Lease.
ARTICLE 10. MISCELLANEOUS PROVISIONS
Section 10.1 Notices. Any notice or demand from Landlord to Tenant or
-------
from Tenant to Landlord shall be in writing and shall be deemed duly served if
mailed by registered or certified mail, return receipt requested, addressed, if
to Tenant, at the Building, or to such other address as Tenant shall have last
designated by notice in writing to Landlord, and if to Landlord, at the address
of Landlord set forth herein or such other address as Landlord shall have last
designated by notice in writing to Tenant. Notice shall be deemed served when
mailed.
Section 10.2 Brokerage. Tenant and Landlord warrant that they have had
---------
no dealings with any broker or agent in connection with this Lease other than
the Broker, if any, named herein, and each covenants to pay, hold harmless and
indemnify the other from and against any and all cost, expense or liability for
34
<PAGE>
any compensation, commissions and/or charges claimed by any other broker or
agent with whom they had dealings with respect to this Lease or the negotiation
thereof.
Section 10.3 Estoppel Certificates. Each of the parties agrees that it
---------------------
will, at any time and from time to time, within ten (10) business days following
written notice by the other party, execute, acknowledge and deliver to the other
party a statement in writing certifying that this Lease is unmodified and 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), and the dates
to which Rent and any other payments due hereunder from Tenant have been paid
and stating whether or not to the best of knowledge of the signer of such
certificate the other party is in default in performance of any covenant,
agreement or condition contained in this Lease, and, if so, specifying each such
default of which the signer may have knowledge.
Section 10.4 Applicable Law and Construction. The laws of the State of
-------------------------------
Georgia shall govern the validity, performance and enforcement of this Lease.
The invalidity or unenforceability of any provision of this Lease shall not
affect or impair any other provision. The submission of this document to Tenant
for examination does not constitute an offer to lease, or a reservation of or
option to lease, and becomes effective only upon execution and delivery thereof
by Landlord and Tenant. All negotiations, considerations, representations and
understandings between the parties are incorporated in this Lease. Landlord or
Landlord's agents have made no representations or promises with respect to the
Building or the Premises, except as herein expressly set forth. The headings of
the several articles and sections contained herein are for convenience only and
do not define, limit or construe the contents of such articles or sections.
Whenever herein the singular number is used, the same shall include the plural,
and the neuter gender shall include the masculine and feminine genders.
Section 10.5 Transfer of Tenants. Landlord hereby reserves the right,
-------------------
at its sole option and upon giving at least sixty (60) calendar days advance
written notice to Tenant, to transfer and remove Tenant from the Premises (and
from any other space to which Tenant was relocated pursuant to this Section
10.5) at any time prior or after occupancy of the Premises to any other
available space in the Building of substantially equal area. Landlord hereby
agrees to bear the expense of such transfer and removal, as well as the expense
of any renovations or alteration which are necessary to make the new space
conform substantially in layout and appointment with the Premises. If Landlord
moves Tenant to such new space, every term and condition of this Lease shall
remain in full force and effect, except that the Fixed Rent and Tenant's Pro
Rata Share shall be adjusted to reflect any change in the rentable floor area of
the new space, and such new space shall thereafter be deemed to be the Premises
as though Tenant had entered into an express written amendment of this Lease
with respect thereto. Failure of Tenant to cooperate with Landlord pursuant to
this provision and to remove itself from the Premises shall permit Landlord (i)
to enter the Premises and to remove Tenant and its property therefrom, by force
if necessary, and to relocate Tenant and its property in the new space provided
by Landlord pursuant to this provision, all without being liable to Tenant in
any manner whatsoever for such acts except for the expenses which are provided
in this Section 10.5 to be paid by Landlord or (ii) to cancel and terminate this
Lease effective ninety (90) days from the date of original notification by
Landlord.
Section 10.6 Construction on Adjacent Premises or Buildings. Tenant
----------------------------------------------
understands that while the Building is under construction and until it is fully
occupied, both Landlord and other occupants of the Building will be performing
work, aspects of which may involve areas in close proximity to the Premises. If
any excavation or other building operation shall be about to be made or shall be
made on any premises adjoining or above or below the Premises or on any other
portion of the Building, Tenant shall permit Landlord or the adjoining owner,
and their respective agents, employees, licensees and contractors, to enter the
Premises and to shore the foundations and/or walls thereof, and to erect
scaffolding and/or protective barricades around and about the Premises (but not
35
<PAGE>
so as to preclude entry thereto) and to do any act or thing necessary for the
safety or preservation of the Premises. Tenant's obligations under this Lease
shall not be affected by any such construction or excavation work, shoring-up,
scaffolding or barricading. Landlord shall not be liable in any such case for
any inconvenience, disturbance, loss of business or any other annoyance arising
from any such construction, excavation, shoring-up, scaffolding or barricades,
but Landlord shall use its best efforts so that such work will cause as little
inconvenience, annoyance and disturbance to Tenant as possible, consistent with
accepted construction practices in the vicinity, and so that such work shall be
expeditiously completed.
Section 10.7 Mortgagee Protection. Tenant agrees to give any mortgagee
--------------------
and/or trust deed holder, by registered mail, a copy of any notice served upon
Landlord with respect to Landlord's default hereunder, provided that prior to
such notice Tenant has been notified, in writing, of the address of such
mortgagees and/or trust deed holders. If Landlord shall have failed to cure
such default within the time provided for in this Lease, then the mortgagees
and/or trust deed holders shall have an additional thirty (30) days within which
to cure such default or if such default cannot be cured within such period, then
such additional time as may be necessary if within such thirty (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including, but not limited to,
commencement of foreclosure proceedings, if necessary to effect such cure), in
which event this Lease shall not be terminated by Tenant while remedies are
being so diligently pursued.
Section 10.8 Financing. If any lending institution with which Landlord
---------
has negotiated interim or long-term financing for the Building shall require
changes in this Lease as a condition of its approval of this Lease for such
financing, and if within thirty (30) days after notice from Landlord Tenant
fails or refuses to execute the amendment to this Lease accomplishing the
changes which are needed in connection with approval of this Lease for purposes
of such financing, then provided such amendment does not alter the business
terms herein set forth, detract from Tenant's rights hereunder, or impose
additional obligations upon Tenant, Landlord shall have the right to cancel this
Lease at any time prior to the commencement of Landlord's Additional Work. In
the event of cancellation by Landlord hereunder, this Lease shall be null and
void with no further liability on the part of either party hereto.
Section 10.9 Recording. Tenant agrees not to record this Lease.
---------
Section 10.10 Binding Effect of Lease. The covenants, agreements and
-----------------------
obligations herein contained shall extend to, bind and inure to the benefit of
the parties hereto and their respective personal representatives, heirs,
successors and permitted assigns. Each covenant, agreement, obligation or other
provision herein contained shall be deemed and construed as a separate and
independent covenant, not dependent on any other provision of this Lease unless
otherwise expressly provided.
Section 10.11 Effect of Unavoidable Delays. The provisions of this
----------------------------
Section shall be applicable if there shall occur, during the Term or prior to
the commencement thereof, any (i) strikes(s), lockout(s) or labor dispute(s);
(ii) inability to obtain labor, materials, or reasonable substitutes therefor;
or (iii) acts of God, governmental restrictions, regulations or controls, enemy
or hostile governmental action, civil commotion, fire or other casualty, or
other conditions similar or dissimilar to those enumerated in this item (iii)
beyond the reasonable control of the party obligated to perform. If Landlord or
Tenant shall, as the result of any of the above-described events, fail
punctually to perform any obligation on its part to be performed under this
Lease, then such failure shall be excused and not be a breach of this Lease by
the party in question, but only to the extent occasioned by such event.
Notwithstanding anything herein contained, however, the provisions of this
Section shall not be applicable to Tenant's obligations to pay Rent or its
obligations to pay any
36
<PAGE>
other sums, moneys, costs, charges or expenses required to be paid by Tenant
hereunder.
Section 10.12 No Oral Changes. Neither this Lease nor any provision
---------------
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
Section 10.13 Landlord's Consent. Whenever in this Lease express
------------------
provision is made that Landlord shall not unreasonably withhold or delay its
consent, Tenant's sole and only remedy for Landlord's breach of such agreement
shall be limited to an action for injunction or declaratory judgment and in no
event shall Landlord be liable for any damages to Tenant.
Section 10.14 Invalid Provisions. If any provision of this Lease is
------------------
held unlawful or invalid, then this Lease shall continue in full force and
effect but such unlawful or invalid provision shall be deemed omitted. If any
portion of Fixed or Additional Rent shall at any time be held to be higher than
the amount which Landlord may lawfully reserve, then the amount thereof shall be
reduced to the highest lawful amount.
Section 10.15 Usufruct Only. This Lease shall create the relationship
--------------
of landlord and tenant between Landlord and Tenant; no estate shall pass out of
Landlord, and Tenant has a usufruct which is not subject to levy and sale.
IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this Lease
as of the day and year first above written.
CORPORATE PROPERTY INVESTORS
By:/s/ J. Michael Maloney
----------------------------
Senior Vice President
ATTEST: PREMIERE COMMUNICATIONS, INC.
/s/ Patrick G. Jones By: /s/ Julianne F. Vaio
- ----------------------------- ---------------------------
By:__________________________
Secretary
(Seal)
37
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this day of , 19 , before me personally came J.
MICHAEL MALONEY, to me known, who being by me duly sworn, did depose and say
that he resides at 48 Remsen Street, Brooklyn, New York 11201 that he is the
Senior Vice President of CORPORATE PROPERTY INVESTORS, one of the Parties
described in and which executed the foregoing instrument; that he knows the seal
of the said Corporate Property Investors; that the seal affixed to the said
instrument in such seal; that it was so affixed by order of the Board of
Trustees of the said Corporate Property Investors and that he signed his name
thereto by like order.
--------------------------------------
Notary Public
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
On this 3rd day of March, 1997, before me personally came Julianne F.
Vaio, , to me known, who being by me duly sworn, did depose and say that
she resides at 3399 Peachtree Rd. NE, Suite 400, Atlanta, Georgia 30326 that she
is the Treasurer of Premiere Communications, Inc. the corporation described in
and which executed the foregoing instrument; that he knows the seal of the said
corporation; that the seal affixed to the said instrument in such corporate
seal; that it was so affixed by order of the Board of Directors of the said
corporation; and that she signed her name thereto by like order.
/s/
--------------------------------------
Notary Public
Notary Public, Fulton County, Georgia
My Commission Expires May 18, 1998
38
<PAGE>
RIDERS TO LEASE between CORPORATE PROPERTY INVESTORS, as Landlord, and PREMIERE
COMMUNICATION as Tenant for Suite No. 300 and 400 at The Lenox Building,
Atlanta, Georgia.
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, anything to the contrary contained in the
printed form of the lease to which these Riders are attached, the following
terms are hereby added and incorporated. In the event of a conflict or
inconsistences between these Riders and the printed form of this Lease, the
Riders shall be deemed to control.
Rider #1 - amending Article I, Definitions
- --------
(A) The Premises Section is hereby amended by inserting the following
language at the end of the section:
In addition to the Leased Premises, the Tenant shall also have the
following non-exclusive rights as appurtenances to the Leased Premises:
(a) The right of reasonable access to and from the Building and
Premises, and to and from any parking facilities located on the Property,
twenty-four (24) hours per day, seven (7) days per week, and parking
privileges as may be agreed from time to time;
(b) The right of reasonable access to and from, and the right to use,
designated common areas in the Building and the Property as is reasonably
afforded to all tenants of the Building;
(c) The right to riser space for HVAC and other equipment which
service the Premises; and
(d) The right to do, possess, exercise and enjoy, as to the Premises,
any and all rights and privileges appertaining to a leasehold tenancy under
existing and future laws applicable thereto, to the extent not inconsistent
with any reserved rights and privileges of Landlord pursuant to this Lease;
and
(e) The right to control access and use of the halls and restrooms on
all floors in which Tenant is the only tenant served on that elevator bank
on that floor;
(f) Tenant may use the existing stairway between Tenant's floors for
travel between floors. Tenant's use of the stairway shall be conditioned
upon the following:
(1) Tenant's use shall not interfere with the emergency
operations of the door locking, unlocking, or monitoring
system; and
(2) No smoking will be allowed in the stairway.
(B) The Size of the Premises Section is hereby amended by inserting the
following language at the end of the section:
The Parties agree that the Leased Premises are measured in accordance
with the standards of the Building Owners and Managers Association
International ("BOMA") as follows:
For the purposes of this Lease, the Leased Premises shall be deemed to
comprise 35,553 square feet of usable area and 40,886 square feet of
rentable area, and the Building shall be deemed to comprise 348,152 square
feet of rentable area, subject to adjustment as provided herein. Whenever
39
<PAGE>
any space is added to or deleted from the Leased Premises pursuant to any
provision of this Lease, the usable and rentable areas of such space shall
be agreed upon by Landlord and Tenant, or failing such agreement, shall be
determined in accordance with the American National Standard Method of
Measuring Floor Area in Office Buildings of BOMA.
(C) The Tenant's Pro Rata Share Section is hereby amended by inserting the
following language at the beginning of the section in front of the phrase "11.74
percent":
Tenant's Pro Rata Share is a percentage which is calculated by dividing a
numerator, consisting of the total rentable area of the Premises by a
denominator consisting of the total rentable area contained in the
Building, which percentage, subject to adjustment as provided herein, is
estimated to be
(D) The "Additional Rent" provision is hereby amended by deleting the
phrase "7 and 9" and by inserting the word "and" between the numbers "3" and
"5".
(E) The "Exhibit C" provision is hereby amended by deleting the word
"None" and by inserting the phrase "Lenox Building Rules and Regulations" in its
place.
(F) Following Exhibit G - Building Rules and Regulations, the following
reference to Exhibits H and I is hereby inserted:
Exhibit H - Subordination, Non-disturbance and Attornment
Agreement
Exhibit I - Certified Floor Plan Verifying Premises
Rentable and Useable Space
Rider #2 - amending Recital
- --------
Tenant is currently in possession of the Premises under a sublease with
Sales Technologies, which expires on August 31, 1997 (the "Sublease").
Rider #3 - amending Article 2
- --------
(A) Section 2.1 and 2.2 are hereby deleted in their entirety.
(B) Tenant is currently in possession of the Premises pursuant to the
Sublease. Tenant is familiar with the Premises and accepts same "as is" and
"where is" condition, and Landlord shall not be obligated to do any further
construction or make any additional improvements in the Premises, except as may
otherwise be expressly provided herein.
(C) So long as Tenant leases the entire floor of the Building, it may,
subject to Landlord approval of plans, incorporate the Common Area corridors
located on such floor into its Premises.
(D) Landlord has budgeted to refurbish the elevator lobbies and restrooms
in the Building during the 1997-1998 Calendar Years. Landlord agrees to
refurbish the restrooms and elevator lobbies of the third (3rd) and fourth (4th)
floors between September 1, 1997 and March 31, 1998, which work shall be
consistent with the materials and design of the elevator lobbies and restrooms
located on the other floors in the Building.
Rider #4 Signage and Exterior Signage
- --------
(A) Tenant shall have the right to erect signage in the elevator lobbies
located on the third (3rd) and (4th) floor, provided, however, Tenant obtains
40
<PAGE>
Landlord's prior written approval for the signs, which approval shall not be
unreasonably withheld or delayed.
(B) Landlord has erected a monument in the Entry Plaza adjacent to the
Building, which monument bears the logos or other identification signs of
tenants of the Building which, from time to time occupy rentable floor space in
the Building. Landlord hereby grants Tenant the right, at its sole cost and
expense, to have its name on said monument, so long as the Tenant named on the
recital page personally occupies not less than two (2) full floors in the
Building. In the event Tenant subleases or assigns any portion of the Premises,
such that it occupies less than two (2) full floors of the Building, Landlord
may remove Tenant's name from the monument.
Rider #5 - Adding - Furniture
- --------
(A) Landlord purchased certain trade fixtures including, but not limited
to, moveable work stations, furniture and the like which were designed for use
by Sales Technologies, Inc. in the Sublease space and which are currently being
utilized by Tenant under the Sublease. At the expiration of such Sublease,
Landlord agrees that Tenant, subject to Sales Technologies right to purchase
same if said right is not exercised, Tenant may utilize such trade fixtures
throughout the Term of this Lease. Tenant is familiar with the aforedescribed
trade fixtures, and accepts same in "as is" condition.
(B) The aforedescribed trade fixtures shall be the property of Landlord;
however, Tenant shall have the right, at Tenant's option, at the expiration or
sooner termination of the Term, to purchase the trade fixtures from Landlord for
an amount equal to the then existing fair market value, as mutually agreed upon
by Landlord and Tenant; failing which, fair market value shall be determined by
an appraiser designated by Tenant and reasonably acceptable to Landlord, the
cost of such appraiser to be borne by Tenant. During the term, the ongoing
maintenance and repair of the trade fixtures shall be Tenant's responsibility.
Rider #6 - amending Section 2.3
- --------
(A) Section 2.3, Line 1, after "additions" add "and" delete the words
"and fixtures".
(B) Section 2.3, Line 2, delete "or located upon".
(C) Section 2.3, Line 7, after "furniture" add "trade fixtures" and
"floor mounted, free standing (Liebert type units) supplemental air units".
(D) Section 2.3, Line 8, add a period after "property" and delete the
remainder of the sentence and substitute the following in lieu thereof. "Tenant
shall repair any and all damage to the Premises, caused by Tenant in removing
the aforementioned property, which may include sheet rocking, holes and walls
which were damaged as a result of removal of the supplemental air units and the
like. However, Tenant shall not remove the HVAC air handlers or supplemental
air units located above the ceiling.
Rider #7 - amending Section 3.1
- --------
Section 3.1, Line 8, delete "on demand" and substitute "from and after five
(5) days of demand".
Rider #8 - amending Section 3.2(A)
- --------
(A) Notwithstanding anything to the contrary contained in this Section
3.2 A, Tenant's Pro Rata Share of Taxes shall not include an increase in Taxes
which is as a result of improvements made to the Building by any other tenant
therein.
41
<PAGE>
(B) In the event of an expansion of the Building, Tenant's Pro Rata share
shall be ratable adjusted by any increase in the rentable square feet of the
Building as a result of said expansion.
Rider #9 - amending section 3.2(B), (C), (E)
- --------
(A) Section 3.2(B) Line 9, delete "five (5)" and substitute "thirty
(30)".
(B) Section 3.2(C), Line 4, insert the following language in front of the
word "Tenant": "Upon receipt of notice that Taxes will change,"
(C) Section 3.2(E), Line 16, delete the remainder of the section
following the word "Taxes" and insert a period.
Rider #10 - amending Section 3.2 H
- ---------
(A) Notwithstanding anything to the contrary set forth in Section 3.2
(H), Operating Costs shall not include any of the following:
(1) Ground rents payable by Landlord;
(2) Payments of principal, amortization payments and interest
charges in connection with Landlord's mortgage financing or
any other borrowings;
(3) Brokerage commissions and leasing fees;
(4) The costs of decorations installed in the public areas of the
Building, but only to the extent such costs materially exceed
the sums expended for decorating the public areas of other
class "A" Office Buildings in the Buckhead Area of Atlanta,
Georgia.
(5) The cost of correcting defects in the construction of the
Building, Parking Garage and Auxiliary Area;
(6) To the extent that Landlord receives insurance proceeds or
condemnation awards with respect thereto (or would have
received same but for Landlord's default under an insurance
policy or failure to diligently prosecute a condemnation
claim), the cost of repairs made by Landlord as a result of
damage, destruction or condemnation; reimbursed or
compensated;
(7) The cost of any items for which Landlord is reimbursed by
insurance or otherwise reimbursed or compensated (or would
have been reimbursed or compensated but for Landlord's default
under its insurance policy or failure to take reasonable
action);
(8) Except for capital expenditures expressly set forth in the
printed portion of Section 3.2 (H), the cost of any
alteration, addition, replacement or other item which, under
generally accepted accounting principles, is properly
classified as a capital expenditure;
(9) Advertising and promotion expenditures in connection with the
Building;
(10) To the extent that any employee of the Building performs
services for any other building owned by Landlord or an
Affiliate of Landlord, the portion of such employee's
42
<PAGE>
compensation which is reasonably allocable to services with
respect to such other building;
(11) The cost of preparing space in the Building for occupancy by
tenants;
(12) Professional fees incurred by Landlord in the preparation of
leases;
(13) The cost of statements and reports rendered to other tenants
of the Building or shareholders of Landlord;
(14) Depreciation: Depreciation of the Building;
(15) The cost of Landlord's litigation with other tenants of the
Building, including damages payable by Landlord in connection
therewith;
(16) Any cost representing an amount paid to an entity related to
Landlord which is in excess of the amount which would have
been paid in the absence of such relationship;
(17) Expenses incurred in connection with the initial construction
of the Building, Parking Garage and Auxiliary Areas;
(18) To the extent such Article 5 services exceed those provided to
Tenant under this Lease, the cost of Article 5 services
provided by Landlord to any other tenant in the Building;
(19) Charitable or Political Contributions: costs resulting from
charitable or political contributions;
(20) Environmental and Other Compliance, Any costs or expenses
relating to asbestos removal or encapsulation or any fines,
costs, expenses or damages relating to any violation of any
environmental law in effect as of the date of installation of
the substance violating such law (as the same distinguished
from expenses incurred in complying with any environmental
laws), unless the condition giving rise to such violation or
fines arose out of, or is caused by, acts or omissions of
Tenant, its employees, contractors or agent;
(21) Art Objects. Costs and expenses relating to the acquisition,
repair, replacement and insurance of sculptures, paintings,
tapestries or other objects of art (normal cleaning,
maintenance and replacement of light fixtures excepted);
(22) Salaries, wages, or fringe benefits payable to the executives
or principals of Landlord or of any general partner or other
component entity of Landlord;
(23) Costs related to the operations of Corporate Property
Investors (or any successor thereto as Landlord), as the same
are distinguished from the costs of operation and maintenance
of the Building and its supporting facilities, including,
without limitation, Landlord's accounting and legal fees,
costs of defending any lawsuits with any mortgage (except as
the actions of Tenant may be at issue), direct costs of
selling, syndicating, financing, mortgaging or hypothecating
any of Landlord's interest in
43
<PAGE>
the Building, costs of any disputes between Landlord and its
employees (if any) not engaged in the management, operation or
maintenance of the Building, or disputes of Landlord with the
Building management (unless such disputes arise out of or in
relation to this Lease);
(24) Costs of any repair or replacement made in accordance with
Article Eight of this Lease entitled "Destruction;
Condemnation";
(25) Any bad debt loss, rent loss, or reserves for bad debts or
rent loss;
(26) Costs of services performed by Landlord specifically for other
tenants in the Building to the extent such work or services
are in excess of Building standard services, and the costs of
alterations or improvements to other space in the Building
which are not available for all tenants of the Building
(27) Any compensation paid to clerks, attendants, or other persons
in commercial concessions (i.e., concession in which the
customer directly pays for the provision of goods or services)
operated by Landlord, and other expenses related the cost of
any work performed or service provided (such as electricity)
for any facility other than the Building (such as a garage
facility) or shuttle service for which fees are charged or
other compensation received;
(28) Costs of any new items not included as Operating Expenses for
the 1997 calendar year or material changes or additions to the
Operating Expenses generated by such changes or additions made
after the date of this Lease
(29) Costs of overtime or other costs incurred by Landlord to cure
its default hereunder or the default of a tenant, or incurred
by reason of the misconduct or negligence of Landlord or a
tenant or their respective agents, invitees, employees or
contractors including costs associated with death or injury to
persons, damage to or loss of property, or use of deficient
building materials;
(30) Damages or costs or expenses paid or payable by Landlord in
connection with claims, actions or counterclaims as a result
of Landlord's gross negligence or willful malfeasance or
willful misfeasance;
(31) Fines or penalties resulting from violation of laws, rules or
regulations and any interest costs associated therewith,
unless such fines, penalties or late charges are due to an act
of Tenant or Tenant's failure to timely pay any amounts due
under this Lease;
(32) Costs of constructing, installing, operating and maintaining
any specialty service or facility, such as an observatory,
broadcasting facility, restaurant, luncheon club, retain
space, sundry shop, newsstand, concession or athletic or
recreational club or the costs associated with services or
benefits (such as beautifying or maintaining a plaza,
cafeteria or dining facility, parking area, terrace or
balcony) not offered or available to Tenant;
44
<PAGE>
(B) It is understood that no individual above the level of Building
manager shall be included in (xi) of the main body of Section 3.2 (H).
(C) It is understood that Operating Costs shall be net of all rebates,
reimbursements, credits and similar items received by Landlord.
(D) Section 3.2(H) is amended as follows:
(1) Line 1, insert the following after the word "mean": reasonable
expenses, costs and disbursements computed on the accrual basis
in accordance with generally accepted accounting principles,
relating to or incurred or paid in connection with:
(2) Line 8, add "on-site" before "equipment".
(3) Line 9, delete "and depreciation thereof".
(4) Line 18, after "improvements" add "to the extent the cost of
same exceeds $200,000.00, they shall be amortized or depreciated
over a period of not less than three (3) or more than ten (10)
years as reasonably determined by Landlord in accordance with
generally accepted accounting practices for office buildings.
(5) Line 24, insert after the word "Areas" the phrase "not to exceed
three percent (3%), so long as building is managed by Landlord
affiliate".
(6) Line 28, in phrase (xiii) after "comparable properties", insert
a comma and add "Class A Office Buildings in the area of
Atlanta, Georgia".
Rider #11 - amending Section 3.2 I
- ---------
Section 3.2(I) is hereby amended by inserting the following at the end of
the section:
(A) Provided Tenant is not then in default, Tenant shall have the right,
to be exercised not more than once during any calendar or fiscal year adopted by
Landlord, to audit Common Area Operating Costs, subject to the following
conditions:
(i) Any such audit shall be conducted during the normal business
hours of Landlord's office and only upon a minimum of thirty (30) days prior
written notice; and
(ii) Tenant, its employees and auditors shall at all times keep the
results of any such audit in complete confidence and in connection therewith,
Tenant, its employees and auditors agree not to disclose the results of such
audit to any person whatsoever except in the event of litigation or arbitration;
and
(iii) Tenant agrees to pay Landlord all Fixed Rent and Additional
Rent theretofore and thereafter coming due, including the Additional Rent which
is the subject of the audit, in the amount billed by Landlord and when due and
payable as provided under this Lease, subject, however, to the right of
reimbursement in the event Tenant's position in the audit is upheld.
(B) The cost of such audit shall be borne by Tenant unless such audit
discloses an error of more than ten (10%) percent of the total audited amount
for the year in dispute which favors Landlord, in which event Landlord shall
bear the cost of such audit. If such audit reveals that the amount previously
determined
-45-
<PAGE>
by Landlord was incorrect, a correction shall be made and either Landlord shall
promptly (not to exceed 45 days) return to Tenant (or Credit Tenant's account)
or Tenant shall promptly (not to exceed 45 days) pay any underpayment to
Landlord. Notwithstanding the pendency of any dispute hereunder, Tenant shall
make payments based upon Landlord's determination or calculation until such
determination or calculation has been established hereunder to be incorrect. In
the event that Landlord is in error, then the amount overpaid by Tenant shall be
returned to Tenant.
(C) In the event the total monthly charges paid by Tenant on account of
excess Operating Costs during such Calendar Year shall be greater than Tenant's
Pro Rata share of the actual excess Operating Costs for such Calendar Year, as
shown by such statement, then Landlord shall credit the difference to Tenant's
account, or pay Tenant the difference within thirty (30) days after it sends
Tenant such statement.
Rider #12 - amending Section 3.3
- ---------
Section 3.3, Line 1, delete "the due date of any payment of Rent" and
substitute "from and after five (5) days notice from Landlord that any
installment of Rent is past due".
Rider #13 - amending Section 4.1
- ---------
(A) Section 4.1(A), Line 7, delete the remainder of the Section following
the word "areas".
(B) Notwithstanding the rights reserved by Landlord pursuant to Section
4.1 (A), Landlord shall not exercise said rights in such a manner as to:
(i) Change the size or configuration of the rentable floor space of
the Premises or of any common facilities located on a floor of
the Building which is wholly leased to Tenant;
(ii) Materially interfere with the rights granted to Tenant pursuant
to this Lease; or
(iii) Materially interfere with Tenant's use of the Premises for the
conduct of its business.
Rider #14 - amending Section 5.1
- ---------
(A) Landlord agrees to comply with Governmental Requirements insofar as
they apply to Landlord's maintenance and repair obligations hereunder.
(B) Line 1, insert the word "and HVAC" after the word "electricity".
Rider #15 - amending Section 5.3
- ---------
(A) Section 5.3(A), lines 1 and 2, delete the phrase "Standard Building
Hours and Days" and substitute "twenty-four (24) hours a day, seven (7) days a
week".
(B) Section 5.3(B), lines 2 and 3, delete the phrase "only during Standard
Building Hours and Days".
(C) Section 5.3(B), Line 4, insert the phrase "of measured actual
electrical usage" after the word "watts".
(D) Section 5.3(C), Line 1, insert the following language at the beginning
of the paragraph:
-46-
<PAGE>
Tenant shall have a base amount for electrical charge expense of $1.60 per
rentable square foot per year which is included as Fixed Rent. Landlord
shall endeavor to install new electric meters for the Premises before the
1997 year end. In the event that Tenant shall use more electricity than
$1.60 per rentable square foot of office space per year, Tenant shall be
charged for the cost of such electricity as Additional Rent.
(E) Section 5.3(C), Lines 6 and 7, delete the phrase "Tenant shall
reimburse Landlord for the cost of such inspection and".
(F) Section 5.3(C), Line 11, delete the word "Tenant" and insert the word
"Landlord" in its place.
(G) Section 5.3(C), Line 15, delete the number "ten (10)" and insert the
word "thirty (30)" in its place.
Rider #16 - amending Section 5.4
- ---------
Section 5.4, Line 2, delete the phrase "Standard Building Hours and Days
and at other times" and substitute "one elevator to provide service twenty-four
(24) hours per day, seven (7) days per week access to the Premises".
Rider #17 - amending Section 5.5
- ---------
Landlord hereby represents to Tenant that as of the date of execution and
delivery of this lease the temperature specifications for the HVAC system
serving the Building are as follows:
Winter - at least 68 degrees
Summer - the higher of 78 degrees or 20 degrees less than the outside
temperature.
Rider #18 - amending Section 5.6 and 5.7
- ---------
(A) Section 5.6, Paragraph 1, Line 4, delete the phrase "when considered
necessary by the Landlord for the comfortable occupancy" and insert the phrase
"as needed for the comfortable use and occupancy" in its place.
(B) Section 5.6, Paragraph 1, Line 6, insert the following language at the
end of the section:
Landlord shall provide additional or after-hours HVAC service at Tenant's
reasonable request and at Buckhead office building market costs to Tenant.
(D) Section 5.6, Paragraph 3, Line 3, delete the phrase "Premises shall
contain" and insert the phrase "Tenant shall install".
(E) Section 5.7, Line 3, after the word "cleaned", add "(according to the
cleaning schedule set forth as Exhibit F, which may change from time to time in
Landlord's sole, but commercially reasonable judgment in keeping with comparable
Class A Office Buildings in the Buckhead Area of Atlanta, Georgia)".
(F) With regard to Section 5.7, the cleaning of any portions of the
Premises which are used for the storage, preparation, service or consumption of
food or beverages shall be limited to the cleaning of external surfaces.
-47-
<PAGE>
Rider #19 - amending Section 5.10
- ---------
(A) Section 5.10, Lines 5 and 6, insert the phrase "which rates shall not
exceed the actual cost of such service, plus Landlord's reasonable overhead"
after the word "rates".
(B) Section 5.10, Lines 2 and 3, delete "heat, and mechanical
ventilation".
Rider #20 - amending Section 5.11
- ---------
If, as a result of the exercise by Landlord of its rights under Section
5.11, services are interrupted to the extent that Tenant is unable to conduct
its business in any portion of the Premises for more than five (5) consecutive
Standard Building Days, then Tenant shall be entitled to a proportionate (based
on the ratio that the affected portions of the premises bear to the entire
Premises) abatement of Rent for each day after the fifth (5th) such day during
which the condition continues.
Rider #21 - amending Section 5.12
- ---------
Tenant shall have the access to the Premises twenty-four (24) hours a day,
seven (7) days a week, subject to Landlord's reasonable rules and regulations.
Rider #22 - amending Section 6.1
- ---------
(A) Section 6.1, Line 3, add "sprinkler" after "elevator".
(B) Landlord shall operate the Building in a manner substantially similar
to other class "A" office buildings located in the Buckhead area of Atlanta,
Georgia.
(C) Landlord shall, in exercising its rights and in performing its
obligations under this Section, perform its work with continuity, diligence and
dispatch and in such a manner (consistent with prudent practice) as will cause
the least possible interference with Tenant's business.
(D) If, as a result of the exercise by Landlord of its rights under
Section 6.1, there is created a substantial and material interference with
Tenant's ability to conduct its business in any portion of the Premises and
Tenant closes for business in such portion for more than five (5) consecutive
Standard Building Days, Tenant shall be entitled to a proportionate (based on
the ratio that the affected portions of the Premises bear to the entire
Premises) abatement of Rent for each day after the fifth (5th) business day
during which the condition continues.
Rider #23 - amending Section 6.1 - Tenant's Right of Self-Help
- ---------
(A) If Landlord fails to make or commence to make any required repair or
replacement in or at or exclusively affecting the Premises (however, if
Landlord shall attempt to make a repair and Tenant is not satisfied, or it
is ineffectual, Tenant shall be required to give notice (i.e. notice again)
pursuant to this paragraph before it exercises self help), then, after ten
(10) business days' written notice (in emergency, reasonable notice shall
suffice), Tenant shall have the right (but no obligation) to make the
repair or replacement for Landlord, and Landlord shall promptly pay Tenant
for the cost incurred.
However, in the event Landlord disputes the necessity of the
repair, its obligations to make same, or the cost thereof, Tenant's remedy
shall be an action at law to recover all costs and attorneys' fees, and
Tenant shall not be entitled to any offsets or deductions from Rent.
(B) Section 6.1, Line 12, delete the word "not".
-48-
<PAGE>
(C) Section 6.1, Line 13, delete the word "until".
(D) Section 6.1, Line 15 delete the phrase "a reasonable time" and insert
the phrase "ten (10) business days".
(E) Section 6.1, Line 15, insert at the end of the section:
Landlord shall, if required to do so as provided under Section 7.1(C),
and Rider 25, shall bring Premises into compliance with Government
Requirements.
(F) Section 6.2(A), Line 7, delete the word "provided" after the word
"leased" and by insert in its place the phrase "on the condition".
(G) Section 6.2(A), Line 12, delete the words "shall be" and insert the
words "has been" in their place.
(H) Section 6.2(A), Line 16, insert the phrase "and (iv) the transferee
Landlord has expressly agreed to assume all of the duties and obligations of
Landlord under the Lease" after the word "Tenant".
Rider #24 - amending Article 6
- ---------
(A) Add the following as Section 6.3 - Quiet Enjoyment
Section 6.3 Quiet Enjoyment
---------------
Landlord warrants that it has full right to execute and to perform
this Lease and that Tenant, upon payment in full of the required monthly
Rent and performance of the terms, conditions, covenants and agreements
contained in this Lease on behalf of Tenant to be performed, shall
peaceably and quietly have, hold and enjoy the Premises and the
appurtenances thereto set forth in this Lease during the Term.
(B) Add the following as Section 6.4 - Landlord's Insurance
Section 6.4 Landlord's Insurance
--------------------
Landlord shall carry comprehensive general liability insurance against
claims arising in connection with Landlord's operation of the public
areas of the Building and Auxiliary Areas and fire insurance with
extended coverage covering, to the extent of at least eighty (80%)
percent of replacement value, the Building and all improvements
therein which are or upon installation become part of the realty
(except for tenants' or other occupants' improvements which are
required to be insured or self-insured by such tenants or occupants);
provided, however, that so long as Landlord has a net worth of at
least $500,000,000.00, Landlord shall have the right to self-insure
for any loss or damage which could be covered by such insurance.
Rider #25 - amending Section 7.1
- ---------
(A) Section 7.1(C), Line 5, insert the following after the word
"Authority":
; provided however, that in the event a condition exists as of the
Commencement Date which is not in compliance with Government Regulations in
existence on the Commencement Date and any Governmental Authority requires
repairs, alterations, additions, replacements or improvements to be
performed in the Premises to bring such condition into compliance, then the
same shall be Landlord's responsibility under Section 6.1 herein.
-49-
<PAGE>
(B) Section 7.1(E), Line 9, delete the word "visitors".
(C) Section 7.1(F), Line 2, delete the phrase "with contractual liability
endorsement".
Rider #26 - amending Section 7.1 G
- ---------
(A) Section 7.1(G), Line 1, insert the phrase "Except as provided herein"
in front of the word "Landlord."
(B) Section 7.1(G), Line 3, add "or willful misconduct" after
"negligence".
(C) Section 7.1(G), Lines 4 and 5, delete the phrase "(other than
accidents or occurrences against which Tenant is insured)".
Rider #27 - amending Section 7.1 H
- ---------
(A) In exercising its rights under Section 7.1 (H), Landlord shall not
materially change the size or configuration of the Premises.
(B) In performing work pursuant to this Section 7.1 (H), Landlord shall
take or cause to be taken all reasonable steps to minimize inconvenience to
Tenant and interference with Tenant's business operations. If Landlord shall
cause any damage to the Premises while performing work hereunder, Landlord shall
promptly repair all such damage.
(C) If, as a result of the exercise by Landlord of its rights under
Section 7.1 (H), Tenant is unable to conduct its business in any portion of the
Premises for more than five (5) consecutive Standard Building Days, then Tenant
shall be entitled to a proportionate (based on the ratio that the affected
portions of the Premises bear to the entire Premises) abatement of Rent for each
day after the fifth (5th) such day that Tenant continues to be unable to operate
in such portions.
Except in the case of an emergency, Landlord shall not enter the Premises
except on reasonable prior notice to Tenant (which may be oral).
(D) Section 7.1(H), Line 6, after "others" add "such as prospective
lenders, purchasers, investors and the like, however, with respect to
prospective lessees of the Premises, such entry shall be limited to the last
year of the Term".
Rider #28 - amending Section 7.1 I and J
- ---------
Delete Section 7.1 (I) in its entirety and substitute the following in lieu
thereof:
(A) In the event of any action or proceeding arising out of or pursuant to
the Lease, the successful party shall be entitled to recover its reasonable
attorneys' fees and all other costs and expenses incurred in connection with the
action or proceeding
(B) Section 7.1(J), Line 4, delete the remainder of the first sentence
after the word "Tenant", and insert the following phrase in lieu thereof:
; provided, however, that Tenant shall not be required to discharge such
lien so long as Tenant is defending against such lien and such lien is not
capable of levy.
-50-
<PAGE>
Rider #29 - amending Section 7.1 K
- ---------
(A) Section 7.1(K), Line 4, after "Tenant" add "and including all trade
fixtures, supplemental air units, and or equipment specific to Tenant's
business."
(B) Section 7.1(K), delete the second sentence of the section.
(C) Section 7.1(K), Lines 8 and 9, delete the phrase "improvements or".
(D) Section 7.1(K), Line 12, delete the phrase "restoration of" and insert
the phrase "damages caused by removal in" in its place.
Rider #30 - amending Section 7.1 L
- ---------
(A) Section 7.1(L), Line 9, delete the period after the word "Lease" and
insert the following language in its place:
; provided, however, that Tenant shall not be obligated to attorn to any
mortgagee, holder of security deeds or deeds of trust, or lessee of the
Building, the Building Parcel, or any part thereof unless such mortgagee or
lessee has delivered to Tenant a nondisturbance agreement, substantially
similar to and imposing no additional burdens than the form attached hereto
as Exhibit H. Following the delivery of such nondisturbance agreement,
(B) Section 7.1(L), Line 15, delete the period after the word "Lease" and
insert the following language:
; provided, however, that Tenant shall not be obligated to attorn to any
lessee of any ground or underlying lease or any part thereof unless such
lessee has delivered to Tenant a nondisturbance agreement substantially
similar to and imposing no additional burdens than the form attached hereto
as Exhibit H.
(C) At present there are no mortgages on the Office Building. The
subordination of this Lease to mortgages hereafter placed on the Office Building
shall be effective only to mortgages made to a "Lending Institution" (as defined
below). As to any mortgage hereafter placed not made to a Lending Institution,
such subordination shall be conditioned on the receipt by Tenant from the
mortgagee of a non-disturbance agreement, in recordable form, providing in
substance that in the event of a foreclosure of such mortgage and provided
Tenant is not in default, this Lease and Tenant's possession shall not be
disturbed and Tenant shall attorn to such mortgagee. As used in this Rider, the
term "Lending Institution" shall mean a savings bank, a savings and loan
association, a commercial bank or trust company (whether acting individually, or
in any fiduciary capacity), an insurance company, a real estate investment
trust, an educational institution, or a state, municipal or similar public
employees' welfare or other pension or retirement fund or system or a private
pension, retirement or profit sharing trust or fund, or a corporate, private or
union pension trust or fund, or any other corporation or entity entitled to
exemption from income tax under the Internal Revenue Code of the United States,
as amended from time to time.
Rider #31 - amending Section 7.1 M
- ---------
(A) Section 7.1(M), Line 3, after the word "areas" insert "attach hereto
as Exhibit G".
(B) Section 71.(M), Line 3, , delete the word "uniform" and substitute
"uniformly applied to all tenants".
Rider #32 - amending Section 7.2 B
- ---------
-51-
<PAGE>
Section 7.2(B), Line 24, delete the last sentence of the section in its
entirety.
Rider #33 - amending Section 7.2 (C)
- ---------
(A) Section 7.2(C), Paragraph 1, Line 3, after "concession" add "without
obtaining Landlord's prior consent".
(B) Section 7.2(C), Paragraph 2, line 2, delete "(but not less than all)"
and substitute "[no more than four (4) partial subleases, per floor and provided
there are no more than four (4) occupants of a floor at any given time (i.e. (i)
four subtenants or (ii) Tenant and three subtenants]".
(C) Section 7.2(C), Paragraph 2, line 3, delete the remainder of the
sentence after the word "however," and insert the following in lieu thereof:
that the proposed assignee or subtenant is not then an existing tenant
with whom Landlord is then negotiating.
(D)
(E) Section 7.2(C), Paragraph 2, line 17, insert the following language
after the word "Lease":
with regard to such proposed space to be subleased or assigned
(F) Delete Section 7.2 (C) (i), (Paragraph 3), in its entirety.
(G) Section 7.2 (C) (ii), (Paragraph 4), Lines 1 and 2, delete "In the
event that Landlord shall not exercise its right to cancel this lease as above
provided,".
(H) Section 7.2(C)(iii), (Paragraph 5), Line 4, delete the phrase "Tenant
or, at Landlord's option."
Rider #34 - amending Section 8.1 B
- ---------
(A) In the event the Premises shall be damaged to the extent of more than
fifty (50%) percent of the costs of replacement thereof during the last year of
the Term or the last year of any renewal period, Tenant shall have the right to
terminate this Lease by written notice to the Landlord served within sixty (60)
days after the fire or casualty, such termination to be effective on the
thirtieth (30th) day following the date of said notice.
(B) In the event this Lease has not been terminated pursuant to Section
8.1 (B) and Landlord has failed to (i) commence restoration or rebuilding within
three (3) months from the date of the casualty or (ii) substantially complete
such restoration within nine (9) months after the date of the casualty, Tenant
may give Landlord notice of Tenant's intention to terminate this Lease. If
Landlord fails within thirty (30) days thereafter to commence or substantially
complete such restoration, as the case may be, this Lease shall terminate
without the necessity for any further notice from Tenant; provided, however,
that the aforesaid time limits shall be tolled for a period not to exceed four
(4) months in the event Landlord fails to commence or complete restoration by
reason of Unavoidable Delay, as set forth in Section 10.11. Tenant's sole remedy
in the event Landlord shall fail to timely commence or substantially complete
such restoration shall be to terminate this Lease.
(C) Notwithstanding anything above, Tenant shall have a reasonable time to
quit the premises in the event of a termination under the provisions of this
Section 8.1 and this Rider #34, not to exceed forty five (45) days.
-52-
<PAGE>
Rider #35 - amending 8.1 B and C
- ---------
(A) Section 8.1(B), Lines 7, Line 10, and Line 14, delete the word
"Fixed".
(B) Section 8.1(B), Line 7, delete the word "only".
(C) Section 8.1(C), Lines 6 through 10, delete the last sentence of the
section.
Rider #36 - amending Section 8.2 B
- ---------
(A) In the event that more than thirty (30%) percent of the rentable floor
space of the Premises shall be acquired or condemned by eminent domain or shall
be rendered inaccessible or untenantable as the result of such a taking, Tenant
shall have the right to terminate this Lease as of the date of title vesting in
the Governmental Authority.
(B) In the event this Lease has not been terminated pursuant to Section
8.2 (B) and Landlord has failed to (i) commence repairs or alterations
("restoration") within three (3) months from the date of the taking or (ii)
substantially complete such restoration within nine (9) months after the date of
the taking, Tenant may give Landlord notice of Tenant's intention to terminate
this Lease. If Landlord fails within thirty (30) days thereafter to commence or
substantially complete such restoration, as the case may be, this Lease shall
terminate without the necessity for any further notice from Tenant; provided,
however, that the aforesaid time limits shall be tolled for a period not to
exceed four (4) months in the event Landlord fails to commence or complete
restoration by reason of Unavoidable Delay, as set forth in Section 10.11.
Tenant's sole remedy in the event Landlord shall fail to timely commence or
substantially complete such restoration shall be to terminate this Lease.
(C) Notwithstanding anything above, Tenant shall have a reasonable time to
quit the premises in the event of a termination under the provisions of this
Section 8.2 and this Rider #37, not to exceed 45 days.
Rider #37 - amending Section 9.1
- ---------
(A) Section 9.1(A), Line 3, insert the words "Tenant's receipt or refusal
of" after the word "after."
(B) Section 9.1(B), Line 4, insert the words "Tenant's receipt or refusal
of" after the word "after."
(C) Section 9.1(B), Line 7 and 8, delete "or if the Premises shall become
vacant, deserted or abandoned".
(D) Section 9.1(B), Paragraph 2, Line 1, insert the phrase "and failure to
cure or commence cure" after the word "occurrence".
Rider #38 - amending Section 9.2
- ---------
(A) Section 9.2(A), Line 4, after "notice" add "(except as otherwise set
forth in the Lease)".
(B) Section 9.2(B), Line 7, insert a period after the word "Term" and
delete the remainder of the sentence.
(C) Section 9.2(B), Lines 15 through 17, delete the phrase "The reasonable
refusal or failure of Landlord to relet the Premises or any part thereof shall
not release or affect Tenant's liability for damages" and insert the following
language in lieu thereof: "Landlord shall have an affirmative obligation to
attempt to relet the Premises, and"
-53-
<PAGE>
Rider #39 - amending Section 9.5
- ---------
Section 9.5, Line 2, delete the remainder of the section after the word
"as" and insert the phrase "the first month's rent" in its place.
Rider #40 - amending Section 10.1
- ---------
(A) Last sentence of the paragraph, delete "mailed" and substitute
"received or refused".
(B) Notwithstanding anything contained herein to the contrary any notice
or demand to Tenant from Landlord, or Landlord to Tenant shall be duly served by
"receipted" hand delivery or sent by "receipted" overnight courier to the
address at which notices are to be mailed.
Rider #41 - amending Section 10.5
- ---------
Delete Section 10.5 in its entirety.
Rider #42 - amending Section 10.6
- ---------
Delete Section 10.6 in its entirety.
Rider #43 - amending Section 10.13
- ---------
Delete Section 10.13 in its entirety.
Rider #44 - amending Article 10 - add the following as Section 10.16 - Parking
- ---------
Section 10.16 Parking
-------------
(A) Landlord has constructed a parking garage adjacent to the building
(the "Parking Garage"). Tenant and its employees shall be permitted to use said
facility in common with the general public. Tenant shall be entitled to purchase
the equivalent of 2.2 parking cards per 1,000 square feet of rentable floor
space demised under this Lease. It is understood that the Parking Garage shall
operate under a shared parking methodology with other property.
(B) Tenant understands the Landlord may designate an independent
contractor to operate the Parking Garage pursuant to a lease operating agreement
or the like, which instrument shall be subject to all of the terms and
provisions of this Rider. Tenant's arrangements for monthly parking permits
shall be made with Landlord. or if Landlord has designated such an operator,
directly with the operator of the Parking Garage. Parking permit fees shall be
payable to Landlord or the operator, as Landlord shall direct. Subsequent to the
execution and delivery of this Lease, Tenant shall be provided with and shall
promptly execute and deliver a parking agreement, which agreement shall
incorporate the term set forth in this Rider. Tenant's use of the Parking Garage
shall be at Tenant's own risk, it being specifically understood that Landlord
shall not be liable in any way for any injury to Person or property or loss by
theft or damage or otherwise resulting from the use of the Parking Garage by any
Person.
(C) Landlord shall designate (or cause to be so designated) five (5)
parking spaces, of Tenant's aforementioned allocation of parking permits, for
use by officers of Tenant on Mondays through Fridays, from 7:00 a.m. to 6:00
p.m. The location of said parking spaces is set forth on Exhibit D, however the
location of said parking spaces is subject to change for reasons of safety and
governmental compliance on three (3) days' prior written notice to Tenant.
Tenant shall provide Landlord with a list of names, car models, and license
plates of those officers which Tenant has designated to use said spaces. In the
event the parking spaces are not utilized as intended, Landlord shall have the
right to revoke the designated parking spaces on ten (10) days notice to Tenant.
-54-
<PAGE>
(D) Tenant shall have reasonable access to and from the Parking Garage
twenty-four (24) hours a day, seven (7) days a week, subject to the reasonable
rules and regulations of the operator of the Parking Garage.
Rider #45 - amending Telephone - adding Section 10.17
- ---------
Tenant shall have the right to utilize the telecommunications service
provider of its choice. Such telecommunications provider shall only be
permitted to run wire through Building risers to Tenant's space, and is not
permitted to run wires from the Premises to other tenant space (other than
Tenant's) in the Building; provided, however, that Tenant shall have no
affirmative obligation to monitor such telecommunications provider and assumes
no responsibility or liability for its actions.
Rider #46 - Tenant's Rights with Respect to 9th and 10th Floors
- ---------
(A) So long as this Lease is in full force and effect and there has not
occurred any Event of Default hereunder, Tenant shall have a one time right of
first refusal with respect to the ninth (9th) and tenth (10th) floors of the
Building, said right of first refusal to be exercisable as hereinafter set
forth.
(B) If Landlord or its agent shall deliver a proposal regarding space on
the ninth (9th) and tenth (10th) floors of the Building (the Proposal) to a
Person interested in leasing such space, Landlord shall deliver (or shall cause
to be delivered) to Tenant a true and exact copy of the Proposal, and Tenant
shall have the right to be exercised not later than ten (10) business days
following receipt by Tenant of the Proposal to hire the space which is the
subject of the Proposal on the same terms and conditions as are therein set
forth, including, without limitation, the same Fixed Rent, Commencement Date,
Additional Rent and construction terms and provisions, provided, however, that
notwithstanding the length of the term which is set forth in the Proposal (the
Proposed Term), Tenant shall hire the space which is the subject of the Proposal
for a term which expires simultaneously with the initial Term of this Lease, as
extended as provided for in this Lease. If the Proposed Term would expire prior
to the expiration date of the initial Term of this Lease, then Fixed Rent for
the period from the expiration of the Proposed Term through the expiration date
of the initial Term of this Lease (the tack-on period) shall be determined in
accordance with paragraph C of this Rider #46.
(C) From the first (1st) day of the tack-on period through the December 31
next ensuing, Fixed Rent shall be at the same annual rate as was payable during
the last year of the Proposed Term. Thereafter, on each subsequent January 1
during the tack-on period, Fixed Rent shall be increased by the percentage
increase, if any, between the Consumer Price Index (as hereinafter defined) in
effect (as hereinafter defined) on the immediately preceding January 1 and the
Consumer Price Index in effect on the January 1 of the year for which the Fixed
Rent determination is being made. All references herein to the Consumer Price
Index shall be deemed to mean the Consumer Price Index for Urban Wage Earners
and Clerical Workers, all Items, Series A, 1967 equal 100, as published by the
United States Department of Labor (or, if not published, the most closely
comparable index then published). The Consumer Price Index in effect on a
particular date shall be deemed to mean the Index published for the month in
which such date occurs) or, if not published for such month, the Index published
for the month next succeeding.
(D) All leases executed by Landlord and Tenant with respect to space on
the ninth (9th) and tenth (10th) floors which is hired by Tenant pursuant to its
right of first refusal shall contain one (1) renewal option, each for a five (5)
year period. All such leases shall provide that each renewal option may be
exercised by Tenant only if exercised contemporaneously with Tenant's exercise
of the corresponding option set forth in Rider 48 hereto, paragraphs (ii)
through (vi) of which shall be incorporated, in substance, into each such lease;
it being understood that during each renewal period, (i) the Fixed Rent payable
under each such lease shall be the same, on a per square foot basis, as the
Fixed Rent
-55-
<PAGE>
payable under this Lease and (ii) the sums deemed substituted in paragraphs 3.2
(A) and 3.2 (G) of this Lease.
(E) In the event Tenant shall fail to timely exercise its right of first
refusal, Tenant shall be deemed to have waived such right with respect to the
space which is the subject of the Proposal, and Landlord shall have the
unencumbered right to let such space to the Person to whom the Proposal was made
(or to any other Person).
(F) The aforementioned Right of First Refusal shall be personal to
Premiere Communications, Inc. and shall not be assignable or exercisable by any
other Person.
Rider #47 - Tenant's Right of First Offer with Respect to Space in Excess of
- ---------
10,000 Rentable Square Feet on a Floor
(A) During the initial Term of this Lease, Tenant shall have a one (1)
time right of first offer with respect to any leasing of an excess of 10,000
square feet of rentable floor space contained on one (1) floor in the Building,
said right of first offer is subject to and subordinate to any rights of
renewal, expansion or First Refusal of existing tenants in the Building or any
offer by Landlord to extend or renew the then existing tenant(s) of such space
in the Building.
(B) If Landlord or its agent shall have identified space on a floor in the
Building in excess of 10,000 rentable square feet, that it intends to offer for
lease, then Landlord shall advise Tenant of the terms it proposes to offer to
lease the space including Fixed Rent, Commencement Date, Additional Rent and
construction terms and provisions (the "Offer"), and Tenant shall have the right
to be exercised not later than ten (10) business days following receipt by
Tenant of the Offer, to hire the space which is the subject of the Offer, on the
same terms and conditions as are therein set forth, including, without
limitation, the same Fixed Rent, Commencement Date, Additional Rent and
construction terms and provisions, except the Term which shall expire
simultaneously with the initial Term of this Lease.
(C) In the event Tenant shall fail to timely exercise its right of First
Offer, Tenant shall be deemed to have waived such right with respect to the
space which is the subject of the Offer, and Landlord shall have the
unencumbered right to let such space to any Person.
(D) The rights granted pursuant to this Rider shall be personal to
Premiere Communications, Inc., and shall not be assignable to or exercisable by
any other Persons.
(E) It is understood that time is of essence with respect to Tenant's
exercise of its rights hereunder.
Rider #48 - amending Term - Renewal Rights
- ---------
Landlord hereby grants Tenant the right to extend the Term of this Lease
for a period of five (5) years (the "Extension Term") subject to the following
terms and conditions:
(i) Tenant shall not be in default under the Lease beyond any
applicable notice or cure period at the time of exercise of
such right or at the commencement of the Extension Term, and
the Lease shall, at each such time, be in full force and
effect.
(ii) Tenant shall give Landlord three hundred sixty (360) days
prior written notice of its desire to extend the Lease.
Within forty-five (45) days following receipt of Tenant's
notice, Landlord shall advise Tenant of Landlord's
-56-
<PAGE>
Estimate of the Fair Market Value Rent (the "Landlord's
Estimate") for the Premises for the Extension Term.
(iii) The Fair Market Value Rent ("FMVR") shall be based upon the
rental rates for which comparable space in the Building is
then being leased; however, such rates shall be adjusted for
comparability with respect to the following factors: (a)
location (i.e., floor, view, access); (b) improvements (i.e.
quantity and quality of buildouts and customization for a
particular tenant); (c) renewals or relocations of existing
tenants; (d) size and configuration; and (e) any discounts,
allowances and any periods of free rent. In the event that
Tenant does not agree with Landlord's Estimate as to the FMVR,
the parties may each choose a real estate broker with at least
ten years' experience and a familiarity with the Buckhead
submarket who will determine the FMVR. In the event the two
brokers cannot come to an agreement as to the FMVR, the
brokers will choose a third broker with at least ten years'
experience and a familiarity with the Buckhead submarket,
whose decision will be final and binding upon the parties.
(iv) Tenant shall notify Landlord within fifteen (15) days after
receipt of Landlord's determination of FMVR of whether Tenant
elects to extend the Term of this Lease, it being understood
that failure of Tenant to so notify Landlord within said
fifteen (15) day period shall be deemed a waiver of Tenant's
right to extend the Lease. If Tenant exercises its right to
extend, as aforesaid, then Landlord shall so notify Tenant and
the Extension Term shall commence as of the expiration of the
original Term, and shall be on the same terms and conditions
of the Lease except:
(a) Fixed Rent shall be the FMVR as determined according to
Section (iii) of this Rider 48, above.
(b) The base calendar year set forth in Section 3.2 (A) and
(G) shall be the calendar year preceding the calendar
year in which the Extension Term commences;
(c) There shall be no obligation on the part of Landlord or
Tenant to perform any work in or at the Premises to
prepare the Premises for Tenant's occupancy during the
Extension Term.
(v) The aforesaid right to extend the Term of this Lease shall be
personal to Premiere Communications, Inc. and shall not be
assignable to, or exercisable by any other Person.
(vi) It is understood that time is of the essence with respect to
Tenant's exercise of its rights hereunder.
-57-
<PAGE>
EXHIBIT A
Site Plan
58
<PAGE>
EXHIBIT B
Floor Plan
59
<PAGE>
EXHIBIT C & G
THE LENOX BUILDING
RULES AND REGULATIONS
The sidewalks and public portions of The Lenox Building, such as entrances,
passages, courts, elevators, vestibules, stairways, corridors halls, shall not
be obstructed or encumbered by Tenant or used for any purpose other than egress
and egress to and from the Premises.
Except where installed by Landlord, no awning or other projection shall be
attached to the outside walls of The Lenox Building and no curtain, blind,
shade, louvered openings or screen shall be attached to or hung in, or used in
connection with, any window or door of the Premises, without prior written
consent of Landlord.
Except as otherwise specifically permitted under Tenant's lease from the
Premises, no sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside of the
Premises or The Lenox Building or on corridor walls. Signs at entrance doors
shall conform to building standard signs, samples of which are on display in
Landlord's rental office. Signs at entrance doors shall, at Tenant's expense,
be inscribed, painted or affixed for Tenant by sign makers approved by Landlord.
In the event of the violation of the foregoing by Tenant, Landlord may remove
same without any liability, and may charge the expense incurred by such removal
to Tenant.
Skylights, windows, heating, ventilating and air conditioning vents and doors
that reflect or admit light and air into the halls, passageways or other public
places in The Lenox Building shall not be covered or obstructed by Tenant, nor
shall any bottles, parcels, or other articles be placed on the window sills.
Mini-blinds are required to be in the down position at all times.
No show case or other article shall be put in front of or affixed to any part of
the exterior of The Lenox Building, nor placed in public halls, corridors or
vestibules without the prior written consent of Landlord.
Water and wash closets and other plumbing fixtures shall not be used for any
purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by Tenant.
Tenant shall not deface any part of the Premises or The Lenox Building.
Tenant shall not engage or pay employees on the Premises, except those actually
working for Tenant on said Premises, nor advertise for laborers giving an
address at The Lenox Building.
Tenant shall not employ any cleaning and maintenance contractor, nor any
individual, firm or organization for such purpose, without Landlord's prior
written consent. Tenants shall not employ any mechanical (HVAC), electrical or
plumbing contractor other than those approved by the Landlord.
Landlord shall have the right to prohibit any advertising by Tenant which, in
Landlord's reasonable opinion, impairs the reputation of The Lenox Building or
its desirability as a building for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
Landlord reserves the right to exclude from The Lenox Building at all times
other than standard building days and hours all persons not presenting a pass
signed by Tenant. Tenant shall be responsible for all persons to whom it issues
a pass
60
<PAGE>
and shall be liable to Landlord for all acts of such persons. Landlord may deny
anyone requesting access to Tenant premises, after hours, who does not have a
key or acceptable identification.
The Premises shall not be used for lodging or sleeping or for any immoral or
illegal purpose.
The requirements of Tenant will be attended to only upon application at the
Management Office of The Lenox Building. Building employees shall not perform
any work or do anything outside of their regular duties, unless under special
instructions from the office of Landlord.
Canvassing, soliciting and peddling in The Lenox Building are prohibited, and
Tenant shall cooperate to prevent the same. Shoe shine, auto glass, auto repair
and car wash services may not perform work on the property without the prior
approval of the Landlord.
All hand trucks used to transport property within The Lenox Building shall be
equipped with rubber tires and side guards. No hand truck shall be used in
passenger elevators.
All paneling or other wood products not constituting furniture shall be of fire
retardant materials. Before installation of such materials, certification of
the materials' fire retardant characteristics shall be submitted to Landlord or
its agents, in a manner satisfactory to Landlord. No live Christmas trees,
----
wreaths or garlands will be permitted unless certified as fire retardant.
Neither Tenant's employees nor Tenant's agents shall be permitted to remove
materials from The Lenox Building without a signed letter of authorization on
Tenants' letterhead, giving the individual permission to remove specific
material.
Tenants and their employees will park only in those areas designated by the
Landlord. No parking in the loading dock area, lobby entry plaza, fire lanes or
reserved (handicap, visitor, etc.) spaces will be permitted. No entry or egress
through the loading dock/service vestibule is allowed.
No access to the building roof, mechanical or control rooms by tenants,
employees or contractors is permitted without the prior approval of the
Landlord. Landlord reserves the right to control access to the building
balconies. No light weight furniture or material is to be allowed on the
building balconies.
Duplicate door keys, building pass cards and parking garage cards are available
only through the Landlord's management offices.
All adjustments to HVAC controls, thermostats, ducts, diffusers, etc. must be
made by Landlord's maintenance personnel.
Smoking or loitering in the restrooms or stairwells is not permitted.
Landlord reserves the right to promulgate additional rules and regulations,
which Landlord may make, for the management and use of the Building and
Auxiliary Areas.
61
<PAGE>
EXHIBIT D
Parking Space Exhibit
62
<PAGE>
EXHIBIT E
COMMENCEMENT DATE AND RATIFICATION
OF LEASE AGREEMENT
The undersigned, Corporate Property Investors, having its principal place
of business at 3 Dag Hammarskjold Plaza (305 East 47th Street) New York, NY
10017 (Landlord), and ________________ _______________________________ having
its principal place of business at ______________________________________
(Tenant), in consideration of TEN and no/100 ($10.00) DOLLARS and other good and
valuable consideration, the receipt whereof is hereby acknowledged, agree as
follows:
1. That certain lease (which lease, and the amendments hereinafter
listed, if any, as hereby modified, is hereinafter collectively referred to as
the "Lease") from Landlord to Tenant dated ______________________, as amended on
(no amendments), which Lease demises ________ square feet of rentable floor
space in the building known as The Lenox Building, located at 3399 Peachtree
Road, N.E., Atlanta, Georgia 30326 is in full force and effect. The
Commencement Date of the original Term is _________________, and the expiration
date is ________________.
2. The lease contains the following renewal terms:
3. Tenant has accepted possession of the Premises demised to it under the
Lease and is now in occupancy thereof.
4. No Rent under the Lease has been paid for more than thirty (30) days
in advance of its due date.
5. Tenant is paying the full Rent called for under the Lease on a current
basis without concession and without offset, claim or defense against Landlord
and/or against payment of the Rent.
6. All of Landlord's Work, as defined in the Lease, has been completed,
except for any latent defects.
7. $__________ has been deposited with Landlord as security for Tenant's
performance of its obligations under the Lease.
IN WITNESS WHEREOF, the parties have executed this agreement this ______
day of ____________________.
LANDLORD:
Corporate Property Investors
By:___________________________
TENANT:
By:___________________________
63
<PAGE>
EXHIBIT F
PERIMETER MAINTENANCE CORPORATION
CLEANING SCHEDULE
-----------------
THE LENOX BUILDING
I. LOBBY & COMMON AREA
-------------------
A. Daily
-----
1. Sweep and police entrance areas to curb.
2. Vacuum walk-off mats.
3. Empty all trash receptacles; damp clean, sanitize exterior,
and replace liners.
4. Empty and clean ashtrays and sand urns.
5. Spot clean to hand height (70") all windows, glass
partitions, and glass doors.
6. Spot clean all walls to hand height.
7. Damp clean all window ledges.
8. Dust and spot clean hand rails.
9. Dust mop composition floors.
10. Spot mop composition floors.
11. Vacuum carpet.
12. Spot Clean Carpet.
13. Buff traffic area's.
14. Police stairwells.
15. Spot mop stairwells.
B. Weekly
------
1. Sweep baseboards, corners, around and under desks.
2. Spray buff composition floors.
3. Sweep stairwells.
4. Damp mop stairwells.
5. High dust ledges in atrium.
C. Monthly
-------
1. High dust above hand height all horizontal surfaces including
any shelves, moldings, ledges, pipes, ducts, vents, and
heating outlets.
2. Clean exterior of urns and trash containers.
D. Annually
--------
1. Refinish composition floors.
II. Elevators
---------
A. Daily
-----
1. Vacuum and spot clean carpet or dust mop/wet mop composition
floor.
2. Door tracts vacuumed and wiped clean.
3. Wall panels, cab doors cleaned and polished.
III. ESCALATORS
----------
A. Daily
-----
1. Clean hand rails.
2. Clean interior side panels.
3. Mop entrance & exit plates.
B. Weekly
------
1. Polish all stainless steel.
64
<PAGE>
2. Polish entrance and exit plates.
C. Special Task
------------
1. Use crevice tool to vacuum around walls and in corners.
2. Employees will be instructed to be extremely careful not to
damage wood finishes when performing all cleaning tasks.
IV. OFFICES
-------
A. Daily
-----
1. Empty wastebaskets and replace liners as needed.
2. Empty and damp clean ashtrays.
3. Dust furniture, paying special attention to lacquered and
special finished furniture.
4. Dust all telephones.
5. Dust all exposed filing cabinets, bookcases and shelves.
6. Spot clean desk tops.
7. Clean counter tops.
8. Clean and sanitize water fountain(s).
9. Clean sand urns of debris.
10. Spot clean door glass, partition glass, lobby glass, and
metal partitions.
11. Spot clean entrance doors.
12. Dust mop composition floors.
13. Spot mop composition floors.
14. Vacuum carpet.
15. Spot clean carpet.
B. Weekly
------
1. Low dust all horizontal surfaces to hand height (70").
2. Clean entire desk tops (where possible).
3. Remove fingerprints from doors, frames, light switches, kick
and push plates, handles, and moldings around doorways.
C. Monthly
-------
1. High dust above hand height all horizontal surfaces,
including shelves, moldings, ledges, pipes, ducts, and
heating outlets.
2. Remove dust and cobwebs from ceiling areas.
3. Buff composition flooring.
D. Quarterly
---------
1. Dust venetian blinds.
E. Annually
--------
1. Refinish composition floors.
NOTE: All maid carts, trash carts and vacuum cleaners will have a protective
bumper to avoid damage to walls, doors and furniture.
V. RESTROOMS
---------
A. Daily
-----
1. Clean and sanitize all vitreous fixtures including toilet
bowls, urinals, and hand basins.
65
<PAGE>
2. Clean and sanitize all flush rings, drain and overflow
outlets.
3. Clean and polish all chrome fittings.
4. Clean and sanitize toilet seats.
5. Damp mop with disinfectant.
6. Clean and polish all glass and mirrors.
7. Empty all containers and disposals.
8. Spot clean and sanitize exterior of all containers.
9. Dust metal partitions and window sills.
10. Remove spots, stains, splashes from wall area adjacent to
hand basins.
11. Refill all dispensers to normal limits: Soap, tissue, and
towels.
12. Spot clean metal partitions.
13. Low dust all surfaces to hand height including sills,
moldings, ledges, shelves, frames, and ducts.
14. Remove spots, stains, and splashes from wall area adjacent to
hand basins.
B. Weekly
------
1. Wash and sanitize metal partitions.
2. Spot clean tile walls.
3. Polish stainless steel.
4. High dust above hand height including sills, moldings, ledges
shelves, frames, ducts, and heating outlets.
C. Quarterly
---------
1. Machine scrub floor.
VI. KITCHEN - VENDING AREAS
-----------------------
A. Daily
-----
1. Wash and sanitize table tops.
2. Damp clean seats and backs of chairs.
3. Empty and damp clean ashtrays.
4. Empty all containers and disposals.
5. Remove fingerprints from doors, frames, light switches, kick
and push plates and handles.
6. Vacuum carpet.
7. Spot clean carpet.
8. Dust mop composition floors.
9. Mop composition floors.
10. Wash and sanitize counter tops.
11. Empty wastebaskets and replace liners.
B. Weekly
------
1. Low dust all surfaces below hand height including sills,
mouldings, ledges, shelves, frames and vents.
2. Sanitize exterior of containers and disposals.
VII. LOADING DOCK
------------
A. Daily
-----
1. Sweep and police.
2. Maintain clean appearance.
B. Weekly (or as needed)
------
1. Pressure wash.
66
<PAGE>
EXHIBIT H
STANDARD FORM
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made as of this ____ day of _____________, 1997 by and
among _______________________, a corporation having an office and place of
business at ____________________ ("Lender"), _________________________, a
corporation, whose address is ___________________________ ("Landlord"), and
_______________________,having an office at ____________________ ("Tenant").
WITNESSETH
WHEREAS, Tenant has entered into a certain lease (the "Lease"), dated
___________________, with Landlord covering premises (the "Premises") within a
certain building known as ___________________, located in ______________ (a
conformed copy of said Lease has been delivered to Lender); and
WHEREAS, Lender has made a certain loan (the "Loan") to Landlord, which
Loan is secured by the mortgages (the "Mortgages") more particularly described
in Exhibit A annexed hereto and affecting the premises known as
__________________, in ___________________; and
WHEREAS, Lender has been requested by Tenant and by Landlord to enter into
a non-disturbance and attornment agreement with Tenant;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
(1) The Lease and any extensions, renewals, replacements or modifications
thereof, and all of the right, title and interest of Tenant thereunder in and to
the Premises, are and shall be subject and subordinate to the Mortgages and to
all of the terms and conditions contained therein, and to any renewals,
modifications, replacements, consolidations and extensions thereof.
(2) Lender consents to the Lease and, in the event Lender comes into
possession of or acquires title to the Premises as a result of the foreclosure
or other enforcement of the Mortgages or the notes secured by the Mortgages, or
as a result of any other means, Lender agrees that, so long as Tenant is not
then in default hereunder beyond any applicable notice and grace periods and the
Lease is then in full force and effect, Lender will recognize Tenant and will
not terminate the Lease or disturb Tenant in its possession of the Premises or
evict Tenant from the Premises for any reason other than one which would entitle
Landlord to terminate the Lease under its terms or would cause, without any
further action by Landlord, the termination of the Lease or would entitle
Landlord under the terms of the Lease to dispossess Tenant from the Premises.
(3) Tenant agrees with Lender that if the interest of Landlord in the
Premises shall be transferred to and owned by Lender by reason of foreclosure or
other proceedings brought by it, or in any other manner, or shall be conveyed
thereafter by Lender or shall be conveyed pursuant to a foreclosure sale of the
Premises, Tenant shall, upon notice of receipt of such transfer of interest to
Lender, be bound to Lender under all of the terms, covenants and conditions of
the Lease for the balance of the term thereof remaining and any extensions or
renewals thereof which may be effected in accordance with any option therefor in
the Lease, with the same force and effect as if Lender were the landlord under
the Lease, and Tenant does hereby attorn to Lender as its landlord, said
attornment to be effective and self-operative without the execution of any
further instruments on the part of any of the parties hereto immediately upon
Lender succeeding to the interest of Landlord in the Premises. Tenant agrees,
however, upon the election of and written demand by Lender to promptly execute
an instrument in confirmation of the foregoing provisions, reasonably
satisfactory to Lender, in which Tenant shall acknowledge such attornment and
shall set forth the terms and conditions of its tenancy.
67
<PAGE>
(4) Tenant agrees with Lender that if Lender shall succeed to the interest
of Landlord under the Lease, Lender shall not be (a) liable for any action or
omission of any prior landlord under the Lease, except to the extent that such
action or omission continues after Lender succeeds to the interest of Landlord,
or (b) subject to any offsets or defenses which Tenant might have against any
prior landlord, or (c) bound by any security deposit which Tenant may have paid
to any prior landlord, unless such deposit is in an escrow fund available to
Lender, or (d) bound by an amendment or modification of the Lease not expressly
provided for in the Lease made without Lender's written consent, or (e) bound by
any notice of termination not provided for in the Lease given by Landlord to
Tenant without Lender's written consent thereto, or (f) personally liable under
the Lease, and Lender's liability under the Lease shall be limited to the
ownership interest of Lender in the Premises. Tenant further agrees with Lender
that Tenant will not voluntarily subordinate the Lease to any lien or
encumbrance without Lender's written consent.
(5) In the event that Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to Lender, and Lender shall have the right
(but not the obligation) to cure such default. Tenant shall not take any action
with respect to such default under the Lease, including, without limitation, any
action in order to terminate, rescind or void the Lease or to withhold any
rental thereunder, for a period of 30 days after receipt of such written notice
by Lender with respect to any such default capable of being cured by the payment
of money and for a period of 45 days after receipt of such written notice by
Lender with respect to any other default (provided, that in the case of any
default which cannot be cured by the payment of money and cannot with diligence
be cured within such 45-day period because of the nature of such default or
because Lender requires time to obtain possession of the Premises in order to
cure the default, if Lender shall proceed promptly and proceed with reasonable
diligence to obtain possession of the Premises, where possession is required,
and to cure the same and thereafter shall prosecute the curing of such default
with diligence and continuity, then the time within which such default may be
cured shall be extended for such period as may be necessary to complete the
curing of the same with diligence and continuity).
(6) Landlord has agreed in the mortgages that the rentals payable under
the Lease shall be paid directly by Tenant to Lender upon the occurrence of a
default by landlord under the Mortgages. Accordingly, after notice is given by
Lender to Tenant that the rentals under the Lease should be paid to Lender,
Tenant shall pay to Lender, or in accordance with the directions of Lender, all
rentals and other moneys due and to become due to Landlord under the Lease.
Tenant shall have no responsibility to ascertain whether such demand by Lender
is permitted under the Mortgages. Landlord hereby waives any right, claim or
demand it may now or hereafter have against Tenant by reason of such payment to
Lender, and any such payment to Lender shall discharge the obligations of Tenant
to make such payment to Landlord.
(7) Tenant declares, agrees and acknowledges that:
(i) Lender, in making disbursements pursuant to any agreement
relating to the Loan, is under no obligation or duty to, nor has Lender
represented that it will, see to the application of such proceeds, and any
application or use of such proceeds for purposes other than those provided for
in such agreement shall not defeat at the subordination herein made in whole or
in part; and
(ii) It intentionally and unconditionally waives, relinquishes and
subordinates the Lease and its leasehold interest thereunder in favor of the
lien or charge of the Mortgages, and in consideration of this waiver,
relinquishment and subordination, specific loans and advances are being and will
be made by Lender to Landlord and, as part and parcel thereof, specific monetary
and other obligations are being and will be entered into by Landlord and Lender
which would not be made or entered into but for said reliance upon this waiver,
relinquishment and subordination.
68
<PAGE>
(8) This Agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns. As used herein the term "Tenant" shall
include Tenant, its successors and assigns; the words "foreclosure" and
"foreclosure sale" as used herein shall be deemed to include the acquisition of
Landlord's estate in the Premises by voluntary deed (or assignment) in lieu of
foreclosure; and the word "Lender" shall include the Lender herein specifically
named and any of its successors, participants and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or under
foreclosure of the Mortgages.
(9) All notices, consents and other communications pursuant to the
provisions of this Agreement shall be in writing and shall be sent by registered
or certified mail, return receipt requested, or by a reputable commercial
overnight carrier that provides a receipt, such as Federal Express or Airborne,
and shall be deemed given when postmarked and addressed as follows:
If to Lender:
with a copy to:
If to Tenant:
If to Landlord:
or to such other address as shall from time to time have been designated by
written notice by such party to the other parties as herein provided.
(10) This Agreement shall be the whole and only agreement between the
parties hereto with regard to the subordination of the Lease and the leasehold
interest of Tenant thereunder to the lien or charge of the Mortgages in favor of
Lender, and shall supersede and control any prior agreements as to such, or any
subordination, including, but not limited to, those provisions, if any,
contained in the Lease, which provide for the subordination of the Lease and the
leasehold interest of Tenant thereunder to a deed or deeds of trust or to a
mortgage or mortgages to be thereafter executed, and shall not be modified or
amended and no provision herein shall be waived except in writing by the party
against which enforcement of any such modification or amendment is sought.
The use of the neuter gender in this Agreement shall be deemed to include
any other gender, and words in the singular number shall be held to include the
plural, when the sense requires. In the event any one or more of the provisions
of this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein. This Agreement shall be governed by and construed in
accordance with the laws of the State of ____________.
69
<PAGE>
IN WITNESS WHEREOF, the parties hereto have placed their hands and seals
the day and year first above written.
Signed and acknowledged in TENANT:
the presence of us:
________________________
____________________________ By:____________________________
Typed Name:
Title:
____________________________ Attest:________________________
LANDLORD:
____________________________ _______________________________
BY:
Typed Name:
Title:
____________________________ Attest:_________________________
LENDER
____________________________ By:_____________________________
Typed Name:
Title:
____________________________ Attest:_________________________
70
<PAGE>
EXHIBIT I
FLOOR PLAN
71
<PAGE>
EXHIBIT 10.5
EQUIPMENT LEASE
---------------
THIS EQUIPMENT LEASE (this "Lease") is made and entered into this 15th day
of December, 1997, by and between PREMIERE COMMUNICATIONS, INC., a Florida
corporation ("Lessor"), and ENDEAVOR TECHNOLOGIES, INC., a Georgia corporation
("Lessee"), to be effective as of the "Effective Date", as defined below.
WHEREAS, Lessor and Lessee have, or simultaneously with the execution of
this Lease, shall, enter into that certain Sublease Agreement between Lessor as
sublessor and Lessee as sublessee dated of even date herewith (the "Sublease"),
and that certain Co-Marketing and Integration Agreement between Lessor and
Lessee dated of even date herewith (the "Co-Marketing Agreement"); and
WHEREAS, Lessor desires to lease to Lessee and Lessee desires to lease from
Lessor certain "PBX" equipment and certain other personal property as more
particularly described herein.
NOW THEREFORE, for and in consideration of the sum of TEN and NO/100
Dollars, the mutual promises set forth below, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1. Agreement to Lease.
------------------
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, that
certain machinery, equipment and other personalty (collectively called the
"Equipment") to be described on the equipment schedules to be attached hereto as
Schedule A upon mutual agreement prior to the Effective Date hereof. In the
- ----------
event the parties fail to reach agreement on the final form of Schedule A prior
----------
to the Effective Date hereof, or fail to mutually agree to waive the requirement
that such schedule be attached hereto, then either party shall have the right to
terminate this Agreement by written notice to the other, in which event this
Agreement and the Sublease shall wholly cease and neither party shall have any
further rights or obligations hereunder.
2. Definition of Effective Date, Term, and Renewal.
-----------------------------------------------
The term of this Lease shall commence on the date (the "Effective Date")
which is the earlier of (i) the date agreed upon between Lessor and Lessee for
the commencement of occupancy under the Sublease, or (ii) February 1, 1998, and
shall continue for an initial term (the "Term") ending on the date which is two
(2) years from such date (the "Termination Date").
Provided that Lessee is not then in default hereunder or under the Sublease
or the Co-Marketing Agreement, and provided that the Sublease shall be renewed,
Lessor hereby agrees to use its good faith efforts to provide a renewal of this
Lease on the same terms and conditions for one (1) additional term of one (1)
year unless prohibited by the superior landlord of Lessor for the premises in
which the Equipment is kept (the "Superior Landlord").
3. Rental.
------
As rental for the Equipment, Lessee shall pay Lessor, without deduction or
setoff, the annual amount set forth on Schedule B, payable in advance in monthly
----------
installments beginning on the Effective Date of this Lease, and continuing each
and every month thereafter on the date which is the same payment date as set
forth in the Sublease. Appropriate prorations shall be made for partial month's
<PAGE>
payments in the event the Term commences or ends on a date which is not a rent
payment date. All payments of rent shall be made at the address set forth in
Paragraph 23, below, or at such other place as Lessor may designate in writing.
In the event Lessee fails to pay rent by its due date, Lessee shall pay a late
charge equal to one and one-half percent (1 1/2%) per month of that payment
accruing until paid.
All amounts payable hereunder shall be net to Lessor, so that this Lease
shall yield to Lessor the rentals specified during the Term, and so that all
costs, expenses and obligations of Lessor hereunder of every kind and nature
whatsoever relating to the Equipment shall be paid by Lessee.
4. Use.
---
Lessee shall use the Equipment in a reasonable and prudent manner and shall
comply with and conform to all national, state, municipal, and other laws,
ordinances, and regulations relating to the possession, use or maintenance of
the Equipment. If at any time during the term of this Lease Lessor supplies
Lessee with labels, plates, or other markings, stating that the Equipment is not
owned by Lessee, Lessee shall, or shall permit Lessor to, affix and keep the
same upon a prominent place on the Equipment. Lessee's use shall be confined to
the location or locations specified in the Sublease or at such other location as
Lessor shall approve in advance in writing, in its sole and absolute discretion.
Lessee shall not sublet or lend the Equipment or any part thereof, or permit the
Equipment to be used by anyone other than Lessee's employees and authorized
agents.
5. Condition of Equipment; Warranties.
----------------------------------
Lessor agrees to deliver the Equipment to Lessee, on the Effective Date, in
good working order and repair. Lessor warrants that Lessee shall have the right
to possession and quiet use of the Equipment in the regular course of business
as provided in this Lease, subject to Lessor's activities which are required
pursuant to any agreements between Lessor and Superior Landlord, including that
certain Agreement of Lease dated March 3, 1997. Lessor shall make available to
Lessee all rights available to Lessor under any manufacturer's warranty or
maintenance agreement on the Equipment, to the extent permitted by the
manufacturer, and shall cooperate with Lessee with regard to such matters during
the term of this Lease.
6. Lessor's Inspection.
-------------------
Upon reasonable notice to Lessee, Lessor shall have the right to inspect
any of the Equipment at any reasonable time, and on reasonable notice, but
without undue disruption to the business of Lessee.
7. Alterations, Improvements.
-------------------------
Lessee shall not make any alterations, additions, or improvements to the
Equipment without the prior written consent of Lessor, in its reasonable
discretion. No alterations, additions, or improvements to the Equipment shall
be permitted without Lessor's consent except for such as may be removed without
causing material damage to the Equipment or otherwise reducing its value below
that which it would have been had no such alterations, additions, or
improvements been made; provided, however, that nothing contained in this
Paragraph 7 shall be deemed to prohibit Lessee from performing ordinary
maintenance and repairs to the Equipment as required by Paragraph 9 of this
Lease. In the event of any such alterations, additions or improvements, the
same shall be made at Lessee's sole cost, and Lessee agrees to restore the
Equipment to its original condition (normal wear and tear excepted) upon
expiration of the Term or earlier termination of this Lease, if so requested by
Lessor.
2
<PAGE>
8. Taxes.
-----
Lessee shall pay all federal, state, county or municipal taxes,
assessments, or other governmental charges including, without intending to limit
the generality of the foregoing, any personal property taxes incurred in
connection with the shipment, use, operation, ownership, leasing, sale, or
possession of the Equipment during the term of this Lease. Lessee shall comply
with all state and local laws requiring the filing of ad valorem tax returns on
the Equipment. Any statements for such taxes received by Lessor shall be
forwarded promptly to the Lessee by the Lessor.
Lessee shall keep the Equipment free and clear of all levies, attachments,
liens, and encumbrances other than those being contested and which, as a result
of such contest, do not adversely threaten title to the Equipment. Lessee shall
give Lessor immediate written notice of attempted levies, attachments, liens,
encumbrances, or other judicial processes of every kind whatsoever and shall
cooperate with Lessor, and take whatever reasonable action may be necessary, to
enable Lessor to file, register, or record this Lease or such other notice as
Lessor shall deem appropriate in such offices as Lessor may determine and
wherever required or permitted by law for the proper protection of title to the
Equipment; and Lessee shall pay all costs, charges, and expenses incident
thereto, if the charges resulted from action or inaction on the part of Lessee.
9. Repairs, Costs, Risk of Loss.
----------------------------
Lessee shall, at its own expense, keep the Equipment in good working order
and repair, reasonable wear and tear and normal obsolescence excepted, and,
subject to the aforementioned exceptions, shall furnish all parts, mechanisms,
and devices required to keep the Equipment in good working order. Lessee shall
pay all costs, fees, expenses, and charges incurred by Lessee in connection with
the shipment, use, operation, ownership, leasing, sale or possession of the
Equipment during the term of this Lease.
Lessee hereby assumes all risk of loss, damage, theft, or destruction of
the Equipment, except to the extent resulting from the material breach by Lessor
of the Co-Marketing Agreement, provided, that no loss, damage, theft or
destruction of or to the Equipment or any part thereof shall impair or abate any
obligation of Lessee under this Lease which shall continue in full force and
effect, except as provided in this Lease.
In the event of loss, destruction, or damage of any kind whatsoever to the
Equipment for which Lessee is responsible, Lessee shall either place the same in
good repair, condition, and working order, or replace the same with like
equipment in good repair, condition, and working order; provided, that if the
Equipment is determined to be lost, stolen, destroyed, or damaged beyond repair,
other than as a result of reasonable wear and tear or normal obsolescence,
Lessee may, at its option, pay Lessor the "Fair Market Value" in cash, as such
term is defined on Schedule B hereto. All proceeds of insurance received by
----------
Lessor or Lessee under any policy referred to in Paragraph 11 shall be applied
toward the cost of any such repair or replacement. Upon payment of the Fair
Market Value for an item of Equipment, this Lease shall terminate, with respect
to such Equipment, and Lessee thereupon shall become entitled to such Equipment
"as-is-where-is", without warranty, express or implied, with respect to any
matter whatsoever, and rent shall be abated in proportion to the amount of such
payment in relation to the Fair Market Value of all of the Equipment.
3
<PAGE>
10. Surrender.
---------
Upon the expiration or earlier termination of this Lease, with respect to
the Equipment, Lessee shall (unless Lessee has paid Lessor in cash the "Fair
Market Value" of the Equipment pursuant to Paragraph 9, above) at its own cost
and expense, return the Equipment unencumbered to Lessor in good working order,
ordinary wear and tear and reasonable obsolescence resulting from the proper use
thereof alone excepted, in any reasonable manner as may be specified in writing
by Lessor.
11. Insurance.
---------
Lessee shall, at its own expense, maintain insurance with respect to the
Equipment, covering all risks of loss thereof or damage thereto by fire, and
such other risks as covered by "extended coverage" endorsements including, but
not limited to, destruction, theft, and public liability. Policies for such
insurance shall name Lessor and Superior Landlord as additional insureds as
their interests may appear. Lessee shall pay the premiums therefor and deliver
to Lessor the policies of insurance or duplicates thereof, or other evidence
showing such coverages to be in effect. Each insurer shall agree, by
endorsement upon the policy or policies issued by it or by independent
instruments furnished to Lessor, that it will give Lessor ten days written
notice before the effective date of any alteration or cancellation of such
policy(ies). The proceeds of such insurance, at Lessee's option, shall be
applied toward the replacement, restoration, or repair of the Equipment or
toward payment of the obligation of Lessee under this Lease.
12. Lessee's Indemnification.
------------------------
Lessee shall indemnify Lessor against, and hold Lessor harmless from, any
and all claims, actions, suits, proceedings, costs, demands, damages, and
liabilities of whatever nature (including negligence, tort, and strict
liability), all costs and expenses relating to or in any way arising out of the
possession, use, operation, control, maintenance, repair, return, or disposition
of the Equipment or any portion thereof, including without limitation claims for
injury or death of persons and for damage to property; except those caused by
the gross negligence or willful misconduct of Lessor and except to the extent
resulting from Lessor's material breach of the Co-Marketing Agreement. During
the term of this Lease, Lessee shall also indemnify Lessor against and hold
Lessor harmless from, any and all federal, state, county, municipal, or other
license fees or taxes whatsoever and penalties and interest thereon (except for
penalties and interest caused solely by Lessor's failure to timely file returns
or make payments), whether assessed, levied against, or payable by the Lessor or
otherwise, with respect to the Equipment or any portion thereof or the purchase,
sale, rental, use, operation, control, possession, or ownership of the Equipment
or any portion thereof, or measured in any way by the value thereof.
13. Lessor's Payment.
----------------
In the event that Lessee fails to procure or maintain insurance or to
comply with any other provision of this Lease, Lessor shall have the right, but
shall not be obligated, to effect such insurance or compliance on behalf of
Lessee. In that event, Lessor shall provide invoices showing all monies spent
and expenses incurred by Lessor in effecting such insurance or compliance,
including any reasonable legal fees incurred in connection therewith, and the
amounts shown thereon shall be paid by Lessee to Lessor with the next monthly
payment of rent. Failure to repay in this manner shall carry with it the same
consequence as a failure to pay an installment of rent hereunder.
4
<PAGE>
14. Events of Default.
-----------------
The occurrence of any of the following shall constitute an "Event of
Default" by Lessee: (a) non-payment when due of any amount payable under this
Lease when such default continues for a period of fifteen (15) days; or (b)
failure to observe, keep, or perform any other provision of this Lease required
to be observed, kept, or performed by Lessee and failure of Lessee to remedy,
cure, or remove such failure in observing, keeping, or performing the provisions
of this Lease within 30 days after receipt of written notice from Lessor.
15. Remedies.
--------
Upon the occurrence of any Event of Default which is not timely cured,
Lessor may, at its option, terminate this Lease. In addition, Lessor may
proceed by appropriate legal proceedings, either at law or in equity, to recover
damages for the breach of the terms of this Lease or to enforce the specific
performance by Lessee of the applicable terms of this Lease.
Lessor may, in its sole discretion and upon demand, enter into any premises
where the Equipment or any portion thereof may be found and take possession of
and remove the same (which entry and repossession shall not operate to terminate
this Lease unless Lessor expressly so elects), whereupon all rights of Lessee in
the Equipment shall terminate absolutely. Lessor may, rather than take
possession of the Equipment, render any and all of the Equipment unusable,
without removing it from the premises where located. Lessee hereby waives any
and all damages occasioned by such taking of possession unless caused by
Lessor's gross negligence or willful misconduct. Notwithstanding any
repossession, or any other action which Lessor may take, Lessee shall be, and
remain liable for, the full performance of all obligations on the part of Lessee
to be performed under this Lease.
Lessor may, at its option, attempt to relet the Equipment or any portion
thereof for such rentals and on such terms as Lessor may elect, or sell the
Equipment or any portion thereof at public or private sale on such terms and
notice as Lessor shall reasonably determine. Any repossession or rendering
unusable or sale or reletting of the Equipment or any portion thereof by Lessor
shall not bar an action for damages as provided in this Lease and the bringing
of an action or the entry of judgment against the Lessee shall not bar the
Lessor's right to repossess the Equipment or any portion thereof.
All of Lessor's remedies are cumulative and may be exercised concurrently
or separately and, in addition, Lessor may exercise any other right or remedy
which may be available to it under the Uniform Commercial Code. This Lease is
deemed to be intended as security and, accordingly, Lessee agrees that the
Equipment shall secure the indebtedness set forth herein.
16. Personal Property.
-----------------
The Equipment is, and shall at all times be and remain, personal property
notwithstanding that the Equipment or any part thereof may now be, or hereafter
become, in any manner affixed or attached to, or imbedded in, or permanently
resting upon, real property or any building thereon, or attached in any manner
to what is permanent as by means of cement, plaster, nails, bolts, screws, or
otherwise.
5
<PAGE>
17. Assignment.
----------
Neither party may assign its rights under this Lease to any other party
(except for Lessor's assignment of its rights hereunder to a lender holding a
security interest in and to the Equipment or to Superior Landlord, or to a
direct or indirect subsidiary of Premiere Technologies, Inc.), without the
express written consent of the other party, in its reasonable discretion.
18. Intentionally Deleted.
---------------------
19. Termination Rights
------------------
In the event of termination of the Sublease or the Co-Marketing Agreement,
either party hereto, provided it is not responsible for a default causing such
termination, shall have the right to terminate this Lease upon written notice to
the other party, which termination shall be effective on the date on which such
other agreement terminates, unless the parties mutually agree to another
effective date. In the event of such termination, Lessee shall surrender the
Equipment to Lessor in the manner described in Paragraph 10 of this Lease and
neither party shall have any further rights or obligations under this Lease,
except for rights or obligations that had accrued prior to the effective date of
the termination of this Lease.
20. Parties.
-------
"Lessor," as used in this Lease, shall for all purposes include its
successors or permitted assigns. "Lessee" shall, as to its duties and
obligations, include its successors or permitted assigns.
21. Waiver.
------
A waiver by Lessor of any Event of Default by Lessee shall not be construed
as a waiver as to any future Events of Default.
22. Amendments; Severability.
------------------------
No agreement shall be effective to amend this Lease unless such agreement
is in writing and signed by the party to be charged thereby.
Wherever possible, each provision of this Lease shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Lease shall be prohibited by or be invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Lease.
6
<PAGE>
23. Notice.
------
Any notices permitted or required by this Lease shall be in writing and
delivered by hand or by reputable overnight courier or by certified mail, return
receipt requested. In Lessee's case, notices shall be addressed to:
PRIOR TO THE EFFECTIVE DATE HEREOF:
- -----------------------------------
Lessor: Premiere Communications, Inc.
------ 3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Patrick G. Jones
with a copy to:
Premiere Communications, Inc.
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Julianne F. Vaio
Lessee: Endeavor Technologies, Inc.
------ 1100 Lake Hearn Drive, Suite 370
Atlanta, Georgia 30342-1524
Attention: W. Michael Heekin
AFTER THE EFFECTIVE DATE HEREOF:
- --------------------------------
Lessor: Premiere Communications, Inc.
------ 3399 Peachtree Road, N.E.
Lenox Building, Suite 700
Atlanta, Georgia 30326
Attention: Patrick G. Jones
with a copy to:
Premiere Communications, Inc.
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: Julianne F. Vaio
Lessee: Endeavor Technologies, Inc.
------ 3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, Georgia 30326
Attention: W. Michael Heekin
7
<PAGE>
Lessor and Lessee may change their respective addresses for notice pursuant
to this Lease by providing written notice of same in the method specified above.
24. Time.
----
Time is of the essence to this Lease and to each and all of the provisions
of this Lease.
25. Titles; Construction; Counterparts.
----------------------------------
The titles to the paragraphs of this Lease are solely for the convenience
of the parties and are not intended as an aid to the interpretation of this
Lease. This Lease and all rights under this Lease shall be governed by,
construed, and enforced in accordance with the laws of the State of Georgia.
This Lease may be executed in multiple counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and the
same agreement.
IN WITNESS WHEREOF, Lessee and Lessor have caused their duly authorized
representatives to execute this Lease under seal as of the day and year first
above written.
LESSEE:
------
ENDEAVOR TECHNOLOGIES, INC.,
a Georgia corporation
By: /s/ W. Michael Heekin
---------------------
Title: Chief Operating Officer
-----------------------
[CORPORATE SEAL]
LESSOR:
------
PREMIERE COMMUNICATIONS, INC.,
a Florida corporation
By: /s/ Patrick G. Jones
--------------------
Title: Senior Vice President
---------------------
[CORPORATE SEAL]
8
<PAGE>
SCHEDULE "A"
EQUIPMENT SCHEDULE
------------------
1. DESCRIPTION OF THE EQUIPMENT
Manufacturer
Quantity Item Serial and Model No.
-------- ---- --------------------
<PAGE>
Schedule A, continued
2. DESCRIPTION OF THE EQUIPMENT OWNED BY SUPERIOR LANDLORD. With regard to
the following Equipment, Lessee acknowledges and agrees that Superior Landlord
is the sole owner thereof and that Lessor has no right, title or interest in and
to such Equipment, except that which has been granted by Superior Landlord,
pursuant to the terms of the Master Lease or otherwise. Lessor shall not be
liable to Lessee for loss, cost, or damage to Lessee on account of the above.
Manufacturer
Quantity Item Serial and Model No.
-------- ---- --------------------
<PAGE>
SCHEDULE "B"
Annual Rental for each year of the Term:
$291,732.00
Payable in monthly installments of:
$24,311.00
The "Fair Market Value" of the Equipment is agreed to be the fair market value
(appropriately adjusted for prior use, reasonable wear and tear and
obsolescence) determined for a particular item of the Equipment (or all of the
Equipment, as the case may be) by a neutral, third-party appraiser reasonably
acceptable to Lessor and Lessee having sufficient professional experience in the
field of providing appraisals for equipment similar to the Equipment.
<PAGE>
EXHIBIT 10.8
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made and entered into as of
the 31st day of December, 1998, by and among WebMD, Inc., a Georgia corporation
("Purchaser"), certifiedemail.com, Inc., a Georgia corporation ("Seller"), and
SunTrust Bank, Atlanta, a Georgia banking corporation ("Escrow Agent").
WHEREAS, Purchaser, Seller and Gary B. "Court" Coursey, an individual
resident of Georgia and the sole voting shareholder of Seller (the
"Shareholder), have entered into an Asset Purchase Agreement on the date hereof
(the "Purchase Agreement") pursuant to which Seller and Shareholder have sold,
and Purchaser has purchased, substantially all of the assets used in connection
with the operation of a business providing services relating to the
certification of delivery of electronic mail via the Internet;
WHEREAS, Section 2 of the Purchase Agreement provides for the escrow of the
Purchase Price (as defined in the Purchase Agreement) to protect Purchaser with
respect to any claim of Purchaser arising in connection with the Purchase
Agreement against Seller or Shareholder; and
WHEREAS, Purchaser and Seller desire to appoint the Escrow Agent as escrow
agent for the purpose of receiving, holding and distributing the Deposit (as
defined below), and the Escrow Agent is willing to act as escrow agent subject
to and in accordance with the terms and conditions of this Escrow Agreement.
1. DEFINED TERMS. As used herein, all defined terms not otherwise
-------------
defined herein have the meanings ascribed to them in the Purchase Agreement.
2. APPOINTMENT AND AGREEMENT OF ESCROW AGENT. Purchaser and Seller
-----------------------------------------
hereby appoint the Escrow Agent to serve as, and the Escrow Agent hereby agrees
to act as, escrow agent upon the terms and conditions of this Escrow Agreement.
3. DEPOSIT. Purchaser warrants that it has deposited with the Escrow
-------
Agent, on the date hereof, a certificate representing 50,000 shares of
Purchaser's Series D Common Stock, issued in the name of Seller (the "Deposit"),
together with 25 stock powers, executed in blank by Seller ("Stock Powers") and
25 certified resolutions of Seller with the signatures of Seller's officers on
each such document guaranteed by a participant in the Medallion signature
guarantee program. For the purposes of this Escrow Agreement, each share of
Purchaser's Series D Common Stock shall be deemed to have a value of $20.00.
4. OPERATION OF ESCROW.
-------------------
(a) The Escrow Agent will hold the Deposit for delivery as set forth
herein.
<PAGE>
(b) If any claim of Purchaser arises against Seller or Shareholder (a
"Claim") in connection with the Purchase Agreement, Purchaser shall provide
written notice to the Escrow Agent with a copy to Seller of (i) such Claim, (ii)
the monetary value of such Claim and (iii) the number of shares of the Deposit
(valued at $20 per share) necessary to satisfy such Claim (collectively, a
"Notice of Claim").
(c) Once Purchaser provides a Notice of Claim pursuant to Section
4(b), Seller shall have twenty days from the date Purchaser sent the Notice of
Claim to send to the Escrow Agent with a copy to Purchaser written notice (an
"Objection Notice") of: (i) objection to the release of the shares held in the
Deposit necessary to satisfy such Claim; and (ii) a request that the Claim be
submitted to arbitration in accordance with the provisions of Section 4(d).
(d) If Seller sends a timely Objection Notice to the Escrow Agent,
the Claim shall be submitted to and settled by a panel of three arbitrators
appointed by the Atlanta Regional Office of the American Arbitration Association
and shall be settled in accordance with the Commercial Rules of the American
Arbitration Association. Such arbitrators shall apply Georgia law. In rendering
a decision, the arbitrators shall make specific findings of fact and take into
account all applicable judicial precedents. The arbitrators shall be required to
provide in writing to the parties the basis for the award or order of such
arbitrators, and a court reporter shall record all hearings with such record
constituting the official transcript of such proceedings. The decision of the
arbitrators shall be binding and conclusive on all parties involved, and
judgment upon their decision may be entered in the highest court of any forum,
federal or state, having jurisdiction. All arbitration fees shall be borne
equally by the parties, provided that the prevailing party in the arbitration
proceedings shall be awarded attorney fees and all other costs and expenses
incurred directly or indirectly in connection with the proceedings, unless the
arbitrators shall for good cause determine otherwise.
(e) If Seller fails to provide a timely Objection Notice, the Escrow
Agent shall release to Purchaser the number of shares of the Deposit specified
in the Notice of Claim as set forth in Section 4(b).
(f) If the Escrow Agent is obligated to release shares of the Deposit
to Purchaser or any other party pursuant to Section 4(d) or 4(e), the Escrow
Agent shall provide to Purchaser's transfer agent the then-current stock
certificate representing the Deposit, a completed Stock Power setting forth the
number of shares to be released and instructions as to the party to whom shares
are to be distributed, pursuant to Purchaser's Notice of Claim. Upon completion
of such distribution, Purchaser's transfer agent shall be instructed to deliver
to the Escrow Agent a balance certificate representing the remaining portion of
the Deposit.
5. RELEASE OF DEPOSIT. The Deposit, less the total amount of all Claims
------------------
validly made by Purchaser and satisfied hereunder pursuant to Section 4 of this
Escrow Agreement, shall be distributed on the first business day immediately
following December 31, 1999 ("Release Date") by providing to each individual
shareholder of Seller identified on Schedule A at the applicable address set
----------
forth thereon an amount equal to the then-current number of
2
<PAGE>
shares in the Deposit multiplied by the percentage identified on Schedule A as
----------
such shareholder's applicable portion of the Deposit. In connection therewith,
the Escrow Agent shall provide to Purchaser's transfer agent the then-current
stock certificate representing the Deposit and completed Stock Powers containing
instructions for such distributions to each individual shareholder by the
Purchaser's transfer agent. If, prior to the Release Date, Purchaser has given
notice of any Claims, the Escrow Agent shall retain a portion of the Deposit
having a value as set forth hereunder equal to the aggregate of all such Claims
as such value is estimated by Purchaser in any applicable Notice of Claim
(collectively the "Retained Portion"). The Escrow Agent shall retain the
Retained Portion in escrow, and the Escrow Agent's obligations hereunder shall
be extended with respect thereto until the resolution of all such Claims
pursuant to Section 4 hereof.
6. NOTICES. All notices, instructions and other communications provided
-------
for herein shall be in writing and shall be deemed validly given, made or
served, on the date of delivery in the case of personal delivery or if delivered
by telecopier (receipt confirmed), or forty-eight (48) hours after deposit with
the U.S. Postal Service if sent by certified mail, return receipt requested,
addressed as follows :
If to Purchaser:
WebMD, Inc.
400 The Lenox Building
3399 Peachtree Road, NE
Atlanta, Georgia 30326
Telephone: (404) 479-7600
Telecopier: (404) 479-7651
Attention: Chief Executive Officer
Tax ID #: 58-2277528
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
Atlanta, Georgia 30309
Telephone: (404) 817-6000
Telecopier: (404) 817-6050
Attention: James Walker IV, Esq.
3
<PAGE>
If to Seller and/or Shareholder:
certifiedemail.com, Inc.
2870 Peachtree Road, Suite 414
Atlanta, Georgia 30305
Telephone: (404) 266-2232
Telecopier: (404) 266-3494
Attention: Mr. Gary B. "Court" Coursey
Tax ID #: 58-2350228
With a copy to:
The Law Offices of Kirby Turnage
999 Peachtree Street, N.E., Suite 1750
Atlanta, Georgia 30309
Telephone: (404) 872-0000
Telecopier: (404) 873-2748
Attention: Kirby Turnage, Esq.
If to Escrow Agent:
SunTrust Bank, Atlanta
Corporate Trust Division
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305-1797
Telephone: (404) 240-1956
Telecopier: (404) 240-1932
Attention: Rebecca Fischer
or to such other addresses as the parties may designate.
7. FEES. All fees payable to the Escrow Agent for holding the Deposit in
----
escrow, disbursing the Deposit and acting as escrow agent hereunder are as set
forth in Schedule B attached hereto and shall be paid by Purchaser at the time
-----------
of closing.
8. DUTIES OF ESCROW AGENT. The Escrow Agent's duties and
----------------------
responsibilities shall be limited to those expressly set forth in this Escrow
Agreement; provided, however, with the Escrow Agent's written consent, this
Escrow Agreement may be amended at any time or times by an instrument in writing
signed by all of the then parties in interest, including the Escrow Agent.
9. LIMITATION ON LIABILITY. The Escrow Agent shall not be liable to
-----------------------
anyone by reason of any error of judgment, or for any act done or act taken or
omitted by it in good faith, or for any mistake of fact or law, or for anything
which it may do or refrain from doing in
4
<PAGE>
connection herewith, unless caused by or arising out of its own gross negligence
or willful misconduct.
10. RELIANCE. The Escrow Agent shall be entitled to rely and shall be
--------
protected in acting in reliance upon any writing furnished to it by any party
hereto in accordance with the terms hereof, and shall be entitled to treat as
genuine, and as the document it purports to be, any letter, paper notice or
other document furnished to it by any party and believed by the Escrow Agent in
good faith to be genuine and to have been signed by the proper party. The
Escrow Agent may consult with counsel with respect to any question relating to
its duties or responsibilities hereunder and shall not be liable for any action
taken or omitted in good faith on advice of such counsel.
11. CONFLICTING CLAIMS. In the event of any disagreement between the
------------------
parties hereto resulting in conflicting claims and demands being made in
connection with or against the Deposit, the Escrow Agent shall be entitled, at
its option, to refuse to comply with the claims or demands of any party until
such disagreement is finally resolved in the manner provided in Section 4
hereof, but shall continue to comply with the other terms and conditions of this
Escrow Agreement, and in so doing the Escrow Agent shall not be or become liable
to any party.
12. ATTACHMENT, GARNISHMENT, ETC. If all or any part of the Deposit is at
-----------------------------
any time attached, garnished or levied upon, or if the payment, assignment,
transfer, conveyance or delivery of all or any part of the Deposit shall be
stayed or enjoined by any court order, or if any order or judgment shall be made
or entered by any court affecting all or any part of the Deposit, then in any of
such events, the Escrow Agent is authorized, to rely upon and comply with any
such order, writ, judgment or decree, which it believes in good faith is binding
upon it, and if it complies with any such order, writ, judgment or decree, it
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, even though such order, writ, judgment
or decree may be subsequently reversed, modified, annulled, set aside or
vacated.
13. [Intentionally Omitted].
14. INDEMNIFICATION. Seller and Purchaser shall reimburse and jointly and
---------------
severally indemnify the Escrow Agent, its employees, directors, officers and
agents for, and hold each harmless against, any loss, liability or expense,
including, without limitation, reasonable attorneys' fees and expenses, incurred
without gross negligence or willful misconduct on the part of the Escrow Agent
arising out of, or in connection with the acceptance of, or the performance of,
its duties and obligations under this Escrow Agreement. Promptly after the
receipt by the Escrow Agent of notice of any demand or claim or the commencement
of any action, suit or proceeding, the Escrow Agent shall, if a claim in respect
thereof is to be made against any of the other parties hereto, notify such other
parties thereof in writing; but the failure by the Escrow Agent to give such
notice shall not relieve such party from any liability which it may have to the
Escrow Agent hereunder, except to the extent such indemnifying party is
materially prejudiced by such failure. For the purposes hereof, the term
"expense or
5
<PAGE>
loss" shall include all amounts paid or payable to satisfy any claim, demand or
liability, or in settlement of any claim, demand, action, suit or proceeding
settled with the express written consent of the indemnifying party, and all
reasonable costs and expenses, including, but not limited to, counsel fees,
expenses and disbursements paid or incurred in investigating or defending
against any such claim, demand, action, suit or proceeding. The Escrow Agent
shall have no right of setoff under this Agreement or otherwise against amounts
in the Deposit.
15. RESIGNATION OR REMOVAL OF ESCROW AGENT. The Escrow Agent may at any
--------------------------------------
time resign by giving thirty days' prior written notice of resignation to Seller
and Purchaser. Seller and Purchaser may at any time jointly remove the Escrow
Agent by giving thirty days' prior written notice signed by each of them to the
Escrow Agent. If the Escrow Agent shall resign or be removed, a successor escrow
agent, which shall be a bank or trust company having assets in excess of $2
billion, shall be appointed by Seller and Purchaser by written instrument
executed by Seller and Purchaser and delivered to the Escrow Agent and to such
successor escrow agent and, thereupon, the resignation or removal of the
predecessor Escrow Agent shall become effective and such successor escrow agent,
without any further act, deed or conveyance, shall become vested with all right,
title and interest to all cash and property held hereunder of such predecessor
Escrow Agent, and such predecessor Escrow Agent shall, on the written request of
Seller, Purchaser or the successor escrow agent, execute and deliver to such
successor escrow agent all the right, title and interest hereunder in and to the
Deposit of such predecessor Escrow Agent and all other rights hereunder of such
predecessor Escrow Agent. If no successor escrow agent shall have been appointed
within the effective date of the removal or resignation of the Escrow Agent, the
Escrow Agent shall be entitled to apply to a court of competent jurisdiction for
the appointment of a successor and tender into the Registry of a court of
competent jurisdiction all or a portion of the Deposit. Upon its resignation and
delivery of the Deposit as set forth above, the Escrow Agent shall be discharged
from any and all further obligations arising in connection with the escrow
contemplated by this Escrow Agreement provided, however the provisions of
Section 14 hereof shall survive any removal or resignation.
16. TERMINATION. This Escrow Agreement shall terminate on the date on
-----------
which there is no property remaining in the Deposit.
17. FURTHER ASSURANCES. From time to time on and after the date hereof,
------------------
Seller and Purchaser shall each deliver or cause to be delivered to the Escrow
Agent such further documents and instruments and shall do and cause to be done
such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of this
Escrow Agreement, to evidence compliance herewith or to secure itself that it is
protected in acting hereunder.
18. GOVERNING LAW. This Escrow Agreement shall be construed, governed,
-------------
enforced and administered in accordance with the laws of the State of Georgia,
without giving effect to the conflict of law principles thereof. Except as set
forth in Section 4 hereof, all actions and proceedings arising out of or
relating to this Escrow Agreement shall be heard and
6
<PAGE>
determined in any state or federal court sitting in the City of Atlanta,
Georgia, and the parties hereto irrevocably submit to the jurisdiction of such
courts and waive any defense of an inconvenient forum to the maintenance of any
such action or proceeding.
19. COUNTERPARTS. This Escrow Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the day, month and year first above written.
PURCHASER:
WebMD, Inc.
By: /s/ W. Michael Heekin
-------------------------------------
W. Michael Heekin
Executive Vice President
SELLER:
certifiedemail.com, Inc.
By: /s/ Gary B. "Court" Coursey, Jr.
-------------------------------------
Gary B. "Court" Coursey, Jr.
President and Chairman of the Board
of Directors
ESCROW AGENT:
SunTrust Bank, Atlanta
By: /s/ Rebecca Fischer
-------------------------------------
Name: Rebecca Fischer
-----------------------------------
Title: Trust Officer
----------------------------------
7
<PAGE>
EXHIBIT 10.9
STOCK PURCHASE WARRANT
THIS STOCK PURCHASE WARRANT (hereinafter referred to as the "Warrant") is
made and entered into as of July 21, 1998 (the "Issuance Date"), by and between
ENDEAVOR TECHNOLOGIES, INC., a Georgia corporation (the "Company"), and MATRIA
HEALTHCARE, INC. (the "Warrantholder").
W I T N E S S E T H:
WHEREAS, the Company desires to grant the Warrantholder warrants to
purchase shares of the Company's Common Stock Series D (the "Stock"), upon the
terms and conditions herein contained;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, and of other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. GRANT OF WARRANT. The Company hereby grants to the Warrantholder the
right to purchase 80,000 shares of Stock (the "Warrant Shares"), subject to
adjustment as set forth in Section 6.
2. EXERCISE PRICE. The purchase price (the "Exercise Price") for each
Warrant Share shall be the per share price at which the Company's stock is
offered to the public in the Company's initial public offering of its capital
stock (the "IPO"); provided, however, that if the closing of the IPO has not
-------- -------
occurred on or before June 30, 1999, the Exercise Price shall be equal to the
lesser of (i) $20.00 or (ii) the fair market value of the Company's stock on
June 30, 1999 as determined by the Board of Directors of the Company in a
commercially reasonable manner. The basis of determination shall be provided in
writing to the Warrantholder.
3. EXERCISE OF WARRANT.
(a) The Warrant shall be exercisable upon the earlier of (i) the
closing of the IPO or (ii) June 30, 1999, and shall remain exercisable until the
expiration of the Warrant in accordance with its terms. The Warrantholder may
exercise the Warrant by delivering to the Company a written notice of exercise
signed by the Warrantholder, in substantially the form attached hereto as
Exhibit A (a "Notice of Exercise"), together with payment to the Company of the
aggregate Exercise Price of the Warrant Shares so purchased. The Exercise Price
shall be payable, at the option of the Warrantholder (i) by a check payable to
the Company or (ii) by the surrender of a portion of this Warrant where the
Warrant Shares subject to the portion of this Warrant that is surrendered have a
fair market value equal to such aggregate Exercise Price for the Warrant Shares
to be purchased pursuant to the Notice of Exercise.
<PAGE>
(b) The Warrantholder may not exercise the Warrant for less than
5,000 Warrant Shares (except that if the number of remaining Warrant Shares is
less than 5,000, this Warrant may be exercised with respect to such lesser
number of Warrant Shares).
(c) Within 15 days after the exercise of the Warrant as herein
provided, the Company shall deliver to the Warrantholder a certificate or
certificates for the Warrant Shares being issued in the name of the
Warrantholder and in such denominations as are requested by the Warrantholder.
Additionally, if the Warrant is being exercised for fewer than all of the
Warrant Shares issuable thereunder, the Company shall execute and deliver to the
Warrantholder a new warrant (dated the date hereof) evidencing the right to
purchase the balance of the Warrant Shares.
(d) The Company covenants and agrees that all Warrant Shares which
may be issued upon exercise of the Warrant shall, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, and free from all liens, claims and encumbrances, except
restrictions imposed by applicable securities laws, the Company's Articles of
Incorporation, as amended, or this Warrant. The Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrant such
number of authorized but unissued shares of Stock as will be sufficient to
permit the exercise in full of the Warrant.
4. TERM OF WARRANT. The term of the Warrant shall continue in effect
until the earlier of: (i) the date on which the Warrant has been exercised or
canceled with respect to all of the Warrant Shares; or (ii) five years from the
Issuance Date.
5. CONSENT TO TRANSFER. This Warrant and all rights hereunder are
nontransferable and nonassignable by the Warrantholder, unless the Company
consents thereto in writing. Any transfer or attempted transfer except pursuant
to the preceding sentence shall be null and void and of no effect whatsoever.
6. ADJUSTMENTS.
(a) If, prior to the termination of the Warrant as provided in
Section 4 hereof:
(i) The number of outstanding shares of Stock is increased by a
stock split, stock dividend, or other similar event, the Exercise Price
shall be proportionately reduced and the number of Warrant Shares that have
not theretofore been purchased by the Warrantholder shall be
proportionately increased.
(ii) The number of outstanding shares of Stock is decreased by a
combination or reclassification of shares, or other similar event, the
Exercise Price shall be proportionately increased and the number of Warrant
Shares that have not theretofore been purchased by the Warrantholder shall
be proportionately reduced.
If any adjustment under this Section 6(a) would create a fractional share of
Stock or a right to acquire a fractional share of Stock, such fractional share
shall be disregarded and the number of Warrant Shares subject to the Warrant
shall be the next higher number of shares.
2
<PAGE>
(b) If, prior to the termination of the Warrant as provided in
Section 4 hereof, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Stock shall be changed into the same or a different number of shares
of the same or another class or classes of stock or securities of the Company or
another entity, then the Warrantholder shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the Warrant Shares immediately theretofore
purchasable and receivable upon the exercise of the Warrant, such shares of
stock and/or securities as may be issued or payable with respect to or in
exchange for the number of Warrant Shares immediately theretofore purchasable
and receivable upon the exercise of the Warrant had such merger, consolidation,
exchange of shares, recapitalization or reorganization not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of the Warrantholder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares purchasable upon the exercise of the Warrant) shall
thereafter be applicable, as nearly as may be practicable in relation to any
shares of stock or securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this subsection (b)
unless the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligation to deliver to the Warrantholder such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
Warrantholder may be entitled to purchase. The foregoing notwithstanding, in the
event of a merger or consolidation in which the Company is not the surviving
entity, if the Company concludes that it will be unable to satisfy the
conditions of this subsection (b) without a material adverse effect on the terms
of such proposed transaction, then the Company shall have the option, prior to
or contemporaneously with the closing of such merger or consolidation, to
purchase the Warrant from the Warrantholder at its then fair value, determined
with regard to both the spread between the Exercise Price and the value of the
consideration to be received in the transaction and the remaining term of the
Warrant. The Company and the Warrantholder shall agree on such fair value or, in
the event they are unable to agree, shall submit the question of fair value to
an investment banking firm to be selected by the Warrantholder and reasonably
satisfactory to the Company, with the cost of such investment banking firm to be
paid by the Company.
7. INVESTMENT REPRESENTATION. As a condition to the issuance of Warrant
Shares hereunder, the Warrantholder shall represent to the Company that the
Warrant Shares it will acquire pursuant to such exercise are being purchased for
its own account for investment purposes only and not with a present view to
resale or a distribution thereof, unless the Warrantholder delivers to the
Company an opinion of counsel acceptable to counsel for the Company stating that
such a representation is not required under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws. The Warrantholder
acknowledges that the Warrant Shares may be "restricted securities" as defined
in the Act and that such Warrant Shares may not be able to be resold unless such
resale is registered under the Act and applicable state securities laws or
unless an exemption is available.
8. CERTAIN NOTICES. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
3
<PAGE>
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
generally any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially
all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of
the affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or securities
convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the
Warrantholder, by certified or registered mail, (i) at least twenty days'
prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, and (ii) in the case of such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least twenty days' prior written notice of
the date when the same shall take place. Any notice required by clause (i)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and any notice required by clause (ii) shall specify the
date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
9. NO RIGHTS AS A SHAREHOLDER. The Warrantholder shall not have any
interest in or shareholder rights with respect to any shares of Stock which are
subject to the Warrant until such shares have been issued and delivered to the
Warrantholder in accordance with this Warrant.
10. TAXES. As a condition to the issuance of Warrant Shares hereunder, the
Company may withhold, or require the Warrantholder to pay or reimburse the
Company for, any taxes which the Company determines are required to be withheld
under federal, state or local law in connection with the exercise of the
Warrant.
11. HEIRS AND SUCCESSORS. This Warrant and all terms and conditions hereof
shall be binding upon the Company and its successors and assigns.
4
<PAGE>
12. GOVERNING LAW. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Georgia without regard to
the principles of conflicts of laws.
13. NOTICES. The addresses of record for the parties for all purposes of
this Warrant shall be the addresses set forth below, unless a party notifies the
other party of a new address in writing. Any notice under this Warrant provided
by either party shall be in writing and shall be deemed to have been
sufficiently given or served and effective for all purposes upon receipt by the
other party of such notice.
Endeavor Technologies, Inc.
400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
Attention: President
Matria Healthcare, Inc.
1850 Parkway Place, 12/th/ Floor
Marietta, Georgia 30067
Attention: General Counsel
14. SEVERABILITY. The provisions of this Warrant, and of each separate
section and subsection, are severable, and if any one or more provisions may be
determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any unenforceable provision to the extent enforceable,
shall nevertheless be binding and enforceable.
15. COUNTERPARTS. This Warrant may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Facsimile transmission of
signatures shall be deemed originals.
5
<PAGE>
IN WITNESS WHEREOF, the Company and Warrantholder have caused this Warrant
to be executed by their duly authorized officers as of the Issuance Date.
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
--------------------------------------------
Name: W. Michael Heekin
--------------------------------------------
Title: Chief Operating Officer
--------------------------------------------
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
--------------------------------------------
Name: Frank D. Powers
--------------------------------------------
Title: Executive Vice President and Chief Operating
--------------------------------------------
Officer
--------------------------------------------
6
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
[DATE]
Endeavor Technologies, Inc.
400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
Attention: President
Re: Exercise of Stock Purchase Warrant
----------------------------------
Dear Sir:
The undersigned, __________________________________, pursuant to that
certain Warrant, dated as of ______________________, 1998, by and between
Endeavor Technologies, Inc. and the undersigned (the "Warrant"), hereby
exercises the Warrant for the following number of Warrant Shares, subject to the
terms and conditions of the Warrant:
Number of Warrant Shares Being Purchased _______________________________
Total Purchase Price and Amount Remitted _______________________________
Very truly yours,
___________________________________
[Name]
<PAGE>
EXHIBIT 10.10
NONCOMPETITION AGREEMENT
------------------------
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into
this 21st day of July, 1998 (the "Execution Date"), by and among ENDEAVOR
TECHNOLOGIES, INC., a Georgia corporation ("Endeavor"), QUALITY DIAGNOSTIC
SERVICES, INC., a Georgia corporation and a wholly owned subsidiary of Endeavor
("QDS"), TELEMEDICS, INC., a Georgia corporation and wholly owned subsidiary of
Endeavor ("Telemedics"), and MATRIA HEALTHCARE, INC., a Delaware corporation
("Matria"). Endeavor, QDS and Telemedics are sometimes referred to collectively
as the "Companies" and individually as a "Company."
BACKGROUND:
----------
A. Contemporaneously with the execution of this Agreement, Matria is
acquiring substantially all of the assets of QDS and Telemedics pursuant to the
terms of that certain Asset Purchase Agreement (the "Purchase Agreement"), dated
as of July 20, 1998 and effective as of July 1, 1998 among Matria and the
Companies. Terms used and not otherwise defined herein shall have the same
meanings ascribed to them in the Purchase Agreement.
B. As a material inducement for Matria to enter into the Purchase
Agreement, each Company has agreed to enter into this Agreement.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, Ten Dollars ($10.00) in
hand paid, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
-----------
have the following respective meanings:
(a) "Competing Business" shall mean a business that, wholly or
------------------
partly, directly or indirectly, is engaged in providing, selling or
marketing cardiac event monitoring or cardiac disease management services
or home maternity monitoring or management services (excluding patient
education or patient requests for medical information via the Internet) or
designing, developing, manufacturing, testing, selling, marketing or
distributing products and equipment relating thereto; provided, however,
-------- -------
that the Endeavor Business shall not be considered a Competing Business.
(b) "Competitive Position" shall mean: (i) a Company's direct or
--------------------
indirect equity ownership (excluding ownership of less than 1% of the
outstanding common stock of any publicly held corporation) or control of
any portion of any Competing Business; or (ii) any Company serving as a
consultant, lender, joint venturer, partner, agent, advisor or independent
contractor of or to any Competing Business.
<PAGE>
(c) "Confidential Information" shall mean all valuable, proprietary
------------------------
and confidential business information belonging to QDS or Telemedics that
does not constitute a Trade Secret and that is not generally known by or
available to the competitors of QDS or Telemedics but is generally known
only to such Company and those of its employees, independent contractors,
clients or agents to whom such information must be confided for internal
business purposes.
(d) "Covenant Period" shall mean the period of time commencing on the
---------------
date hereof and continuing for a period of five (5) years hereafter.
(e) "Endeavor Business" shall mean the development, marketing, sales
-----------------
and provision of Internet based information and communications services,
including, without limitation, Endeavor's WebMD service offering, so long
as such services do not include cardiac or maternity monitoring services.
(f) "Restricted Territory" shall mean the United States of America.
--------------------
(g) "Trade Secrets" shall mean the trade secrets of QDS or Telemedics
-------------
as defined under applicable law.
2. CONFIDENTIALITY. Each Company hereby acknowledges and agrees that the
---------------
Trade Secrets and Confidential Information represent a substantial investment of
such Company and that any unauthorized disclosure or use of any of the Trade
Secrets or Confidential Information or any other violation of the
confidentiality provisions of this Section 2, would be wrongful and could cause
immediate and irreparable injury to Matria. Accordingly, each Company hereby
agrees that it will not, without the express prior written consent of Matria,
distribute, sell, market, publish, disclose, transfer, assign, disseminate or
otherwise communicate to any other person or entity, or use, copy or appropriate
for or on behalf of itself or any other person or entity: (a) any Confidential
Information during the Covenant Period; or (b) any Trade Secret at any time
during which such information constitutes a trade secret under applicable law.
Each Company agrees that it will adhere to all reasonable confidentiality
requirements that Matria may establish from time to time and immediately notify
Matria of any unauthorized disclosure or use of any Trade Secret or Confidential
Information by it. Each Company also agrees to assist Matria, at Matria's
expense and to the extent necessary, in the procurement or any protection of
Matria's rights in or to any Trade Secrets or Confidential Information.
Notwithstanding anything herein to the contrary, the restrictions set forth in
Section 2 will not be applicable to information which otherwise constitutes
Trade Secrets or Confidential Information but is solely to be used in the
furtherance of the Endeavor Business.
3. NONCOMPETITION. During the Covenant Period, each Company agrees that
--------------
it will not, without the prior written consent of Matria, either directly or
indirectly, alone or in conjunction with any other person or entity, accept,
enter into or take any action in furtherance of a Competitive Position in the
Restricted Territory. Notwithstanding anything herein to the
-2-
<PAGE>
contrary, the restrictions set forth in Section 3 will not be applicable to any
action taken in furtherance of the Endeavor Business.
4. NONSOLICITATION OF CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. During the
--------------------------------------------------------
Covenant Period, each Company agrees that it will not, without the prior written
consent of Matria, either directly or indirectly, alone or in conjunction with
any other person or entity, solicit, entice or induce any customer, supplier or
distributor of Matria or any of its subsidiaries (or any actively sought
prospective customer, supplier or distributor of Matria or any of its
subsidiaries) for or on behalf of any Competing Business.
5. NONSOLICITATION OF PERSONNEL. During the Covenant Period, each Company
----------------------------
agrees that it will not, without the prior written consent of Matria, either
directly or indirectly, alone or in conjunction with any other person or entity,
solicit or attempt to solicit any "key or material" employee, consultant,
contractor or other personnel of Matria or any of its subsidiaries to terminate,
alter or lessen that party's affiliation with Matria or any of its subsidiaries
or to violate the terms of any agreement or understanding between such employee,
consultant, contractor or other person and Matria. Each Company also agrees
that, for eighteen (18) months hereafter, it will not, without the prior written
consent of Matria, either directly or indirectly, alone or in conjunction with
any other person or entity, employ or contract with any "key or material"
employee, consultant, contractor or other personnel of Matria or any of its
subsidiaries; provided, however that Matria and Endeavor hereby agree that Alva
Teets may be employed by Endeavor after a period of six months from the
Execution Date. For purposes of this Section 5, "key or material" employees,
consultants, contractors or other personnel shall mean those such persons or
entities who have direct access to or have had substantial exposure to
Confidential Information or Trade Secrets.
6. ACKNOWLEDGMENTS. Each Company hereby acknowledges and agrees that the
---------------
covenants contained in Sections 2, 3, 4 and 5 hereof (the "Protective
Covenants") are made by it (and shall be treated) as "ancillary to the sale of
the Business" under the Purchase Agreement. Each Company further acknowledges
and agrees that the Protective Covenants are reasonable as to time, scope and
territory given Matria's need to protect the Trade Secrets and Confidential
Information and given the substantial benefits which the Companies shall receive
as a result of the transactions contemplated by the Purchase Agreement. In the
event any covenant or agreement in this Agreement shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too great a period of time or over too great a geographical area or by
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable
and/or over the maximum geographical area as to which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
7. SPECIFIC PERFORMANCE. Each Company hereby acknowledges and agrees that
--------------------
any breach of a Protective Covenant by it will cause irreparable damage to
Matria, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, each
Company agrees that, in addition to any other remedy that may
-3-
<PAGE>
be available at law, in equity, or hereunder, Matria shall be entitled to
specific performance and injunctive relief, without posting bond or other
security to enforce or prevent any violation of any of the Protective Covenants
by it.
8. MISCELLANEOUS.
-------------
(a) This Agreement, together with the Purchase Agreement, contains
the entire agreement and understanding concerning the subject matter hereof
between the parties hereto. No waiver, termination or discharge of this
Agreement, or any of the terms or provisions hereof, shall be binding upon
either party hereto unless confirmed in writing. This Agreement may not be
modified or amended, except by a writing executed by both parties hereto.
No waiver by either party hereto of any term or provision of this Agreement
or of any default hereunder shall affect such party's rights thereafter to
enforce such term or provision or to exercise any right or remedy in the
event of any other default, whether or not similar.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia without regard to the principles of
the conflicts of laws.
(c) This Agreement may not be assigned, in whole or in part, by any
Company without the prior written consent of Matria or by Matria without
the prior written consent of Endeavor, and any attempted assignment not in
accordance herewith shall be null and void and of no force or effect;
provided, however, that Matria may assign this Agreement to any wholly-
owned subsidiary operating the Business and to any person who acquires the
Business from Matria or such subsidiary.
(d) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
(e) If any provision of this Agreement shall be held void, voidable,
invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and, accordingly, the remaining provisions of
this Agreement shall remain in full force and effect as though such void,
voidable, invalid or inoperative provision had not been contained herein.
(f) This Agreement shall not be construed more strongly against any
party hereto regardless of which party is responsible for its preparation.
(g) Upon the reasonable request of any party, each party hereto
agrees to take any and all actions, including, without limitation, the
execution of certificates, documents or instruments, necessary or
appropriate to give effect to the terms and conditions set forth in this
Agreement.
(h) All rights and remedies of each party hereto are cumulative of
each other and of every other right or remedy such party may otherwise have
at law or in equity, and
-4-
<PAGE>
the exercise of one or more rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of other rights or remedies.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute the same Agreement. Any signature page of any such counterpart,
or any electronic facsimile thereof, may be attached or appended to any
other counterpart to complete a fully executed counterpart of this
Agreement, and any telecopy or other facsimile transmission of any
signature shall be deemed an original and shall bind such party.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the day and year
first above written.
"Endeavor"
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
----------------------------------------
Title: Chief Operating Officer
-------------------------------------
[CORPORATE SEAL]
"QDS"
QUALITY DIAGNOSTIC SERVICES, INC.
By: /s/ Blake Whitney
----------------------------------------
Title: President
-------------------------------------
[CORPORATE SEAL]
"Telemedics"
TELEMEDICS, INC.
By: /s/ Jeffrey T. Arnold
----------------------------------------
Title: Chief Executive Officer
-------------------------------------
[CORPORATE SEAL]
"Matria"
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
----------------------------------------
Title: Executive Vice President and Chief
-------------------------------------
Operating Officer
-------------------------------------
[CORPORATE SEAL]
-6-
<PAGE>
EXHIBIT 10.11
MANAGEMENT SERVICES AGREEMENT
-----------------------------
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is made and
entered into this 21st day of July, 1998 (the "Execution Date") to be effective
as of July 1, 1998 (the "Effective Date"), by and between ENDEAVOR TECHNOLOGIES,
INC., a Georgia corporation ("Endeavor"), and MATRIA HEALTHCARE, INC., a
Delaware corporation ("Matria").
BACKGROUND:
----------
A. Matria is acquiring, effective as of the Effective Date,
substantially all of the assets of Quality Diagnostic Services, Inc. ("QDS") and
Telemedics, Inc. ("Telemedics"), both Georgia corporations and wholly owned
subsidiaries of Endeavor, pursuant to the terms of that certain Asset Purchase
Agreement, dated July 21, 1998, and effective as of the Effective Date (the
"Purchase Agreement"), among Endeavor, QDS, Telemedics and Matria. Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Purchase Agreement.
B. As a material inducement for Matria to enter into the Purchase
Agreement, Endeavor has agreed to enter into this Agreement.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. SERVICES. Subject to the terms and conditions set forth in this
--------
Agreement, Matria hereby retains Endeavor to provide to Matria the management
and transition services more particularly described on Exhibit A attached hereto
---------
and incorporated herein by this reference (the "Services") to assist with the
transition of the Business to Matria, and Endeavor agrees to render the Services
to Matria.
2. TRANSITION AND CONSULTING EMPLOYEES.
-----------------------------------
(a) Subject to the terms and conditions set forth in this
Agreement, Endeavor agrees to make available to Matria the employees listed on
Exhibit B attached hereto and incorporated herein by this reference (the
- ---------
"Transition Employees"). Such Transition Employees shall be made available to
Matria, solely to provide the Services, on a full-time basis (approximately 40
hours per week), until the later of (i) three months after the Execution Date,
or (ii) three months after Matria identifies and commences training of current
Matria employees or hires such Transition Employees' replacements, as
applicable, but in no event past the end of the Term ("Transition Part I");
provided, however, that Mark Bogart will be available on a full-time basis
throughout the Term unless terminated by Matria as hereinafter provided. After
the end of Transition Part I, Endeavor agrees to make the Transition Employees
available to Matria to provide the Services, on an "as-needed" basis, as
reasonably requested by Matria, until the end of the Term. Endeavor may utilize
the services of the Transition Employees to the extent that such
<PAGE>
Transition Employees are not otherwise engaged by Matria to perform the
Services, provided, however, that Endeavor shall in no way interfere with the
Transition Employees' providing of the Services to Matria under this Agreement.
In addition to the above, Endeavor agrees that Matria shall have the right to
terminate Mark Bogart's services pursuant to this Section 2(a), upon 30 days
written notice to Endeavor and Bogart (the "Bogart Termination"), and upon such
Bogart Termination, all of the remaining provisions and terms of this Agreement
shall continue and remain in full force and effect, except as provided in
Section 5(a) below.
(b) Subject to the terms and conditions set forth in this
Agreement, Endeavor agrees to make available to Matria, to provide the Services,
the employees listed on Exhibit C, attached hereto and incorporated herein by
---------
this reference, on an "as-needed," basis, as reasonably requested by Matria,
until the end of the Term (the "Consulting Employees").
3. RIGHT TO OCCUPY SPACE AND USE EQUIPMENT. Endeavor hereby grants to
---------------------------------------
Matria and Matria employees the right, during the Term, to occupy such space
located at the principal office of Endeavor at 400 The Lenox Building, 3399
Peachtree Road, N.E., Atlanta, Georgia 30326 (the "Lenox Office"), currently
occupied by Endeavor and QDS in connection with the operation of the Business,
and to use such equipment, currently used by Endeavor and QDS at the Lenox
Office in the operation of the Business (including, without limitation, office
furniture, computers, telephones and fax machines but excluding Endeavor's
executive offices), as is reasonably required for Purchaser to operate the
Business.
4. RECEIVING AND SHIPPING AREA AND BUSINESS OFFICE. Matria, reasonably
-----------------------------------------------
assisted by Endeavor, agrees to move (i) all receiving and shipping functions
from the areas not included in the Licensed Premises Agreement (the "Shipping
Area") and (ii) all billing functions in the area currently used by Endeavor for
such billing functions (the "Business Office") within 60 days after the
Execution Date. If Matria fails to move the receiving and shipping functions out
of the Shipping Area and the billing functions out of the Business Office within
such time period, Matria agrees to pay Endeavor $2.92 per each square foot left
occupied per month (or portion thereof). In no event shall such Shipping Area or
Business Office be occupied past six months from the Execution Date.
5. COMPENSATION AND EXPENSES.
-------------------------
(a) As consideration for Endeavor's performance of the Services,
and Endeavor making available the Transition Employees and the Consulting
Employees, Matria shall pay to Endeavor on the first day of each month during
the Term of this Agreement a monthly cash fee in the amount of $25,000 (provided
such payments will be prorated for partial months) (the "Management Fee");
provided, however, that upon a Bogart Termination, the Management Fee shall be
reduced by $10,000 per month (or as may be prorated for a partial month), which
Endeavor and Matria hereby agree is the portion of the Management Fee
attributable to the services to be performed by Mark Bogart.
(b) Matria shall reimburse the Transition Employees and the
Consulting Employees for all reasonable expenses such employees incur in
performing their duties pursuant
2
<PAGE>
to this Agreement, at the request or on behalf of Matria, including, without
limitation, travel, lodging, meal and entertainment expenses and long distance
telephone charges; provided, however, that Matria shall have no obligation to
reimburse the Transition Employees or the Consulting Employees for expenses not
approved by Matria.
6. INDEPENDENT CONTRACTOR.
----------------------
(a) Endeavor and Matria, in the performance of this Agreement,
will be acting in their own separate capacities and not as agents, employees,
partners, joint venturers or associates of one another. It is expressly
understood and agreed that (i) Endeavor is an independent contractor of Matria
in all manners and respects and Endeavor is not authorized, nor are any of its
employees or agents authorized, to bind Matria to any liability or obligation or
to represent that it has any such authority; and (ii) Matria is not authorized,
nor are any of its employees or agents authorized, to bind Endeavor to any
liability or obligation or to represent that it has any such authority.
(b) The Transition Employees and the Consulting Employees shall
remain employees of Endeavor, and Endeavor shall be solely responsible for all
of its withholding taxes, social security taxes, unemployment taxes, and
workers' compensation insurance premiums with respect to the Transition
Employees and the Consulting Employees.
7. OWNERSHIP OF WORK PRODUCT. All work product, property, data,
-------------------------
documentation or information or materials conceived, discovered, developed or
created by Endeavor, QDS, the Transition Employees or the Consulting Employees
in performing the Services pursuant to this Agreement (collectively, the "Work
Product") will be owned exclusively by Matria. To the greatest extent possible,
any Work Product will be deemed to be a "work made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by
------
Matria. Endeavor hereby unconditionally and irrevocably transfers and assigns to
Matria all right, title and interest in and to any Work Product; provided,
however, that "Work Product" shall not include Endeavor 2000 software or any
derivative works thereof.
8. TERM. Unless sooner terminated in accordance with the provisions of
----
Section 9 hereof, the term (the "Term") of this Agreement shall commence as of
the Effective Date and shall continue until December 31, 1998.
9. TERMINATION.
-----------
(a) Notwithstanding anything else contained herein to the
contrary, and in addition to any other rights and remedies it may have at law,
in equity or hereunder, either party hereto may cancel and terminate this
Agreement if the other party fails to correct or cure any material breach
hereunder within ten days after receiving written notice thereof from such
party.
(b) Notwithstanding anything else contained herein to the contrary
Matria may cancel and terminate this Agreement at any time (for any reason or
for no reason) upon 30 days written notice to Endeavor.
3
<PAGE>
10. INDEMNIFICATION. Endeavor hereby indemnifies and agrees to defend
---------------
and hold harmless Matria and its affiliates, employees, officers, agents,
partners and independent contractors from and against any and all damages,
losses, costs (including, without limitation, court costs and attorneys' fees),
settlements, suits, actions, expenses, liabilities and claims of any kind caused
by or resulting from any breach of this Agreement by Endeavor and/or QDS. Matria
hereby indemnifies and agrees to defend and hold harmless Endeavor and its
affiliates, employees, officers, agents, partners and independent contractors
from and against any and all damages, losses, costs (including, without
limitation, court costs and attorneys' fees), settlements, suits, actions,
expenses, liabilities and claims of any kind caused by or resulting from any
breach of this Agreement by Matria.
11. NOTICES.
-------
(a) All notices provided for or required by this Agreement shall
be in writing and shall be delivered personally to the other designated party,
or mailed by certified or registered mail (return receipt requested) or
delivered by a recognized national overnight courier service, as follows:
If to Endeavor or QDS: Endeavor Technologies, Inc.
400 The Lenox Building
3399 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Chief Executive Officer
If to Matria: Matria Healthcare, Inc.
1850 Parkway Place
12th Floor
Marietta, Georgia 30067
Attention: General Counsel
(b) Notices delivered pursuant to Section 11(a) shall be deemed
given: (i) at the time delivered, if personally delivered; (ii) at the time
received, if mailed; and (iii) two business days after timely delivery to an
overnight courier service.
(c) Either party hereto may change the address to which notice is
to be sent by written notice to the other party in accordance with the
provisions of this Section 11.
12. MISCELLANEOUS.
-------------
(a) This Agreement contains the entire agreement and understanding
concerning the subject matter hereof between the parties hereto. No waiver,
termination or discharge of this Agreement, or any of the terms or provisions
hereof, shall be binding upon either party hereto unless confirmed in writing.
This Agreement may not be modified or amended, except by a writing executed by
the parties hereto. No waiver by any party hereto of
4
<PAGE>
any term or provision of this Agreement or of any default hereunder shall affect
such party's rights thereafter to enforce such term or provision or to exercise
any right or remedy in the event of any other default, whether or not similar.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to principles
of conflicts of laws.
(c) No party may assign or otherwise transfer this Agreement, in
whole or in part, without the prior written consent of the other parties hereto,
and any attempted assignment not in accordance herewith shall be null and void
and of no force or effect. Matria may assign this Agreement to a wholly-owned
subsidiary of Matria without the consent of the other parties hereto, provided
that Matria shall remain liable for the performance of its obligations
hereunder.
(d) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
(e) The headings contained herein are for the convenience of the
parties only and shall not be interpreted to limit or affect in any way the
meaning of the language contained in this Agreement.
(f) This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute the same agreement. Any signature page of any such counterpart, or
any electronic facsimile thereof, may be attached or appended to any other
counterpart to complete a fully executed counterpart of this Agreement, and any
telecopy or other facsimile transmission of any signature shall be deemed an
original and shall bind such party.
(g) If any provision of this Agreement shall be held void,
voidable, invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and accordingly, the remaining provisions of this
Agreement shall remain in full force and effect as though such void, voidable,
invalid or inoperative provision had not been contained herein.
(h) This Agreement shall not be construed more strongly against
any party hereto regardless of which party is responsible for its preparation.
(i) Upon the reasonable request of another party, each party
hereto agrees to take any and all actions, including, without limitation, the
execution of certificates, documents or instruments, necessary or appropriate to
give effect to the terms and conditions set forth in this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement on the Execution
Date, to be effective as of the Effective Date.
"Endeavor"
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
----------------------------------
Title: Chief Operating Officer
----------------------------------
"Matria"
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
----------------------------------
Title: Executive Vice President and Chief
----------------------------------
Operating Officer
----------------------------------
AGREED TO AND ACCEPTED BY:
"QDS"
QUALITY DIAGNOSTIC SERVICES, INC.
By: /s/ Blake Whitney
------------------------
Title: President
------------------------
6
<PAGE>
EXHIBIT A
MANAGEMENT RESPONSIBILITIES
---------------------------
The Transition Employees and Consulting Employees will consult with
Matria in the management of the Business and provide any and all reasonable
assistance to facilitate a smooth transition in the change of ownership of the
Business of QDS and the Transition Employees and the following Consulting
Employees: Jennifer Haley, Michael Carr, Christopher Carter, Jarret Ludeman,
Mitchell Miller, and Adam Rasner, shall provide substantially the same services
and perform substantially the same duties for Matria as such employees provided
and performed for QDS before the Effective Date (collectively, the "Transition
Assistance").
Endeavor agrees, as part of its responsibility to provide the
Transition Assistance, to use its reasonable efforts during the Term:
1. within 60 days of the Execution Date, as to the
Transition Employees, to assist Matria in identifying and training replacements
of the Transition Employees or to assist Matria in training Matria's employees
to take over the roles, duties and obligations of the Transition Employees, as
directed by Matria in consultation with Endeavor;
2. to assist Matria in establishing relationships with all
former sales representatives and employees of QDS;
3. to assist Matria in obtaining an independent
physiological laboratory or independent diagnostic testing facility, as the case
may be, provider identification number;
4. to assist Matria in re-contracting with each payor and
physician with which QDS is under contract to provide services;
5. to assist Matria in establishing relationships with all
former medical directors and consulting physicians of QDS; and
6. to assist Matria in transitioning information systems,
billing and collection functions and financial reporting and record keeping
functions to Matria employees.
<PAGE>
EXHIBIT B
TRANSITION EMPLOYEES
Anderson, Rick
Bogart, Mark
Brown, Jeffery M.
Gurr, Stuart
<PAGE>
EXHIBIT C
CONSULTING EMPLOYEES
Arnold, Jeffrey T.
Whitney, T. Blake
Draughon, K. Robert
Heekin, W. Michael
Haley, Jennifer
Nichols, John C.
Carr, Michael
Carter, Christopher
Ludeman, Jarret
Miller, Mitchell
Rasner, Adam
Arnold, R. Scott
<PAGE>
EXHIBIT 10.12
LICENSED PREMISES AGREEMENT
---------------------------
THIS LICENSED PREMISES AGREEMENT ("Agreement") is entered into this 21st
day of July, 1998 (the Execution Date"), by and between ENDEAVOR TECHNOLOGIES,
INC., a Georgia corporation ("Licensor"), and MATRIA HEALTHCARE, INC., a
Delaware corporation ("Licensee").
W I T N E S S E T H:
WHEREAS, Licensor is subleasing certain premises known as Suite 400 (the
"Premises"), located at The Lenox Building, 3399 Peachtree Street, N.E.,
Atlanta, Georgia (the "Building"), pursuant to that certain sublease (the
"Sublease") by and between Licensor, as subtenant, and Premiere Communications,
Inc., as sublandlord ("Sublandlord"), dated as of December 16, 1997; and
WHEREAS, Sublandlord is leasing the Premises pursuant to that certain lease
(the "Lease") by and between Sublandlord, as tenant, and Corporate Property
Investors, Inc., as landlord ("Landlord"), dated as of March _____, 1997; and
WHEREAS, Sublandlord and Licensor entered into that certain Equipment Lease
dated December 15, 1997 (the "Equipment Lease"); and
WHEREAS, Licensor operates a call center upon the Premises and Licensee
desires to use, on a non-exclusive basis, certain amenities associated with such
call center; and
WHEREAS, Licensor is willing to grant a license to Licensee for Licensee's
use of such amenities, subject to the terms and conditions below stated.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Recitals. The foregoing Recitals are true and correct and are
--------
incorporated by this reference as if fully set forth herein.
2. Grant of License.
----------------
a. Licensor hereby grants to Licensee an exclusive license to use
twenty (20) call stations (the "Chairs") within the Premises. Licensee
agrees that the location of the Chairs shall be designated (and may be
redesignated from time to time as deemed necessary or appropriate) by
Licensor in its sole discretion.
b. Licensor hereby grants to Licensee a non-exclusive license, in
common with Licensor and its successors, assigns, licensees, invitees and
guests, to use, as reasonably necessary, the aisles, corridors, break
rooms, restrooms and other amenities within or associated with the
Premises, including any and all common areas of the Building in which
Licensor has been granted such rights under the Sublease (such common areas
of the Premises and the Building, together with the Chairs, being
hereinafter referred to as the "Licensed Premises"), subject to such
reasonable rules and regulations as Licensor may promulgate from time to
time and the terms and conditions of this Agreement and the Sublease and
the Lease.
<PAGE>
c. Notwithstanding any provision of the Equipment Lease to the
contrary, during the term of this Agreement, Licensor hereby grants to
Licensee a non-exclusive license, in common with Licensor, its successors
and assigns, to use the Equipment (as such term is defined in the Equipment
Lease) in a reasonable and prudent manner in connection with the non-
exclusive license granted to Licensee pursuant to Sections 2(a) and 2(b)
hereof. Licensee shall abide by the terms of the Equipment Lease. Licensee
shall not repair the Equipment without Licensor's consent.
3. Term. The term of the license granted hereunder shall commence as of
----
the date of this Agreement and shall expire, unless sooner terminated, on
December 31, 1998.
4. Use. The Licensed Premises may be used by Licensee only for the
---
conduct of a call center in support of Licensee's health care business, and for
no other purpose, without the prior written consent of Licensor, which consent
may be withheld in Licensor's sole discretion. Licensee shall comply with the
terms and conditions of this Agreement and those of the Sublease and the Lease
(copies of which are attached hereto as Exhibit A and Exhibit B, respectively)
--------- ---------
and shall comply with all legal requirements in connection with its use of the
Licensed Premises, including, without limitation, compliance with all zoning,
building and environmental laws and the obtaining of all required licenses and
permits.
5. License Fee. Licensee shall pay Licensor a license fee of $5,833.33
-----------
per month, beginning on the Execution Date and continuing on the first (1st) day
of each month thereafter during the term of the Agreement ("Due Date"), without
demand, deduction, set-off or abatement whatsoever, said payments to be made in
lawful United States currency. Appropriate prorations shall be made in the event
the Execution Date is not a Due Date or in the event that the Agreement
terminates prior to a Due Date.
6. Subordination. Licensee acknowledges that its use of the Licensed
-------------
Premises shall at all times be subject to the rights of Licensor and to the
rights of Sublandlord and Landlord set forth in the Sublease and Lease,
respectively. Licensor shall have no liability to Licensee for any acts of the
Sublandlord or Landlord pursuant to the Sublease or Lease.
7. Personal Rights. The rights of Licensee under this Agreement are
---------------
personal to Licensee and shall not run with the land. Licensee may not assign or
transfer its rights hereunder to any other person, firm, corporation or entity,
other than to a wholly-owned subsidiary of Licensee, without the prior written
consent of Licensor, which consent may be withheld in Licensor's sole
discretion. No person claiming by, through or under Licensee, other than to a
wholly-owned subsidiary of Licensee, shall have the benefit of this Agreement,
and any attempted transfer or assignment of Licensee's rights hereunder, other
than to a wholly-owned subsidiary of Licensee, made without the prior written
consent of Licensor shall be void or voidable, at Licensor's sole discretion.
8. Indemnification. Licensee shall not claim any damages from Licensor in
---------------
connection with or on account of any injuries or damages arising directly or
indirectly from or in connection with Licensee's use of or inability to use the
Licensed Premises unless due to or caused by Licensor's gross negligence or
without willful misconduct, and Licensee shall indemnify and hold Licensor
harmless from and against all claims, expenses, obligations, liabilities,
judgments, awards, violations, fines, penalties, costs and damages (including
without limitation, attorneys' fees and costs of suit) (collectively, a "Loss")
in connection with any occurrence whatsoever on or with respect to the use or
occupancy by Licensee of the Licensed Premises including, without limitation,
claims or damages resulting from violations of applicable building codes or
permits), but excluding any Loss due to or caused by Licensor's gross negligence
or willful misconduct or arising from or in connection with Licensor's failure
to obtain the consent of Landlord or Sublandlord to this Agreement as may be
required by the Lease or the Sublease..
2
<PAGE>
9. Insurance. Licensee, at Licensee's sole cost and expense, shall obtain
---------
and maintain in effect at all times during the term of this Agreement, insurance
as follows:
a. Comprehensive general liability insurance, written by an
insurance company reasonably approved by Licensor, naming Licensor as an
additional insured. Such policy shall protect Licensor and Licensee against
loss, damage or liability for personal injury or death of any person or
loss or damage to property, occurring in, on or about the Licensed
Premises, with limits of not less than One Million Dollars ($1,000,000.00)
per occurrence and Three Million Dollars ($3,000,000.00) in the aggregate,
such coverage to include personal injury, bodily injury, broad form
property damage, premises/operations, blanket contractual liability,
products and completed operations liability, and contain provisions stating
that the insureds and additional insureds are covered jointly and
severally;
b. "All Risk" insurance against fire, extended coverage, vandalism,
malicious mischief and all risks, upon all property owned by Licensee and
located at the Licensed Premises, in an amount equal to the full
replacement cost thereof; and
c. Worker's Compensation and employer's liability insurance covering
all of Licensee's employees (including any person deemed to be an employee
under any applicable law, code, regulation or ruling), at or about the
Licensed Premises.
No policy required by this paragraph 9 shall be cancelable except upon thirty
(30) days prior written notice to Licensor. Within ten (10) days of execution of
this Agreement, Licensee shall deliver to Licensor a certificate of insurance
evidencing compliance with this paragraph 8.
10. No Estate. Licensee expressly agrees that Licensee does not and shall
---------
not at any time claim any interest or estate of any kind or extent whatsoever in
the Licensed Premises or the Premises, other than the rights granted under, and
subject to, the terms and conditions contained in this Agreement.
11. Termination. Licensee shall have the right to terminate this Agreement
-----------
for any reason upon thirty (30) days prior written notice to Licensor. In
addition, in the event of termination of the Sublease or the Lease, either party
hereto, provided it is not responsible for a default causing such termination,
shall have the right to terminate this Agreement upon written notice to the
other party, which termination shall be effective on the date on which such
other agreement terminates, unless the parties may agree to another effective
date. Upon the expiration of this Agreement or the sooner termination thereof in
accordance with this paragraph 11 or paragraph 12 below, Licensee shall
peaceably surrender the Licensed Premises and restore same to Licensor's
reasonable satisfaction, and thereafter, Licensee shall have no further rights
in or to the Licensed Premises.
12. Default. Licensee shall be in default of this Agreement if it fails to
-------
comply with any provision hereof or with any term or condition of the Sublease
or Lease, other than the non-assignment provisions thereof.
13. Remedies. Should any default by Licensee continue for a period of ten
--------
(10) days after receipt of written notice from Licensor, Licensor shall have the
right (a) to terminate this Agreement; (b) to perform or cure Licensee's
default, the cost of which shall be paid by Licensee upon demand, together with
interest at the rate of twelve percent (12%) per annum; (c) to remove all
persons, goods, fixtures and chattels from the Licensed Premises (by force or
otherwise), without liability for damages; and (d) to recover from Licensee any
and all damages or losses incurred by Licensor as a result of such breach,
including, without limitation, attorneys' fees and costs of suit. No remedy or
election hereunder shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.
3
<PAGE>
14. Services. Licensor acknowledges and agrees that Licensee shall
--------
provide, only via the Sublandlord and/or Landlord, maintenance or repair of the
Licensed Premises, utilities or services described as being provided to Licensor
under the Sublease and/or Lease. Licensee shall receive directly from the
Sublandlord and/or Landlord all services and utilities and the performance of
all obligations which the Sublandlord and/or Landlord is required to provide in
and for the benefit of the Licensed Premises, and Licensor shall have no
liability whatsoever in the event that Sublandlord and/or Landlord fails to
furnish or perform any such services or obligations during the term of this
Agreement.
15. Brokers. Licensee warrants and represents to Licensor that it has
-------
dealt with no broker or real estate agent or made no agreement or created any
liability with respect to this License and/or the Licenses Premises or in
connection with the payment of brokerage or other commissions to anyone, and
Licensee hereby agrees to indemnify, defend and hold Licensor harmless from and
against all liability, cost or expense arising out of the claims of any other
broker or real estate agent claiming by, through or under Licensee for a
commission in connection with this Agreement and/or the transactions
contemplated by this Agreement.
16. Notices. Whenever in this Agreement it shall be required or permitted
-------
that notice or demand be given or served by either party to the other, such
notice shall be in writing, and shall be deemed to have been duly given if sent
by certified mail, postage prepaid, return receipt requested, or by a nationally
recognized overnight courier service, charges prepaid, to the following
addresses:
If to Licensor: Endeavor Technologies, Inc.
The Lenox Building
3399 Peachtree Street, N.E.
Suite 400
Atlanta, Georgia 30309
Attn: W. Michael Heekin
If to Licensee: Matria Healthcare, Inc.
1850 Parkway Place, 12/th/ Floor
Marietta, Georgia 30067
Attn.: General Counsel
Either party may change its address and person to whose attention notice is to
be given by giving notice as herein provided.
17. Miscellaneous.
-------------
a. This Agreement shall be governed by the laws of the State of
Georgia, without regard to principles of conflicts of laws.
b. This Agreement may not be recorded in any public office without
the prior written consent of Licensor.
c. This Agreement shall constitute the entire agreement of the
parties with respect to the subject matter hereof, and may be amended only
by a writing signed by Licensor and Licensee.
d. The captions which appear at the beginning of each paragraph
hereof are included solely for convenience of reference and are not
intended to form a part of this Agreement.
4
<PAGE>
e. Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties signatory hereto and
their respective permitted successors and assigns.
f. In the event Licensor, without any fault on its part, is a party
to any proceeding, including litigation, commenced by or against Licensee
or by or against any parties in possession of the Licensed Premises or any
part thereof claiming under Licensee, Licensee shall pay, as an additional
license fee, all costs, including, without limitation, attorneys' fees by
or imposed by or upon Licensor in connection with such proceeding and costs
of enforcement of this Agreement against Licensee.
IN WITNESS WHEREOF, the parties have executed this License Agreement as of
the day and year first above written.
ATTEST: LICENSOR:
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin By: /s/ Blake Whitney
------------------------------ ------------------------------------
Print name: W. Michael Heekin Print name: Blake Whitney
---------------------- ----------------------------
Its: Secretary Its: President
---------------------------- -----------------------------------
LICENSEE:
MATRIA HEALTHCARE, INC.
By: /s/ Roberta L. McCaw By: /s/ Frank D. Powers
---------------------------- ------------------------------------
Print name: Roberta L. McCaw Print name: Frank D. Powers
--------------------- ----------------------------
Its: Vice President, Legal Its: Executive Vice President & COO
--------------------------- -----------------------------------
5
<PAGE>
CONSENT OF LANDLORD AND SUBLANDLORD
-----------------------------------
Corporate Property Investors, as Landlord under the Lease, and Premiere
Communications, Inc., as Sublandlord under the Sublease, hereby consent to the
license granted by Endeavor Technologies, Inc., as Licensor, to Matria
Healthcare, Inc., as Licensee, pursuant to the foregoing License Agreement, and
further acknowledge that the right to terminate the Lease or Sublease, if any,
by virtue of the granting of such license, is hereby waived.
ATTEST: LANDLORD:
CORPORATE PROPERTY INVESTORS, INC.
By:_______________________________ By:___________________________________
Print name:_______________________ Print name:___________________________
Its:______________________________ Its:__________________________________
Date:_________________________________
SUBLANDLORD:
PREMIERE COMMUNICATIONS, INC.
By:_______________________________ By:___________________________________
Print name:_______________________ Print name:___________________________
Its:______________________________ Its:__________________________________
Date:_________________________________
6
<PAGE>
EXHIBIT A
SUBLEASE
SEE EXHIBIT 10.4 TO REGISTRATION STATEMENT
<PAGE>
EXHIBIT B
LEASE
SEE EXHIBIT A TO EXHIBIT 10.4 TO REGISTRATION STATEMENT
<PAGE>
EXHIBIT 10.14
NONCOMPETITION AGREEMENT
------------------------
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into
this 21st day of July, 1998 (the "Execution Date"), by and among ENDEAVOR
TECHNOLOGIES, INC., a Georgia corporation ("Endeavor"), JEFFREY T. ARNOLD, a
Georgia resident, ("Arnold"), and MATRIA HEALTHCARE, INC., a Delaware
corporation ("Matria"), as the sole intended Third Party Beneficiary.
BACKGROUND:
----------
A. Contemporaneously with the execution of this Agreement, Matria is
acquiring substantially all of the assets of Quality Diagnostic Services, Inc.
("QDS") and Telemedics, Inc. ("Telemedics") pursuant to the terms of that
certain Asset Purchase Agreement (the "Purchase Agreement"), dated as of July
20, 1998 and effective as of July 1, 1998, among Matria, Endeavor, QDS and
Telemedics. Terms used and not otherwise defined herein shall have the same
meanings ascribed to them in the Purchase Agreement.
B. As a material inducement for Matria to enter into the Purchase
Agreement, Endeavor has agreed to require Arnold to enter into this Agreement
with Endeavor in consideration of Arnold's right to employment with Endeavor.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
-----------
shall have the following respective meanings:
(a) "Competing Business" shall mean a business that, wholly or
------------------
partly, directly or indirectly, is engaged in providing, selling or
marketing cardiac event monitoring or cardiac disease management services
or home maternity monitoring or management services (excluding patient
education or patient requests for medical information via the Internet) or
designing, developing, manufacturing, testing, selling, marketing or
distributing products and equipment relating thereto; provided, however,
-------- -------
that the Endeavor Business shall not be considered a Competing Business.
(b) "Competitive Position" shall mean: (i) Arnold's direct or
--------------------
indirect equity ownership (excluding ownership of less than one percent
(1%) of the outstanding common stock of any publicly held corporation) or
control of any portion of any Competing Business; (ii) Arnold serving as a
director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business; or (iii)
any employment arrangement between Arnold and any Competing Business
whereby Arnold is required to perform services for the Competing Business
substantially similar to those that Arnold performed for Endeavor, QDS and
Telemedics.
<PAGE>
(c) "Confidential Information" shall mean all valuable, proprietary
------------------------
and confidential business information belonging to QDS or Telemedics that
does not constitute a Trade Secret and that is not generally known by or
available to the competitors of QDS or Telemedics but is generally known
only to Endeavor, QDS, Telemedics and those of its employees, independent
contractors, clients or agents to whom such information must be confided
for internal business purposes.
(d) "Covenant Period" shall mean the period of time commencing with
---------------
the date of this Agreement and continuing for a period of five (5) years
hereafter.
(e) "Endeavor Business" shall mean the development, marketing, sales
-----------------
and provision of Internet based information and communications services,
including, without limitation, Endeavor's WebMD service offering, so long
as such services do not include cardiac or maternity monitoring services.
(f) "Restricted Territory" shall mean the United States of America.
--------------------
(g) "Trade Secrets" shall mean trade secrets of QDS and Telemedics as
-------------
defined under applicable law.
2. CONFIDENTIALITY. Arnold hereby acknowledges and agrees that the Trade
---------------
Secrets and Confidential Information represent a substantial investment of QDS
and Telemedics, respectively, and that any unauthorized disclosure or use of any
of the Trade Secrets or Confidential Information or any other violation of the
confidentiality provisions of this Section 2, would be wrongful and could cause
immediate and irreparable injury to Matria. Accordingly, Arnold hereby agrees
that he will not, without the express prior written consent of Endeavor and
Matria, distribute, sell, market, publish, disclose, transfer, assign,
disseminate or otherwise communicate to any other person or entity, or use, copy
or appropriate for or on behalf of himself or any other person or entity: (a)
any Confidential Information during the Covenant Period; or (b) any Trade Secret
at any time during which such information constitutes a trade secret under
applicable law. Arnold agrees that he will adhere to all reasonable
confidentiality requirements that Matria may establish from time to time, with
respect to the Confidential Information and Trade Secrets, and immediately
notify Endeavor and Matria of any unauthorized disclosure or use of any Trade
Secret or Confidential Information by him. Arnold also agrees to assist Matria,
at Matria's expense and to the extent necessary, in the procurement or any
protection of Matria's rights in or to any Trade Secrets or Confidential
Information. Notwithstanding anything herein to the contrary, the restrictions
set forth in Section 2 will not be applicable to information which otherwise
constitutes Trade Secrets or Confidential Information but is solely to be used
in the furtherance of the Endeavor Business.
3. NONCOMPETITION. During the Covenant Period, Arnold agrees that he
--------------
will not, without the prior written consent of Endeavor and Matria, either
directly or indirectly, alone or in conjunction with any other person or entity,
accept, enter into or take any action in furtherance of a Competitive Position
in the Restricted Territory. Notwithstanding anything herein to the
-2-
<PAGE>
contrary, the restrictions set forth in this Section 3 will not be applicable to
any action taken in furtherance of the Endeavor Business
4. NONSOLICITATION OF CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. During the
--------------------------------------------------------
Covenant Period, Arnold agrees that he will not, without the prior written
consent of Endeavor and Matria, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit, entice or induce any
customer, supplier or distributor of Matria or any of its subsidiaries (or any
actively sought prospective customer, supplier or distributor of Matria or any
of its subsidiaries) for or on behalf of any Competing Business.
5. NONSOLICITATION OF PERSONNEL. During the Covenant Period, Arnold
----------------------------
agrees that he will not, without the prior written consent of Endeavor and
Matria, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit or attempt to solicit any "key or material" employee,
consultant, contractor or other personnel of Matria or any of its subsidiaries
to terminate, alter or lessen that party's affiliation with Matria or any of its
subsidiaries or to violate the terms of any agreement or understanding between
such employee, consultant, contractor or other person and Matria. Arnold also
agrees that, for eighteen (18) months hereafter, he will not, without the prior
written consent of Matria, directly or indirectly, alone or in conjunction with
any other person or entity, employ or contract with any "key or material"
employee, consultant, contractor or other personnel of Matria or any of its
subsidiaries; provided, however that Matria and Endeavor hereby agree that Alva
Teets may be employed by Endeavor after a period of six months from the
Execution Date. For purposes of this Section 5, "key or material" employees,
consultants, contractors or other personnel shall mean those such persons or
entities who have direct access to or have had substantial exposure to
Confidential Information or Trade Secrets.
6. ACKNOWLEDGMENTS. Arnold hereby acknowledges and agrees that the
---------------
covenants contained in Sections 2, 3, 4 and 5 hereof (the "Protective
Covenants") are made by him (and shall be treated) as "ancillary to the sale of
the Business" under the Purchase Agreement. Arnold further acknowledges and
agrees that the Protective Covenants are reasonable as to time, scope and
territory given Matria's need to protect the Trade Secrets and Confidential
Information. In the event any covenant or agreement in this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
7. SPECIFIC PERFORMANCE. Arnold hereby acknowledges and agrees that any
--------------------
breach of a Protective Covenant by him will cause irreparable damage to Matria,
the exact amount of which will be difficult to ascertain, and that the remedies
at law for any such breach will be inadequate. Accordingly, Arnold agrees that,
in addition to any other remedy that may be available at law, in equity, or
hereunder, Endeavor and Matria shall be entitled to specific
-3-
<PAGE>
performance and injunctive relief, without posting bond or other security to
enforce or prevent any violation of any of the Protective Covenants by him.
8. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
-----------------------
Matria is the sole intended third party beneficiary of all of Endeavor's rights
under this Agreement. In the event that Endeavor fails to exercise its rights
or remedies hereunder, Matria shall have the sole right to enforce any of
Endeavor's rights and remedies hereunder, in Endeavor's name or otherwise.
9. MISCELLANEOUS.
-------------
(a) This Agreement contains the entire agreement and understanding
concerning the subject matter hereof between the parties hereto. No
waiver, termination or discharge of this Agreement, or any of the terms or
provisions hereof, shall be binding upon any party hereto unless confirmed
in writing. This Agreement may not be modified or amended, except by a
writing executed by all parties hereto. No waiver by any party hereto of
any term or provision of this Agreement or of any default hereunder shall
affect such party's rights thereafter to enforce such term or provision or
to exercise any right or remedy in the event of any other default, whether
or not similar.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, without regard to the principles of
the conflicts of laws.
(c) This Agreement may not be assigned, in whole or in part, by
Arnold without the prior written consent of Endeavor and Matria, and any
attempted assignment not in accordance herewith shall be null and void and
of no force or effect; provided, however, that Matria may assign this
Agreement to any wholly-owned subsidiary operating the Business and to any
person who acquires the Business from Matria or such subsidiary.
(d) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
(e) If any provision of this Agreement shall be held void, voidable,
invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and, accordingly, the remaining provisions of
this Agreement shall remain in full force and effect as though such void,
voidable, invalid or inoperative provision had not been contained herein.
(f) This Agreement shall not be construed more strongly against any
party hereto regardless of which party is responsible for its preparation.
(g) Upon the reasonable request of any party, each party hereto
agrees to take any and all actions, including, without limitation, the
execution of certificates, documents
-4-
<PAGE>
or instruments, necessary or appropriate to give effect to the terms and
conditions set forth in this Agreement.
(h) All rights and remedies of each party hereto are cumulative of
each other and of every other right or remedy such party may otherwise have
at law or in equity, and the exercise of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute the same Agreement. Any signature page of any such counterpart,
or any electronic facsimile thereof, may be attached or appended to any
other counterpart to complete a fully executed counterpart of this
Agreement, and any telecopy or other facsimile transmission of any
signature shall be deemed an original and shall bind such party.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the day and year
first above written.
"Endeavor"
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
--------------------------------------
Title: Chief Operating Officer
-----------------------------------
[CORPORATE SEAL]
"Matria"
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
--------------------------------------
Title: Executive Vice President and Chief
-----------------------------------
Operating Officer
-----------------------------------
[CORPORATE SEAL]
"Arnold"
/s/ Jeffrey T. Arnold
------------------------------------------
JEFFREY T. ARNOLD
-6-
<PAGE>
EXHIBIT 10.15
FORM OF NONCOMPETITION AGREEMENT
--------------------------------
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into
this 21st day of July, 1998 (the "Execution Date"), by and among ENDEAVOR
TECHNOLOGIES, INC., a Georgia corporation ("Endeavor"), ________________, a
Georgia resident, ("Covenantor"), and MATRIA HEALTHCARE, INC., a Delaware
corporation ("Matria"), as the sole intended Third Party Beneficiary.
BACKGROUND:
----------
A. Contemporaneously with the execution of this Agreement, Matria is
acquiring substantially all of the assets of Quality Diagnostic Services, Inc.
("QDS") and Telemedics, Inc. ("Telemedics") pursuant to the terms of that
certain Asset Purchase Agreement (the "Purchase Agreement"), dated as of July
20, 1998 and effective as of July 1, 1998, among Matria, Endeavor, QDS and
Telemedics. Terms used and not otherwise defined herein shall have the same
meanings ascribed to them in the Purchase Agreement.
B. As a material inducement for Matria to enter into the Purchase
Agreement, Endeavor has agreed to require Covenantor to enter into this
Agreement with Endeavor in consideration of Covenantor's right to employment
with Endeavor.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
-----------
shall have the following respective meanings:
(a) "Competing Business" shall mean a business that, wholly or
------------------
partly, directly or indirectly, is engaged in providing, selling or
marketing cardiac event monitoring services; or designing, developing,
manufacturing, testing, selling, marketing or distributing products and
equipment relating thereto; provided, however, that the Endeavor Business
-------- -------
shall not be considered a Competing Business.
(b) "Competitive Position" shall mean: (i) Covenantor's direct or
--------------------
indirect equity ownership (excluding ownership of less than one percent
(1%) of the outstanding common stock of any publicly held corporation) or
control of any portion of any Competing Business; (ii) Covenantor serving
as a director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business; or (iii)
any employment arrangement between Covenantor and any Competing Business
whereby Covenantor is required to perform services for the Competing
Business substantially similar to those that Covenantor performed for
Endeavor, QDS and Telemedics.
<PAGE>
(c) "Confidential Information" shall mean all valuable, proprietary
------------------------
and confidential business information belonging to QDS or Telemedics that
does not constitute a Trade Secret and that is not generally known by or
available to the competitors of QDS or Telemedics but is generally known
only to Endeavor, QDS, Telemedics and those of its employees, independent
contractors, clients or agents to whom such information must be confided
for internal business purposes.
(d) "Covenant Period" shall mean the period of time commencing with
---------------
the date of this Agreement and continuing for a period of one (1) year
hereafter.
(e) "Endeavor Business" shall mean the development, marketing, sales
-----------------
and provision of Internet based information and communications services,
including, without limitation, Endeavor's WebMD service offering, so long
as such services do not include cardiac or maternity monitoring services.
(f) "Restricted Territory" shall mean the United States of America.
--------------------
(g) "Trade Secrets" shall mean all trade secrets of QDS and
-------------
Telemedics as defined under applicable law.
2. CONFIDENTIALITY. Covenantor hereby acknowledges and agrees that the
---------------
Trade Secrets and Confidential Information represent a substantial investment of
QDS and Telemedics, respectively, and that any unauthorized disclosure or use of
any of the Trade Secrets or Confidential Information or any other violation of
the confidentiality provisions of this Section 2, would be wrongful and could
cause immediate and irreparable injury to Matria. Accordingly, Covenantor
hereby agrees that he will not, without the express prior written consent of
Endeavor and Matria, distribute, sell, market, publish, disclose, transfer,
assign, disseminate or otherwise communicate to any other person or entity, or
use, copy or appropriate for or on behalf of himself or any other person or
entity: (a) any Confidential Information during the Covenant Period; or (b) any
Trade Secret at any time during which such information constitutes a trade
secret under applicable law. Covenantor agrees that he will adhere to all
reasonable confidentiality requirements that Matria may establish from time to
time, with respect to the Confidential Information and Trade Secrets, and
immediately notify Endeavor and Matria of any unauthorized disclosure or use of
any Trade Secret or Confidential Information by him. Covenantor also agrees to
assist Matria, at Matria's expense and to the extent necessary, in the
procurement or any protection of Matria's rights in or to any Trade Secrets or
Confidential Information. Notwithstanding anything herein to the contrary, the
restrictions set forth in Section 2 will not be applicable to information which
otherwise constitutes Trade Secrets or Confidential Information but is solely to
be used in the furtherance of the Endeavor Business.
3. NONCOMPETITION. During the Covenant Period, Covenantor agrees that
--------------
he will not, without the prior written consent of Endeavor and Matria, either
directly or indirectly, alone or in conjunction with any other person or entity,
accept, enter into or take any action in furtherance of a Competitive Position
in the Restricted Territory. Notwithstanding anything
-2-
<PAGE>
herein to the contrary, the restrictions set forth in this Section 3 will not be
applicable to any action taken in furtherance of the Endeavor Business
4. NONSOLICITATION OF CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. During the
--------------------------------------------------------
Covenant Period, Covenantor agrees that he will not, without the prior written
consent of Endeavor and Matria, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit, entice or induce any
customer, supplier or distributor of Matria or any of its subsidiaries (or any
actively sought prospective customer, supplier or distributor of Matria or any
of its subsidiaries) for or on behalf of any Competing Business.
5. NONSOLICITATION OF PERSONNEL. During the Covenant Period, Covenantor
----------------------------
agrees that he will not, without the prior written consent of Endeavor and
Matria, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit or attempt to solicit any "key or material" employee,
consultant, contractor or other personnel of Matria or any of its subsidiaries
to terminate, alter or lessen that party's affiliation with Matria or any of its
subsidiaries or to violate the terms of any agreement or understanding between
such employee, consultant, contractor or other person and Matria. For purposes
of this Section 5, "key or material" employees, consultants, contractors or
other personnel shall mean those such persons or entities who have direct access
to or have had substantial exposure to Confidential Information or Trade
Secrets.
6. ACKNOWLEDGMENTS. Covenantor acknowledges and agrees that the
---------------
Protective Covenants are reasonable as to time, scope and territory given
Matria's need to protect the Trade Secrets and Confidential Information. In the
event any covenant or agreement in this Agreement shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too great a period of time or over too great a geographical area or by
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable
and/or over the maximum geographical area as to which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
7. SPECIFIC PERFORMANCE. Covenantor hereby acknowledges and agrees that
--------------------
any breach of a Protective Covenant by him will cause irreparable damage to
Matria, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, Covenantor
agrees that, in addition to any other remedy that may be available at law, in
equity, or hereunder, Endeavor and Matria shall be entitled to specific
performance and injunctive relief, without posting bond or other security to
enforce or prevent any violation of any of the Protective Covenants by him.
8. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
-----------------------
Matria is the sole intended third party beneficiary of all of Endeavor's rights
under this Agreement. In the event that Endeavor fails to exercise its rights
or remedies hereunder, Matria shall have the sole right to enforce any of
Endeavor's rights and remedies hereunder, in Endeavor's name or otherwise.
-3-
<PAGE>
9. MISCELLANEOUS.
-------------
(a) This Agreement contains the entire agreement and understanding
concerning the subject matter hereof between the parties hereto. No
waiver, termination or discharge of this Agreement, or any of the terms or
provisions hereof, shall be binding upon any party hereto unless confirmed
in writing. This Agreement may not be modified or amended, except by a
writing executed by all parties hereto. No waiver by any party hereto of
any term or provision of this Agreement or of any default hereunder shall
affect such party's rights thereafter to enforce such term or provision or
to exercise any right or remedy in the event of any other default, whether
or not similar.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, without regard to the principles of
conflicts of laws.
(c) This Agreement may not be assigned, in whole or in part, by
Covenantor without the prior written consent of Endeavor and Matria, and
any attempted assignment not in accordance herewith shall be null and void
and of no force or effect; provided, however, that Matria may assign this
Agreement to any wholly-owned subsidiary operating the Business and to any
person who acquires the Business from Matria or such subsidiary.
(d) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
(e) If any provision of this Agreement shall be held void, voidable,
invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and, accordingly, the remaining provisions of
this Agreement shall remain in full force and effect as though such void,
voidable, invalid or inoperative provision had not been contained herein.
(f) This Agreement shall not be construed more strongly against any
party hereto regardless of which party is responsible for its preparation.
(g) Upon the reasonable request of any party, each party hereto
agrees to take any and all actions, including, without limitation, the
execution of certificates, documents or instruments, necessary or
appropriate to give effect to the terms and conditions set forth in this
Agreement.
(h) All rights and remedies of each party hereto are cumulative of
each other and of every other right or remedy such party may otherwise have
at law or in equity, and the exercise of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute the
-4-
<PAGE>
same Agreement. Any signature page of any such counterpart, or any
electronic facsimile thereof, may be attached or appended to any other
counterpart to complete a fully executed counterpart of this Agreement, and
any telecopy or other facsimile transmission of any signature shall be
deemed an original and shall bind such party.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the day and year
first above written.
"Endeavor"
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
----------------------------------------
Title: Chief Operating Officer
-------------------------------------
[CORPORATE SEAL]
"Matria"
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
----------------------------------------
Title: Executive Vice President and Chief
-------------------------------------
Operating Officer
-------------------------------------
[CORPORATE SEAL]
"Covenantor"
---------------------------------------------
-6-
<PAGE>
EXHIBIT 10.16
NONCOMPETITION AGREEMENT
------------------------
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into
this 21st day of July, 1998 (the "Execution Date"), by and among ENDEAVOR
TECHNOLOGIES, INC., a Georgia corporation ("Endeavor"), BLAKE WHITNEY, a Georgia
resident ("Whitney"), and MATRIA HEALTHCARE, INC., a Delaware corporation
("Matria"), as the sole intended Third Party Beneficiary.
BACKGROUND:
----------
A. Contemporaneously with the execution of this Agreement, Matria is
acquiring substantially all of the assets of Quality Diagnostic Services, Inc.
("QDS") and Telemedics, Inc. ("Telemedics") pursuant to the terms of that
certain Asset Purchase Agreement (the "Purchase Agreement"), dated as of July
20, 1998 and effective as of July 1, 1998, among Matria, Endeavor, QDS and
Telemedics. Terms used and not otherwise defined herein shall have the same
meanings ascribed to them in the Purchase Agreement.
B. As a material inducement for Matria to enter into the Purchase
Agreement, Endeavor has agreed to require Whitney to enter into this Agreement
with Endeavor in consideration of Whitney's right to employment with Endeavor.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
-----------
shall have the following respective meanings:
(a) "Competing Business" shall mean a business that, wholly or partly,
------------------
directly or indirectly, is engaged in providing, selling or marketing
cardiac event monitoring services; or designing, developing, manufacturing,
testing, selling, marketing or distributing products and equipment relating
thereto; provided, however, that the Endeavor Business shall not be
-------- -------
considered a Competing Business.
(b) "Competitive Position" shall mean: (i) Whitney's direct or
--------------------
indirect equity ownership (excluding ownership of less than one percent
(1%) of the outstanding common stock of any publicly held corporation) or
control of any portion of any Competing Business; (ii) Whitney serving as a
director, officer, consultant, lender, joint venturer, partner, agent,
advisor or independent contractor of or to any Competing Business; or (iii)
any employment arrangement between Whitney and any Competing Business
whereby Whitney is required to perform services for the Competing Business
substantially similar to those that Whitney performed for Endeavor, QDS and
Telemedics.
<PAGE>
(c) "Confidential Information" shall mean all valuable, proprietary
------------------------
and confidential business information belonging to QDS or Telemedics that
does not constitute a Trade Secret and that is not generally known by or
available to the competitors of QDS or Telemedics but is generally known
only to Endeavor, QDS, Telemedics and those of its employees, independent
contractors, clients or agents to whom such information must be confided
for internal business purposes.
(d) "Covenant Period" shall mean the period of time commencing with
---------------
the date of this Agreement and continuing for a period of eighteen (18)
months hereafter.
(e) "Endeavor Business" shall mean the development, marketing, sales
-----------------
and provision of Internet based information and communications services,
including, without limitation, Endeavor's WebMD service offering, so long
as such services do not include cardiac or maternity monitoring services.
(f) "Restricted Territory" shall mean the United States of America.
--------------------
(g) "Trade Secrets" shall mean all trade secrets of QDS and
-------------
Telemedics as defined under applicable law.
2. CONFIDENTIALITY. Whitney hereby acknowledges and agrees that the
---------------
Trade Secrets and Confidential Information represent a substantial investment of
QDS and Telemedics, respectively, and that any unauthorized disclosure or use of
any of the Trade Secrets or Confidential Information or any other violation of
the confidentiality provisions of this Section 2, would be wrongful and could
cause immediate and irreparable injury to Matria. Accordingly, Whitney hereby
agrees that he will not, without the express prior written consent of Endeavor
and Matria, distribute, sell, market, publish, disclose, transfer, assign,
disseminate or otherwise communicate to any other person or entity, or use, copy
or appropriate for or on behalf of himself or any other person or entity: (a)
any Confidential Information during the Covenant Period; or (b) any Trade Secret
at any time during which such information constitutes a trade secret under
applicable law. Whitney agrees that he will adhere to all reasonable
confidentiality requirements that Matria may establish from time to time, with
respect to the Confidential Information and Trade Secrets, and immediately
notify Endeavor and Matria of any unauthorized disclosure or use of any Trade
Secret or Confidential Information by him. Whitney also agrees to assist
Matria, at Matria's expense and to the extent necessary, in the procurement or
any protection of Matria's rights in or to any Trade Secrets or Confidential
Information. Notwithstanding anything herein to the contrary, the restrictions
set forth in Section 2 will not be applicable to information which otherwise
constitutes Trade Secrets or Confidential Information but is solely to be used
in the furtherance of the Endeavor Business.
3. NONCOMPETITION. During the Covenant Period, Whitney agrees that he
--------------
will not, without the prior written consent of Endeavor and Matria, either
directly or indirectly, alone or in conjunction with any other person or entity,
accept, enter into or take any action in furtherance of a Competitive Position
in the Restricted Territory. Notwithstanding anything herein to the
-2-
<PAGE>
contrary, the restrictions set forth in this Section 3 will not be applicable to
any action taken in furtherance of the Endeavor Business
4. NONSOLICITATION OF CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. During the
--------------------------------------------------------
Covenant Period, Whitney agrees that he will not, without the prior written
consent of Endeavor and Matria, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit, entice or induce any
customer, supplier or distributor of Matria or any of its subsidiaries (or any
actively sought prospective customer, supplier or distributor of Matria or any
of its subsidiaries) for or on behalf of any Competing Business.
5. NONSOLICITATION OF PERSONNEL. During the Covenant Period, Whitney
----------------------------
agrees that he will not, without the prior written consent of Endeavor and
Matria, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit or attempt to solicit any "key or material" employee,
consultant, contractor or other personnel of Matria or any of its subsidiaries
to terminate, alter or lessen that party's affiliation with Matria or any of its
subsidiaries or to violate the terms of any agreement or understanding between
such employee, consultant, contractor or other person and Matria. For purposes
of this Section 5, "key or material" employees, consultants, contractors or
other personnel shall mean those such persons or entities who have direct access
to or have had substantial exposure to Confidential Information or Trade
Secrets.
6. ACKNOWLEDGMENTS. Whitney hereby acknowledges and agrees that the
---------------
Protective Covenants are reasonable as to time, scope and territory given
Matria's need to protect the Trade Secrets and Confidential Information. In the
event any covenant or agreement in this Agreement shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too great a period of time or over too great a geographical area or by
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable
and/or over the maximum geographical area as to which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
7. SPECIFIC PERFORMANCE. Whitney hereby acknowledges and agrees that any
--------------------
breach of a Protective Covenant by him will cause irreparable damage to Matria,
the exact amount of which will be difficult to ascertain, and that the remedies
at law for any such breach will be inadequate. Accordingly, Whitney agrees
that, in addition to any other remedy that may be available at law, in equity,
or hereunder, Endeavor and Matria shall be entitled to specific performance and
injunctive relief, without posting bond or other security to enforce or prevent
any violation of any of the Protective Covenants by him.
8. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
-----------------------
Matria is the sole intended third party beneficiary of all of Endeavor's rights
under this Agreement. In the event that Endeavor fails to exercise its rights
or remedies hereunder, Matria shall have the sole right to enforce any of
Endeavor's rights and remedies hereunder, in Endeavor's name or otherwise.
-3-
<PAGE>
9. MISCELLANEOUS.
-------------
(a) This Agreement contains the entire agreement and understanding
concerning the subject matter hereof between the parties hereto. No
waiver, termination or discharge of this Agreement, or any of the terms or
provisions hereof, shall be binding upon any party hereto unless confirmed
in writing. This Agreement may not be modified or amended, except by a
writing executed by all parties hereto. No waiver by any party hereto of
any term or provision of this Agreement or of any default hereunder shall
affect such party's rights thereafter to enforce such term or provision or
to exercise any right or remedy in the event of any other default, whether
or not similar.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia without regard to the principles of
the conflicts of laws.
(c) This Agreement may not be assigned, in whole or in part, by
Whitney without the prior written consent of Endeavor and Matria, and any
attempted assignment not in accordance herewith shall be null and void and
of no force or effect; provided, however, that Matria may assign this
Agreement to any wholly-owned subsidiary operating the Business and to any
person who acquires the Business from Matria or such subsidiary.
(d) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
(e) If any provision of this Agreement shall be held void, voidable,
invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and, accordingly, the remaining provisions of
this Agreement shall remain in full force and effect as though such void,
voidable, invalid or inoperative provision had not been contained herein.
(f) This Agreement shall not be construed more strongly against any
party hereto regardless of which party is responsible for its preparation.
(g) Upon the reasonable request of any party, each party hereto
agrees to take any and all actions, including, without limitation, the
execution of certificates, documents or instruments, necessary or
appropriate to give effect to the terms and conditions set forth in this
Agreement.
(h) All rights and remedies of each party hereto are cumulative of
each other and of every other right or remedy such party may otherwise have
at law or in equity, and the exercise of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute the
-4-
<PAGE>
same Agreement. Any signature page of any such counterpart, or any
electronic facsimile thereof, may be attached or appended to any other
counterpart to complete a fully executed counterpart of this Agreement, and
any telecopy or other facsimile transmission of any signature shall be
deemed an original and shall bind such party.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the day and year
first above written.
"Endeavor"
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
-------------------------
Title: Chief Operating Officer
-----------------------
[CORPORATE SEAL]
"Matria"
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
------------------------------------
Title: Executive Vice President and Chief
----------------------------------
Operating Officer
----------------------------------
[CORPORATE SEAL]
"Whitney"
/s/ Blake Whitney
-----------------------------------------
BLAKE WHITNEY
-6-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.17
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement") is made and entered into as of
the 24th day of August, 1998, by and between WEBMD, INC., a Georgia corporation
f/k/a Endeavor Technologies, Inc. (the "Company"), and HBO & COMPANY OF GEORGIA,
a Delaware corporation (the "Purchaser").
1. SALE AND ISSUANCE OF SECURITIES.
1.1 Authorization of Shares. The Board of Directors of the Company shall,
-----------------------
prior to the Closing (as defined in Section 2.1), adopt and file with the
Secretary of State of the State of Georgia an Amendment to its Articles of
Incorporation containing the preferences, limitations and relative rights of the
Series A Preferred Stock, in the form attached hereto as Exhibit 1.1 (the
-----------
"Charter Amendment").
1.2 Sale of Shares. Subject to the terms and conditions hereof, at the
--------------
Closing (defined in Section 2.1) the Company shall issue and sell to Purchaser,
and Purchaser shall purchase from the Company, six hundred sixty-seven thousand
(667,000) shares of Series A Preferred Stock, no par value per share (the
"Purchased Shares"), for the purchase price provided in Section 1.3 below.
1.3 Purchase Price. The purchase price for the Purchased Shares shall be
--------------
fifteen dollars ($15.00) per share, or an aggregate of ten million five thousand
dollars ($10,005,000) (the "Purchase Price"). The Purchase Price shall be paid
at the Closing in cash.
1.4 Issuance of Warrant. On the Closing Date, the Company shall issue to
-------------------
Purchaser, for no additional consideration, a warrant in the form of Exhibit 1.4
-----------
attached hereto (hereinafter, the "Warrant") dated the Closing Date initially
providing for the purchase of shares of Series A Preferred Stock, no par value
per share (the "Preferred Stock"). The Warrant shall be immediately vested and
exercisable for three (3) years following the issue date thereof and shall
entitle the holder to purchase 300,000 shares of the Preferred Stock (or Common
Stock as provided therein) at an exercise price of $18.00 per share, subject to
adjustment as set forth therein.
The Company shall reserve and keep available for issuance at all times,
free from preemptive rights, such number of its authorized but unissued shares
of the Preferred Stock and its voting Common Stock, no par value and without
series designation ("Common Stock"), as is sufficient to permit exercise in full
of the Warrant in accordance with the terms thereof and the conversion of such
Preferred Stock into Common Stock. All shares of Preferred Stock and Common
Stock that are so issuable shall, when issued upon exercise, be duly and validly
issued and fully paid and non-assessable.
1.5 Use of Cash Proceeds. The Company, as determined by the Board of
--------------------
Directors thereof, shall use the cash proceeds from the sale of the Purchased
Shares for general
<PAGE>
working capital and to pay expenses associated with the transactions
contemplated by this Agreement in accordance with Section 12.8 hereof. Such cash
proceeds shall not be used to retire loans made by shareholders to the Company
or for the redemption of any capital stock of the Company.
1.6 Agreements. Each of the parties hereto agrees at the Closing to enter
----------
into the respective agreements described in Articles 5 and 6 to which they are
indicated as a party.
2. CLOSING; DELIVERIES.
2.1 Closing. The closing of the purchase and sale of the Purchased Shares
-------
(the "Closing") shall be held at the offices of Jones, Day, Reavis & Pogue,
Atlanta, Georgia, on August 24, 1998, or at such other place or on such other
date as the parties may agree (the date of the Closing is hereinafter referred
to as the "Closing Date").
2.2 Deliveries at Closing. At the Closing, the Company shall deliver to
---------------------
Purchaser a certificate, registered in Purchaser's name, representing the
Purchased Shares, against payment by Purchaser of the Purchase Price by wire
transfer. The Company shall also deliver such other instruments and documents as
are described in Article 5.
2.3 Issuance of Additional Shares. The parties acknowledge that the
------------------------------
Company intends to make an initial offering to the public of its Common Stock
pursuant to a registration statement effective under the federal Securities Act
of 1933, as amended (the "Securities Act"), following the Closing Date (the
closing of such offering being referred to hereinafter as the "Initial Public
Offering"). If the Company does not close the Initial Public Offering at an
offering price of $18.00 per share (as adjusted for any stock splits, stock
dividends, combinations or the like) on or before the date that is one hundred
eighty (180) days following the Closing Date, the Company shall issue for no
additional consideration to Purchaser 150,000 additional shares of Preferred
Stock without need for any further action by Purchaser; provided that if the
Company closes the Initial Public Offering within such 180-day period, but does
so at an offering price less than $18.00 per share (as adjusted for any stock
splits, stock dividends, combinations or the like), such shares shall consist of
Common Stock rather than Preferred Stock. Furthermore, in the event the Company
fails to close the Initial Public Offering on or before the first anniversary of
the Closing Date, the Company shall issue promptly to Purchaser, for no
additional consideration, an additional 50,000 shares of Preferred Stock without
need for any further action by Purchaser. The numbers of shares of stock
specified in this Section 2.3 shall be adjusted for any stock splits, stock
dividends, recapitalizations or similar events occurring prior to the dates
indicated.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
3.1 Organization and Standing; Charter and Bylaws. Each of the Company
---------------------------------------------
and its wholly owned subsidiaries Endeavor Technologies, Inc. (formerly known as
Quality
2
<PAGE>
Diagnostic Services, Inc.) and Telemedics, Inc. (each, a "Subsidiary" and,
collectively, the "Subsidiaries") is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Georgia and in good
standing under such laws. The Company has previously delivered to Purchaser true
and accurate copies of the Articles of Incorporation and Bylaws, as presently in
effect, of the Company.
3.2 Corporate Power. The Company has all requisite legal and corporate
---------------
power and authority to enter into this Agreement and, when the Charter Amendment
has been adopted and filed, to sell the Purchased Shares and to carry out and
perform its other obligations under the terms of this Agreement.
3.3 Subsidiaries and Affiliates. Except as set forth in Exhibit 3.3
--------------------------- -----------
attached hereto, the Company does not own or control, directly or indirectly,
any interest or investment in any corporation, partnership, association or other
form of business entity.
3.4 Capitalization. Immediately prior to the Closing Date, the authorized
--------------
capital stock of the Company shall consist of 107,000,000 shares of capital
stock, of which (a) 75,000,000 shares are designated as Common Stock, voting and
without par value per share, of which 3,000,000 are issued and outstanding; (b)
3,000,000 have been designated as Common Stock Series B, nonvoting and without
par value per share, of which 1,400,000 are issued and outstanding; (c)
1,500,000 shares of which have been designated as Common Stock Series C,
nonvoting and without par value per share, of which 1,500,000 are issued and
outstanding; (d) 15,000,000 shares of which have been designated as Common Stock
Series D, nonvoting and without par value per share, of which 4,406,805 are
issued and outstanding; (e) 2,500,000 shares of which have been designated as
Common Stock Series E, nonvoting and without par value per share, of which
2,100,000 are issued and outstanding; and (f) 10,000,000 shares of preferred
stock, of which no shares are issued and outstanding. All such issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable, are owned beneficially and of record by the shareholders and
in the amounts set forth in Exhibit 3.4 ("Schedule of Shareholders, Option
----------- --------------------------------
Holders and Warrant Holders") attached hereto, and, except as set forth in
- ---------------------------
Exhibit 3.4, have been offered, issued, sold and delivered by the Company in
- -----------
compliance with applicable federal and state securities laws. Except as shown
in Exhibit 3.4, there are no outstanding rights, options, warrants, conversion
-----------
rights or agreements for the purchase or acquisition from the Company or any
Subsidiary of any shares of its respective capital stock other than the rights
created by this Agreement.
3.5 Authorization. All corporate action on the part of the Company and
-------------
its directors, officers and shareholders necessary for the authorization,
execution, delivery and performance of all its obligations under this Agreement
and any document contemplated hereby; for the authorization, issuance and
delivery by the Company of the Purchased Shares, the Warrant, the shares of
Preferred Stock or Common Stock, as the case may be, issuable upon exercise of
the Warrant (the "Warrant Shares"), and the additional shares of Preferred Stock
or Common Stock, as the case may be, pursuant to the terms of Section 2.3 hereof
(the "Additional Shares"); for the authorization and reservation of the shares
of Preferred Stock or Common Stock, as the case may be, issuable pursuant to the
Performance-Based Warrant, if any, issued pursuant to the terms of Section 10
hereof (the "Performance-Based Warrant Shares"); and for
3
<PAGE>
the authorization and reservation of the shares of the Common Stock issuable
upon conversion of all such Preferred Stock pursuant to the terms of the
Company's Articles of Incorporation (the "Conversion Shares"), has been (or will
be) taken prior to the Closing. This Agreement constitutes the valid and binding
obligation of the Company and is enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights generally, and except
that the availability of the remedy of specific performance or other equitable
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
3.6 Validity of Stock. The Purchased Shares, the Warrant Shares, the
-----------------
Additional Shares, and the Performance-Based Warrant Shares, when issued, sold
and delivered in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, will be free of any liens or
encumbrances, and will not be subject to any preemptive rights, rights of first
refusal or redemption rights, other than as provided herein and in the Charter
Amendment. The Conversion Shares have been duly and validly reserved, and
neither they nor the issuance thereof are subject to any preemptive rights or
rights of first refusal or redemption rights, and, upon issuance, they will be
validly issued, fully paid and nonassessable.
3.7 Disclosure. No representation or warranty by the Company in this
----------
Agreement or in any written statement or certificate (excluding any draft
registration statement) furnished to Purchaser in connection with the
transactions contemplated by this Agreement contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state a material
fact necessary to make the statements made not misleading in light of the
circumstances under which they were made.
3.8 Financial Statements. The Company has furnished Purchaser with (a)
--------------------
audited consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1996 and 1997, together with audited consolidated statements of
income and cash flows for the three-year period ended December 31, 1997, and (b)
an unaudited consolidated balance sheet of the Company as of June 30, 1998,
together with unaudited consolidated statements of income and cash flow for the
six-month period then ended (the "Interim Financial Statements"; all the
foregoing financial statements being collectively referred to hereafter as the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and fairly present the financial position of the Company and the results
of its operations as of the dates and for the periods indicated, subject, in the
case of the Interim Financial Statements, to normal year-end adjustments (which
will not deviate materially from the other financial statements) and the absence
of footnotes.
3.9 Changes. Except as disclosed in Exhibit 3.9 attached hereto and
------- -----------
except for any changes resulting from the sale of substantially all of the
assets of the Subsidiaries to Matria Healthcare, Inc., on July 21, 1998,
effective as of July 1, 1998, and as disclosed in the Interim Financial
Statements, since the date of the Interim Financial Statements, there has not
been:
4
<PAGE>
3.9.1 any change in the assets, liabilities, financial condition, or
operations of the Company considered in the aggregate from that reflected in the
Interim Financial Statements, except changes in the ordinary course of business
that have not been, either individually or in the aggregate, materially adverse;
3.9.2 any materially adverse change (individually or in the
aggregate), except in the ordinary course of business, in the contingent
obligations of the Company by way of guaranty, endorsement, indemnity, warranty,
or otherwise;
3.9.3 any damage, destruction, or loss that had a material adverse
effect on the properties or business of the Company, whether or not covered by
insurance;
3.9.4 any loans made by the Company to its employees, officers, or
directors or members of their immediate families other than travel and other
commercially reasonable advances made in the ordinary course of business;
3.9.5 any increases in the compensation of any of the Company's
officers or directors;
3.9.6 any declaration or payment of any dividend or other
distribution of the assets of the Company;
3.9.7 any other event or condition of any character that has had a
material adverse effect on the business of the Company; or
3.9.8 any agreement or commitment by the Company to do any of the
things described in this Section 3.9.
3.10 Material Liabilities. Except (a) as disclosed in Exhibit 3.10
-------------------- ------------
attached hereto or as reflected in the Interim Financial Statements, (b) for the
obligations and liabilities incurred in the ordinary course of business since
the date of the Interim Financial Statements, and (c) for obligations under
contracts made in the ordinary course of business that would not be required by
GAAP to be reflected in the Interim Financial Statements, neither the Company
nor any Subsidiary has any material liabilities or obligations, absolute or
contingent.
3.11 Contracts and Commitments. Other than this Agreement or as set forth
-------------------------
in Exhibit 3.11 attached hereto, neither the Company nor any Subsidiary has any
------------
contracts, agreements or instruments to which it is a party and that involve
either (a) a commitment by, or revenue to, the Company or any Subsidiary in
excess of $25,000 annually, or (b) provisions restricting or affecting the
development, manufacture or distribution of the Company's or any Subsidiary's
products or services. Except as set forth in Exhibit 3.11, all contracts,
------------
agreements or instruments to which the Company or any Subsidiary is a party are
valid and binding upon the Company or the respective Subsidiary, as the case may
be, and the other parties thereto and are in full force and effect and
enforceable in accordance with their terms,
5
<PAGE>
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equitable principles, and none of the Company, any Subsidiary or, to the
Knowledge of the Company (as defined in Section 12.9 hereof), any other party to
any such contract, agreement or instrument has breached any provision of, or is
in default under, the terms thereof, and there are no claims or allegations of
offset, defense, or counterclaims that would prevent the work in process of any
of the Company and the Subsidiaries or its contracts and agreements from
maturing in due course into fully collectible accounts receivable. Except as set
forth on Exhibit 3.11, each of the Company and the Subsidiaries has complied
------------
with all applicable statutes, ordinances, rules, regulations and orders relating
to seeking, bidding, obtaining, performing under or otherwise complying with,
contracts with governmental and quasi-governmental authorities, agencies or
other entities.
3.12 Computer Software.
-----------------
3.12.1 Exhibit 3.12.1 contains a complete and accurate list of the
--------------
computer software that is owned by each of the Company and the Subsidiaries and
used in their respective businesses (the "Owned Software"), except for
commercially available business software applications and other commercially
available over-the-counter "shrink-wrap" software that is generally used by any
of the Company and the Subsidiaries in the ordinary course of its business (the
"Business Software"). To the Company's Knowledge, except for the Licensed
Software (as such term is defined below) incorporated within the Owned Software,
and except as otherwise set forth in Exhibit 3.12.1, each of the Company and the
--------------
Subsidiaries has exclusive rights and title to the Owned Software, free and
clear of all claims, including claims or rights of joint owners and employees,
agents, consultants, customers, licensees or any other parties who may have been
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such Owned Software. Each contract programmer, independent
contractor, nonemployee agent and person or other entity (other than employees)
who has performed development or computer programming services for any of the
Company and the Subsidiaries in connection with the Owned Software has executed
a confidentiality agreement in favor of the Company or any Subsidiary, and each
of the Company and the Subsidiaries has obtained an assignment or license of, or
otherwise owns, the intellectual property resulting therefrom. No Owned
Software has been published or disclosed to any other parties except pursuant to
contracts requiring such other parties to keep the Owned Software confidential.
(For purposes of the preceding sentence, marketing materials that describe the
Owned Software and its functions in general shall not be deemed a publication or
disclosure of the Owned Software.) To the best of the Company's Knowledge, no
such other party has breached any such obligation of confidentiality.
3.12.2 Each of the Company and the Subsidiaries has the right and
license to use, sublicense, modify and copy all software (other than the
Business Software) of which each of the Company and the Subsidiaries is a
licensee or lessee or that each of the Company and the Subsidiaries otherwise
has obtained the right to use (collectively, the "Licensed Software") to the
extent necessary to operate each of the Company's and any Subsidiary's business,
free and clear of any limitations or encumbrances, including Licensed Software
that
6
<PAGE>
has been incorporated into or made a part of any Owned Software. Each of the
Company and the Subsidiaries is in full compliance with all material provisions
of each license, lease or other agreement relating to the Licensed Software.
Neither the Company nor any Subsidiary has published or disclosed any Licensed
Software to any other party except, in the case of Licensed Software, if any,
that any of the Company and the Subsidiaries leases or markets to others,
pursuant to contracts requiring such other parties to keep the Licensed Software
confidential. To the best of the Company's Knowledge, no party to whom any of
the Company and the Subsidiaries has disclosed Licensed Software has breached
such obligation of confidentiality.
3.12.3 The Owned Software, the Licensed Software, and the Business
Software constitute all software used in any of the Company's and any
Subsidiary's business (the "Company Software"). The transactions contemplated
herein will not cause a breach or default under any licenses, leases or similar
agreements relating to the Company Software or impair any of the Company's and
any Subsidiary's ability to use the Company Software in the same manner as the
Company Software is currently used or is contemplated to be used by the Company.
Neither the Company nor any Subsidiary has infringed or is infringing any
intellectual property rights of any third party with respect to the Owned
Software, and, to the best of the Company's Knowledge, no other person or entity
is infringing any intellectual property rights of any of the Company and the
Subsidiaries with respect to the Owned Software.
3.12.4 Except as disclosed in Exhibit 3.12.4, neither the Company nor
--------------
any Subsidiary has granted any licenses or other rights, and neither the Company
nor any Subsidiary has any obligation to grant licenses or other rights, with
respect to the Company Software. Each of the Company and the Subsidiaries has
complied in all material respects with the obligations to its customers,
licensees and lessees in respect of the Company Software, if any, listed in
Exhibit 3.12.4.
- --------------
3.12.5 Neither the Company nor any Subsidiary has granted marketing
or brokering rights in the Company Software to any third party.
3.12.6 The Business Software that is material to the operation of the
Company's or any Subsidiary's business, the Owned Software and any Licensed
Software that has been incorporated into any Owned Software is capable of
correctly processing, providing and/or receiving date data within and between
the Twentieth and Twenty-First Centuries, provided that all hardware, software
and firmware used with the Company Software and computer equipment properly
exchanges accurate date data with it. To the Company's Knowledge after
reasonable inquiry, the business of neither the Company nor any Subsidiary
depends to any extent on embedded computer technology or computer information
systems of its current vendors or suppliers that would, in the event that the
embedded chips or vendor/supplier computer systems fail to be Year 2000
compliant, have a material adverse effect on the Company's or any Subsidiary's
business or properties.
3.13 Protection of Intellectual Property Generally. Exhibit 3.13 hereto
--------------------------------------------- ------------
sets forth a complete and correct list and summary description of all registered
and material unregistered
7
<PAGE>
trademarks, trade or company names, service marks, service names, brand names
and registrations, if any, therefor; all registered copyrights; all patents and
all patent applications, if any, in each case applicable to or used or intended
to be used in the business of any of the Company and the Subsidiaries, together
with a complete list of all licenses granted by or to each of the Company and
the Subsidiaries with respect to any of the above. The Company has filed an
application in the United States Patent and Trademark Office for registration of
WebMD as a service mark (which application has been initially denied), but
otherwise neither the Company nor any Subsidiary has not sought governmental
protection by way of patent, trademark or copyright registration or application
for the property listed in Exhibit 3.13 hereto. Each of the Company and the
------------
Subsidiaries validly owns or is validly licensed to use all inventions,
processes, know-how, formulas, patterns, designs, and trade secrets that are
used in the conduct of its business as now conducted. All such rights and all
rights listed in Exhibit 3.13 hereto are valid and enforceable and are free from
------------
any security interest, lien or encumbrance or any default on the part of any of
the Company and the Subsidiaries, and are not now involved in any pending or, to
the knowledge of the Company, threatened interference proceeding. No option,
license, sublicense or other agreement has been granted in respect of any
patent, trademark, brand name, trade secret, copyright or pending application
therefor listed in Exhibit 3.13 hereto, except as noted in Exhibit 3.13. Except
------------ ------------
as set forth on Exhibit 3.13, neither the Owned Software nor any of the
------------
Company's or any Subsidiary's other owned intellectual property infringes any
patent, trademark, service mark, trade or company name or application therefor
or any other related technological right of any other person. None of the rights
of any of the Company and the Subsidiaries described in this Section 3.13 will
be impaired in any way by the transactions provided for herein, and all of such
rights will be fully enforceable by each of the Company and the Subsidiaries
after the Closing Date without the consent or agreement of any other party.
Neither the Company nor any Subsidiary believes it is or will be necessary to
utilize any inventions of any of its employees (or individuals it currently
intends to hire) made prior to their employment by any of the Company and the
Subsidiaries.
3.14 Compliance with Other Instruments. The execution, delivery and
---------------------------------
performance of and compliance with this Agreement, the issuance of the Purchased
Shares and the issuance of the Conversion Shares will not result in any
violation or be in conflict with or constitute a default under any of the terms
or provisions of the Company's or any Subsidiary's Articles of Incorporation or
bylaws, or any mortgage, indenture, contract, agreement or instrument to which
the Company or any Subsidiary is a party, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of any of the Company and the Subsidiaries pursuant to any such term or
provision.
3.15 Litigation and Other Proceedings. Except as disclosed in Exhibit
-------------------------------- -------
3.15 attached hereto, there are no actions, proceedings or investigations
- ----
pending against any of the Company or the Subsidiaries or their respective
properties or shareholders (or, to the Knowledge of the Company, any basis
therefor or threat thereof) that, either in any case or in the aggregate, could
reasonably be expected to result in any material adverse change in the business
or financial condition of any of the Company or the Subsidiaries or any of their
respective properties or assets or in any material impairment of the right or
ability of any of the Company
8
<PAGE>
or the Subsidiaries to carry on their respective businesses as now conducted or
as proposed to be conducted, or in any material liability on the part of any of
the Company or the Subsidiaries, and none that challenges the validity of this
Agreement or any action taken or to be taken in connection herewith. The
foregoing includes, without limiting its generality, actions pending or, to the
Knowledge of the Company, threatened (or any threat thereof) involving the prior
employment of any of the Company's or any Subsidiary's employees or their use in
connection with the Company's or any Subsidiary's business of any information or
techniques allegedly proprietary to any of their former employers.
3.16 Employees. Except as disclosed in Exhibit 3.16 attached hereto, each
--------- ------------
of the Company and the Subsidiaries has no employment contracts with any of its
employees not expressly terminable at will and no collective bargaining
agreements covering any of its employees. Further, neither the Company nor any
Subsidiary has any policies, procedures or handbooks providing for other than
at-will employment. Neither the Company nor any Subsidiary is aware of any
proposed, threatened or actual union organization activity affecting the
Company's or any Subsidiary's current or prospective operations.
3.17 Registration Rights. Except as provided for in Article 11 hereof,
-------------------
and in Exhibit 3.17 attached hereto, neither the Company nor any Subsidiary is
------------
under any obligation to register any of its presently outstanding securities or
any of its securities that may hereafter be issued pursuant to this or any other
existing agreement.
3.18 Governmental Consents. Except for the filing of the Charter
---------------------
Amendment as contemplated by Section 1.1 hereof and the filing of a Form D with
the Securities and Exchange Commission (the "Commission") and the State of
Georgia, no consent, approval or authorization of, or registration, declaration,
designation, qualification or filing with, any governmental authority on the
part of any of the Company and the Subsidiaries is required in connection with
the valid execution and delivery of this Agreement, the offer, sale or issuance
of the Purchased Shares by the Company, the issuance by the Company of the
Conversion Shares, or the consummation of any other transaction contemplated
hereby other than as provided by applicable securities laws.
3.19 Other Consents. All consents of any third party and any shareholders
--------------
of any of the Company and the Subsidiaries necessary for the execution, delivery
and performance by each of the Company and the Subsidiaries of this Agreement or
the consummation of the transactions contemplated hereby, including, without
limitation, any consents necessary from Sirrom Investments, Inc., have been
received prior to the Closing.
3.20 Title to Property and Assets. Except as disclosed in Exhibit 3.20
---------------------------- ------------
attached hereto, each of the Company and the Subsidiaries has good and
marketable title to its material properties and assets and has good title to all
its leasehold interests, in each case subject to no mortgage, pledge, lien,
encumbrance or charge.
3.21 Customers and Suppliers. Except as disclosed in Exhibit 3.21
----------------------- ------------
attached hereto, no customer or supplier has taken, and neither the Company nor
any Subsidiary has received
9
<PAGE>
any notice or has any Knowledge that any customer or supplier of any of the
Company and the Subsidiaries contemplates taking, any steps that could disrupt
the business relationship of any of the Company and the Subsidiaries with such
customer or supplier or could result in a diminution in the value of any of the
Company and the Subsidiaries in a manner that would have a material adverse
effect on the business or financial condition of any of the Company and the
Subsidiaries.
3.22 Insurance. Each of the Company and the Subsidiaries has fire and
---------
casualty insurance policies in an amount sufficient to allow it to replace with
proceeds from such insurance any of its material, tangible properties that might
be damaged or destroyed.
3.23 Licenses and Permits; Compliance with Law. Except as disclosed in
-----------------------------------------
Exhibit 3.23 attached hereto, each of the Company and the Subsidiaries holds all
- ------------
licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of its
business and the use of its assets. Except as disclosed in Exhibit 3.23
------------
attached hereto, each of the Company and the Subsidiaries has conducted, and is
presently conducting, its business so as to comply in all material respects with
all applicable statutes, ordinances, rules, regulations and orders of any
governmental authority. Further, neither the Company nor any Subsidiary is
presently charged with or, to the knowledge of the Company, under governmental
investigation with respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation. To the knowledge of the Company, neither the
Company nor any Subsidiary is presently the subject of any pending or, to the
knowledge of the Company, threatened adverse proceeding by any regulatory
authority having jurisdiction over its business, properties or operations.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any such
license, certificate, permit, franchise or right held by any of the Company and
the Subsidiaries.
3.24 Tax Matters. Except as disclosed in Exhibit 3.24 attached hereto,
----------- ------------
each of the Company and the Subsidiaries has accurately prepared and timely
filed all income and other tax returns, if any, that are required to be filed,
and has paid, or made provision for the payment of, all taxes that have or may
have become due pursuant to said returns or pursuant to any assessment that has
or may be received from any taxing authority for the period through the date of
the Interim Financial Statements, and there are no outstanding agreements by any
of the Company and the Subsidiaries for the extension of time for the assessment
of any tax. The United States income tax returns of each of the Company and the
Subsidiaries (if any) have not been audited by the Internal Revenue Service.
Except as disclosed in Exhibit 3.24, no deficiency assessment or proposed
------------
adjustment of the Company's or any Subsidiary's United States income tax or
state or municipal taxes (if any) is pending, and the Company has no Knowledge
of any proposed liability for any tax to be imposed upon the Company's or any
Subsidiary's properties or assets for which there is not an adequate reserve
reflected in the Interim Financial Statements.
3.25 Employment; No Conflicting Agreements. Except as disclosed in
-------------------------------------
Exhibit 3.25 attached hereto, none of the officers, directors, and key employees
- ------------
of any of the Company and
10
<PAGE>
the Subsidiaries is obligated under any contract (including licenses, covenants,
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
his or her obligation to use his or her best efforts to promote the interests of
any of the Company and the Subsidiaries or that would conflict with the business
of any of the Company and the Subsidiaries as any of the Company and the
Subsidiaries presently conducts, or presently proposes to conduct, the same.
3.26 Indebtedness to Directors and Officers; Interested Party
--------------------------------------------------------
Transactions. Except as disclosed in Exhibit 3.26 attached hereto, neither the
- ------------ ------------
Company nor any Subsidiary is indebted to any of its directors or officers or
party to any contract with any affiliate of its directors or officers, and, to
the Knowledge of the Company, none of such directors or officers has a claim of
any nature against any of the Company and the Subsidiaries except for
compensation due for past or current pay periods. To the Knowledge of the
Company and except as disclosed in Exhibit 3.26, no officer, director or holder
------------
of more than five percent (5%) of the capital stock of any of the Company, the
Subsidiaries or any "affiliate" or "associate" (as these terms are defined in
Rule 405 promulgated under the Securities Act) of any such person or entity or
any of the Company and the Subsidiaries has or has had, either directly or
indirectly, (a) an interest in any person or entity that (i) furnishes or sells
services or products that are furnished or sold or are proposed to be furnished
or sold by any of the Company and the Subsidiaries , or (ii) purchases from or
sells or furnishes to any of the Company and the Subsidiaries any goods or
services, or (b) a beneficial interest in any contract or agreement to which any
of the Company and the Subsidiaries is a party or by which it may be bound or
affected. Except as set forth in Exhibit 3.26 hereto, there are no existing
------------
material arrangements or proposed material transactions between any of the
Company and the Subsidiaries and any officer, director, or holder or any
affiliate or associate of any such person, of more than five percent (5%) of the
capital stock of any of the Company and the Subsidiaries.
3.27 Employee Plans. Exhibit 3.27 attached hereto lists all employee
-------------- ------------
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and all severance, bonus, retirement, pension,
profit-sharing, deferred compensation plans and other similar fringe or employee
benefit plans, programs or arrangements, and all employee or compensation
agreements, written or otherwise, for the benefit of or relating to any employee
of any of the Company and the Subsidiaries (collectively, "Employee Plans").
None of the Company, the Subsidiaries, and any of their respective officers or
directors has taken any action, directly or indirectly, to obligate any of the
Company and the Subsidiaries to adopt any additional Employee Plans. Each of
the Company and the Subsidiaries has complied with all terms and conditions of
the Employee Plans the violation of which would have a material adverse effect
on the business, as currently conducted or as any of the Company and the
Subsidiaries presently proposes to conduct it, and assets of any of the Company
and the Subsidiaries.
3.28 No Integration with Other Offerings. The acquisition by Purchaser of
-----------------------------------
the Purchased Shares, the Warrant and the Additional Shares will not be
"integrated" with any
11
<PAGE>
other offering or sale of securities of the Company required to be registered
under the Securities Act, or the rules and regulations promulgated thereunder.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company as follows:
4.1 Access to Information. Purchaser acknowledges that all documents,
---------------------
records, and books pertaining to the Company have been made available for
inspection by Purchaser. Purchaser has a pre-existing business or personal
relationship with the Company or with one or more of the Company's officers,
directors or controlling persons. Purchaser and its advisor or advisors, or a
person or persons acting on their behalf, have had a reasonable opportunity to
ask questions of and receive answers from the officers of the Company,
concerning the terms and conditions of the offering of the Purchased Shares and
the Warrant, and to obtain additional information, to the extent possessed or
obtainable without unreasonable effort or expense by the officers of the
Company. All such questions have been answered to the full satisfaction of
Purchaser.
4.2 Experience; Investment. Purchaser has such knowledge and experience
----------------------
in financial and business matters as to enable Purchaser (a) to utilize the
information made available to it in connection with the offering of the
Purchased Shares and the Warrant, (b) to evaluate the merits and risks
associated with a purchase of the Purchased Shares and the Warrant, and (c) to
make an informed decision with respect thereto. Purchaser's business and
financial experience is such that the Company could reasonably assume Purchaser
has the capacity to protect its own interests in connection with the offer, sale
and issuance of the Purchased Shares and the Warrant. Purchaser is acquiring
the Purchased Shares and the Warrant solely for its own account, not as a
nominee or agent, and not with a view to, or for sale in connection with, any
distribution thereof. Purchaser is an "accredited investor" within the meaning
of Regulation D promulgated by the Commission under the Securities Act by reason
of being a corporation with assets in excess of $5,000,000.
4.3 Registration Under the Securities Act. Purchaser understands that (a)
-------------------------------------
neither the offering nor the sale of the Purchased Shares and the issuance of
the Warrant has been registered under the Securities Act or applicable state
securities laws, in reliance upon exemptions from the registration provisions of
the Securities Act and applicable state securities laws, (b) the Purchased
Shares purchased by Purchaser and the Warrant issued to the Purchaser must be
held by it indefinitely unless the sale or transfer thereof is subsequently
registered under the Securities Act and applicable state securities laws or an
exemption from such registration is available, and the certificates or documents
representing all Purchased Shares and the Warrant will be legended to reflect
such restrictions, (c) except as provided in Article 11 hereof, the Company is
under no obligation to register any Purchased Shares, Additional Shares,
Conversion Shares, Performance-Based Warrant Shares or the Warrant Shares on
Purchaser's behalf or to assist it in complying with any exemption from
registration, and (d) the officers of the Company will rely upon the
representations and warranties made by
12
<PAGE>
Purchaser in this Agreement in order to establish such exemption from the
registration provisions of the Securities Act and applicable state securities
laws.
4.4 Transfer. Purchaser will not transfer the Warrant or any Purchased
--------
Shares, Additional Shares, Warrant Shares or Conversion Shares without
registration under the Securities Act and applicable state securities laws
unless the transfer is exempt from registration under the Securities Act and
such laws and is made in compliance with the legends contemplated by Section
12.11 herein.
4.5 Authorization. All action on the part of Purchaser necessary for the
-------------
authorization, execution, delivery and performance of all obligations of
Purchaser under this Agreement has been (or will be) taken prior to the Closing.
This Agreement, when executed and delivered by Purchaser, will constitute the
valid and binding obligation of Purchaser and is enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and except that the availability of the remedy of specific
performance or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
5. CONDITIONS TO CLOSING OF PURCHASER.
The obligation of Purchaser to purchase and pay for the Purchased Shares at
the Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Article 3 hereof shall be true and correct in
all respects when made and shall be true and correct on such Closing Date with
the same force and effect as if they had been made on and as of said date.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects.
5.3 Filing of Charter Amendment. The Charter Amendment shall have been
---------------------------
properly filed with the Secretary of State of the State of Georgia prior to the
Closing.
5.4 Compliance Certificate. Unless the Closing Date is the same as the
----------------------
date of this Agreement, Purchaser shall have received a certificate executed by
the President of the Company, dated as of the Closing Date, certifying that the
conditions specified in Sections 5.1 through 5.3 hereof have been fulfilled.
5.5 Opinion of Company's Counsel. Purchaser shall have received from
----------------------------
Nelson Mullins Riley & Scarborough, L.L.P., counsel to the Company, in form and
substance satisfactory to Purchaser and its counsel, a favorable opinion
addressed to Purchaser, dated as of the Closing Date, substantially in the form
set forth in Exhibit 5.5 attached hereto.
-----------
13
<PAGE>
5.6 Shareholders' Agreement. The Company and Jeffrey T. Arnold, T. Blake
-----------------------
Whitney, K. Robert Draughon, W. Michael Heekin, Bruce A. Springer (the
"Managers") shall have entered into a certain Shareholders' Agreement (the
"Shareholders' Agreement"), substantially in the form as set forth in Exhibit
-------
5.6 attached hereto, which will grant Purchaser a right of co-sale against the
- ---
Common Stock owned by the Managers.
5.7 Evidence of Consents. The Company shall have given Purchaser
--------------------
evidence satisfactory to Purchaser that it has received all necessary consents
of third parties and shareholders of the Company pursuant to Section 3.19
hereof.
5.8 Second Amendment to Restated Shareholders Agreement. The Company and
---------------------------------------------------
certain shareholders of the Company who are party to that certain Restated
Shareholders Agreement dated October 18, 1996, shall have entered into the
Second Amendment to Restated Shareholders Agreement substantially in the form of
Exhibit 5.8 attached hereto (the "Restated Shareholders Agreement Amendment").
- -----------
6. CONDITIONS TO CLOSING OF THE COMPANY.
The obligation of the Company to sell the Purchased Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by Purchaser in Article 4 hereof shall be true and correct in
all respects when made and shall be true and correct on such Closing Date with
the same force and effect as if they had been made on and as of said date.
6.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by or complied with by Purchaser on or prior to
such Closing Date shall have been performed or complied with in all respects.
6.3 Shareholders' Agreement. Purchaser shall have executed the
-----------------------
Shareholders' Agreement referred to in Section 5.6.
6.4 Restated Shareholders' Agreement Amendment. Purchaser shall have
------------------------------------------
entered into the Restated Shareholders Agreement Amendment referred to in
Section 5.8.
7. COVENANTS OF THE COMPANY.
7.1 Basic Information and Access.
----------------------------
Subject to Section 7.2:
7.1.1 As soon as practicable after the end of each fiscal year, and
in any event within ninety (90) days after each fiscal year beginning with the
year ending December
14
<PAGE>
31, 1998, the Company shall furnish to Purchaser audited consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year and audited consolidated statements of income and cash flow of the Company
and its subsidiaries, if any, for such fiscal year, prepared in accordance with
GAAP consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
Ernst & Young, LLP or another independent public accounting firm, which shall
also be one of the six largest firms of nationally recognized standing in the
United States, a recognized regional firm or a firm acceptable to Purchaser.
7.1.2 As soon as practicable after the end of each fiscal quarter,
and in any event within forty-five (45) days thereafter, the Company shall
furnish to Purchaser consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal quarter, and consolidated
statements of income and cash flow of the Company and its subsidiaries, if any,
for such fiscal quarter and for the current fiscal year to date, prepared in
accordance with GAAP consistently applied, with such statements certified by the
chief financial officer of the Company as having been prepared in accordance
with GAAP consistently applied, and accompanied by a brief narrative description
of the Company's business activities during said quarter.
7.1.3 No later than thirty (30) days prior to the end of each fiscal
year, the Company shall furnish to Purchaser a business plan and budget for the
Company and its subsidiaries for the next fiscal year (commencing with the
Company's 1999 fiscal year), containing information, data and other materials
typically included in a business plan and budget of a company similar in size
and nature to the Company, which budget shall include budget data for each month
of such fiscal year, and which budget and business plan shall be approved by a
majority of the Board of Directors of the Company; provided that the
presentation of the business plan and budget to the member of the Board of
Directors to be elected by Purchaser shall satisfy such requirement.
7.1.4 The Company shall permit at least one (1) representative of
Purchaser, (a) to visit and inspect any of the properties of the Company or any
of its subsidiaries and to discuss its and their affairs, finances and accounts
with the officers of the Company and its subsidiaries, all at such reasonable
times during regular business hours and as often as may be reasonably requested;
(b) to attend all meetings of the Board of Directors of the Company, with
respect to which reasonable notice shall be provided to Purchaser; and (c) to
discuss the affairs, finances and accounts of the Company with its officers and
consult with and advise the officers of the Company as to the management of the
Company at all reasonable times and as often as reasonably requested; provided
that Purchaser shall cause all its inspections to be conducted in a manner that
is not disruptive to the employees or operations of the Company; and, provided
further, that the member of the Board of Directors to be elected by Purchaser or
the holders of the Preferred Stock shall satisfy the requirements of this
Section 7.1.4.
7.2 Suspension of Certain Covenants. The covenants set forth in Article
-------------------------------
7, except those in Section 7.1.3, shall be suspended and be of no force or
effect if the Company becomes
15
<PAGE>
subject to the reporting requirements of the federal Securities Exchange Act of
1934, as amended (the "Securities Exchange Act"); provided that such covenants
shall once again apply in the event the Company ceases to remain subject to such
requirements and if at such time the Purchaser owns Purchased Shares, Warrant
Shares, Conversion Shares or Performance-Based Warrant Shares.
7.3 Confidentiality. Purchaser agrees that it will keep confidential and
---------------
will not disclose, divulge or use any confidential, proprietary or secret
information that Purchaser may obtain from the Company, and that the Company has
marked "confidential," "proprietary" or "secret" or has otherwise identified as
being such, pursuant to financial statements, reports and other materials
submitted by the Company pursuant hereto, pursuant to visitation or inspection
rights granted hereunder or pursuant to the participation of the person elected
by Purchaser on the Company's Board of Directors (the "Confidential
Information"); provided that the term Confidential Information shall not include
any information supplied by the Company that (a) on the date hereof or
thereafter becomes generally available to the public other than as a result of a
disclosure, directly or indirectly, by Purchaser; (b) is disclosed by Purchaser
with the prior written consent of the Company; (c) was available to Purchaser on
a non-confidential basis from a source other than the Company prior to its
disclosure to Purchaser by the Company; or (d) becomes available to Purchaser on
a non-confidential basis from a source other than the Company; provided further,
that, with regard to clauses (c) and (d), the source was not himself or itself
known by Purchaser to be bound by a confidentiality agreement, fiduciary duty or
other obligation of confidentiality with the Company and did not receive such
information, directly or indirectly, from a person or entity so bound.
7.4 Additional Affirmative Covenants. In addition, for so long as any
--------------------------------
Purchased Shares remain outstanding, and until the occurrence of an "Initial
Public Offering" (as such term is defined in the Company's Articles of
Incorporation), the Company shall, or shall cause any Subsidiary, as applicable,
to:
7.4.1 promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company or
any Subsidiary; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set aside on its
books adequate reserves with respect thereto; and provided, further, that the
Company shall pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien that may have attached as
security therefor;
7.4.2 promptly pay, or cause to be paid, when due, in conformance
with customary trade terms, all other material indebtedness incident to the
operations of the Company and its subsidiaries, if any, which is not subject to
a good faith dispute;
7.4.3 keep its properties and those of its subsidiaries, if any, used
in or valuable to the Company's and its subsidiaries' business operations in
good repair, working
16
<PAGE>
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto;
7.4.4 comply, and cause its subsidiaries, if any, to comply, in all
material respects, at all times with the provisions of all leases to which any
of the Company and its subsidiaries is a party or under which any of them
occupies real property;
7.4.5 keep its material assets and those of its subsidiaries that are
of an insurable character insured by reputable insurers against loss or damage
by fire and explosion in amounts customary for companies in similar businesses
similarly situated; and maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated;
7.4.6 keep true records and books of account in which full, true and
correct entries will be made of all dealings or transactions in relation to its
and its subsidiaries' business and affairs in accordance with GAAP applied on a
consistent basis;
7.4.7 duly observe and conform to, and cause its subsidiaries, if
any, to so observe and conform to, in all material respects, all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their property or assets;
7.4.8 maintain in full force and effect its corporate existence,
rights and franchises and use its commercially reasonable efforts to maintain in
full force and effect all licenses and other rights to use patents, processes,
licenses, trademarks, service marks, trade names or copyrights owned or
possessed by it or any subsidiary and necessary to the conduct of its business;
and
7.4.9 obtain a confidentiality and non-disclosure agreement as
described in Section 7.7 from each new employee of the Company or a subsidiary.
7.5 Board Member. The Company agrees that, upon the request of Purchaser
------------
at any time after the closing of the Initial Public Offering, until the third
(3rd) anniversary of the Closing Date, the Company shall include an individual
designated by Purchaser among the nominees to the Company's Board of Directors
submitted for approval to the shareholders of the Company at the next and each
regularly scheduled shareholders' meeting following such request, until such
request is withdrawn. At all times as such designee is a member of the
Company's Board of Directors, the Company shall obtain and maintain director and
officer liability insurance in the amount of at least $5,000,000 per occurrence
prior to the Initial Public Offering and $7,500,000 thereafter (which coverage
shall include issues regarding the Initial Public Offering process), and shall
furnish Purchaser with evidence reasonably satisfactory to it of such insurance
coverage as Purchaser may request from time to time.
7.6 No Integrated Offerings. Prior to the Initial Public Offering, the
-----------------------
Company shall not make any offering or sale of securities of the Company that
are required to be registered under the Securities Act, or the rules or
regulations promulgated thereunder.
17
<PAGE>
7.7 Employee Confidentiality Agreements. Following the Closing Date, each
-----------------------------------
of the Company and the Subsidiaries shall use reasonable efforts to obtain non-
disclosure and confidentiality agreements with respect to its trade secrets and
other proprietary information from each of its employees on terms customary for
companies in similar businesses similarly situated.
8. RIGHT OF FIRST REFUSAL -- ANSWERING SERVICE BUSINESS.
8.1 Grant of Right. During the period commencing on the Closing Date and
--------------
ending on the third (3rd) anniversary of the Closing Date, in the event that the
Company proposes to sell all or substantially all the Company's physician-only
answering service business (hereinafter referred to as the "Answering Service
Business") to a third party other than an Affiliate (as such term is defined
below) of the Company (the "Offeror"), whether such sale involves the assets of
the Answering Service Business or the stock of an Affiliate of the Company that
owns the assets associated with the Answering Service Business, Purchaser shall
have the right to purchase all, but not less than all, such assets or stock (the
"Answering Service Right of First Refusal"); provided, however, that such
Answering Service Right of First Refusal shall be subject to the exclusive
option of Matria Healthcare, Inc. to provide after-hours call support services
as a subcontractor to the Company in respect of the Answering Service Business
in the specialty areas of obstetrics and gynecology and cardiology; provided,
further, that such Answering Service Right of First Refusal shall not apply to a
proposal to sell substantially all of the assets of the Company or the stock of
such subsidiary, unless the business of the Company or such subsidiary consists
exclusively or nearly exclusively of the Answering Service Business. For
purposes of this Section 8.1, the term "Affiliate" shall mean any corporation,
partnership, limited liability company, or other entity that controls, is
controlled by, or is under common control with the Company, with "control" being
defined for this purpose as ownership of a majority of the voting interest of
the entity so controlled.
8.2 Notice of Proposed Transfer. Before effecting any proposed transfer
---------------------------
of all or substantially all of the Answering Service Business, the Company shall
give written notice to Purchaser describing fully the proposed transfer,
including the particular assets to be transferred, the name and address of the
proposed transferee(s) and the proposed transfer price, and the fair market
value of any proposed non-cash consideration (as provided in Section 8.4 below)
(the "Transfer Notice"). The Transfer Notice shall contain an accurate summary
of the offer of the Offeror, which must be a binding and bona fide offer.
8.3 Exercise of Right. At any time within the ten (10)-business day
-----------------
period immediately following receipt of the Transfer Notice, Purchaser may elect
to purchase all, but not less than all, of the assets subject to the Transfer
Notice at the price and upon the terms set forth therein by written notice to
the Company (the "Election Notice"); provided, however, that the Company and
Purchaser shall enter into a definitive agreement within the thirty (30)-day
period immediately following receipt of the Transfer Notice.
8.4 Closing of Purchase. The closing of any sale and purchase of the
-------------------
assets subject to the Transfer Notice shall be held at the offices of the
Company, on a date and time
18
<PAGE>
agreed upon by the Company and Purchaser, provided that such closing shall in no
event be held more than forty-five (45) days after delivery of the Election
Notice or within ten (10) business days following the receipt of all required
governmental approvals, whichever is later. If Purchaser fails to exercise the
Answering Service Right of First Refusal in a timely manner as to all the assets
subject to the Transfer Notice, or if it elects to purchase such assets, but
fails to close the purchase thereof within the period specified in the preceding
sentence, then the Company may, within one hundred twenty (120) days following
delivery of the Transfer Notice, transfer such assets to the Offeror on the
terms and conditions contained in the Transfer Notice. Any proposed transfer on
terms and conditions materially more favorable to the Offeror than those
described in the Transfer Notice, as well as any proposed transfer by the
Company after the expiration of such 120-day period, shall again be subject to
the Answering Service Right of First Refusal and shall require compliance by the
Company with the procedure described in this Article 8.
8.5 Non-Cash Consideration. In the event the consideration proposed to be
----------------------
paid by the Offeror as described in the Transfer Notice includes non-cash
consideration, the Transfer Notice shall state the fair market value thereof.
Purchaser may, within ten (10) business days after delivery of the Transfer
Notice to it, by written notice to the Company, challenge such valuation by
specifying Purchaser's valuation of such non-cash consideration. In the event
of such a challenge, the Company and Purchaser shall agree upon one independent
appraiser, who shall determine the fair market value of the non-cash
consideration for these purposes. In the even that such parties are unable to
agree upon such an appraiser, the parties agree that the American Arbitration
Association ("AAA") shall be employed to choose an independent appraiser and
shall use their best efforts to cause AAA to designate an independent appraiser
within a maximum of fourteen (14) days, and such person shall promptly determine
the fair market value of the non-cash consideration for these purposes. In the
event the appraisal process is utilized, (a) the party whose valuation of the
shares less closely approximates the value determined by the appraiser, measured
by dollar amounts and not by percentages, shall pay all costs of the independent
appraiser and (b) the relevant time periods for the exercise of the Right of
First Refusal and for the consummation of any transfer pursuant to Section 8.3
or 8.4 shall be tolled from the time Purchaser challenges the Company's
valuation of the non-cash consideration until the independent appraiser
determines the fair market value thereof. In the event that the Answering
Service Right of First Refusal is exercised, Purchaser shall pay cash to the
Company in lieu of said non-cash consideration equal to the fair market value of
such non-cash consideration as determined in accordance with this Section 8.5.
9. RIGHT OF FIRST REFUSAL -- NEW SECURITIES.
9.1 New Securities Defined. "New Securities" shall mean any common stock
----------------------
or preferred stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase said common stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible into said
common stock or preferred stock; provided, however, that "New Securities" does
not include:
19
<PAGE>
9.1.1 securities offered to the public pursuant to a registration
statement under the Securities Act;
9.1.2 securities issued pursuant to the acquisition by the Company of
any product, technology, know-how or another corporation by merger, purchase of
all or substantially all of the assets, or any other reorganization whereby the
Company owns over fifty percent (50%) of the voting power of such corporation;
9.1.3 shares of the Company's capital stock issued in connection with
any stock split, stock dividend or recapitalization by the Company;
9.1.4 any shares of common stock of the Company pursuant to options,
warrants or rights granted either before or after the Closing Date to purchase
shares of such common stock, in favor of employees, directors, officers or
consultants of the Company or any subsidiary thereof pursuant to a stock option
plan or agreement approved by the Company's Board of Directors; provided, that
such stock options thereunder, if granted after the Closing Date, are granted at
a price that the Company's Board of Directors determines in good faith is not
less than the fair market value of the securities into which they are
exercisable as of the date of grant;
9.1.5 any conversion into Common Stock pursuant to the Company's
Articles of Incorporation (as amended by the Charter Amendment);
9.1.6 the purchase by Matria Healthcare, Inc. of up to 134,000 shares
of Preferred Stock at a purchase price of no less than $15.00 per share and, for
no additional consideration, a warrant for the purchase of up to 60,000 shares
of Preferred Stock; or
9.1.7 up to 300,000 shares of Common Stock Series D of the Company
issued at any time following the Closing Date pursuant to options to purchase
shares of such stock in favor of officers, employees or consultants of the
Company or any subsidiary thereof pursuant to bona fide commitments made by the
Company prior to July 1, 1998.
9.2 Exercise of Right. In the event the Company proposes to undertake an
-----------------
issuance of New Securities prior to the occurrence of an Initial Public
Offering, it shall give Purchaser written notice of its intention, describing
the type of New Securities, the price, the closing date of the offering thereof,
and the general terms upon which the Company proposes to issue the same.
Purchaser shall be entitled at any time during the offering of the New
Securities to purchase some or all of its pro rata portion of such New
Securities for the price and upon the general terms specified in the notice (and
in any case at a price and upon general terms no more favorable to any of the
other purchasers in such offering), by giving, within ten (10) business days
after receiving such notice from the Company, written notice to the Company of
such election stating therein the time and place of the closing of such
purchase, which must be a date no later than ten (10) days following the closing
date of the offering specified in the notice given by the Company or any
extended closing date thereof. For
20
<PAGE>
purposes of this Section 9.2, Purchaser's pro rata portion of New Securities
shall be equal to a fraction, the numerator of which is the sum of
(i) the number of shares of Common Stock into which shares of
Preferred Stock held by Purchaser immediately prior to such issuance have
been converted since the Preferred Stock was issued to Purchaser, and
(ii) the number of shares of Common Stock into which Purchaser's
shares of Preferred Stock could be converted if fully converted immediately
prior to such issuance,
and the denominator of which is the sum of
(y) the number of shares of Common Stock of all series actually
outstanding immediately prior to such issuance and
(z) the number of shares of Common Stock of all series into which
the then outstanding shares of Preferred Stock could be converted or
exercised if fully converted or exercised immediately prior to such
issuance.
9.3 Non-Conforming Offers. Any offer by the Company of securities in
---------------------
addition to those specified in the notice described in Section 9.1 above,
whether on the same or different terms as are specified therein, shall again
require compliance by the Company with the terms of this Article 9.
10. PROVISION FOR PERFORMANCE-BASED WARRANT.
Following the Closing Date, the Company and Purchaser shall continue to
negotiate in good faith to enter into a joint product marketing or strategic
alliance agreement with respect to the Company's Internet-based information and
communications services operations and certain of Purchaser's own Internet-based
products and services (the "Strategic Alliance Agreement"). If, and only if,
Purchaser and the Company enter into the Strategic Alliance Agreement within
ninety (90) days following the Closing Date, the Company shall issue to
Purchaser, for no additional consideration, within five (5) days following the
execution by the parties of the Strategic Alliance Agreement, a performance-
based warrant to purchase an aggregate of *** shares of Preferred Stock or, in
the event that the Initial Public Offering has been closed by such date, Common
Stock (the "Performance-Based Warrant"). The Performance-Based Warrant would be
granted with respect to ***, *** and *** shares on December 31 of each of the
calendar years 1998, 1999 and 2000, respectively, with the exercise price per
share equal to the fair market value of the underlying capital stock on the
respective dates of grant (as adjusted for stock splits, stock dividends,
combinations and the like occurring after the date thereof) provided that the
joint marketing efforts of Purchaser and the Company yielded the Company gross
revenues of $***, $*** and $***, respectively, during such years. Such
Performance-Based Warrant shall otherwise contain terms substantially similar to
those of the
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
21
<PAGE>
Warrant. Nothing set forth in this Agreement shall obligate either Purchaser or
the Company to enter into the Strategic Alliance Agreement, whether on the
foregoing terms or otherwise.
11. REGISTRATION RIGHTS.
11.1 Certain Definitions. As used in this Agreement, in addition to the
-------------------
terms defined above, the following terms shall have the following respective
meanings:
"Commission" shall have the meaning set forth in Section 3.18 hereof.
------------
"Holders" shall mean Purchaser and any other person holding Registrable
---------
Securities to whom these registration rights have been transferred pursuant to
Section 11.10 hereof.
"Initial Public Offering" shall have the meaning set forth in Section 2.3
-------------------------
hereof.
"Initiating Holders" shall mean a Holder or Holders who in the aggregate
--------------------
own at least fifty percent (50%) of the Registrable Securities then issued and
outstanding (including shares that are issuable upon exercise of the Warrant).
"Other Shareholders" shall mean persons other than Holders who, by virtue
--------------------
of agreements with the Company, are entitled to include their securities in a
registration effected pursuant to this Agreement.
The terms "register," "registered" and "registration" refer to the
-------- ---------- --------------
effectiveness of a registration statement prepared and filed in compliance with
the Securities Act.
"Registrable Securities" as of any particular time shall mean (a) all
------------------------
Conversion Shares, (b) all Warrant Shares to the extent they consist of Common
Stock, and (c) any additional shares of Common Stock issued with respect to the
Conversion Shares described in (a) and (b) pursuant to any stock split, stock
dividend, recapitalization or similar event, or automatic conversion thereof
into another series of Common Stock pursuant to the provisions of the Company's
Articles of Incorporation (as amended by the Charter Amendment).
"Registration Expenses" shall mean all expenses incurred by the Company in
-----------------------
complying with Sections 11.2 and 11.3 hereof, including, without limitation, all
registration and filing fees; printing expenses; fees and disbursements of
counsel for the Company; reasonable fees and expenses of a single counsel for
the selling Holders; state "blue sky" fees and expenses; and accountants'
expenses, including without limitation any special audits required by the
Commission with respect to any such registration; but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company.
"Securities Act" shall have the meaning set forth in Section 2.3 hereof.
----------------
"Securities Exchange Act" shall have the meaning set forth in Section 7.2
-------------------------
hereof.
22
<PAGE>
"Selling Expenses" shall mean all underwriting discounts, selling
------------------
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and any other securities of the Company being sold in the same
registration as the Registrable Securities by Other Shareholders.
"Warrant Shares" shall have the meaning set forth in Section 3.5 hereof.
----------------
11.2 Requested Registration.
----------------------
11.2.1 Demand Registration Rights. Subject to the conditions of
--------------------------
Subsection 11.2.2 below, the Initiating Holders may make up to two (2) demands
on the Company to register all or a portion consisting of at least 200,000
shares of the Registrable Securities on Form S-1 or such other form that may be
available to the Company to effect such demand registration and up to four (4)
demands on the Company to register all or a portion consisting of at least
200,000 shares of the Registrable Securities on Form S-3, if available (each
being referred to hereinafter as a "Demand Registration"); provided, however,
that, the Initiating Holders may not initiate a demand on the Company to
register any Registrable Securities until (i) the first anniversary of the
Closing Date, if a registration statement filed with the Commission with respect
to the Initial Public Offering is not declared effective prior to such
anniversary; or (ii) after the date that is six (6) months following the
effective date of the registration statement relating to the Initial Public
Offering if such effective date occurs prior to the first anniversary of the
Closing Date. Notwithstanding the foregoing, if an offering required pursuant
to this Section 11.2 would constitute the initial offering to the public of the
securities of the Company, then such offering may only be made by means of an
underwritten public offering (either firm or best efforts), provided that in the
event that neither the Company nor the Initiating Holders have secured an
underwriter reasonably acceptable to the other entity or group for such purpose
during the one hundred eighty (180)-day period after the Company's receipt of
the request for registration from the Initiating Holders, then the Company shall
promptly file a registration statement pursuant to Rule 415 under Regulation C
promulgated under the Securities Act covering the Registrable Securities
described in the Initiating Holder's request.
11.2.2 Request for Registration. In the event the Company shall
------------------------
receive from the Initiating Holders a written request that the Company effect a
Demand Registration with respect to all or a portion consisting of at least
200,000 shares of the Registrable Securities, other than a registration pursuant
to Rule 415 under Regulation C promulgated under the Securities Act, the Company
shall:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "blue sky" or other state
securities laws, and appropriate
23
<PAGE>
compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the
sale and distribution of such portion of such Registrable Securities
as is specified in such request, together with such portion of the
Registrable Securities of any Holder or Holders joining in such
request as is specified in a written request given within twenty (20)
days after receipt of such written notice from the Company; provided
that the Company shall not be obligated to take any action to effect
any such registration pursuant to this Section 11.2 in any particular
jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to
service in such jurisdiction and except as may be required by the
Securities Act.
In the event the Company is not obligated to effect any requested
registration by virtue of the foregoing, such request shall not be deemed to be
a Demand Registration for purposes of Subsection 11.2.1. Subject to the
foregoing, the Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request of the Initiating Holders. Notwithstanding the
foregoing provisions of this Section 11.2.2, the Company's obligation to file a
registration statement hereunder shall be suspended for a period not to exceed
ninety (90) days and no more than once during any period of twelve (12)
consecutive months if there exists at the time material non-public information
relating to the Company that, in the reasonable opinion of the Company, should
not be disclosed or if the filing of such registration statement would, in the
opinion of the Board of Directors of the Company, arrived at in good faith,
adversely affect the Company, a material financing project or a material
proposal or pending acquisition, merger or other corporate reorganization to
which the Company is then, or is then expected to become a party.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Subsection 11.2.3 below, include
securities offered by the Company for its own account and/or other securities of
the Company that are held by Other Shareholders.
11.2.3 Underwriting. If the Initiating Holders intend or are
------------
required to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to Subsection 11.2.1 and the Company shall include such
information in the written notice referred to in Subsection 11.2.2(i) hereof.
The right of any Holder to registration pursuant to this Section 11.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein.
If the Company shall request inclusion in any registration pursuant to
Section 11.2 of securities being sold for its own account, or if Other
Shareholders shall request inclusion in any registration pursuant hereto, then,
subject to the last sentence of this Subsection 11.2.3 with respect to the
Company's request, the Initiating Holders shall, on behalf of all Holders,
include such securities in the underwriting and may condition such offer on
their acceptance of
24
<PAGE>
the further applicable provisions of this Article 11. The Company shall
(together with all Holders and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form and containing customary terms reasonably acceptable to the
Initiating Holders, with the representative of the underwriter or underwriters
selected for such underwriting by the Company and reasonably acceptable to the
Initiating Holders; provided, however, that if the Company has not selected an
underwriter reasonably acceptable to the Initiating Holders within thirty (30)
days after the Company's receipt of the request for registration from the
Initiating Holders, then the Initiating Holders may select an underwriter
reasonably acceptable to the Company in connection with such registration.
Notwithstanding any other provision of this Section 11.2, if the underwriter
representative advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, the securities
of the Company held by Other Shareholders shall first be excluded from such
registration to the extent so required by such limitation, and, to the extent
additional shares need to be excluded in order to conform to such limitation,
the securities requested by the Company to be included, if any, shall next be
excluded. The Company shall advise all holders of securities requesting
registration as to the number of shares of securities that may be included in
the registration and underwriting as allocated in the foregoing manner. If any
Other Shareholder or Holder who has requested inclusion in such registration as
provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration. If the underwriter has not limited the number of shares to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities and other securities of the Holders that would otherwise have been
included in such registration and underwriting will not be limited thereby.
11.3 Company Registration.
--------------------
11.3.1 If the Company shall determine to register any of its
securities in connection with the public offering of such securities solely for
cash on a form that would permit the registration of the Registrable Securities
other than on Form S-8, Form S-4 or another form not available for registering
the Registrable Securities for sale to the public, the Company shall promptly
give to each Holder written notice of such registration (a "Piggyback
Registration"), and shall include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder or Holders within fifteen (15) days after
receipt of such written notice from the Company, subject to the underwriter
limitations, if any, described in Subsection 11.3.4 hereof; provided, however,
that no Holder shall have the right to participate in an Initial Public Offering
pursuant to a registration statement declared effective within the twelve (12)-
month period following the Closing Date. The Company shall have the right to
withdraw or cease to prepare or file any registration statement for any offering
referred to in this Subsection 11.3.1 without any obligation or liability to any
Holder.
25
<PAGE>
11.3.2 Number of Piggyback Registrations. Subject to the underwriter
---------------------------------
limitations, if any, described in Subsection 11.3.4 below, each Holder shall be
entitled to have its Registrable Securities included in an unlimited number of
Piggyback Registrations pursuant to this Section 11.3 until such time as the
number of Registrable Securities held by any such Holder does not exceed one
percent (1%) of the shares outstanding of the Company as shown by the most
recent report or statement published by the Company and filed with the
Commission.
11.3.3 Holdback by the Company. If the Company has previously filed
-----------------------
a registration statement with respect to Registerable Securities pursuant to
Section 11.2 or pursuant to this Section 11.3, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4, Form S-8 or any successor forms),
whether on its own behalf or at the request of any Holder or Holders, until a
period of ninety (90) days has elapsed from the effective date of such a
previous registration.
11.3.4 Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Subsection 11.3.1 hereof. In such event the right of any Holder to
registration pursuant to Subsection 11.3.1 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company. Notwithstanding any other provision of this Section 11.3, if the
underwriter reasonably determines that marketing factors require a limitation on
the number of shares to be underwritten, such reduction in the number of shares
that may be included in the registration shall be made (a) first, to the shares
of the Holders and Other Shareholders requesting registration of securities
pursuant to piggyback registration rights; (b) second, to the shares of the
Company, and (c) third, to the shares of any person other than the Holders
requesting registration of securities pursuant to demand registration rights;
all in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities that such person, Holders and Other
Shareholders had requested to be included in such registration; provided,
however, that in no event shall the total amount of Purchaser's shares of
securities included in the offering pursuant to a Piggyback Registration be less
than the number of securities included in the offering by any other single
selling shareholder pursuant to piggyback registration rights unless all of
Purchaser's shares of securities are included in the offering. The Company
shall advise all holders of securities requesting registration as to the number
of shares or securities that may be included in the registration and
underwriting as allocated in the foregoing manner. No such reduction shall be
made with respect to securities offered by the Company for its own account. If
any Holder or Other Shareholder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written
26
<PAGE>
notice to the Company and the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall also be withdrawn
from such registration.
11.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company; and all Selling Expenses shall be borne
by the Holders, the Other Shareholders of the securities so registered and the
Company, to the extent of securities registered on its behalf, pro rata on the
basis of the number of their shares so registered; provided, however, that the
Company shall not be required to pay any Registration Expenses if, as a result
of the withdrawal of a request for registration by the Initiating Holders
pursuant to Section 11.2 hereof, the registration statement does not become
effective, in which case the Holders and Other Shareholders requesting
registration shall bear such Registration Expenses pro rata on the basis of the
number of their shares so included in the registration request (except for the
fees of any counsel for the Holders, which shall be borne only by the persons
whom such counsel represented, pro rata on the basis of the number of their
shares so included in the registration request); provided, further, that such
registration shall not be counted as a Demand Registration pursuant to
Subsection 11.2.1 hereof; and provided, further, that if any jurisdiction in
which the securities shall be qualified shall require that expenses incurred in
connection with the qualification of the securities in that jurisdiction be
borne by the selling shareholders, then such expenses shall be payable by the
selling shareholders pro rata to the extent required by such jurisdiction.
11.5 Registration Procedures. In the case of each registration effected
-----------------------
by the Company pursuant to this Agreement, the Company shall keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense the Company shall use its best efforts to:
11.5.1 keep such registration effective for a period of one hundred
eighty (180) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; and
11.5.2 furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
11.6 Indemnification.
---------------
11.6.1 With respect to each Holder whose securities have been
registered pursuant to this Agreement, the Company shall indemnify such Holder,
each of such Holder's officers, directors and partners, and each person
controlling (as defined in Subsection 11.6.4 below) such Holder and each of such
controlling person's officers, directors and partners, and shall also indemnify
each underwriter, if any, and each person who controls any underwriter, against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on (a) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or
27
<PAGE>
compliance, (b) 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, or (c) any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and shall reimburse each such Holder
and each person controlling such Holder, and each of such controlling person's
officers, directors and partners, each of its officers, directors and partners,
each such underwriter, and each person who controls such underwriter, for any
legal and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based upon
written information furnished to the Company by such Holder or on behalf of such
Holder by the officers, directors or partners of such Holder seeking to be
indemnified, where such information is stated to be specifically for use in such
prospectus, offering circular or related document.
11.6.2 Each Holder and Other Shareholder shall, if securities held by
him or it are included among the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
(as defined in Subsection 11.6.4 below) the Company or such underwriter, and
each other such Holder and Other Shareholder and each of such controlling
person's officers, directors and partners, and each person controlling such
other Holder or Other Shareholder and each of such controlling person's
officers, directors and partners, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or 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, and shall reimburse the Company, such other Holders, Other
Shareholders, directors, officers, partners, persons, each underwriter and each
person who controls such underwriter for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder or
Other Shareholder specifically for use therein; provided, however, that the
obligations of such Holder or Other Shareholder hereunder shall be limited to an
amount equal to the proceeds to such Holder or Other Shareholder of securities
sold as contemplated herein.
11.6.3 Each party entitled to indemnification under this Section 11.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for
28
<PAGE>
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be withheld unreasonably). The Indemnified Party may
participate in such defense with counsel of its own choosing, but the fees and
expenses of such counsel shall be at such Indemnified Party's expense unless (i)
the Indemnifying Party and the Indemnified Party shall have agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential conflicting interests between them.
The failure of any Indemnified Party to give notice as provided herein shall
relieve the Indemnifying Party of its obligations under this Section 11.6 only
if such failure is prejudicial to the ability of the Indemnifying Party to
defend such action, and such failure shall in no event relieve the Indemnifying
Party of any liability that he or it may have to any Indemnified Party otherwise
than under this Section 11.6. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability with respect to such
claim or litigation.
11.6.4 For purposes of this Section 11.6, the term "control" shall
have the meaning assigned thereto under the Securities Act.
11.7 Information by Holders and Other Shareholders. Each Holder or Other
---------------------------------------------
Shareholder of securities included in any registration shall furnish to the
Company such information regarding such Holder or Other Shareholder and the
distribution proposed by such Holder or Other Shareholder as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
11.8 Limitations on Registration of Issues of Securities. From and after
---------------------------------------------------
the date of this Agreement, without the consent of the holders of a majority of
the Registrable Securities then issued and outstanding and that are issuable
upon the exercise of the Warrant, the Company shall not enter into any
agreements with any holder or prospective holder of any securities of the
Company that, upon any registration of any of its securities, the Company will
include among the securities that it then registers securities owned by such
holder or prospective holder except to the extent such agreement could give such
holder or prospective holder rights no greater than those of an Other
Shareholder under this Article 11. In any event, any registration rights given
by the Company to any holder or prospective holder of its securities shall not
conflict with the registration and other rights provided in this Agreement.
11.9 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission that may permit the sale of the
Common Stock to the public without registration, the Company shall, for so long
as Registrable Securities are outstanding:
29
<PAGE>
11.9.1 make and keep public information available, as those terms
are understood and defined in Rule 144 promulgated by the Commission under the
Securities Act ("Rule 144"), at all times after ninety (90) days following the
Initial Public Offering;
11.9.2 file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act at any time after it has become subject to the reporting
requirements thereunder; and
11.9.3 so long as any Holder owns any securities constituting or
representing Registrable Securities, furnish to such Holder forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after ninety (90) days following
the Initial Public Offering), and of the Securities Act and the Securities
Exchange Act (at any time after it has become subject to the reporting
requirements thereunder), a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
such Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
registration.
11.10 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities of the Company under Sections 11.2 and 11.3 hereof may be
assigned by any Holder to any transferee of Registrable Securities together with
the securities being transferred, provided that in each case the Company is
given written notice, at the time or within a reasonable time after said
transfer, stating the name and address of said transferee and identifying the
securities with respect to which such registration rights are being assigned;
provided, however, that such transfer right shall be subject to the provisions
of Section 12.3 hereof. No such assignment shall be effective unless the
transferee shall be required, as a condition to such transfer, to agree in
writing that he or it will receive and hold such securities subject to the
provisions of this Article 11.
11.11 "Market Stand-Off" Agreement. If requested by the Company upon the
----------------------------
recommendation of the Board of Directors of the Company and an underwriter of
Common Stock (or other securities) of the Company, the Holders shall not sell
or otherwise transfer or dispose of any Common Stock (or other securities) of
the Company held by them during the one hundred eighty (180)-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement shall apply only with respect to an underwritten
Initial Public Offering; and
(b) Other Shareholders selling securities pursuant to such
registration statement and all officers and directors of the Company enter into
similar agreements.
Such agreement shall be in writing in form satisfactory to the Company and
such underwriter. The Company may impose stop-transfer instructions with
respect to the shares
30
<PAGE>
(or securities) subject to the foregoing restriction until the end of said one
hundred eighty (180)-day period.
12. MISCELLANEOUS.
12.1 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Georgia, without regard to its principles of
conflicts of laws.
12.2 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by Purchaser and the closings
of the transactions contemplated hereby.
12.3 Successors and Assigns.
----------------------
(a) Except as otherwise expressly provided in this Section 12.3, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the respective
Purchaser, and the rights, remedies and entitlements of the respective Purchaser
under this Agreement may be assigned in full or in part at any time after the
date of this Agreement together with the entire Warrant or no fewer than 200,000
shares of Preferred Stock or Conversion Shares constituting or derived from the
Purchased Shares, the Warrant Shares, or the Additional Shares. No such
assignment shall be effective unless (i) the transferee shall be required, as a
condition to such transfer, to agree in writing that he or it will receive and
hold the Purchased Shares subject to the applicable provisions of this Agreement
and the Shareholders' Agreement referred to in Sections 5.6 and 6.3 hereof, (ii)
the Company is given written notice at the time of the assignment or within a
reasonable time after such assignment, stating the name and address of said
transferee and identifying the Purchased Shares that are being assigned, or
(iii) the Company has received the written opinion of counsel to the Company
that such transfer is permitted under the federal securities laws, rules and
regulations.
(b) Purchaser covenants and agrees that it shall not transfer the
Warrant, the Warrant Shares, the Purchased Shares, the Additional Shares or the
Conversion Shares (collectively, the "Purchased Securities") to any of the
entities listed in Exhibit 12.3 attached hereto, or to any entity or person that
------------
controls or is controlled by an entity listed in Exhibit 12.3 ("control" being
------------
defined for such purpose as ownership of at least a majority of the voting
interests of the entity), unless the proposed transfer has been approved by the
Company's Board of Directors.
(c) In the event Purchaser proposes to sell, transfer or otherwise
dispose of any of the Purchased Securities (the "Subject Securities") to any
entity that is under common control (as the term "control" is defined in Section
12.3(b) above) with an entity listed in Exhibit 12.3 hereto (a "Sister Entity"),
------------
the Company shall have a right of first refusal to purchase all, but not less
than all, the Subject Securities that Purchaser proposes to transfer to such
Sister Entity (the "Subject Securities Right of First Refusal"). Before
effecting any proposed transfer of any Subject Securities, Purchaser shall give
written notice to the Company
31
<PAGE>
describing fully the proposed transfer, including the type and number of Subject
Securities, the name and address of the proposed transferee(s) and the proposed
transfer price, and the fair market value of any proposed non-cash consideration
as provided in Section 12.3(d) hereof (the "Transfer Notice"). The Transfer
Notice shall contain an accurate summary of the offer of the proposed
transferee(s), which must be a bona fide offer. At any time within the ten (10)-
day period immediately following the receipt of the Transfer Notice, the Company
may elect to purchase all, but no fewer than all, of the Subject Securities at
the price per share set forth in the Transfer Notice. The closing of any sale
and purchase of the Subject Securities pursuant to exercise of the Subject
Securities Right of First Refusal shall be held at the offices of the Company on
a date and at a time designated by the Company in its notice of exercise of the
Subject Securities Right of First Refusal; but in no event shall such closing be
held more than thirty (30) days after delivery of the Transfer Notice. If the
Company fails to exercise the Subject Securities Right of First Refusal in a
timely manner as to all the Subject Securities upon the terms set forth in the
Transfer Notice, or if it elects to purchase all such Subject Securities, but
fails to close the purchase thereof within such 30-day period, then Purchaser
may transfer all the Subject Securities on the terms and conditions described in
the Transfer Notice. Any proposed transfer on terms and conditions materially
different from those described in the Transfer Notice shall again be subject to
the Subject Securities Right of First Refusal and shall require compliance by
Purchaser with the procedure described in this Section 12.3(c).
(d) In the event the consideration proposed to be paid to Purchaser
as described in the Transfer Notice referred to in Section 12.3(c) hereof
includes non-cash consideration, the Transfer Notice shall state the fair market
value thereof, which valuation shall be conclusive and binding on the Company in
the absence of a timely challenge made in accordance with this Section 12. The
Company, may, within ten (10) days after delivery of the Transfer Notice to the
Company, by written notice to Purchaser, challenge such valuation, such notice
to specify the Company's valuation of such non-cash consideration. In the case
of such a challenge, Purchaser and the Company shall agree upon one independent
appraiser, who shall determine the fair market value of the non-cash
consideration for these purposes. In the event that such parties are unable to
agree upon such an appraiser, the parties agree that the American Arbitration
Association ("AAA") shall be employed to choose an independent appraiser and
shall use their best efforts to cause AAA to designate an independent appraiser
within a maximum of fourteen (14) days, and such person shall promptly determine
the fair market value of the non-cash consideration for these purposes. In the
event the appraisal process is utilized, (i) the party whose valuation of the
shares less closely approximates the value determined by the appraiser, measured
by dollar amounts and not by percentages, shall pay all costs of the independent
appraiser and (ii) the relevant time periods for the exercise of the Subject
Securities Right of First Refusal and for the closing of exercising such right
shall be tolled from the time a challenge is made to Purchaser's valuation of
the non-cash consideration until the independent appraiser determines the fair
market value thereof. In the event the Company exercises the Subject Securities
Right of First Refusal, it shall pay cash to Purchaser in lieu of said non-cash
consideration equal to the fair market value as determined in accordance with
this Section 12.3(d).
32
<PAGE>
12.4 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated orally, but only by a written instrument signed by the holders of at
least a majority of the Purchased Shares then issued and outstanding (as well as
any shares issued with respect to the same upon any stock split, stock dividend,
recapitalization or similar event) and a representative of the Company so
authorized by its Board of Directors.
12.5 Notices. All notices and other communications required or permitted
-------
hereunder shall be given in writing and shall be deemed effectively given upon
personal delivery or three (3) business days following deposit with the United
States Postal Service, by certified mail, return receipt requested, postage
prepaid, or otherwise delivered by hand or by messenger, addressed;
(a) if to Purchaser, at:
HBO & Company of Georgia
301 Perimeter Center North
Atlanta, Georgia 30346
Attn: Mr. Russell G. Overton
Senior Vice President
Corporate Planning and Business Development
with a copy to:
Mr. Jay M. Lapine
Senior Vice President and General Counsel
(same address)
with a copy to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attn: Sidney R. Brown, Esq.
or
(b) if to any other holder of any shares of Preferred Stock, the
Warrant, any Warrant Shares, or Conversion Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such shares of Preferred Stock or Conversion Shares who has so
furnished an address to the Company, or
33
<PAGE>
(c) if to the Company, at:
WebMD, Inc.
400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
Attn: Mr. Jeffrey T. Arnold, Chief Executive Officer
with a copy to:
L. Scott Askins, Esq.
Vice President and Corporate Counsel
(same address)
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, Georgia 30309
Attn: James Walker IV, Esq.
or at such other address as the Company shall have furnished to Purchaser and
each such other holder in writing.
12.6 Delays or Omissions; Remedies Cumulative. No delay or omission to
----------------------------------------
exercise any right, power or remedy accruing to any party, upon any breach or
default under this Agreement, shall impair any such right, power or remedy of
such party or be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
of a party's remedies, either under this Agreement, or by law or otherwise
afforded to such party, shall be cumulative and not alternative.
12.7 Agent's Fees. Each party (a) represents and warrants that it has
------------
retained no finder or broker in connection with the transactions contemplated by
this Agreement (except as disclosed to the other parties hereto as of the date
hereof) and (b) hereby agrees to indemnify and to hold the other parties
harmless of and from any liability for commissions or compensation in the nature
of an agent's, finder's or broker's fee to any broker or other person or firm
(and the cost and expenses of defending against such liability or asserted
liability) for which said party is responsible.
12.8 Expenses. The Company shall bear its own expenses and legal fees
--------
(and expenses and disbursements of its legal counsel) incurred on its behalf
with respect to this
34
<PAGE>
Agreement and the transactions contemplated hereby. The Company shall also pay
all out-of-pocket expenses of Purchaser, including the legal fees (and
reasonable expenses and disbursements) of Jones, Day, Reavis & Pogue, counsel to
Purchaser, not to exceed twenty thousand dollars ($20,000). If the Closing does
not occur for any reason, each party shall pay its own expenses and legal fees.
12.9 Construction of Certain Terms. The titles of the articles, sections,
-----------------------------
and subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement. For purposes of this
Agreement, the terms "Company's Knowledge," "Knowledge of the Company" and
"Knowledge" as applied to the Company means, as to a particular matter, the
actual knowledge of the Company's executive officers (including its two Vice
Presidents of Sales), in-house corporate counsel, and controller. Wherever the
words "including," "include" or "includes" are used in this Agreement, they
shall be deemed followed by the words "without limitation." References to any
gender shall be deemed to mean any gender. All references herein to the
Company's knowledge or awareness shall mean the knowledge of managers and key
employees of the Company.
12.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.11 Legends. In addition to any legends required by the Securities Act
-------
or any applicable state securities laws, the Company shall place the following
legend on the front or back of each certificate evidencing ownership of shares
of Preferred Stock:
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH
SHAREHOLDER WHO SO REQUESTS A STATEMENT OF THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS
APPLICABLE TO EACH CLASS, AND SERIES WITHIN A CLASS, OF
CAPITAL STOCK OF THE CORPORATION AND THE VARIATIONS IN
RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO EACH
SERIES (AND THE AUTHORITY OF THE CORPORATION'S BOARD OF
DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES).
The Company shall place legends on each certificate evidencing ownership of
shares of Common Stock identical to those initially placed on the certificates
for Preferred Stock relating to the Securities Act and all applicable state
securities laws.
12.12 Enforcement.
-----------
(a) Remedies at Law or in Equity. If the Company shall default in
----------------------------
any of its obligations under this Agreement or if any representation or warranty
made by or on behalf of the Company or Purchaser in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the Closing Date or as of the date it
35
<PAGE>
was made, furnished or delivered, the other parties may proceed to protect and
enforce their respective rights by suit in equity or action at law, whether for
the specific performance of any term contained in this Agreement, injunction
against the breach of any such term or in furtherance of the exercise of any
power granted in this Agreement, or to enforce any other legal or equitable
right of such party or to take any one of more of such actions. In the event any
party brings such an action against any other party, the prevailing party in
such dispute shall be entitled to recover from the losing party all reasonable
fees, costs and expenses enforcing any right of such prevailing party under or
with respect to this Agreement, including such reasonable fees and expenses of
attorneys and accountants, which shall include all fees, costs and expenses of
appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein or in
----------------------------
any exhibit hereto is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to a
party at law or in equity. No express or implied waiver by any party of any
default shall be a waiver of any future or subsequent default. The failure or
delay of any party in exercising any rights granted him or it hereunder shall
not constitute a waiver of any such right and any single or partial exercise of
any particular right by such party shall not exhaust the same or constitute a
waiver of any other right provided herein.
12.13 Timely Performance. Time is of the essence as to the performance of
------------------
the obligations required of the respective parties under this Agreement.
12.14 No Joint Venture. Nothing in this Agreement shall be deemed to
----------------
constitute the Company and Purchaser as partners, agents or joint venturers.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
36
<PAGE>
[SIGNATURES TO INVESTMENT AGREEMENT]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
THE COMPANY:
WEBMD, INC.,
f/k/a Endeavor Technologies, Inc.
By: /s/ Jeffrey T. Arnold
-------------------------------------------
Jeffrey T. Arnold
Chief Executive Officer
PURCHASER:
HBO & COMPANY OF GEORGIA
By: /s/ Russell G. Overton
-------------------------------------------
Russell G. Overton
Senior Vice President
Corporate Planning and Business
Development
<PAGE>
List of Exhibits
- ---------------
1.1 Form of Charter Amendment
1.4 Form of Warrant
3.3 Subsidiaries and Affiliates
3.4 Outstanding Rights, etc. in Respect of Authorized Capital Stock
3.9 Changes Since Date of Interim Financial Statements
3.10 Material Liabilities
3.11 Contracts
3.12.1 Owned Software
3.12.4 Licenses With Respect to Company Software
3.13 Intellectual Property
3.15 Litigation
3.16 Employment Agreements
3.20 Title Exceptions
3.21 Customers and Suppliers
3.23 Compliance with Laws Exceptions
3.24 Tax Exceptions
3.25 Conflicts of Officers, Directors and Key Employees
3.26 Indebtedness to Directors and Officers; Interested Party Transactions
3.27 Employee Benefit Plans
5.5 Form of Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
5.6 Form of Shareholders' Agreement
5.8 Form of Second Amendment to Shareholders Agreement
12.3 List of Company's Competitors
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.18
AMENDMENT TO INVESTMENT AGREEMENT
---------------------------------
THIS AMENDMENT TO INVESTMENT AGREEMENT (this "Amendment"), dated as of
the 23rd day of October, 1998, is made by and between WebMD, INC., a Georgia
corporation (formerly known as Endeavor Technologies, Inc., the "Company"), and
HBO & COMPANY OF GEORGIA, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
- - - - - - --- - -
WHEREAS, the Company and Purchaser are parties to that certain
Investment Agreement dated as of August 24, 1998 (the "Agreement"); and
WHEREAS, the Company and Purchaser desire to amend the Agreement as
provided in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Purchaser hereby agree as follows:
1. Section 2.3 of the Agreement is hereby amended to read in full as
follows:
"2.3 Issuance of Additional Shares. The parties acknowledge that the
-----------------------------
Company may make an initial offering to the public of its Common Stock pursuant
to a registration statement effective under the federal Securities Act of 1933,
as amended (the "Securities Act"), following the Closing Date (the closing of
such offering being referred to hereinafter as the "Initial Public Offering").
If the Company does not close the Initial Public Offering at an offering price
of at least $18.00 per share (as adjusted for any stock splits, stock dividends,
combinations or the like) on or before the date that is two hundred seventy
(270) days following the Closing Date, the Company shall issue for no additional
consideration to Purchaser 150,000 additional shares of Preferred Stock without
need for any further action by Purchaser; provided that if the Company closes
the Initial Public Offering within such 270-day period, but does so at an
offering price less than $18.00 per share (as adjusted for any stock splits,
stock dividends, combinations or the like), such shares shall consist of Common
Stock rather than Preferred Stock. Furthermore, in the event the Company fails
to close the Initial Public Offering on or before the date that is 90 days
following the first anniversary of the Closing Date, the Company shall issue
promptly to Purchaser, for no additional consideration, an additional 50,000
shares of Preferred Stock without need for any further action by Purchaser. The
numbers of shares of stock specified in this Section 2.3 shall be adjusted for
any stock splits, stock dividends, recapitalizations or similar events occurring
prior to the dates indicated."
2. Section 10 of the Agreement is hereby amended to read in full as
follows:
"10. PROVISION FOR PERFORMANCE-BASED WARRANT.
Following the Closing Date, the Company and Purchaser shall continue
to negotiate in good faith to enter into a strategic distribution alliance
agreement with respect to the Purchaser's distribution of the Company's
Internet-based information and communications
<PAGE>
services (the "Strategic Alliance Agreement"). If, and only if, the Purchaser
and the Company enter into the Strategic Alliance Agreement within ninety (90)
days following the Closing Date, the Company shall issue to Purchaser, for no
additional consideration, within five (5) days following the execution by the
parties of the Strategic Alliance Agreement, a performance-based warrant to
purchase an aggregate of *** shares of Preferred Stock or, in the event that the
Initial Public Offering has been closed by such date, Common Stock (the
"Performance-Based Warrant"). The Performance-Based Warrant would be granted
with respect to ***, *** and *** shares on March 31 of each of the calendar
years 1999, 2000 and 2001, respectively, with the exercise price per share equal
to the fair market value of the underlying capital stock on the respective dates
of grant (as adjusted for stock splits, stock dividends, combinations and the
like occurring after the date thereof) provided that the joint marketing efforts
of Purchaser and the Company yielded the Company gross revenues of $***, $***
and $***, respectively, during the twelve-month period ending on March 31 of
1999, 2000 and 2001, respectively. Such Performance-Based Warrant shall
otherwise contain terms substantially similar to those of the Warrant. Nothing
set forth in this Agreement shall obligate either Purchaser or the Company to
enter into the Strategic Alliance Agreement, whether on the foregoing terms or
otherwise."
3. The remainder of the Agreement shall remain unchanged.
IN WITNESS WHEREOF, the Company and Purchaser have executed this Amendment
as of the day and year first above written.
WebMD, INC.
By: /s/ W. Michael Heekin
-----------------------------------
Name: W. Michael Heekin
-----------------------------
Title: Chief Operating Officer
----------------------------
HBO & COMPANY OF GEORGIA
By: /s/ Michael L. Kappel
-----------------------------------
Name: Michael L. Kappel
-----------------------------------
Title: Sr. VP - Corporate Planning
----------------------------
and Business Development
----------------------------
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
EXHIBIT 10.19
THIS WARRANT AND THE SHARES OF SERIES A PREFERRED STOCK OR COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE FEDERAL
SECURITIES ACT OF 1933, AS AMENDED, THE GEORGIA SECURITIES ACT OF 1973, AS
AMENDED, OR THE SECURITIES LAWS OF ANY OTHER STATE. THIS WARRANT AND ANY OF SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER SAID ACTS AND ALL OTHER
APPLICABLE SECURITIES LAWS UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THIS WARRANT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED IN
SECTION 12.3 OF THAT CERTAIN INVESTMENT AGREEMENT OF EVEN DATE HEREWITH BY AND
BETWEEN WEBMD, INC. AND HBO & COMPANY OF GEORGIA.
WARRANT TO PURCHASE SHARES OF
SERIES A PREFERRED STOCK OR COMMON STOCK OF WEBMD, INC.
Date of Issuance: August 24, 1998
THIS CERTIFIES that, for value received, HBO & Company of Georgia, a
Delaware corporation, or registered assigns (the "Holder"), is entitled to
purchase, at any time and from time to time prior to the third (3rd) anniversary
of the Date of Issuance indicated hereinabove, subject to the other provisions
of this warrant, from WebMD, Inc., a Georgia corporation (the "Company"), (i) up
to three hundred thousand (300,000) shares of no par value Series A Preferred
Stock of the Company, no par value per share (the "Preferred Stock"), at
eighteen dollars ($18.00) per share prior to an Initial Public Offering (as
defined herein) or (ii) subsequent to an Initial Public Offering, that number of
shares of Common Stock into which the number of shares of Preferred Stock would
be convertible immediately prior to the closing of such Initial Public Offering,
each subject to the adjustments set forth in Article V hereof. This warrant is
hereinafter referred to as the "Warrant."
ARTICLE I
CERTAIN DEFINITIONS
For all purposes of this Warrant, unless the context otherwise requires, the
following terms shall have the following respective meanings:
"Act": the federal Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
1
<PAGE>
"Additional Shares of Preferred Stock": all shares of Preferred Stock
issued by the Company after the Date of Issuance other than the Warrant Shares.
"Common Stock": unless otherwise indicated, the Company's authorized
"Common Stock," no par value per share, without designation as to series, as it
exists on the date hereof.
"Commission": the Securities and Exchange Commission or any other federal
agency then administering the Act.
"Company": WebMD, Inc., a Georgia corporation, located at 400 The Lenox
Building, 3399 Peachtree Road, Atlanta, Georgia, 30326, and any other
corporation assuming or required to assume the Warrant pursuant to Article V.
"Convertible Securities": evidences of indebtedness, shares of stock or
other securities that are convertible into or exchangeable for Additional Shares
of Preferred Stock.
"Date of Issuance": the issue date of this Warrant, indicated on the first
page hereof.
"Exercise Price": $18.00 per Warrant Share.
"Market Price": with respect to a share of Common Stock on any business
day following the Initial Public Offering:
(a) if such security is listed or admitted for trading on any national
securities exchange, the last sale price of such security, regular way, or
the average of the closing bid and asked prices thereof if no such sale
occurred, in each case as officially reported on the principal securities
exchange on which such security is listed, or (b) if not reported as
described in clause (a), the average of the closing bid and asked prices of
such security in the over-the-counter market as shown by the National
Association of Securities Dealers, Inc. Automated Quotation System, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Company, or (c) if not quoted
as described in clause (b), the average of the closing bid and asked prices
for such security as reported by the National Quotation Bureau Incorporated
or any similar successor organization, as reported by any member firm of
the New York Stock Exchange selected by the Company. If such security is
quoted on a national securities or central market system in lieu of a
market or quotation system described above, the closing price shall be
determined in the manner set forth in clause (a) of the preceding sentence
if actual transactions are reported and in the manner set forth in clause
(b) of the preceding sentence if bid and asked prices are reported but
actual transactions are not.
"Holder": as defined on the first page hereof.
"Initial Public Offering": as defined in the Company's Articles of
Incorporation.
2
<PAGE>
"Person": any individual, corporation, partnership, trust, unincorporated
organization and any government, and any political subdivision, instrumentality
or agency thereof.
"Preferred Stock": as defined on the first page hereof.
"Stock Unit": one share of Preferred Stock, as such stock is constituted on
the Date of Issuance and thereafter the number of shares of Preferred Stock as
shall result from the adjustments specified in Article V.
"Warrant Office": as defined in Section 3.1.
"Warrant Shares": the shares of Preferred Stock or Common Stock, as the
case may be, purchasable by the Holder upon the exercise of this Warrant.
Following the occurrence of an Initial Public Offering, all references in this
Agreement to "Preferred Stock" shall be deemed to refer to Common Stock, by
virtue of the automatic conversion of the Preferred Stock into Common Stock that
will occur pursuant to the Company's Articles of Incorporation.
ARTICLE II
EXERCISE OF WARRANT
2.1 Method of Exercise. To exercise this Warrant, the Holder shall deliver
------------------
to the Company at the Warrant Office designated pursuant to Section 3.1 (a) a
Notice of Exercise substantially in the form attached hereto as Exhibit A duly
------- -
executed by the Holder specifying the number of Warrant Shares to be purchased;
(b) payment of an amount equal to the aggregate Exercise Price for all such
Warrant Shares, which shall be made (i) in cash or by certified or bank
cashier's check payable to the order of the Company, or (ii) by delivery to the
Company of that number of shares of Preferred Stock having a value computed
based upon the then current fair value determined in good faith by the Company's
Board of Directors, equal to the then applicable Exercise Price multiplied by
the number of Warrant Shares then being purchased, and (c) this Warrant. In the
alternative, this Warrant may be exercised on a net basis, such that, without
the exchange of any funds, the Holder receives that number of Warrant Shares
subscribed to less that number of Warrant Shares having an aggregate value
computed based upon the fair value at the time of exercise equal to the
aggregate Exercise Price that would otherwise have been paid by such Holder for
the number of Warrant Shares subscribed to. The Company shall, as promptly as
practicable, and in any event within five (5) days thereafter, cause to be
issued and delivered to the Holder (or its nominee) or the transferee designated
in the Notice of Exercise a certificate or certificates representing the number
of Warrant Shares specified in the Notice of Exercise. The stock certificate or
certificates so delivered shall be in denominations of shares as may be
specified in said notice and shall be issued in the name of the Holder or such
other name as shall be designated in said notice. At the time of delivery of
the certificate or certificates, appropriate notation shall be made on the
Warrant Shares Purchase Schedule attached to this Warrant designating the
3
<PAGE>
number of shares purchased, and this Warrant shall then be returned to the
Holder if this Warrant has been exercised only in part. The Holder or transferee
so designated in the Notice of Exercise shall be deemed to have become the
Holder of record of such Warrant Shares for all purposes as of the close of
business on the date on which the Notice of Exercise is delivered to the Warrant
Office, provided that an amount equal to the aggregate Exercise Price and this
Warrant shall have also been delivered to the Company. The Company shall pay all
expenses, taxes (excluding capital gains and income taxes) and other charges
payable in connection with the preparation, issuance and delivery of stock
certificates, except that, in case stock certificates shall be registered in a
name or names other than the name of the Holder, funds sufficient to pay all
stock transfer taxes payable upon the issuance of stock certificates shall be
paid by the Holder promptly upon receipt of a written request of the Company
therefor.
2.2 Shares to be Fully Paid and Non-Assessable. All Warrant Shares issued
------------------------------------------
upon the exercise of this Warrant shall be validly issued, fully paid, non-
assessable and free from preemptive rights.
2.3 No Fractional Shares to be Issued. The Company shall not be required
---------------------------------
upon any exercise of this Warrant to issue a certificate representing any
fraction of a share of Preferred Stock.
2.4 Legend on Warrant Shares. Each certificate for Warrant Shares issued
------------------------
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Act, shall bear substantially the following legend (and any
additional legend required by any national securities exchanges upon which such
shares may, at the time of such exercise, be listed or under applicable
securities laws):
The securities represented by this certificate have not been registered
under the federal Securities Act of 1933, as amended, or the Georgia
Securities Act of 1973, as amended ("the Acts"), or the securities laws of
any state. They may not be sold, transferred, assigned, pledged,
hypothecated, encumbered, or otherwise disposed of unless, in the opinion
of counsel reasonably acceptable to the issuer, such transfer would be
pursuant to an effective registration statement under said Acts or pursuant
to an exemption from such registration.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of counsel to the Company, the securities represented thereby need
no longer be subject to the restrictions on transferability. In addition, the
provisions of Article IV shall be binding upon all subsequent holders of this
Warrant.
2.5 Acknowledgment of Continuing Obligation. The Company shall, at the
---------------------------------------
time of any exercise of this Warrant in whole or in part, upon request of the
Holder, acknowledge in writing its continuing obligation to such holder in
respect of any rights to which the Holder shall continue to be entitled after
exercise in accordance with this Warrant; provided, however,
4
<PAGE>
that the failure of the Holder to make any such request shall not affect the
continuing obligation of the Company to the Holder in respect of such rights.
ARTICLE III
WARRANT OFFICE; TRANSFER, DIVISION
OR COMBINATION OF WARRANTS
3.1 Warrant Office. The Company shall maintain an office for certain
--------------
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's location set forth in Article I hereof, and may subsequently be
such other office of the Company or of any transfer agent of the Common Stock in
the continental United States as to which written notice has previously been
given to all of the Holders of the Warrants.
3.2 Ownership of Warrant. The Company may deem and treat the Person in
--------------------
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article III.
3.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
-------------------
Office books for the registration of permitted transfers of this Warrant.
Subject to the provisions of Article IV, this Warrant and all rights hereunder
are transferable, in whole or in part, on the books at that office, upon
surrender of this Warrant at that office, together with a written assignment of
this Warrant duly executed by the Holder or his or its duly authorized agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of the transfer. Subject to Article IV, upon surrender and payment, the Company
shall execute and deliver a new Warrant in the name of the assignee, noting
thereon the number of Warrant Shares theretofore purchased under this Warrant,
and this Warrant shall promptly be canceled. A Warrant may be exercised by a
new Holder for the purchase of shares of Preferred Stock without having a new
warrant issued.
3.4 Division or Combination of Warrants. This Warrant may not be divided
-----------------------------------
or combined with any other warrant.
3.5 Expenses of Delivery of Warrants. The Company shall pay all expenses,
--------------------------------
taxes (other than transfer taxes), and other charges payable in connection with
the preparation, issuance and delivery of new Warrants hereunder.
ARTICLE IV
RESTRICTION ON TRANSFER
4.1 Restrictions on Transfer. Notwithstanding any provisions contained in
------------------------
this Warrant to the contrary, this Warrant shall not be exercisable or
transferable except upon the
5
<PAGE>
conditions specified in this Article IV, which conditions are intended, among
other things, to insure compliance with the provisions of the Act in respect of
the exercise or transfer of the Warrant. The Holder, by acceptance hereof,
agrees that he or it will not transfer this Warrant prior to delivery to the
Company of any required opinion of the Holder's counsel (as the opinion and
counsel are described in Section 4.2 hereof) or in violation of the provisions
of Section 4.3 hereof.
4.2 Opinion of Counsel. In connection with any transfer of this Warrant,
------------------
the following provisions shall apply:
(a) If in the opinion of counsel acceptable to the Company, proposed
transfer of this Warrant may be effected without registration of this Warrant
under the Act, the Holder shall be entitled to transfer this Warrant in
accordance with the proposed method of disposition; provided, however, that if
the method of disposition would, in the opinion of such counsel, require that
the Company take any action or execute and file with the Commission or deliver
to the Holder or any other person any form or document in order to establish the
entitlement of the Holder to take advantage of such method of disposition, the
Company agrees, at the cost of the Holder, to take promptly any necessary action
or execute and file or deliver any necessary form or document; provided further,
that such transfer shall be subject to the provisions of Section 4.3 hereof.
Notwithstanding the foregoing, in no event shall the Company be obligated (i) to
effect a registration under the Act or any state securities law so as to permit
the proposed transfer of this Warrant, except pursuant to exercise of the rights
referenced in Article VI hereof, or (ii) to qualify to do business or to file a
general consent to service of process in any state or other jurisdiction.
(b) If in the opinion of such counsel, the proposed transfer of this
Warrant may not be effected without registration of this Warrant under the Act,
the Holder shall not be entitled to transfer this Warrant until registration is
effective.
4.3 Transfer Subject to Provisions of Investment Agreement.
------------------------------------------------------
Notwithstanding any provisions contained in this Warrant to the contrary, any
proposed transfer of this Warrant shall be subject to the provisions of Section
12.3 of that certain Investment Agreement of even date herewith by and between
the Company and HBO & Company of Georgia (the "Investment Agreement").
ARTICLE V
ADJUSTMENTS
5.1 Adjustments to Number of Stock Units. The number of shares of
------------------------------------
Preferred Stock comprising a Stock Unit shall be subject to adjustment from time
to time as set forth in this Section 5.1.
(a) Stock Dividends, Subdivision and Combination. In case at any time
--------------------------------------------
or from time to time the Company shall:
6
<PAGE>
(i) take a record of the holders of its Preferred Stock of any
series for the purpose of entitling them to receive a dividend payable in, or
other distribution of, Preferred Stock, or
(ii) subdivide its outstanding shares of Preferred Stock into a
larger number of shares of Preferred Stock, or
(iii) combine its outstanding shares of Preferred Stock into a smaller
number of shares of Preferred Stock;
then the number of shares of Preferred Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Preferred Stock that a record holder of the number of shares
of Preferred Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event. The adjustments required by this subsection shall be made whenever and as
often as any specified event requiring an adjustment shall occur.
(b) Certain Other Dividends and Distributions. In case at any time or
-----------------------------------------
from time to time the Company shall take a record of the holders of its
Preferred Stock for the purpose of entitling them to receive any dividend or
other distribution of
(i) cash (other than a cash distribution made as a dividend
payable out of the net earnings or net profits of the Company realized during
the year of such distribution or the last preceding year and accumulated net
earnings or net profits of the Company from the date hereof to the time of such
distribution, computed in accordance with generally accepted accounting
principles employed by the Board of Directors of the Company for purposes of
financial reports to shareholders of the Company); or
(ii) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than cash);
then at least five (5) business days prior to the record date to determine
shareholders entitled to receive such dividend or distribution, the Company
shall give notice of such proposed dividend or distribution to the Holder for
the purpose of enabling the Holder to exercise the same, and thereby participate
in such dividend or distribution.
(c) Issuance of Additional Shares of Preferred Stock.
------------------------------------------------
(i) In case at any time prior to the occurrence of the Initial
Public Offering the Company shall (except as hereinafter provided) issue or sell
any Additional Shares of Preferred Stock for a consideration per share less than
the Exercise Price, then the number of shares of Preferred Stock thereafter
comprising a Stock Unit shall be adjusted to that number determined by
multiplying the number of shares of Preferred Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (i) the numerator of which
shall be the number of shares of Preferred Stock issued and outstanding plus the
number of Additional
7
<PAGE>
Shares of Preferred Stock deemed to be outstanding pursuant to Subsection 5.1(d)
immediately prior to the issuance of such Additional Shares of Preferred Stock
plus the number of such Additional Shares of Preferred Stock so issued and (ii)
the denominator of which shall be the number of shares of Preferred Stock issued
and outstanding plus the number of Additional Shares of Preferred Stock deemed
to be outstanding pursuant to Subsection 5.1(d) immediately prior to the
issuance of such Additional Shares of Preferred Stock plus the number of shares
of Preferred Stock that the aggregate consideration for the total number of such
Additional Shares of Preferred Stock so issued would purchase at the Exercise
Price.
(ii) In case at any time after the date of the occurrence of the
Initial Public Offering the Company shall (except as hereinafter provided) issue
or sell any Additional Shares of Common Stock for a consideration per share less
than the Market Price, then the number of shares of Common Stock thereafter
comprising a Stock Unit shall be adjusted to that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (i) the numerator of which
shall be the number of shares of Common Stock issued and outstanding plus the
number of Additional Shares of Common Stock deemed to be outstanding pursuant to
Subsection 5.1(d) immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of such Additional Shares of Common Stock so issued
and (ii) the denominator of which shall be the number of shares of Common Stock
issued and outstanding plus the number of Additional Shares of Common Stock
deemed to be outstanding pursuant to Subsection 5.1(d) immediately prior to the
issuance of such Additional Shares of Common Stock plus the number of shares of
Common Stock that the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at the Market Price.
The provisions of this Subsection 5.1(c) shall not apply to any issuance of
Additional Shares of Preferred Stock or Common Stock for which an adjustment is
provided under Subsection 5.1(a). No adjustment of the number of shares of
Preferred Stock or Common Stock comprising a Stock Unit shall be made under this
subsection upon the issuance of any Additional Shares of Preferred Stock or
Common Stock that are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion
or exchange rights in any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights or
upon the issuance of such Convertible Securities (or upon the issuance of any
warrant or other rights therefor) pursuant to Subsection 5.1(d).
(d) Issuance of Warrants, Convertible Securities or Other Rights. In
------------------------------------------------------------
case at any time or from time to time the Company shall issue or sell any
warrants or other rights to subscribe for or purchase any Additional Shares of
Preferred Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
consideration per share for which Additional Shares of Preferred Stock may at
any time thereafter be issuable pursuant to such warrants or other rights or
pursuant to the terms of such Convertible Securities shall be lower than the
Exercise Price, then the number of shares of Preferred Stock thereafter
comprising a Stock Unit shall be adjusted as provided in Subsection 5.1(c) and
the aggregate consideration for such maximum number of Additional Shares of
Preferred Stock shall be deemed to be the minimum consideration
8
<PAGE>
received and receivable by the Company for the issuance of such Additional
Shares of Preferred Stock pursuant to such warrants or other rights or pursuant
to the terms of such Convertible Securities. No adjustment of the number of
shares of Preferred Stock comprising a Stock Unit shall be made under this
Subsection 5.1(d) upon the issuance of any Convertible Securities that are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to this Subsection
5.1(d).
(e) Superseding Adjustment of Stock Unit. If, at any time after any
------------------------------------
adjustment of the number of shares comprising a Stock Unit shall have been made
pursuant to the foregoing Subsection 5.1(d) on the basis of the issuance of
warrants or other rights or the issuance of other Convertible Securities, or
after any new adjustments of the number of shares comprising a Stock Unit shall
have been made pursuant to this Subsection 5.1(e),
(i) such warrants or rights or the right of conversion or
exchange in such other Convertible Securities shall expire, and a portion of
such warrants or rights, or the right of conversion or exchange in respect of a
portion of such other Convertible Securities, as the case may be, shall not have
been exercised, and/or
(ii) the consideration per share, for which shares of
Preferred Stock are issuable pursuant to such warrants or rights or the terms of
such other Convertible Securities, shall be increased for any reason,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Preferred Stock that were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(x) treating the number of Additional Shares of Preferred Stock, if
any, theretofore actually issued or issuable pursuant to the previous
exercise of such warrants or rights or such right of conversion or
exchange, as having been issued on the date or dates of such exercise and
for the consideration actually received and receivable therefor, and
(y) treating any such warrants or rights or any such other
Convertible Securities that then remain outstanding as having been granted
or issued immediately after the time of such increase of the consideration
per share for which shares of Preferred Stock are issuable under such
warrants or rights or other Convertible Securities;
and, if and to the extent called for by the foregoing provisions of this Section
5.1 on the basis aforesaid, a new adjustment of the number of shares comprising
a Stock Unit shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.
9
<PAGE>
(f) Other Provisions Applicable to Adjustment Under This Section. The
------------------------------------------------------------
following provisions shall be applicable to the making of adjustments of the
number of shares of Preferred Stock comprising a Stock Unit hereinbefore
provided for in this Section 5.1:
(i) Treasury Stock. The sale or other disposition of any issued
--------------
shares of Preferred Stock owned or held by or for the account of the Company
shall be deemed an issuance thereof for the purposes of this Section 5.1.
(ii) Computation of Consideration. To the extent that any
----------------------------
Additional Shares of Preferred Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional Shares of
Preferred Stock or any Convertible Securities shall be issued for a cash
consideration, the consideration received by the Company therefor shall be
deemed to be the amount of the cash received by the Company therefor, or, if
such Additional Shares of Preferred Stock or Convertible Securities are offered
by the Company for subscription, the subscription price, or, if such Additional
Shares of Preferred Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends (but without deduction of any
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board of Directors of
the Company (but without deduction of any compensation, discounts or expenses
paid or incurred by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). In case any Additional Shares of
Preferred Stock or Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Shares of Preferred Stock or
Convertible Securities shall be issued in connection with any merger in which
the Company issues any securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Preferred Stock, Convertible
Securities, warrants or other rights, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation, the
Company shall be deemed to have issued a number of Additional Shares of
Preferred Stock or Convertible Securities of the other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated,
and the consideration received for such issuance shall be equal to the fair
market value, as determined in good faith by the Board of Directors of the
Company, on the date of such transaction, of such stock or securities of the
other corporation, and if any such calculation results in adjustment of the
number of shares of Preferred Stock comprising a Stock Unit immediately prior to
such merger, conversion or sale for purposes of this Subsection 5.1(f), such
merger, conversion or sale shall be deemed to have been made after giving effect
to such adjustment. The consideration for any Additional Shares of Preferred
Stock issuable pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the
10
<PAGE>
consideration received by the Company for issuing such warrants or other rights,
plus the additional consideration payable to the Company upon the exercise of
such warrants or other rights. The consideration for any Additional Shares of
Preferred Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration received by the Company for issuing any warrants or
other rights to subscribe for or purchase such Convertible Securities, plus the
consideration paid or payable to the Company in respect of the subscription for
or purchase of such Convertible Securities, plus the additional consideration,
if any, payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any time of
any Additional Shares of Preferred Stock or Convertible Securities in payment or
satisfaction of any dividends upon any class of stock other than Preferred
Stock, the Company shall be deemed to have received for such Additional Shares
of Preferred Stock or Convertible Securities a consideration equal to the amount
of such dividend so paid or satisfied.
(iii) When Adjustments to be Made. The adjustments required by the
---------------------------
preceding subsections of this Section 5.1 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the number of shares of Preferred Stock comprising a Stock Unit
that would otherwise be required shall be made (except in the case of a
subdivision or combination of shares of the Preferred Stock, as provided for in
Subsection 5.1(a)) unless and until such adjustment, either by itself or with
other adjustments not previously made, adds or subtracts at least 1/20th of a
share to or from the number of shares of Preferred Stock comprising a Stock Unit
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this section and not previously made, would result in a minimum
adjustment. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(iv) Fractional Interests. In computing adjustments under this
--------------------
section, fractional interests in Preferred Stock shall be taken into account to
the nearest one-thousandth of a share.
(v) When Adjustment Not Required -- Abandonment of Plan for
-------------------------------------------------------
Dividend and the Like. If the Company shall take a record of the holders of its
- ---------------------
Preferred Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution to shareholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(g) Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- ---------------------
reclassify its capital stock, merge or consolidate into another corporation,
then the number of shares of stock purchasable upon exercise of this Warrant
shall be adjusted to consist of the number of shares of stock or other
securities that a record holder of the number of shares of Preferred Stock
purchasable upon
11
<PAGE>
exercise of this Warrant immediately prior to such event would own or be
entitled to receive immediately after such event.
(h) Adjustment of Exercise Price Upon Initial Public Offering. In the
---------------------------------------------------------
event that the offering price per share of Common Stock to the public in the
Initial Public Offering is less than $18.00 (as adjusted for any stock splits,
stock dividends or similar events occurring subsequent to the date hereof),
then, effective upon the occurrence of the Initial Public Offering, the exercise
price hereunder shall automatically be adjusted to equal the Initial Public
Offering price per share.
(i) No Adjustment. Notwithstanding the foregoing, an adjustment as
-------------
provided in this Section 5.1 shall not be made if (a) the Company offers
securities to the public pursuant to a registration statement under the
Securities Act; (b) the Company issues securities pursuant to the acquisition by
the Company of any product, technology, know-how or another corporation by
merger, purchase of all or substantially all of the assets, or any other
reorganization whereby the Company owns over fifty percent (50%) of the voting
power of such corporation; (c) the Company issues shares of its capital stock in
connection with any stock split, stock dividend or recapitalization by the
Company; (d) the Company issues any shares of common stock of the Company
pursuant to options, warrants or rights granted either before or after the Date
of Issuance to purchase shares of such common stock, in favor of employees,
directors, officers or consultants of the Company or any subsidiary thereof
pursuant to a stock option plan or agreement approved by the company's Board of
Directors; provided that such stock options thereunder, if granted after the
Date of Issuance, are granted at a conversion or exercise price that the
Company's Board of Directors determines in good faith is not less than the fair
market value of the securities into which they are exercisable as of the date of
grant; (e) the Company converts any securities into Common Stock pursuant to the
Company's Articles of Incorporation (as amended by the Charter Amendment to be
filed pursuant to the terms of the Investment Agreement); (f) the Company issues
to Matria Healthcare, Inc. up to 134,000 shares of Preferred Stock at a purchase
price of no less than $15.00 per share and, for no additional consideration, a
warrant for the purchase of up to 60,000 shares of Preferred Stock; or (g) the
Company issues up to 300,000 shares of Common Stock Series D of the Company
issued at any time following the Date of Issuance pursuant to options to
purchase shares of such stock in favor of officers, employees or consultants of
the Company or any subsidiary thereof pursuant to bona fide commitments made by
the Company prior to July 1, 1998.
5.2 Notice to Holder. Whenever the Company takes any action that causes
----------------
the composition of a Stock Unit to change under Sections 5.1(a) through 5.1(g),
the Company shall provide the Holder with written notice of such change and the
number of Warrant Shares for which this Warrant is or will become exercisable.
Such notice will be provided not more than ten (10) days after any such action
has occurred.
12
<PAGE>
ARTICLE VI
REGISTRATION RIGHTS
Any and all shares of the Company's Common Stock issued pursuant to this
Warrant or upon conversion of Preferred Stock issued pursuant to this Warrant
shall be deemed "Registrable Securities" for purposes of Article 11 of the
Investment Agreement.
ARTICLE VII
ADDITIONAL NOTICES TO WARRANT HOLDER
In addition to any other notice required hereunder, the Company shall
provide the Holder with a copy of any notice that the Company is required to
provide those Persons holding shares of Preferred Stock on the same date such
persons receive such notice.
ARTICLE VIII
EXPIRATION
This Warrant shall expire and may not be exercised after the third (3rd)
anniversary of the Date of Issuance.
ARTICLE IX
CERTAIN COVENANTS OF THE COMPANY
The Company has taken all action necessary to authorize the issuance of
this Warrant and the issuance of shares of Preferred Stock upon exercise hereof.
The Company covenants and agrees that it will reserve and set apart and have at
all times, free from preemptive rights, a number of shares of authorized but
unissued Preferred Stock or other securities deliverable upon the exercise of
this Warrant sufficient to enable it at any time to fulfill all its obligations
hereunder.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. This Warrant contains the entire agreement between
----------------
the Holder and the Company with respect to the purchase of the Warrant Shares
and supersedes all prior arrangements or understandings with respect thereto.
10.2 Waiver and Amendment. Any term or provision of this Warrant may be
--------------------
waived at any time by the party that is entitled to the benefits thereof, and
any term or provision of this
13
<PAGE>
Warrant may be amended or supplemented at any time by agreement of the holder
hereof and the Company, except that any waiver of any term or condition, or any
amendment or supplementation, of this Warrant must be in writing. A waiver of
any breach or failure to enforce any of the terms or conditions of this Warrant
shall not in any way affect, limit or waive a party's rights hereunder at any
time to enforce strict compliance thereafter with any term or condition of this
Warrant. In the event this Warrant is ever divided and held by more than one
person, the "Holder" for such purposes shall mean the holders of a majority of
the Warrant Shares.
10.3 Illegality. In the event that any one or more of the provisions
----------
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
10.4 Filing of Warrant. A copy of this Warrant shall be filed in the
-----------------
records of the Company.
10.5 Notices. Any notice or other document required or permitted to be
-------
given or delivered to the Holder shall be delivered personally, or sent by
certified or registered mail, to the Holder at the last address shown on the
books of the Company maintained at the Warrant Office for the registration of,
and the registration of transfer of, the Warrant or at any more recent address
of which any Holder shall have notified the Company in writing. Any notice or
other document required or permitted to be given or delivered to the Company
shall be delivered at, or sent by certified or registered mail to, the Warrant
Office, attention: Chief Executive Officer, or such other address within the
United States of America as shall have been furnished by the Company to the
Holder hereof.
10.6 Limitation of Liability; Not Shareholders. No provision of this
-----------------------------------------
Warrant shall be construed as conferring upon the Holder the right to vote,
consent, receive dividends or receive notice other than as herein expressly
provided in respect of meetings of shareholders for the election of directors of
the Company or any other matter whatsoever as a shareholder of the Company. No
provision hereof, in the absence of affirmative action by the Holder to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of such Holder for the purchase price
of any Warrant Shares or as a shareholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.
10.7 Loss, Destruction, Etc. of Warrant. Upon receipt of evidence
---------------------------------
satisfactory to the Company of the loss, theft, mutilation or destruction of the
Warrant, and in the case of any such loss, theft or destruction, upon delivery
of a bond of indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation, upon surrender
and cancellation of the Warrant, the Company shall make and deliver a new
warrant, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant. Any Warrant issued under the provisions of this Section 10.7 in lieu
of any Warrant alleged to be lost, destroyed or
14
<PAGE>
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the company has caused this Warrant to be signed in its
name by its Chief Executive Officer and its corporate seal to be impressed
hereon.
WEBMD, INC.
[CORPORATE SEAL]
Attest:
By: /s/ Jeffrey T. Arnold
---------------------------------------
Jeffrey T. Arnold, Chief Executive Officer
By: /s/ W. Michael Heekin
---------------------
Name: W. Michael Heekin
-----------------
Title: Secretary
---------
15
<PAGE>
WARRANT SHARES PURCHASE SCHEDULE
NO. OF SHARES PURCHASED DATE OF PURCHASE NOTATION BY COMPANY
OFFICER
16
<PAGE>
EXHIBIT A
---------
TO WARRANT
NOTICE OF EXERCISE
Dated:______________________________
The undersigned hereby irrevocably elects to exercise its right to purchase
_____ shares of the [PREFERRED STOCK] [COMMON STOCK], no par value per share, of
WebMD, Inc., such right being pursuant to a Warrant dated _______________ ____,
1998, as issued to HBO & Company of Georgia, for up to ________ shares of such
[PREFERRED STOCK] [COMMON STOCK], and (i) remits herewith the sum of $_______ in
payment for same in accordance with said warrant or (ii), in accordance with
Section 2.1 of the Warrant, elects to receive such number of shares by having
credited to the undersigned the Market Value (as such term is defined in the
Warrant) of a sufficient number of additional shares of [PREFERRED STOCK]
[COMMON STOCK] for which the Warrant could otherwise be exercised such that such
Market Value equals the Exercise Price for such shares of [PREFERRED STOCK]
[COMMON STOCK].
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________________________________________
(Please typewrite or print in block letters)
Address______________________________________________________________________
Signature:__________________________
Shares Heretofore Purchased
Under Warrant:
__________________________________
17
<PAGE>
EXHIBIT 10.20
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of September, 1998, by and between WEBMD, INC., a Georgia
corporation f/k/a Endeavor Technologies, Inc. (the "Company"), and MATRIA
HEALTHCARE, INC., a Delaware corporation (the "Purchaser").
1. SALE AND ISSUANCE OF SECURITIES.
1.1 Sale of Shares. Subject to the terms and conditions hereof, at the
--------------
Closing (defined in Section 2.1) the Company shall issue and sell to Purchaser,
and Purchaser shall purchase from the Company, one hundred thirty-four thousand
(134,000) shares (the "Purchased Shares") of Series A Preferred Stock, no par
value per share (the "Preferred Stock"), for the purchase price provided in
Section 1.2 below.
1.2 Purchase Price. The purchase price for the Purchased Shares shall be
--------------
fifteen dollars ($15.00) per share, or an aggregate of two million ten thousand
dollars ($2,010,000) (the "Purchase Price"). The Purchase Price shall be paid
at the Closing via wire transfer.
1.3 Issuance of Warrant. On the Closing Date, the Company shall issue to
-------------------
Purchaser, for no additional consideration, a warrant in the form of Exhibit 1.3
-----------
attached hereto (hereinafter, the "Warrant") dated the Closing Date initially
providing for the purchase of shares of Preferred Stock. The Warrant shall be
immediately vested and exercisable for three (3) years following the issue date
thereof and shall entitle the holder to purchase 60,000 shares of the Preferred
Stock (or Common Stock as provided therein) at an exercise price of $18.00 per
share, subject to adjustment as set forth therein.
The Company shall reserve and keep available for issuance at all times,
free from preemptive rights, such number of its authorized but unissued shares
of the Preferred Stock and its voting Common Stock, no par value and without
series designation (the "Common Stock"), as is sufficient to permit exercise in
full of the Warrant in accordance with the terms thereof and the conversion of
such Preferred Stock into Common Stock. All shares of Preferred Stock and
Common Stock that are so issuable shall, when issued upon exercise, be duly and
validly issued and fully paid and non-assessable.
1.4 Use of Cash Proceeds. The Company, as determined by the Board of
--------------------
Directors thereof, shall use the cash proceeds from the sale of the Purchased
Shares for general working capital and to pay expenses associated with the
transactions contemplated by this Agreement in accordance with Section 9.8
hereof. Such cash proceeds shall not be used to retire loans made by
shareholders to the Company or for the redemption of any capital stock of the
Company.
1.5 Agreements. Purchaser agrees at the Closing to enter into the
----------
agreement described in Section 6.3.
<PAGE>
2. CLOSING; DELIVERIES.
2.1 Closing. The closing of the purchase and sale of the Purchased Shares
-------
(the "Closing") shall be held at the offices of Nelson Mullins Riley &
Scarborough, L.L.P., Atlanta, Georgia, or at such other place as the parties may
agree on or before September 1, 1998 (the "Closing Date").
2.2 Deliveries at Closing. At the Closing, the Company shall deliver to
---------------------
Purchaser a certificate, registered in Purchaser's name, representing the
Purchased Shares, against payment by Purchaser of the Purchase Price by wire
transfer. The Company shall also deliver such other instruments and documents
as are described in Article 5.
2.3 Issuance of Additional Shares. The parties acknowledge that the
------------------------------
Company intends to make an initial offering to the public of its Common Stock
pursuant to a registration statement effective under the federal Securities Act
of 1933, as amended (the "Securities Act"), following the Closing Date (the
closing of such offering being referred to hereinafter as the "Initial Public
Offering"). If the Company does not close the Initial Public Offering at an
offering price of at least $18.00 per share (as adjusted for any stock splits,
stock dividends, combinations or the like) on or before the date that is one
hundred eighty (180) days following the Closing Date, the Company shall issue
for no additional consideration to Purchaser 30,000 additional shares of
Preferred Stock without need for any further action by Purchaser; provided that
if the Company closes the Initial Public Offering within such 180-day period,
but does so at an offering price less than $18.00 per share (as adjusted for any
stock splits, stock dividends, combinations or the like), the Company shall
issue for no additional consideration to Purchaser 30,000 shares of Common Stock
in lieu of issuing any Preferred Stock. Furthermore, in the event the Company
fails to close the Initial Public Offering on or before the first anniversary of
the Closing Date, the Company shall issue promptly to Purchaser, for no
additional consideration, an additional 10,000 shares of Preferred Stock without
need for any further action by Purchaser. The numbers of shares of stock
specified in this Section 2.3 shall be adjusted for any stock splits, stock
dividends, recapitalizations or similar events occurring prior to the dates
indicated.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
3.1 Organization and Standing; Charter and Bylaws. Each of the Company
---------------------------------------------
and its wholly owned subsidiaries Endeavor Technologies, Inc. (formerly known as
Quality Diagnostic Services, Inc.) and Telemedics, Inc. (each, a "Subsidiary"
and, collectively, the "Subsidiaries") is a corporation duly organized and
validly existing under, and by virtue of, the laws of the State of Georgia and
in good standing under such laws. The Company has previously delivered to
Purchaser true and accurate copies of the Articles of Incorporation, as amended
(the "Articles"), and Bylaws, as presently in effect, of the Company.
2
<PAGE>
3.2 Corporate Power. The Company has all requisite legal and corporate
---------------
power and authority to enter into this Agreement and to sell the Purchased
Shares and to carry out and perform its other obligations under the terms of
this Agreement.
3.3 Subsidiaries and Affiliates. Except as set forth in Exhibit 3.3
--------------------------- -----------
attached hereto, the Company does not own or control, directly or indirectly,
any interest or investment in any corporation, partnership, association or other
form of business entity.
3.4 Capitalization. Immediately prior to the Closing Date, the authorized
--------------
capital stock of the Company shall consist of 107,000,000 shares of capital
stock, of which (a) 75,000,000 shares are designated as Common Stock, voting and
without par value per share, of which 3,000,000 are issued and outstanding; (b)
3,000,000 have been designated as Common Stock Series B, nonvoting and without
par value per share, of which 1,400,000 are issued and outstanding; (c)
1,500,000 shares have been designated as Common Stock Series C, nonvoting and
without par value per share, of which 1,500,000 are issued and outstanding; (d)
15,000,000 shares have been designated as Common Stock Series D, nonvoting and
without par value per share, of which 4,406,805 are issued and outstanding; (e)
2,500,000 shares have been designated as Common Stock Series E, nonvoting and
without par value per share, of which 2,100,000 are issued and outstanding; and
(f) 10,000,000 shares of preferred stock, of which 1,600,000 shares have been
designated as Preferred Stock and of which 667,000 shares are issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued, are fully paid and nonassessable, are owned beneficially and
of record by the shareholders and in the amounts set forth in Exhibit 3.4
-----------
attached hereto and, except as set forth in Exhibit 3.4, have been offered,
-----------
issued, sold and delivered by the Company in compliance with applicable federal
and state securities laws. Except as shown in Exhibit 3.4, there are no
-----------
outstanding rights, options, warrants, conversion rights or agreements for the
purchase or acquisition from the Company or any Subsidiary of any shares of its
respective capital stock other than the rights created by this Agreement.
3.5 Authorization. All corporate action on the part of the Company and
-------------
its directors, officers and shareholders necessary for (i) the authorization,
execution, delivery and performance of all its obligations under this Agreement
and any document contemplated hereby, (ii) the authorization, issuance and
delivery by the Company of the Purchased Shares, the Warrant, the shares of
Preferred Stock or Common Stock, as the case may be, issuable upon exercise of
the Warrant (the "Warrant Shares"), and the additional shares of Preferred Stock
or Common Stock, as the case may be, pursuant to the terms of Section 2.3 hereof
(the "Additional Shares") and (iii) for the authorization and reservation of the
shares of the Common Stock issuable upon conversion of all such Preferred Stock
pursuant to the terms of the Company's Articles of Incorporation (the
"Conversion Shares"), has been (or will be) taken prior to the Closing. This
Agreement constitutes the valid and binding obligation of the Company and is
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or other laws affecting the enforcement
of creditors' rights generally, and except that the availability
3
<PAGE>
of the remedy of specific performance or other equitable relief is subject to
the discretion of the court before which any proceeding therefor may be brought.
3.6 Validity of Stock. The Purchased Shares, the Warrant Shares and the
-----------------
Additional Shares, when issued, sold and delivered in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, will be free of any liens or encumbrances, and will not be
subject to any preemptive rights, rights of first refusal or redemption rights,
other than as provided herein and in the Articles. The Conversion Shares have
been duly and validly reserved, and neither they nor the issuance thereof are
subject to any preemptive rights or rights of first refusal or redemption
rights, and, upon issuance, they will be validly issued, fully paid and
nonassessable.
3.7 Disclosure. No representation or warranty by the Company in this
----------
Agreement or in any written statement or certificate (excluding any draft
registration statement) furnished to Purchaser in connection with the
transactions contemplated by this Agreement contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state a material
fact necessary to make the statements made not misleading in light of the
circumstances under which they were made.
3.8 Financial Statements. The Company has furnished Purchaser with (a)
--------------------
audited consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1996 and 1997, together with audited consolidated statements of
income and cash flows for the three-year period ended December 31, 1997, and (b)
an unaudited consolidated balance sheet of the Company as of June 30, 1998,
together with unaudited consolidated statements of income and cash flow for the
six-month period then ended (the "Interim Financial Statements"; all the
foregoing financial statements being collectively referred to hereafter as the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and fairly present the financial position of the Company and the results
of its operations as of the dates and for the periods indicated, subject, in the
case of the Interim Financial Statements, to normal year-end adjustments (which
will not deviate materially from the other financial statements) and the absence
of footnotes.
3.9 Changes. Except as disclosed in Exhibit 3.9 attached hereto and
------- -----------
except for any changes resulting from the sale of substantially all of the
assets of the Subsidiaries to Purchaser on July 21, 1998, effective as of July
1, 1998, and as disclosed in the Interim Financial Statements, since the date of
the Interim Financial Statements, there has not been:
3.9.1 any change in the assets, liabilities, financial condition, or
operations of the Company considered in the aggregate from that reflected in the
Interim Financial Statements, except changes in the ordinary course of business
that have not been, either individually or in the aggregate, materially adverse;
3.9.2 any materially adverse change (individually or in the
aggregate), except in the ordinary course of business, in the contingent
obligations of the Company by way of guaranty, endorsement, indemnity, warranty,
or otherwise;
4
<PAGE>
3.9.3 any damage, destruction, or loss that had a material adverse
effect on the properties or business of the Company, whether or not covered by
insurance;
3.9.4 any loans made by the Company to its employees, officers, or
directors or members of their immediate families other than travel and other
commercially reasonable advances made in the ordinary course of business;
3.9.5 any increases in the compensation of any of the Company's
officers or directors;
3.9.6 any declaration or payment of any dividend or other
distribution of the assets of the Company;
3.9.7 any other event or condition of any character that has had a
material adverse effect on the business of the Company; or
3.9.8 any agreement or commitment by the Company to do any of the
things described in this Section 3.9.
3.10 Material Liabilities. Except (a) as disclosed in Exhibit 3.10
-------------------- ------------
attached hereto or as reflected in the Interim Financial Statements, (b) for the
obligations and liabilities incurred in the ordinary course of business since
the date of the Interim Financial Statements, and (c) for obligations under
contracts made in the ordinary course of business that would not be required by
GAAP to be reflected in the Interim Financial Statements, neither the Company
nor any Subsidiary has any material liabilities or obligations, absolute or
contingent.
3.11 Contracts and Commitments. Other than this Agreement or as set forth
-------------------------
in Exhibit 3.11 attached hereto, neither the Company nor any Subsidiary has any
------------
contracts, agreements or instruments to which it is a party and that involve
either (a) a commitment by, or revenue to, the Company or any Subsidiary in
excess of $25,000 annually, or (b) provisions restricting or affecting the
development, manufacture or distribution of the Company's or any Subsidiary's
products or services. Except as set forth in Exhibit 3.11, all contracts,
------------
agreements or instruments to which the Company or any Subsidiary is a party are
valid and binding upon the Company or the respective Subsidiary, as the case may
be, and the other parties thereto and are in full force and effect and
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equitable principles, and none of
the Company, any Subsidiary or, to the Knowledge of the Company (as defined in
Section 9.9 hereof), any other party to any such contract, agreement or
instrument has breached any provision of, or is in default under, the terms
thereof, and there are no claims or allegations of offset, defense, or
counterclaims that would prevent the work in process of any of the Company and
the Subsidiaries or its contracts and agreements from maturing in due course
into fully collectible accounts receivable. Except as set forth on Exhibit
-------
3.11, each of the Company and the Subsidiaries has complied with all
- ----
5
<PAGE>
applicable statutes, ordinances, rules, regulations and orders relating to
seeking, bidding, obtaining, performing under or otherwise complying with,
contracts with governmental and quasi-governmental authorities, agencies or
other entities.
3.12 Protection of Intellectual Property Generally. Exhibit 3.12 hereto
--------------------------------------------- ------------
sets forth a complete and correct list and summary description of all registered
and material unregistered trademarks, trade or company names, service marks,
service names, brand names and registrations, if any, therefor; all registered
copyrights; and all patents and all patent applications, if any, in each case
applicable to or used or intended to be used in the business of any of the
Company and the Subsidiaries, together with a complete list of all licenses
granted by or to each of the Company and the Subsidiaries with respect to any of
the above. The Company has filed an application in the United States Patent and
Trademark Office for registration of WebMD as a service mark (which application
has been initially denied), but otherwise neither the Company nor any Subsidiary
has sought governmental protection by way of patent, trademark or copyright
registration or application for the property listed in Exhibit 3.12 hereto.
------------
Each of the Company and the Subsidiaries validly owns or is validly licensed to
use all inventions, processes, know-how, formulas, patterns, designs, and trade
secrets that are used in the conduct of its business as now conducted. All such
rights and all rights listed in Exhibit 3.12 hereto are valid and enforceable
------------
and are free from any security interest, lien or encumbrance or any default on
the part of any of the Company and the Subsidiaries, and are not now involved in
any pending or, to the knowledge of the Company, threatened interference
proceeding. No option, license, sublicense or other agreement has been granted
in respect of any patent, trademark, brand name, trade secret, copyright or
pending application therefor listed in Exhibit 3.12 hereto, except as noted in
------------
Exhibit 3.12. Except as set forth on Exhibit 3.12, none of the Company's or any
- ------------ ------------
Subsidiary's owned intellectual property infringes any patent, trademark,
service mark, trade or company name or application therefor or any related
technological right of any other person. None of the rights of any of the
Company and the Subsidiaries described in this Section 3.12 will be impaired in
any way by the transactions provided for herein, and all of such rights will be
fully enforceable by each of the Company and the Subsidiaries after the Closing
Date without the consent or agreement of any other party. Neither the Company
nor any Subsidiary believes it is or will be necessary to utilize any inventions
of any of its employees (or individuals it currently intends to hire) made prior
to their employment by any of the Company and the Subsidiaries.
3.13 Compliance with Other Instruments. The execution, delivery and
---------------------------------
performance of and compliance with this Agreement and the issuance of the
Purchased Shares, the Conversion Shares, the Warrant Shares and any Additional
Shares will not result in any violation or be in conflict with or constitute a
default under any of the terms or provisions of the Articles or bylaws of the
Company or any Subsidiary's Articles of Incorporation or bylaws, or any
mortgage, indenture, contract, agreement or instrument to which the Company or
any Subsidiary is a party, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of any of the
Company and the Subsidiaries pursuant to any such term or provision.
3.14 Litigation and Other Proceedings. Except as disclosed in Exhibit
-------------------------------- -------
3.14 attached hereto, there are no actions, proceedings or investigations
- ----
pending against any of the Company
6
<PAGE>
or the Subsidiaries or their respective properties or shareholders (or, to the
Knowledge of the Company, any basis therefor or threat thereof) that, either in
any case or in the aggregate, could reasonably be expected to result in any
material adverse change in the business or financial condition of any of the
Company or the Subsidiaries or any of their respective properties or assets or
in any material impairment of the right or ability of any of the Company or the
Subsidiaries to carry on their respective businesses as now conducted or as
proposed to be conducted, or in any material liability on the part of any of the
Company or the Subsidiaries, and none that challenges the validity of this
Agreement or any action taken or to be taken in connection herewith. The
foregoing includes, without limiting its generality, actions pending or, to the
Knowledge of the Company, threatened (or any threat thereof) involving the prior
employment of any of the Company's or any Subsidiary's employees or their use in
connection with the Company's or any Subsidiary's business of any information or
techniques allegedly proprietary to any of their former employers.
3.15 Employees. Except as disclosed in Exhibit 3.15 attached hereto, each
--------- ------------
of the Company and the Subsidiaries has no employment contracts with any of its
employees not expressly terminable at will and no collective bargaining
agreements covering any of its employees. Further, neither the Company nor any
Subsidiary has any policies, procedures or handbooks providing for other than
at-will employment. Neither the Company nor any Subsidiary is aware of any
proposed, threatened or actual union organization activity affecting the
Company's or any Subsidiary's current or prospective operations.
3.16 Registration Rights. Except as provided for in Article 8 hereof, and
-------------------
in Exhibit 3.16 attached hereto, neither the Company nor any Subsidiary is under
------------
any obligation to register any of its presently outstanding securities or any of
its securities that may hereafter be issued pursuant to this or any other
existing agreement.
3.17 Governmental Consents. Except for the filing of a Form D with the
---------------------
Securities and Exchange Commission (the "Commission") and the State of Georgia,
no consent, approval or authorization of, or registration, declaration,
designation, qualification or filing with, any governmental authority on the
part of any of the Company and the Subsidiaries is required in connection with
the valid execution and delivery of this Agreement, the offer, sale or issuance
of the Purchased Shares by the Company, the issuance by the Company of the
Conversion Shares, or the consummation of any other transaction contemplated
hereby other than as provided by applicable securities laws.
3.18 Other Consents. All consents of any third party and any shareholders
--------------
of any of the Company and the Subsidiaries necessary for the execution, delivery
and performance by each of the Company and the Subsidiaries of this Agreement or
the consummation of the transactions contemplated hereby, including, without
limitation, any consents necessary from Sirrom Investments, Inc., have been
received prior to the Closing.
3.19 Title to Property and Assets. Except as disclosed in Exhibit 3.19
---------------------------- ------------
attached hereto, each of the Company and the Subsidiaries has good and
marketable title to its material properties
7
<PAGE>
and assets and has good title to all its leasehold interests, in each case
subject to no mortgage, pledge, lien, encumbrance or charge.
3.20 Insurance. Each of the Company and the Subsidiaries has fire and
---------
casualty insurance policies in an amount sufficient to allow it to replace with
proceeds from such insurance any of its material, tangible properties that might
be damaged or destroyed.
3.21 Licenses and Permits; Compliance with Law. Except as disclosed in
-----------------------------------------
Exhibit 3.21 attached hereto, each of the Company and the Subsidiaries holds all
- ------------
licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of its
business and the use of its assets. Except as disclosed in Exhibit 3.21
------------
attached hereto, each of the Company and the Subsidiaries has conducted, and is
presently conducting, its business so as to comply in all material respects with
all applicable statutes, ordinances, rules, regulations and orders of any
governmental authority. Further, neither the Company nor any Subsidiary is
presently charged with or, to the knowledge of the Company, under governmental
investigation with respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation. To the Knowledge of the Company, neither the
Company nor any Subsidiary is presently the subject of any pending or, to the
knowledge of the Company, threatened adverse proceeding by any regulatory
authority having jurisdiction over its business, properties or operations.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any such
license, certificate, permit, franchise or right held by any of the Company and
the Subsidiaries.
3.22 Tax Matters. Except as disclosed in Exhibit 3.22 attached hereto,
----------- ------------
each of the Company and the Subsidiaries has accurately prepared and timely
filed all income and other tax returns, if any, that are required to be filed,
and has paid, or made provision for the payment of, all taxes that have or may
have become due pursuant to said returns or pursuant to any assessment that has
or may be received from any taxing authority for the period through the date of
the Interim Financial Statements, and there are no outstanding agreements by any
of the Company and the Subsidiaries for the extension of time for the assessment
of any tax. The United States income tax returns of each of the Company and the
Subsidiaries (if any) have not been audited by the Internal Revenue Service.
Except as disclosed in Exhibit 3.22, no deficiency assessment or proposed
------------
adjustment of the Company's or any Subsidiary's United States income tax or
state or municipal taxes (if any) is pending, and the Company has no Knowledge
of any proposed liability for any tax to be imposed upon the Company's or any
Subsidiary's properties or assets for which there is not an adequate reserve
reflected in the Interim Financial Statements.
3.23 Employment; No Conflicting Agreements. Except as disclosed in
-------------------------------------
Exhibit 3.23 attached hereto, none of the officers, directors, and key employees
- ------------
of any of the Company and the Subsidiaries is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with his or her obligation to use his
or her best efforts to promote the interests of any of the Company and the
Subsidiaries or that would conflict with the business of any of the Company and
the Subsidiaries as any of the Company and the Subsidiaries presently conducts,
or presently proposes to conduct, the same.
8
<PAGE>
3.24 Indebtedness to Directors and Officers; Interested Party
--------------------------------------------------------
Transactions. Except as disclosed in Exhibit 3.24 attached hereto, neither the
- ------------ ------------
Company nor any Subsidiary is indebted to any of its directors or officers or
party to any contract with any affiliate of its directors or officers, and, to
the Knowledge of the Company, none of such directors or officers has a claim of
any nature against any of the Company and the Subsidiaries except for
compensation due for past or current pay periods. To the Knowledge of the
Company and except as disclosed in Exhibit 3.24, no officer, director or holder
------------
of more than five percent (5%) of the capital stock of any of the Company, the
Subsidiaries or any "affiliate" or "associate" (as these terms are defined in
Rule 405 promulgated under the Securities Act) of any such person or entity or
any of the Company and the Subsidiaries has or has had, either directly or
indirectly, (a) an interest in any person or entity that (i) furnishes or sells
services or products that are furnished or sold or are proposed to be furnished
or sold by any of the Company and the Subsidiaries , or (ii) purchases from or
sells or furnishes to any of the Company and the Subsidiaries any goods or
services, or (b) a beneficial interest in any contract or agreement to which any
of the Company and the Subsidiaries is a party or by which it may be bound or
affected. Except as set forth in Exhibit 3.24 hereto, there are no existing
------------
material arrangements or proposed material transactions between any of the
Company and the Subsidiaries and any officer, director, or holder of more than
five percent (5%) of the capital stock of any of the Company and the
Subsidiaries or any affiliate or associate of any such person.
3.25 Employee Plans. Exhibit 3.25 attached hereto lists all employee
-------------- ------------
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and all severance, bonus, retirement, pension,
profit-sharing, deferred compensation plans and other similar fringe or employee
benefit plans, programs or arrangements, and all employee or compensation
agreements, written or otherwise, for the benefit of or relating to any employee
of any of the Company and the Subsidiaries (collectively, "Employee Plans").
None of the Company, the Subsidiaries, and any of their respective officers or
directors has taken any action, directly or indirectly, to obligate any of the
Company and the Subsidiaries to adopt any additional Employee Plans. Each of
the Company and the Subsidiaries has complied with all terms and conditions of
the Employee Plans the violation of which would have a material adverse effect
on the business, as currently conducted or as any of the Company and the
Subsidiaries presently proposes to conduct it, and assets of any of the Company
and the Subsidiaries.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company as follows:
4.1 Access to Information. Purchaser acknowledges that all documents,
---------------------
records, and books pertaining to the Company have been made available for
inspection by Purchaser. Purchaser has a pre-existing business or personal
relationship with the Company or with one or more of the Company's officers,
directors or controlling persons. Purchaser and its advisor or advisors, or a
person or persons acting on their behalf, have had a reasonable opportunity to
ask questions of and receive answers from the officers of the Company,
concerning the terms and conditions of the offering of the Purchased Shares and
the Warrant, and to obtain additional information, to the extent possessed or
obtainable without unreasonable effort or expense by the
9
<PAGE>
officers of the Company. All such questions have been answered to the full
satisfaction of Purchaser.
4.2 Experience; Investment. Purchaser has such knowledge and experience
----------------------
in financial and business matters as to enable Purchaser (a) to utilize the
information made available to it in connection with the offering of the
Purchased Shares and the Warrant, (b) to evaluate the merits and risks
associated with a purchase of the Purchased Shares and the Warrant, and (c) to
make an informed decision with respect thereto. Purchaser's business and
financial experience is such that the Company could reasonably assume Purchaser
has the capacity to protect its own interests in connection with the offer, sale
and issuance of the Purchased Shares and the Warrant. Purchaser is acquiring
the Purchased Shares and the Warrant solely for its own account, not as a
nominee or agent, and not with a view to, or for sale in connection with, any
distribution thereof. Purchaser is an "accredited investor" within the meaning
of Regulation D promulgated by the Commission under the Securities Act by reason
of being a corporation with assets in excess of $5,000,000.
4.3 Registration Under the Securities Act. Purchaser understands that (a)
-------------------------------------
neither the offering nor the sale of the Purchased Shares and the issuance of
the Warrant has been registered under the Securities Act or applicable state
securities laws, in reliance upon exemptions from the registration provisions of
the Securities Act and applicable state securities laws, (b) the Purchased
Shares purchased by Purchaser and the Warrant issued to the Purchaser must be
held by it indefinitely unless the sale or transfer thereof is subsequently
registered under the Securities Act and applicable state securities laws or an
exemption from such registration is available, and the certificates or documents
representing all Purchased Shares and the Warrant will be legended to reflect
such restrictions, (c) except as provided in Article 8 hereof, the Company is
under no obligation to register any Purchased Shares, Additional Shares,
Conversion Shares or the Warrant Shares on Purchaser's behalf or to assist it in
complying with any exemption from registration, and (d) the officers of the
Company will rely upon the representations and warranties made by Purchaser in
this Agreement in order to establish such exemption from the registration
provisions of the Securities Act and applicable state securities laws.
4.4 Transfer. Purchaser will not transfer the Warrant or any Purchased
--------
Shares, Additional Shares, Warrant Shares or Conversion Shares without
registration under the Securities Act and applicable state securities laws
unless the transfer is exempt from registration under the Securities Act and
such laws and is made in compliance with the legends contemplated by Section
9.11 herein.
4.5 Authorization. All action on the part of Purchaser necessary for the
-------------
authorization, execution, delivery and performance of all obligations of
Purchaser under this Agreement has been (or will be) taken prior to the Closing.
This Agreement, when executed and delivered by Purchaser, will constitute the
valid and binding obligation of Purchaser and is enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and except that the availability of the remedy of specific
performance or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
10
<PAGE>
5. CONDITIONS TO CLOSING OF PURCHASER.
The obligation of Purchaser to purchase and pay for the Purchased Shares at
the Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Article 3 hereof shall be true and correct in
all respects when made and shall be true and correct on such Closing Date with
the same force and effect as if they had been made on and as of said date.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects.
5.3 Compliance Certificate. Unless the Closing Date is the same as the
----------------------
date of this Agreement, Purchaser shall have received a certificate executed by
the President of the Company, dated as of the Closing Date, certifying that the
conditions specified in Sections 5.1 and 5.2 hereof have been fulfilled.
5.4 Opinion of Company's Counsel. Purchaser shall have received from
----------------------------
Nelson Mullins Riley & Scarborough, L.L.P., counsel to the Company, in form and
substance satisfactory to Purchaser and its counsel, a favorable opinion
addressed to Purchaser, dated as of the Closing Date, substantially in the form
set forth in Exhibit 5.4 attached hereto.
-----------
5.5 Evidence of Consents. The Company shall have given Purchaser
--------------------
evidence satisfactory to Purchaser that it has received all necessary consents
of third parties and shareholders of the Company pursuant to Section 3.18
hereof.
6. CONDITIONS TO CLOSING OF THE COMPANY.
The obligation of the Company to sell the Purchased Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by Purchaser in Article 4 hereof shall be true and correct in
all respects when made and shall be true and correct on such Closing Date with
the same force and effect as if they had been made on and as of said date.
6.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by or complied with by Purchaser on or prior to
such Closing Date shall have been performed or complied with in all respects.
11
<PAGE>
6.3 Joinder Agreement to Restated Shareholders Agreement. Purchaser shall
----------------------------------------------------
have executed a Joinder Agreement, in the form set forth in Exhibit 6.3 attached
-----------
hereto, to that certain Restated Shareholders Agreement dated October 18, 1996,
as amended from time to time.
7. COVENANTS.
7.1 Basic Information and Access. Subject to Section 7.2:
----------------------------
7.1.1 As soon as practicable after the end of each fiscal year, and
in any event within ninety (90) days after each fiscal year beginning with the
year ending December 31, 1998, the Company shall furnish to Purchaser audited
consolidated balance sheets of the Company and its subsidiaries, if any, as of
the end of such fiscal year and audited consolidated statements of income and
cash flow of the Company and its subsidiaries, if any, for such fiscal year,
prepared in accordance with GAAP consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by Ernst & Young, LLP or another independent
public accounting firm, which shall also be one of the six largest firms of
nationally recognized standing in the United States, a recognized regional firm
or a firm acceptable to Purchaser.
7.1.2 As soon as practicable after the end of each fiscal quarter,
and in any event within forty-five (45) days thereafter, the Company shall
furnish to Purchaser consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal quarter, and consolidated
statements of income and cash flow of the Company and its subsidiaries, if any,
for such fiscal quarter and for the current fiscal year to date, prepared in
accordance with GAAP consistently applied, with such statements certified by the
chief financial officer of the Company as having been prepared in accordance
with GAAP consistently applied, and accompanied by a brief narrative description
of the Company's business activities during said quarter.
7.2 Suspension of Certain Covenants. The covenants set forth in Article
-------------------------------
7, except those in Section 7.3, shall be suspended and be of no force or effect
if the Company becomes subject to the reporting requirements of the federal
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act");
provided that such covenants shall once again apply in the event the Company
ceases to remain subject to such requirements and if at such time the Purchaser
owns Purchased Shares, Warrant Shares, Conversion Shares or any Additional
Shares.
7.3 Confidentiality. Purchaser agrees that it will keep confidential and
---------------
will not disclose, divulge or use any confidential, proprietary or secret
information that Purchaser may obtain from the Company, and that the Company has
marked "confidential," "proprietary" or "secret" or has otherwise identified as
being such, pursuant to financial statements, reports and other materials
submitted by the Company pursuant hereto or pursuant to the provisions of
Section 7.1 (the "Confidential Information"); provided that the term
Confidential Information shall not include any information supplied by the
Company that (a) on the date hereof or thereafter becomes generally available to
the public other than as a result of a disclosure, directly or indirectly, by
Purchaser; (b) is disclosed by Purchaser with the prior written consent of the
Company; (c) was
12
<PAGE>
available to Purchaser on a non-confidential basis from a source other than the
Company prior to its disclosure to Purchaser by the Company; or (d) becomes
available to Purchaser on a non-confidential basis from a source other than the
Company; provided further, that, with regard to clauses (c) and (d), the source
was not himself or itself known by Purchaser to be bound by a confidentiality
agreement, fiduciary duty or other obligation of confidentiality with the
Company and did not receive such information, directly or indirectly, from a
person or entity so bound.
8. REGISTRATION RIGHTS.
8.1 Certain Definitions. As used in this Agreement, in addition to the
-------------------
terms defined above, the following terms shall have the following respective
meanings:
"Commission" shall have the meaning set forth in Section 3.17 hereof.
"Holders" shall mean Purchaser and any other person holding Registrable
Securities to whom these registration rights have been transferred pursuant to
Section 8.8 hereof.
"Initial Public Offering" shall have the meaning set forth in Section 2.3
hereof.
"Other Shareholders" shall mean persons other than Holders who, by virtue
of agreements with the Company, are entitled to include their securities in a
registration effected pursuant to this Agreement.
The terms "register," "registered" and "registration" refer to the
effectiveness of a registration statement prepared and filed in compliance with
the Securities Act.
"Registrable Securities" as of any particular time shall mean (a) all
Conversion Shares, (b) all Warrant Shares to the extent they consist of Common
Stock, (c) any Additional Shares of Common Stock issued pursuant to Section 2.3
hereof and (d) any additional shares of Common Stock issued with respect to the
Conversion Shares described in (a) and (b) pursuant to any stock split, stock
dividend, recapitalization or similar event, or automatic conversion thereof
into another series of Common Stock pursuant to the provisions of the Articles.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Section 8.2 hereof, including, without limitation, all
registration and filing fees; printing expenses; fees and disbursements of
counsel for the Company; reasonable fees and expenses of a single counsel for
the selling Holders; state "blue sky" fees and expenses; and accountants'
expenses, including without limitation any special audits required by the
Commission with respect to any such registration; but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company.
"Securities Act" shall have the meaning set forth in Section 2.3 hereof.
"Securities Exchange Act" shall have the meaning set forth in Section 7.2
hereof.
13
<PAGE>
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and any other securities of the Company being sold in the same
registration as the Registrable Securities by Other Shareholders.
"Warrant Shares" shall have the meaning set forth in Section 3.5 hereof.
8.2 Company Registration.
--------------------
8.2.1 If the Company shall determine to register any of its
securities in connection with the public offering of such securities solely for
cash on a form that would permit the registration of the Registrable Securities
other than on Form S-8, Form S-4 or another form not available for registering
the Registrable Securities for sale to the public, the Company shall promptly
give to each Holder written notice of such registration (a "Piggyback
Registration"), and shall include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder or Holders within fifteen (15) days after
receipt of such written notice from the Company, subject to the underwriter
limitations, if any, described in Subsection 8.2.3 hereof; provided, however,
that no Holder shall have the right to participate in an Initial Public Offering
pursuant to a registration statement declared effective within the twelve (12)-
month period following the Closing Date. The Company shall have the right to
withdraw or cease to prepare or file any registration statement for any offering
referred to in this Subsection 8.2.1 without any obligation or liability to any
Holder.
8.2.2 Number of Piggyback Registrations. Subject to the underwriter
---------------------------------
limitations, if any, described in Subsection 8.2.3 below, each Holder shall be
entitled to have its Registrable Securities included in an unlimited number of
Piggyback Registrations pursuant to this Section 8.2 until such time as all the
Registrable Securities may be resold pursuant to Rule 144 promulgated pursuant
to the Securities Act (or any successor provision).
8.2.3 Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Subsection 8.2.1 hereof. In such event the right of any Holder to
registration pursuant to Subsection 8.2.1 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company. Notwithstanding any other provision of this Section 8.2, if the
underwriter reasonably determines that marketing factors require a limitation on
the number of shares to be underwritten, such reduction in the number of shares
that may be included in the registration shall be made (a) first, to the shares
of the Holders and Other Shareholders requesting registration of securities
pursuant to piggyback registration rights; (b) second, to the shares of the
Company, and
14
<PAGE>
(c) third, to the shares of any person other than the Holders requesting
registration of securities pursuant to demand registration rights; all in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities that such person, Holders and Other Shareholders
had requested to be included in such registration; provided, however, that in no
event shall the total amount of Purchaser's shares of securities included in the
offering pursuant to a Piggyback Registration be less than the number of
securities included in the offering by any other single selling shareholder
pursuant to piggyback registration rights unless all of Purchaser's shares of
securities are included in the offering. The Company shall advise all holders of
securities requesting registration as to the number of shares or securities that
may be included in the registration and underwriting as allocated in the
foregoing manner. No such reduction shall be made with respect to securities
offered by the Company for its own account. If any Holder or Other Shareholder
disapproves of the terms of any such underwriting, such person may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall also be withdrawn from such registration.
8.3 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company; and all Selling Expenses shall be borne
by the Holders, the Other Shareholders of the securities so registered and the
Company, to the extent of securities registered on its behalf, pro rata on the
basis of the number of their shares so registered; provided, however, that if
any jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities in that
jurisdiction be borne by the selling shareholders, then such expenses shall be
payable by the selling shareholders pro rata to the extent required by such
jurisdiction.
8.4 Registration Procedures. In the case of each registration effected by
-----------------------
the Company pursuant to this Agreement, the Company shall keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense the Company shall use its best efforts to:
8.4.1 keep such registration effective for a period of one hundred
eighty (180) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; and
8.4.2 furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
8.5 Indemnification.
---------------
8.5.1 With respect to each Holder whose securities have been
registered pursuant to this Agreement, the Company shall indemnify such Holder,
each of such Holder's officers, directors and partners, and each person
controlling (as defined in Subsection 8.5.4 below) such Holder and each of such
controlling person's officers, directors and partners, and shall also
15
<PAGE>
indemnify each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on (a) any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, (b) 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, or (c) any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and shall reimburse each such Holder
and each person controlling such Holder, and each of such controlling person's
officers, directors and partners, each of its officers, directors and partners,
each such underwriter, and each person who controls such underwriter, for any
legal and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based upon
written information furnished to the Company by such Holder or on behalf of such
Holder by the officers, directors or partners of such Holder seeking to be
indemnified, where such information is stated to be specifically for use in such
prospectus, offering circular or related document.
8.5.2 Each Holder and Other Shareholder shall, if securities held by
him or it are included among the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
(as defined in Subsection 8.5.4 below) the Company or such underwriter, and each
other such Holder and Other Shareholder and each of such controlling person's
officers, directors and partners, and each person controlling such other Holder
or Other Shareholder and each of such controlling person's officers, directors
and partners, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or 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, and shall reimburse
the Company, such other Holders, Other Shareholders, directors, officers,
partners, persons, each underwriter and each person who controls such
underwriter for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder specifically for
use therein; provided, however, that the obligations of such Holder or Other
Shareholder hereunder shall be limited to an amount equal to the proceeds to
such Holder or Other Shareholder of securities sold as contemplated herein.
16
<PAGE>
8.5.3 Each party entitled to indemnification under this Section 8.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be withheld unreasonably). The Indemnified Party may participate in such
defense with counsel of its own choosing, but the fees and expenses of such
counsel shall be at such Indemnified Party's expense unless (i) the Indemnifying
Party and the Indemnified Party shall have agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential conflicting interests between them. The failure of
any Indemnified Party to give notice as provided herein shall relieve the
Indemnifying Party of its obligations under this Section 8.5 only if such
failure is prejudicial to the ability of the Indemnifying Party to defend such
action, and such failure shall in no event relieve the Indemnifying Party of any
liability that he or it may have to any Indemnified Party otherwise than under
this Section 8.5. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
8.5.4 For purposes of this Section 8.5, the term "control" shall have
the meaning assigned thereto under the Securities Act.
8.6 Information by Holders and Other Shareholders. Each Holder or Other
---------------------------------------------
Shareholder of securities included in any registration shall furnish to the
Company such information regarding such Holder or Other Shareholder and the
distribution proposed by such Holder or Other Shareholder as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
8.7 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission that may permit the sale of the
Common Stock to the public without registration, the Company shall, for so long
as Registrable Securities are outstanding:
8.7.1 make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated by the Commission under the
Securities Act ("Rule 144"), at all times after ninety (90) days following the
Initial Public Offering;
8.7.2 file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act at any time after it has become subject to the reporting
requirements thereunder; and
17
<PAGE>
8.7.3 so long as any Holder owns any securities constituting or
representing Registrable Securities, furnish to such Holder forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after ninety (90) days following
the Initial Public Offering), and of the Securities Act and the Securities
Exchange Act (at any time after it has become subject to the reporting
requirements thereunder), a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
such Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
registration.
8.8 Transfer of Registration Rights. All, but not less than all, of the
-------------------------------
rights and obligations granted under this Article 8 to cause the Company to
register the Registrable Securities may be assigned, transferred or otherwise
conveyed, in whole but not in part, by the Purchaser to any person provided that
the Purchaser gives the Company written notice (at the time of, or within a
reasonable time after, such transfer) stating the name and address of such
transferee, and such transferee provides its agreement, in a form reasonably
satisfactory to the Company, to be bound by the provisions of this Article 8.
8.9 "Market Stand-Off" Agreement. If requested by the Company upon the
----------------------------
recommendation of the Board of Directors of the Company and an underwriter of
Common Stock (or other securities) of the Company, the Holders shall not sell
or otherwise transfer or dispose of any Common Stock (or other securities) of
the Company held by them during the one hundred eighty (180)-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement shall apply only with respect to an underwritten
Initial Public Offering; and
(b) Other Shareholders selling securities pursuant to such
registration statement and all officers and directors of the Company enter into
similar agreements.
Such agreement shall be in writing in form satisfactory to the Company and
such underwriter. The Company may impose stop-transfer instructions with
respect to the shares (or securities) subject to the foregoing restriction until
the end of said one hundred eighty (180)-day period.
9. MISCELLANEOUS.
9.1 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Georgia, without regard to its principles of
conflicts of laws.
9.2 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by Purchaser and the closings
of the transactions contemplated hereby.
18
<PAGE>
9.3 Assignment. This Agreement may not be assigned by operation of law or
----------
otherwise without the express written consent of the Company and the Purchaser
(which consent may be granted or withheld in the sole discretion of the Company
or the Purchaser); provided, however, that the Purchaser may, without the
consent of the Company, assign this Agreement to any person who directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the Purchaser, but no such assignment shall relieve
the Purchaser of any of its obligations under this Agreement; and provided
further, however, that the rights granted pursuant to Article 8 may be
transferred only in accordance with Section 8.8.
9.4 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated orally, but only by a written instrument signed by the holders of at
least a majority of the Purchased Shares then issued and outstanding (as well as
any shares issued with respect to the same upon any stock split, stock dividend,
recapitalization or similar event) and a representative of the Company so
authorized by its Board of Directors.
9.5 Notices. All notices and other communications required or permitted
-------
hereunder shall be given in writing and shall be deemed effectively given upon
personal delivery or three (3) business days following deposit with the United
States Postal Service, by certified mail, return receipt requested, postage
prepaid, or otherwise delivered by hand or by messenger, addressed;
(a) if to Purchaser:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
with a copy to (which shall not constitute notice):
James L. Smith, III, Esq.
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
or
(b) if to any other holder of any shares of Preferred Stock, the
Warrant, any Warrant Shares, or Conversion Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such shares of Preferred Stock or Conversion Shares who has so
furnished an address to the Company, or
19
<PAGE>
(c) if to the Company, at:
WebMD, Inc.
400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
Attn: Chief Executive Officer
with a copy to (which shall not constitute notice):
L. Scott Askins, Esq.
Vice President and Corporate Counsel
(same address)
with a copy to (which shall not constitute notice):
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, Georgia 30309
Attn: James Walker IV, Esq.
or at such other address as the Company shall have furnished to Purchaser and
each such other holder in writing.
9.6 Delays or Omissions; Remedies Cumulative. No delay or omission to
----------------------------------------
exercise any right, power or remedy accruing to any party, upon any breach or
default under this Agreement, shall impair any such right, power or remedy of
such party or be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
of a party's remedies, either under this Agreement, or by law or otherwise
afforded to such party, shall be cumulative and not alternative.
9.7 Agent's Fees. Each party (a) represents and warrants that it has
------------
retained no finder or broker in connection with the transactions contemplated by
this Agreement (except as disclosed to the other parties hereto as of the date
hereof) and (b) hereby agrees to indemnify and to hold the other parties
harmless of and from any liability for commissions or compensation in the nature
of an agent's, finder's or broker's fee to any broker or other person or firm
(and the cost and expenses of defending against such liability or asserted
liability) for which said party is responsible.
20
<PAGE>
9.8 Expenses. Each party shall bear its own expenses and legal fees (and
--------
expenses and disbursements of its legal counsel) incurred on its behalf with
respect to this Agreement and the transactions contemplated hereby.
9.9 Construction of Certain Terms. The titles of the articles, sections,
-----------------------------
and subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement. For purposes of this
Agreement, the terms "Company's Knowledge," "Knowledge of the Company" and
"Knowledge" as applied to the Company means, as to a particular matter, the
actual knowledge of the Company's executive officers (including its two Vice
Presidents of Sales), in-house corporate counsel, and controller. Wherever the
words "including," "include" or "includes" are used in this Agreement, they
shall be deemed followed by the words "without limitation." References to any
gender shall be deemed to mean any gender. All references herein to the
Company's knowledge or awareness shall mean the knowledge of managers and key
employees of the Company.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.11 Legends. In addition to any legends required by the Securities Act
-------
or any applicable state securities laws, the Company shall place the following
legend on the front or back of each certificate evidencing ownership of shares
of Preferred Stock:
The Corporation will furnish without charge to each shareholder who
so requests a statement of the designations, relative rights,
preferences and limitations applicable to each class, and series
within a class, of capital stock of the Corporation and the
variations in rights, preferences and limitations applicable to each
series (and the authority of the Corporation's board of directors to
determine variations for future series).
The Company shall place legends on each certificate evidencing ownership of
shares of Common Stock identical to those initially placed on the certificates
for Preferred Stock relating to the Securities Act and all applicable state
securities laws.
9.12 Enforcement.
-----------
(a) Remedies at Law or in Equity. If the Company shall default in any
----------------------------
of its obligations under this Agreement or if any representation or warranty
made by or on behalf of the Company or Purchaser in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the Closing Date or as of the date it was made,
furnished or delivered, the other parties may proceed to protect and enforce
their respective rights by suit in equity or action at law, whether for the
specific performance of any term contained in this Agreement, injunction against
the breach of any such term or in furtherance of the exercise
21
<PAGE>
of any power granted in this Agreement, or to enforce any other legal or
equitable right of such party or to take any one of more of such actions. In the
event any party brings such an action against any other party, the prevailing
party in such dispute shall be entitled to recover from the losing party all
reasonable fees, costs and expenses enforcing any right of such prevailing party
under or with respect to this Agreement, including such reasonable fees and
expenses of attorneys and accountants, which shall include all fees, costs and
expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein or in
----------------------------
any exhibit hereto is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to a
party at law or in equity. No express or implied waiver by any party of any
default shall be a waiver of any future or subsequent default. The failure or
delay of any party in exercising any rights granted him or it hereunder shall
not constitute a waiver of any such right and any single or partial exercise of
any particular right by such party shall not exhaust the same or constitute a
waiver of any other right provided herein.
9.13 Timely Performance. Time is of the essence as to the performance of
------------------
the obligations required of the respective parties under this Agreement.
9.14 No Joint Venture. Nothing in this Agreement shall be deemed to
----------------
constitute the Company and Purchaser as partners, agents or joint venturers.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
22
<PAGE>
[SIGNATURES TO INVESTMENT AGREEMENT]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
THE COMPANY:
WEBMD, INC.
By: /s/ Jeffrey T. Arnold
-------------------------------
Jeffrey T. Arnold
Chief Executive Officer
PURCHASER:
MATRIA HEALTHCARE, INC.
By: /s/ Frank D. Powers
-------------------------------
Frank D. Powers
Executive Vice President and
Chief Operating Officer
23
<PAGE>
List of Exhibits
- ----------------
1.3 Form of Warrant
3.3 Subsidiaries and Affiliates
3.4 Outstanding Rights, etc. in Respect of Authorized Capital Stock
3.9 Changes Since Date of Interim Financial Statements
3.10 Material Liabilities
3.11 Contracts
3.12 Intellectual Property
3.14 Litigation
3.15 Employment Agreements
3.16 Registration Rights
3.19 Title Exceptions
3.21 Compliance with Laws Exceptions
3.22 Tax Exceptions
3.23 Conflicts of Officers, Directors and Key Employees
3.24 Indebtedness to Directors and Officers; Interested Party Transactions
3.25 Employee Benefit Plans
5.4 Form of Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
6.3 Form of Joinder Agreement
24
<PAGE>
EXHIBIT 10.21
THIS WARRANT AND THE SHARES OF SERIES A PREFERRED STOCK OR COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE FEDERAL
SECURITIES ACT OF 1933, AS AMENDED, THE GEORGIA SECURITIES ACT OF 1973, AS
AMENDED, OR THE SECURITIES LAWS OF ANY OTHER STATE. THIS WARRANT AND ANY OF
SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER SAID ACTS AND ALL
OTHER APPLICABLE SECURITIES LAWS UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
THIS WARRANT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED IN
ARTICLE IV HEREOF.
WARRANT TO PURCHASE SHARES OF
SERIES A PREFERRED STOCK OR COMMON STOCK OF WEBMD, INC.
Date of Issuance: September 1, 1998
THIS CERTIFIES that, for value received, Matria Healthcare, Inc., a
Delaware corporation, or registered assigns (the "Holder"), is entitled to
purchase, at any time and from time to time prior to the third (3rd) anniversary
of the Date of Issuance indicated hereinabove, subject to the other provisions
of this warrant, from WebMD, Inc., a Georgia corporation (the "Company"), (i) up
to sixty thousand (60,000) shares of Series A Preferred Stock of the Company, no
par value per share (the "Preferred Stock"), at eighteen dollars ($18.00) per
share prior to an Initial Public Offering (as defined herein) or (ii) subsequent
to an Initial Public Offering, that number of shares of Common Stock into which
the number of shares of Preferred Stock would be convertible immediately prior
to the closing of such Initial Public Offering, each subject to the adjustments
set forth in Article V hereof. This warrant is hereinafter referred to as the
"Warrant."
ARTICLE I
CERTAIN DEFINITIONS
For all purposes of this Warrant, unless the context otherwise requires,
the following terms shall have the following respective meanings:
"Act": the federal Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
"Additional Shares of Common Stock": all shares of Common Stock issued by
the Company after the date of the Initial Public Offering.
<PAGE>
"Additional Shares of Preferred Stock": all shares of Preferred Stock
issued by the Company after the Date of Issuance other than the Warrant Shares.
"Common Stock": unless otherwise indicated, the Company's authorized
"Common Stock," no par value per share, without designation as to series, as it
exists on the date hereof.
"Commission": the Securities and Exchange Commission or any other federal
agency then administering the Act.
"Company": WebMD, Inc., a Georgia corporation, located at 400 The Lenox
Building, 3399 Peachtree Road, Atlanta, Georgia, 30326, and any other
corporation assuming or required to assume the Warrant pursuant to Article V.
"Convertible Securities": evidences of indebtedness, shares of stock or
other securities that are convertible into or exchangeable for Additional Shares
of Preferred Stock.
"Date of Issuance": the issue date of this Warrant, indicated on the first
page hereof.
"Exercise Price": $18.00 per Warrant Share.
"Market Price": with respect to a share of Common Stock on any business
day following the Initial Public Offering:
(a) if such security is listed or admitted for trading on any national
securities exchange, the last sale price of such security, regular way, or
the average of the closing bid and asked prices thereof if no such sale
occurred, in each case as officially reported on the principal securities
exchange on which such security is listed, or (b) if not reported as
described in clause (a), the average of the closing bid and asked prices of
such security in the over-the-counter market as shown by the National
Association of Securities Dealers, Inc. Automated Quotation System, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Company, or (c) if not quoted
as described in clause (b), the average of the closing bid and asked prices
for such security as reported by the National Quotation Bureau Incorporated
or any similar successor organization, as reported by any member firm of
the New York Stock Exchange selected by the Company. If such security is
quoted on a national securities or central market system in lieu of a
market or quotation system described above, the closing price shall be
determined in the manner set forth in clause (a) of the preceding sentence
if actual transactions are reported and in the manner set forth in clause
(b) of the preceding sentence if bid and asked prices are reported but
actual transactions are not.
"Holder": as defined on the first page hereof.
"Initial Public Offering": as defined in the Company's Articles of
Incorporation.
2
<PAGE>
"Person": any individual, corporation, partnership, trust, unincorporated
organization and any government, and any political subdivision, instrumentality
or agency thereof.
"Preferred Stock": as defined on the first page hereof.
"Stock Unit": one share of Preferred Stock, as such stock is constituted on
the Date of Issuance and thereafter the number of shares of Preferred Stock as
shall result from the adjustments specified in Article V.
"Warrant Office": as defined in Section 3.1.
"Warrant Shares": the shares of Preferred Stock or Common Stock, as the
case may be, purchasable by the Holder upon the exercise of this Warrant.
Following the occurrence of an Initial Public Offering, all references in
this Agreement to "Preferred Stock" shall be deemed to refer to Common Stock, by
virtue of the automatic conversion of the Preferred Stock into Common Stock that
will occur pursuant to the Company's Articles of Incorporation.
ARTICLE II
EXERCISE OF WARRANT
2.1 Method of Exercise. To exercise this Warrant, the Holder shall deliver
------------------
to the Company at the Warrant Office designated pursuant to Section 3.1 (a) a
Notice of Exercise substantially in the form attached hereto as Exhibit A duly
------- -
executed by the Holder specifying the number of Warrant Shares to be purchased;
(b) payment of an amount equal to the aggregate Exercise Price for all such
Warrant Shares, which shall be made (i) in cash or by certified or bank
cashier's check payable to the order of the Company, or (ii) by delivery to the
Company of that number of shares of Preferred Stock having a value computed
based upon the then current fair value determined in good faith by the Company's
Board of Directors, equal to the then applicable Exercise Price multiplied by
the number of Warrant Shares then being purchased, and (c) this Warrant. In the
alternative, this Warrant may be exercised on a net basis, such that, without
the exchange of any funds, the Holder receives that number of Warrant Shares
subscribed to less that number of Warrant Shares having an aggregate value
computed based upon the fair value at the time of exercise equal to the
aggregate Exercise Price that would otherwise have been paid by such Holder for
the number of Warrant Shares subscribed to. The Company shall, as promptly as
practicable, and in any event within five (5) days thereafter, cause to be
issued and delivered to the Holder (or its nominee) or the transferee designated
in the Notice of Exercise a certificate or certificates representing the number
of Warrant Shares specified in the Notice of Exercise. The stock certificate or
certificates so delivered shall be in denominations of shares as may be
specified in said notice and shall be issued in the name of the Holder or such
other name as shall be designated in said notice. At the time of delivery of
the certificate or certificates, appropriate notation shall be made on the
Warrant Shares Purchase Schedule attached to this Warrant designating the number
of shares purchased, and this Warrant shall then be returned to the Holder
3
<PAGE>
if this Warrant has been exercised only in part. The Holder or transferee so
designated in the Notice of Exercise shall be deemed to have become the Holder
of record of such Warrant Shares for all purposes as of the close of business on
the date on which the Notice of Exercise is delivered to the Warrant Office,
provided that an amount equal to the aggregate Exercise Price and this Warrant
shall have also been delivered to the Company. The Company shall pay all
expenses, taxes (excluding capital gains and income taxes) and other charges
payable in connection with the preparation, issuance and delivery of stock
certificates, except that, in case stock certificates shall be registered in a
name or names other than the name of the Holder, funds sufficient to pay all
stock transfer taxes payable upon the issuance of stock certificates shall be
paid by the Holder promptly upon receipt of a written request of the Company
therefor.
2.2 Shares to be Fully Paid and Non-Assessable. All Warrant Shares issued
------------------------------------------
upon the exercise of this Warrant shall be validly issued, fully paid, non-
assessable and free from preemptive rights.
2.3 No Fractional Shares to be Issued. The Company shall not be required
---------------------------------
upon any exercise of this Warrant to issue a certificate representing any
fraction of a share of Preferred Stock.
2.4 Legend on Warrant Shares. Each certificate for Warrant Shares issued
------------------------
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Act, shall bear substantially the following legend (and any
additional legend required by any national securities exchanges upon which such
shares may, at the time of such exercise, be listed or under applicable
securities laws):
The securities represented by this certificate have not been registered
under the federal Securities Act of 1933, as amended, or the Georgia
Securities Act of 1973, as amended (the "Acts"), or the securities laws of
any state. They may not be sold, transferred, assigned, pledged,
hypothecated, encumbered, or otherwise disposed of unless, in the opinion
of counsel reasonably acceptable to the issuer, such transfer would be
pursuant to an effective registration statement under said Acts or pursuant
to an exemption from such registration.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of counsel to the Company, the securities represented thereby need
no longer be subject to the restrictions on transferability. In addition, the
provisions of Article IV shall be binding upon all subsequent holders of this
Warrant.
2.5 Acknowledgment of Continuing Obligation. The Company shall, at the
---------------------------------------
time of any exercise of this Warrant in whole or in part, upon request of the
Holder, acknowledge in writing its continuing obligation to such holder in
respect of any rights to which the Holder shall continue to be entitled after
exercise in accordance with this Warrant; provided, however, that the failure
4
<PAGE>
of the Holder to make any such request shall not affect the continuing
obligation of the Company to the Holder in respect of such rights.
ARTICLE III
WARRANT OFFICE; TRANSFER, DIVISION
OR COMBINATION OF WARRANTS
3.1 Warrant Office. The Company shall maintain an office for certain
--------------
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's location set forth in Article I hereof, and may subsequently be
such other office of the Company or of any transfer agent of the Common Stock in
the continental United States as to which written notice has previously been
given to all of the Holders of the Warrants.
3.2 Ownership of Warrant. The Company may deem and treat the Person in
--------------------
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article III.
3.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
-------------------
Office books for the registration of permitted transfers of this Warrant.
Subject to the provisions of Article IV, this Warrant and all rights hereunder
are transferable, in whole or in part, on the books at that office, upon
surrender of this Warrant at that office, together with a written assignment of
this Warrant duly executed by the Holder or his or its duly authorized agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of the transfer. Subject to Article IV, upon surrender and payment, the Company
shall execute and deliver a new Warrant in the name of the assignee, noting
thereon the number of Warrant Shares theretofore purchased under this Warrant,
and this Warrant shall promptly be canceled. A Warrant may be exercised by a
new Holder for the purchase of shares of Preferred Stock without having a new
warrant issued.
3.4 Division or Combination of Warrants. This Warrant may not be divided
-----------------------------------
or combined with any other warrant.
3.5 Expenses of Delivery of Warrants. The Company shall pay all expenses,
--------------------------------
taxes (other than transfer taxes), and other charges payable in connection with
the preparation, issuance and delivery of new Warrants hereunder.
ARTICLE IV
RESTRICTION ON TRANSFER
4.1 Restrictions on Transfer. Notwithstanding any provisions contained in
------------------------
this Warrant to the contrary, this Warrant shall not be exercisable or
transferable except upon the conditions specified in this Article IV, which
conditions are intended, among other things, to
5
<PAGE>
insure compliance with the provisions of the Act in respect of the exercise or
transfer of the Warrant.
4.2 Opinion of Counsel. In connection with any transfer of this Warrant,
------------------
the following provisions shall apply:
(a) If in the opinion of counsel acceptable to the Company, proposed
transfer of this Warrant may be effected without registration of this Warrant
under the Act, the Holder shall be entitled to transfer this Warrant in
accordance with the proposed method of disposition; provided, however, that if
the method of disposition would, in the opinion of such counsel, require that
the Company take any action or execute and file with the Commission or deliver
to the Holder or any other person any form or document in order to establish the
entitlement of the Holder to take advantage of such method of disposition, the
Company agrees, at the cost of the Holder, to take promptly any necessary action
or execute and file or deliver any necessary form or document; provided further,
that such transfer shall be subject to the provisions of Section 4.1 hereof.
Notwithstanding the foregoing, in no event shall the Company be obligated (i) to
effect a registration under the Act or any state securities law so as to permit
the proposed transfer of this Warrant, except pursuant to exercise of the rights
referenced in Article VI hereof, or (ii) to qualify to do business or to file a
general consent to service of process in any state or other jurisdiction.
(b) If in the opinion of such counsel, the proposed transfer of this
Warrant may not be effected without registration of this Warrant under the Act,
the Holder shall not be entitled to transfer this Warrant until registration is
effective.
ARTICLE V
ADJUSTMENTS
5.1 Adjustments to Number of Stock Units. The number of shares of
------------------------------------
Preferred Stock comprising a Stock Unit shall be subject to adjustment from time
to time as set forth in this Section 5.1.
(a) Stock Dividends, Subdivision and Combination. In case at any time
--------------------------------------------
or from time to time the Company shall:
(i) take a record of the holders of its Preferred Stock of any
series for the purpose of entitling them to receive a dividend payable in, or
other distribution of, Preferred Stock, or
(ii) subdivide its outstanding shares of Preferred Stock into a
larger number of shares of Preferred Stock, or
(iii) combine its outstanding shares of Preferred Stock into a
smaller number of shares of Preferred Stock;
6
<PAGE>
then the number of shares of Preferred Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Preferred Stock that a record holder of the number of shares
of Preferred Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event. The adjustments required by this subsection shall be made whenever and
as often as any specified event requiring an adjustment shall occur.
(b) Certain Other Dividends and Distributions. In case at any time
-----------------------------------------
or from time to time the Company shall take a record of the holders of its
Preferred Stock for the purpose of entitling them to receive any dividend or
other distribution of
(i) cash (other than a cash distribution made as a dividend
payable out of the net earnings or net profits of the Company realized during
the year of such distribution or the last preceding year and accumulated net
earnings or net profits of the Company from the date hereof to the time of such
distribution, computed in accordance with generally accepted accounting
principles employed by the Board of Directors of the Company for purposes of
financial reports to shareholders of the Company); or
(ii) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash);
then at least five (5) business days prior to the record date to determine
shareholders entitled to receive such dividend or distribution, the Company
shall give notice of such proposed dividend or distribution to the Holder for
the purpose of enabling the Holder to exercise the same, and thereby participate
in such dividend or distribution.
(c) Issuance of Additional Shares of Preferred Stock.
------------------------------------------------
(i) In case at any time prior to the occurrence of the Initial
Public Offering the Company shall (except as hereinafter provided) issue or sell
any Additional Shares of Preferred Stock for a consideration per share less than
the Exercise Price, then the number of shares of Preferred Stock thereafter
comprising a Stock Unit shall be adjusted to that number determined by
multiplying the number of shares of Preferred Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (i) the numerator of which
shall be the number of shares of Preferred Stock issued and outstanding plus the
number of Additional Shares of Preferred Stock deemed to be outstanding pursuant
to Subsection 5.1(d) immediately prior to the issuance of such Additional Shares
of Preferred Stock plus the number of such Additional Shares of Preferred Stock
so issued and (ii) the denominator of which shall be the number of shares of
Preferred Stock issued and outstanding plus the number of Additional Shares of
Preferred Stock deemed to be outstanding pursuant to Subsection 5.1(d)
immediately prior to the issuance of such Additional Shares of Preferred Stock
plus the number of shares of Preferred Stock that the aggregate consideration
for the total number of such Additional Shares of Preferred Stock so issued
would purchase at the Exercise Price.
(ii) In case at any time after the date of the occurrence of the
Initial Public Offering the Company shall (except as hereinafter provided) issue
or sell any Additional
7
<PAGE>
Shares of Common Stock for a consideration per share less than the Market Price,
then the number of shares of Common Stock thereafter comprising a Stock Unit
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the number of shares of Common
Stock issued and outstanding plus the number of Additional Shares of Common
Stock deemed to be outstanding pursuant to Subsection 5.1(d) immediately prior
to the issuance of such Additional Shares of Common Stock plus the number of
such Additional Shares of Common Stock so issued and (ii) the denominator of
which shall be the number of shares of Common Stock issued and outstanding plus
the number of Additional Shares of Common Stock deemed to be outstanding
pursuant to Subsection 5.1(d) immediately prior to the issuance of such
Additional Shares of Common Stock plus the number of shares of Common Stock that
the aggregate consideration for the total number of such Additional Shares of
Common Stock so issued would purchase at the Market Price.
The provisions of this Subsection 5.1(c) shall not apply to any issuance of
Additional Shares of Preferred Stock or Common Stock for which an adjustment is
provided under Subsection 5.1(a). No adjustment of the number of shares of
Preferred Stock or Common Stock comprising a Stock Unit shall be made under this
subsection upon the issuance of any Additional Shares of Preferred Stock or
Common Stock that are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion
or exchange rights in any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights or
upon the issuance of such Convertible Securities (or upon the issuance of any
warrant or other rights therefor) pursuant to Subsection 5.1(d).
(d) Issuance of Warrants, Convertible Securities or Other Rights. In
------------------------------------------------------------
case at any time or from time to time the Company shall issue or sell any
warrants or other rights to subscribe for or purchase any Additional Shares of
Preferred Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
consideration per share for which Additional Shares of Preferred Stock may at
any time thereafter be issuable pursuant to such warrants or other rights or
pursuant to the terms of such Convertible Securities shall be lower than the
Exercise Price, then the number of shares of Preferred Stock thereafter
comprising a Stock Unit shall be adjusted as provided in Subsection 5.1(c) and
the aggregate consideration for such maximum number of Additional Shares of
Preferred Stock shall be deemed to be the minimum consideration received and
receivable by the Company for the issuance of such Additional Shares of
Preferred Stock pursuant to such warrants or other rights or pursuant to the
terms of such Convertible Securities. No adjustment of the number of shares of
Preferred Stock comprising a Stock Unit shall be made under this Subsection
5.1(d) upon the issuance of any Convertible Securities that are issued pursuant
to the exercise of any warrants or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights pursuant to this Subsection 5.1(d).
(e) Superseding Adjustment of Stock Unit. If, at any time after any
------------------------------------
adjustment of the number of shares comprising a Stock Unit shall have been made
pursuant to the foregoing Subsection 5.1(d) on the basis of the issuance of
warrants or other rights or the issuance of other Convertible Securities, or
after any new adjustments of the number of shares comprising a Stock Unit shall
have been made pursuant to this Subsection 5.1(e),
8
<PAGE>
(i) such warrants or rights or the right of conversion or
exchange in such other Convertible Securities shall expire, and a portion of
such warrants or rights, or the right of conversion or exchange in respect of a
portion of such other Convertible Securities, as the case may be, shall not have
been exercised, and/or
(ii) the consideration per share, for which shares of Preferred
Stock are issuable pursuant to such warrants or rights or the terms of such
other Convertible Securities, shall be increased for any reason,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Preferred Stock that were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(x) treating the number of Additional Shares of Preferred Stock, if
any, theretofore actually issued or issuable pursuant to the previous
exercise of such warrants or rights or such right of conversion or
exchange, as having been issued on the date or dates of such exercise and
for the consideration actually received and receivable therefor, and
(y) treating any such warrants or rights or any such other
Convertible Securities that then remain outstanding as having been granted
or issued immediately after the time of such increase of the consideration
per share for which shares of Preferred Stock are issuable under such
warrants or rights or other Convertible Securities;
and, if and to the extent called for by the foregoing provisions of this Section
5.1 on the basis aforesaid, a new adjustment of the number of shares comprising
a Stock Unit shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.
(f) Other Provisions Applicable to Adjustment Under This Section. The
------------------------------------------------------------
following provisions shall be applicable to the making of adjustments of the
number of shares of Preferred Stock comprising a Stock Unit hereinbefore
provided for in this Section 5.1:
(i) Treasury Stock. The sale or other disposition of any issued
--------------
shares of Preferred Stock owned or held by or for the account of the Company
shall be deemed an issuance thereof for the purposes of this Section 5.1.
(ii) Computation of Consideration. To the extent that any
----------------------------
Additional Shares of Preferred Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional Shares of
Preferred Stock or any Convertible Securities shall be issued for a cash
consideration, the consideration received by the Company therefor shall be
deemed to be the amount of the cash received by the Company therefor, or, if
such Additional Shares of Preferred Stock or Convertible Securities are offered
by the Company for subscription, the subscription price, or, if such Additional
Shares of Preferred Stock or Convertible Securities
9
<PAGE>
are sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding any
amounts paid or receivable for accrued interest or accrued dividends (but
without deduction of any compensation, discounts or expenses paid or incurred by
the Company for and in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided, the amount
of such consideration shall be deemed to be the fair value of such consideration
at the time of such issuance as determined in good faith by the Board of
Directors of the Company (but without deduction of any compensation, discounts
or expenses paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In case any Additional
Shares of Preferred Stock or Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of Preferred Stock or
Convertible Securities shall be issued in connection with any merger in which
the Company issues any securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Preferred Stock, Convertible
Securities, warrants or other rights, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation, the
Company shall be deemed to have issued a number of Additional Shares of
Preferred Stock or Convertible Securities of the other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated,
and the consideration received for such issuance shall be equal to the fair
market value, as determined in good faith by the Board of Directors of the
Company, on the date of such transaction, of such stock or securities of the
other corporation, and if any such calculation results in adjustment of the
number of shares of Preferred Stock comprising a Stock Unit immediately prior to
such merger, conversion or sale for purposes of this Subsection 5.1(f), such
merger, conversion or sale shall be deemed to have been made after giving effect
to such adjustment. The consideration for any Additional Shares of Preferred
Stock issuable pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for issuing
such warrants or other rights, plus the additional consideration payable to the
Company upon the exercise of such warrants or other rights. The consideration
for any Additional Shares of Preferred Stock issuable pursuant to the terms of
any Convertible Securities shall be the consideration received by the Company
for issuing any warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the Company in
respect of the subscription for or purchase of such Convertible Securities, plus
the additional consideration, if any, payable to the Company upon the exercise
of the right of conversion or exchange in such Convertible Securities. In case
of the issuance at any time of any Additional Shares of Preferred Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Preferred Stock, the Company shall be deemed to have
received for such Additional Shares of Preferred Stock or Convertible Securities
a consideration equal to the amount of such dividend so paid or satisfied.
(iii) When Adjustments to be Made. The adjustments required by the
---------------------------
preceding subsections of this Section 5.1 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the number of shares of Preferred Stock comprising a Stock Unit
that would otherwise be required shall be made (except
10
<PAGE>
in the case of a subdivision or combination of shares of the Preferred Stock, as
provided for in Subsection 5.1(a)) unless and until such adjustment, either by
itself or with other adjustments not previously made, adds or subtracts at least
1/20th of a share to or from the number of shares of Preferred Stock comprising
a Stock Unit immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as aforesaid)
shall be carried forward and made as soon as such adjustment, together with
other adjustments required by this section and not previously made, would result
in a minimum adjustment. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(iv) Fractional Interests. In computing adjustments under this
--------------------
section, fractional interests in Preferred Stock shall be taken into account to
the nearest one-thousandth of a share.
(v) When Adjustment Not Required -- Abandonment of Plan for
-------------------------------------------------------
Dividend and the Like. If the Company shall take a record of the holders of its
- ---------------------
Preferred Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution to shareholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(g) Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- ---------------------
reclassify its capital stock, merge or consolidate into another corporation,
then the number of shares of stock purchasable upon exercise of this Warrant
shall be adjusted to consist of the number of shares of stock or other
securities that a record holder of the number of shares of Preferred Stock
purchasable upon exercise of this Warrant immediately prior to such event would
own or be entitled to receive immediately after such event.
(h) Adjustment of Exercise Price Upon Initial Public Offering. In
---------------------------------------------------------
the event that the offering price per share of Common Stock to the public in the
Initial Public Offering is less than $18.00 (as adjusted for any stock splits,
stock dividends or similar events occurring subsequent to the date hereof),
then, effective upon the occurrence of the Initial Public Offering, the exercise
price hereunder shall automatically be adjusted to equal the Initial Public
Offering price per share.
(i) No Adjustment. Notwithstanding the foregoing, an adjustment as
-------------
provided in this Section 5.1 (excluding any adjustment required by Section
5.1(h)) shall not be made if (a) the Company offers securities to the public
pursuant to a registration statement under the Securities Act; (b) the Company
issues securities pursuant to the acquisition by the Company of any product,
technology, know-how or another corporation by merger, purchase of all or
substantially all of the assets, or any other reorganization whereby the Company
owns over fifty percent (50%) of the voting power of such corporation; (c) the
Company issues shares of its capital stock (excluding Preferred Stock, as
contemplated by Section 5.1(a)) in connection with any stock split, stock
dividend or recapitalization by the Company; (d) the Company issues any shares
of common stock
11
<PAGE>
of the Company pursuant to options, warrants or rights granted either before or
after the Date of Issuance to purchase shares of such common stock, in favor of
employees, directors, officers or consultants of the Company or any subsidiary
thereof pursuant to a stock option plan or agreement approved by the Company's
Board of Directors; provided that such stock options thereunder, if granted
after the Date of Issuance, are granted at a conversion or exercise price that
the Company's Board of Directors determines in good faith is not less than the
fair market value of the securities into which they are exercisable as of the
date of grant; (e) the Company converts any securities into Common Stock
pursuant to the Company's Articles of Incorporation; or (f) the Company issues
up to 300,000 shares of Common Stock Series D of the Company at any time
following the Date of Issuance pursuant to options to purchase shares of such
stock in favor of officers, employees or consultants of the Company or any
subsidiary thereof pursuant to bona fide commitments made by the Company prior
to July 1, 1998.
5.2 Notice to Holder. Whenever the Company takes any action that causes
----------------
the composition of a Stock Unit to change under Sections 5.1(a) through 5.1(g),
the Company shall provide the Holder with written notice of such change and the
number of Warrant Shares for which this Warrant is or will become exercisable.
Such notice will be provided not more than ten (10) days after any such action
has occurred.
ARTICLE VI
REGISTRATION RIGHTS
Any and all shares of the Company's Common Stock issued pursuant to this
Warrant or upon conversion of Preferred Stock issued pursuant to this Warrant
shall be deemed "Registrable Securities" for purposes of Article 8 of that
certain Investment Agreement of even date herewith by and between the Company
and Matria Healthcare, Inc.
ARTICLE VII
ADDITIONAL NOTICES TO WARRANT HOLDER
In addition to any other notice required hereunder, the Company shall
provide the Holder with a copy of any notice that the Company is required to
provide those Persons holding shares of Preferred Stock on the same date such
persons receive such notice.
ARTICLE VIII
EXPIRATION
This Warrant shall expire and may not be exercised after the third (3rd)
anniversary of the Date of Issuance.
12
<PAGE>
ARTICLE IX
CERTAIN COVENANTS OF THE COMPANY
The Company has taken all action necessary to authorize the issuance of
this Warrant and the issuance of shares of Preferred Stock upon exercise hereof.
The Company covenants and agrees that it will reserve and set apart and have at
all times, free from preemptive rights, a number of shares of authorized but
unissued Preferred Stock or other securities deliverable upon the exercise of
this Warrant sufficient to enable it at any time to fulfill all its obligations
hereunder.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. This Warrant contains the entire agreement between
----------------
the Holder and the Company with respect to the purchase of the Warrant Shares
and supersedes all prior arrangements or understandings with respect thereto.
10.2 Waiver and Amendment. Any term or provision of this Warrant may be
--------------------
waived at any time by the party that is entitled to the benefits thereof, and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant must be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way affect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with any
term or condition of this Warrant. In the event this Warrant is ever divided
and held by more than one person, the "Holder" for such purposes shall mean the
holders of a majority of the Warrant Shares.
10.3 Illegality. In the event that any one or more of the provisions
----------
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
10.4 Filing of Warrant. A copy of this Warrant shall be filed in the
-----------------
records of the Company.
10.5 Notices. Any notice or other document required or permitted to be
-------
given or delivered to the Holder shall be delivered personally, or sent by
certified or registered mail, to the Holder at the last address shown on the
books of the Company maintained at the Warrant Office for the registration of,
and the registration of transfer of, the Warrant or at any more recent address
of which any Holder shall have notified the Company in writing. Any notice or
other document required or permitted to be given or delivered to the Company
shall be delivered at, or sent by certified or registered mail to, the Warrant
Office, attention: Chief Executive Officer, or
13
<PAGE>
such other address within the United States of America as shall have been
furnished by the Company to the Holder hereof.
10.6 Limitation of Liability; Not Shareholders. No provision of this
-----------------------------------------
Warrant shall be construed as conferring upon the Holder the right to vote,
consent, receive dividends or receive notice other than as herein expressly
provided in respect of meetings of shareholders for the election of directors of
the Company or any other matter whatsoever as a shareholder of the Company. No
provision hereof, in the absence of affirmative action by the Holder to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of such Holder for the purchase price
of any Warrant Shares or as a shareholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.
10.7 Loss, Destruction, Etc. of Warrant. Upon receipt of evidence
----------------------------------
satisfactory to the Company of the loss, theft, mutilation or destruction of the
Warrant, and in the case of any such loss, theft or destruction, upon delivery
of a bond of indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation, upon surrender
and cancellation of the Warrant, the Company shall make and deliver a new
warrant, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant. Any Warrant issued under the provisions of this Section 10.7 in lieu
of any Warrant alleged to be lost, destroyed or stolen, or in lieu of any
mutilated Warrant, shall constitute an original contractual obligation on the
part of the Company.
IN WITNESS WHEREOF, the company has caused this Warrant to be signed in its
name by its Chief Executive Officer and its corporate seal to be impressed
hereon.
WEBMD, INC.
[CORPORATE SEAL]
Attest:
By: /s/ Jeffrey T. Arnold
------------------------------------------
By: /s/ W. Michael Heekin Jeffrey T. Arnold, Chief Executive Officer
------------------------------
Name: W. Michael Heekin
---------------------------
Title: Chief Operating Officer and
---------------------------
Secretary
---------------------------
14
<PAGE>
WARRANT SHARES PURCHASE SCHEDULE
NO. OF SHARES PURCHASED DATE OF PURCHASE NOTATION BY COMPANY OFFICER
15
<PAGE>
EXHIBIT A
---------
TO WARRANT
NOTICE OF EXERCISE
Dated:_____________________
The undersigned hereby irrevocably elects to exercise its right to purchase
_____ shares of the [PREFERRED STOCK] [COMMON STOCK], no par value per share, of
WebMD, Inc., such right being pursuant to a Warrant dated _______________ ____,
1998, as issued to Matria Healthcare, Inc., for up to ________ shares of such
[PREFERRED STOCK] [COMMON STOCK], and (i) remits herewith the sum of $_______ in
payment for same in accordance with said warrant or (ii), in accordance with
Section 2.1 of the Warrant, elects to receive such number of shares by having
credited to the undersigned the Market Value (as such term is defined in the
Warrant) of a sufficient number of additional shares of [PREFERRED STOCK]
[COMMON STOCK] for which the Warrant could otherwise be exercised such that such
Market Value equals the Exercise Price for such shares of [PREFERRED STOCK]
[COMMON STOCK].
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name____________________________________________________________________________
(Please typewrite or print in block letters)
Address_________________________________________________________________________
Signature:_________________________
Shares Heretofore Purchased
Under Warrant:
___________________________________
16
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.22
PROCUREMENT AND TRAFFICKING AGREEMENT
Company: Endeavor Technologies Inc.
--------------------------
Address: 400 The Lenox Building
----------------------
3399 Peachtree Road NE
----------------------
Atlanta, GA 30326
-----------------
Web Site URL: www.web-md.com
--------------
This Agreement when executed by the above named company ("Company"), and
DoubleClick Inc. ("DoubleClick"), will constitute a valid and binding agreement
between Company and DoubleClick according to the specific terms and conditions
set forth below and those terms and conditions set forth in the Standard Terms
and Conditions. All terms not otherwise defined below shall be as defined in the
Standard Terms and Conditions.
I. DESCRIPTION OF SERVICES
-----------------------
A. DoubleClick hereby agrees to link Pages to the Service and through
such Service, DoubleClick shall deliver Advertisers' Advertising to
users accessing Pages. DoubleClick and Company shall mutually agree
upon the number and type of Pages to be linked to the Service. It is
understood and agreed that all unsold inventory on Company's Pages
shall be made available for delivery of Direct Advertising.
B. During the Term (as defined below), the Company shall not place, or
permit the placement or delivery of, any Advertising on the Web Site
except through DoubleClick or DoubleClick's authorized
representatives, licensees and assigns which shall be the Company's
sole and exclusive representative for the placement and delivery of
all Advertising on the Web Site. If, however, the specified
representative from National Jewish sells an advertisement within the
WebMD Site, DoubleClick shall allow the sale of that ad and will not
have any obligation to with regards to the placement of the campaign.
The revenue share for this advertisement will be allocated as follows:
***National Jewish, *** Endeavor Technologies and *** DoubleClick. At
no point during the term of this contract may the revenue secured from
such transactions exceed gross revenue of $***.
II. TERM
----
A. The term (the "Term") of this Agreement shall commence on June 15,
1998 and shall continue until such time that it is terminated by
either party on not less than
___________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
ninety (90) days prior written notice to the other party, provided,
however, that in no event may this Agreement be terminated effective
prior to the expiration of one (1) year from the commencement of the
Term.
III. COMPENSATION/PAYMENT
--------------------
A. With respect to the placement and delivery of Advertising (other than
Direct Advertising), DoubleClick shall pay Company, and Company agrees
to accept, the following percentage of the Net Revenues, which
percentage shall be based on the number of Impressions delivered per
month:
Impression Level Company's Share of Net Revenues
-------------------------------------------------------
*** ***
*** ***
*** ***
Company's share of Net Revenues for each month shall be based on the
number of Impressions delivered for that month. DoubleClick shall pay
Company within *** following the end of the month in which
Advertisers' Advertising is delivered to Pages.
B. With respect to the placement and delivery of Direct Advertising,
DoubleClick shall pay Company and Company agrees to accept, the same
percentage payable to Company pursuant to III.A. hereof of the
DoubleClick Adjusted Commissions. Company acknowledges that the
DoubleClick Commissions are contingent on Completed Actions occurring
on Advertisers' Web Sites. DoubleClick shall pay this compensation to
Company within *** following the end of the month in which Completed
Actions occur.
C. Company shall be solely responsible for any costs or expenses it
incurs in connection with the Service or performance of its
obligations under this Agreement including, without limitation,
expenses associated with any HTML programming and linking Pages to the
Service.
D. Notwithstanding anything to the contrary contained herein, in the
event Company terminates this Agreement in accordance with Section II
above and DoubleClick, prior to said termination, has entered into
agreements with Advertisers ("Advertiser Contracts") for the delivery
of Advertising to the Pages, the duration of which Advertiser
Contracts extend beyond the date on which this Agreement has been
terminated by Company, and Company or a third party (other than
DoubleClick) continues to deliver said Advertising after the
termination of this Agreement, then notwithstanding the fact that
DoubleClick does not deliver said Advertising after the termination of
this
________________________
** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
2
<PAGE>
Agreement, DoubleClick shall be entitled to receive ***percent of the
revenues derived from the continued delivery of said Advertising by
Company or such third party as consideration for DoubleClick's
solicitation and procurement of said Advertiser.
IV. COMPANY OBLIGATIONS AND RIGHTS
------------------------------
A. Company agrees to effect all necessary HTML programming with respect
to the Web Site and Pages in accordance with the HTML modifications
(the "HTML Modifications") designated by DoubleClick so as to enable
DoubleClick to perform its obligations under this Agreement.
B. Spots must be within the first screen of a Page and otherwise conform
to the HTML Modifications unless otherwise agreed upon by Company and
DoubleClick.
C. Promptly after the execution of this Agreement, Company agrees to (i)
place a link on the Web Site's home page to DoubleClick's web site for
potential advertisers to learn how they can place Advertising on the
Web Site; (ii) include text on the Pages beneath each Spot saying
"click here"; (iii) include frames, I-frames or layers on all Pages to
permit delivery of enhanced creative; (iv) allow for double Spots on a
majority of the Pages, as mutually agreed between the parties, unless
frames are used for delivery of enhanced creative; and (v) include a
120 x 60 button on the Web Site's home page and/or on another heavily
trafficked Page on the Web Site for the sale of Advertising and/or
collection of user demographic profiles.
D. At such time, if ever, that DoubleClick is able to sell sponsorship
Advertising to an Advertiser for a designated area on a Page which
DoubleClick has determined is suitable and appropriate for sponsorship
Advertising, Company shall affect all necessary HTML and technical
modifications necessary to accommodate said sponsorship Advertising.
E. Company will maintain its Pages and Web Site at a quality standard
that is no less than the standard that exists as of the date of this
Agreement and in a manner in keeping with the quality of other web
sites in the Service.
F. Company agrees that DoubleClick has no responsibility to review the
contents of Pages or the Web Site.
G. Company agrees that it shall not delink or remove more than five
percent (5%) of the Pages from the Service during any consecutive
thirty (30) day period without DoubleClick's prior written consent.
_________________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
3
<PAGE>
H. Company shall have the right to ban and remove Advertising from the
Web Site, and to establish domain restrictions to prevent delivery of
Advertising linked to certain domains, by accessing the Manage Site
Application (located at www.doubleclick.net).
V. DOUBLECLICK OBLIGATIONS AND RIGHTS
----------------------------------
A. DoubleClick shall have the right to refuse to include in the Service,
and to require Company to remove from the Service, any Pages
(including its contents) that DoubleClick determines do not meet the
standards of the Service or which do not comply with the HTML
Modifications, as DoubleClick deems reasonable and necessary in its
sole good faith discretion, or in the event of any material change in
the nature of the Web Site or the Page from that set forth in
Company's application.
B. DoubleClick shall determine in its sole discretion, which Advertisers
shall have access to the Service.
C. Company acknowledges and agrees that promotion of the Service is
critical to enhance usage by Advertisers and in connection therewith
Company agrees that (i) DoubleClick shall have the right to use
Company's name and Pages in advertising and promoting the Service in
any media now or hereafter known and (ii) Company shall, upon
DoubleClick reasonable request, supply DoubleClick with a reasonable
amount of Company's promotional materials so as to facilitate
DoubleClick's sales efforts to prospective Advertisers.
D. DoubleClick shall have the right to use for DoubleClick's own use or
for use in connection with potential Advertisers on the Service,
information concerning Pages, Impressions and users accessing Pages
obtained through the Service, provided DoubleClick does not reproduce
any Pages without Company's prior consent and DoubleClick shall not
disclose to any third party any such current information specifically
pertaining to such users.
E. DoubleClick will make site reports available to Company through
DoubleClick's web site (www.doubleclick.net) listing the number of
Impressions and click-over rates by Page.
F. DoubleClick agrees to actively promote the Web Site to the advertising
community through DoubleClick's standard marketing materials and press
releases and in a manner that is substantially similar to the manner
in which DoubleClick promotes comparable web sites that are part of
the Service.
G. It is understood and agreed that DoubleClick shall determine the rate
card (and any applicable discount) charged to said Advertisers for
delivery of Advertising. It is further understood and agreed that
DoubleClick shall have the right, in its sole discretion, to provide
Advertisers with bonus Impressions free of charge.
4
<PAGE>
DOUBLECLICK INC. COMPANY
By: /s/ Jeff Epstein By: /s/ Jeffrey T. Arnold
--------------------- -------------------------
(Signature) (Signature)
Jeff Epstein Jeffrey T. Arnold
--------------------- -------------------------
(Printed/Typed Name) (Print/Typed Name)
CFO CEO
--------------------- -------------------------
(Official Title) (Official Title)
Dated: 6/16/98
---------------------
5
<PAGE>
STANDARD TERMS AND CONDITIONS
-----------------------------
1. No Assignment. Neither party to this Agreement shall sell,
-------------
transfer or assign this Agreement or the rights or obligations hereunder, other
than to a parent or wholly-owned subsidiary, without the prior written consent
of the other party. Notwithstanding the foregoing, either party shall have the
right to transfer or assign this Agreement to a third party successor-in-
interest, which for the purposes of this Section shall mean any third party
which acquires all or substantially all of the assets of either party, or more
than 75% of the outstanding stock of such party, whether by sale, consolidation,
merger or otherwise. Any act in derogation of the foregoing shall be null and
void.
2. Proprietary Rights. Company understands and agrees that Company
------------------
shall not have, nor will it claim, any right, title or interest in and to any
Advertising (other than its own Advertising), the Service or any elements
thereof (including, without limitation, the grant of a license in or to the
Service or any software, source codes, modifications, updates and enhancements
thereof or any other aspect of the Service), the name "DoubleClick" or any
derivatives thereof, or any other trademarks and logos which are owned or
controlled by DoubleClick and made available to Company through the Service or
otherwise.
3. Representation and Indenmity. Company warrants and represents at
----------------------------
all times that Company (i) owns the Web Site, (ii) has the right and full power
and authority to enter into this Agreement, to grant the rights herein granted
and fully to perform its obligations hereunder, (iii) owns and/or has the right
to use all materials contained on the Web Site or Pages, including, without
limitation, all copyrights, trademarks and other proprietary rights in and to
such materials, and (iv) has secured the requisite permission to use any
person's name, voice, likeness and performance as embodied in such materials, or
any other element contained in said material. In furtherance of the foregoing,
Company agrees to indemnify and hold DoubleClick and the Advertisers harmless
from and against any and all claims, actions, losses, damages, liability, costs
and expenses (including reasonable attorneys' fees) arising out of or in
connection with (i) the breach of any representation, warranty or agreement made
by Company hereunder and/or (ii) the Web Site or Pages, including, without
limitation, claims for infringement of copyright or other intellectual property
rights and violation of rights of privacy or publicity. DoubleClick shall
promptly notify Company of all claims and proceedings related thereto of which
DoubleClick becomes aware. DoubleClick warrants and represents at all times that
DoubleClick owns the Service and that such Service will not infringe upon or
conflict with the copyright held by any third party. In furtherance of the
foregoing, DoubleClick shall indemnify, defend and hold Company harmless from
and against any and all claims, actions, losses, damages, liabilities, costs and
expenses (including reasonable attorneys' fees) resulting from or arising out of
or in connection with any breach of the foregoing representations and
warranties. Company shall promptly notify DoubleClick of all claims and
proceedings related thereto of which Company becomes aware.
4. No Warranties/Liabilities. EXCEPT AS EXPRESSLY PROVIDED ABOVE,
-------------------------
NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OF
6
<PAGE>
MERCHANTABILITY OR FITNESS OF THE SERVICE OR THE WEB SITE FOR A PARTICULAR
PURPOSE INCLUDING, WITHOUT LIMITATION, THE TYPE OF ADVERTISING OR AMOUNT OF
ADVERTISING WHICH WILL BE DELIVERED TO PAGES THROUGH THE SERVICE. DOUBLECLICK
SHALL NOT BE LIABLE FOR ANY ADVERTISERS WHOSE ADVERTISING APPEARS ON THE
SERVICE, NOR THE CONTENTS OF ANY ADVERTISING, NOR SHALL DOUBLECLICK BE LIABLE
FOR ANY LOSS, COST, DAMAGE OR EXPENSE (INCLUDING COUNSEL FEES) INCURRED BY
COMPANY IN CONNECTION WITH COMPANY'S PARTICIPATION IN THE SERVICE. NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY FOR ANY TECHNICAL MALFUNCTION, COMPUTER ERROR
OR LOSS OF DATA OR OTHER INJURY, DAMAGE OR DISRUPTION TO COMPANY'S PAGES OR WEB
SITE OR THE SERVICE. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
ARISING OUT OF OR IN RELATION TO THIS AGREEMENT.
5. Confidentiality. Any information relating to or disclosed in the
---------------
course of this Agreement by either party (the "Disclosing Party") to the other
party (the "Receiving Party"), which is or should be reasonably understood to be
confidential or proprietary to the Disclosing Party, including but not limited
to, the material terms of this Agreement, information about the Service and
technical processes and formulas, source code, product designs, sales, cost and
other unpublished financial information, product and business plans,
projections, and marketing data shall be deemed "Confidential Information" and
shall not be used, disclosed or reproduced by the Receiving Party without the
Disclosing Party's prior written consent. "Confidential Information" shall not
include information (a) already lawfully known to or independently developed by
the Receiving Party, (b) disclosed in published materials, (c) generally known
to the public, (d) lawfully obtained from any third party, or (e) required to be
disclosed by law.
6. Breach. Either party shall have the right to immediately
------
terminate this Agreement in the event the other party commits a material breach
of this Agreement and such breach is not cured by the breaching party within
thirty (30) days of its receipt of notice of such breach from the non breaching
party.
7. Miscellaneous. Notwithstanding any provision hereof, for the
-------------
purpose of this Agreement each party shall be and act as an independent
contractor and not as an employee, partner, joint venturer, or agent of the
other and shall not bind nor attempt to bind the other to any contract.
This Agreement, including the Standard Terms and Conditions, represents the
entire understanding between DoubleClick and Company regarding DoubleClick's
services and supersedes all prior agreements. No waiver, modification or
addition to this Agreement shall be valid unless in writing and signed by the
parties to this Agreement. Notwithstanding the foregoing, DoubleClick shall have
the right to modify or make additions to the placement algorithm governing
Advertising delivery and the HTML Modifications, from time to time upon
reasonable prior notice to Company.
7
<PAGE>
If any provision of this Agreement shall be adjudicated by any court of
competent jurisdiction to be unenforceable or invalid, that provision shall be
limited or eliminated to the minimum extent necessary so that this Agreement
shall otherwise remain in full force and effect and the other provisions shall
be unaffected.
8. Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the substantive laws of the State of New York and Company
agrees that jurisdiction and venue of all matters relating to this Agreement
shall be vested exclusively in the federal, state or local courts within the
State of New York.
9. Definitions. "Advertiser" is defined as a company, entity or
-----------
individual which provides Advertising to DoubleClick for distribution through
the Service. "Advertiser's Web Site" is defined as the web site linked to Direct
Advertising and where a Completed Action occurs. "Advertising" or
"Advertisement" is defined as third party materials including "banners", "pop-up
windows", "buttons", "roadblocks", "tickers", "intermercials", "incentives" and
any other forms of advertisements and their contents, including sponsorships of
any type or form. "Completed Action" is defined as users' activities, as
determined by DoubleClick in its sole discretion, after clicking through on
Direct Advertising, which actions may include, but not be limited to users (i)
completing a form or survey; (ii) making a purchase; (iii) downloading
materials; or (iv) performing a click or multiple clicks within Advertiser's Web
Site. *** "Direct Advertising" or a "Direct Advertisement" is defined as an
advertisement and its contents on which users can click-through to an
Advertiser's Web Site to perform a Completed Action. "DoubleClick Commissions"
is defined as monies payable to DoubleClick from an Advertiser as a result of a
Completed Action. "DoubleClick Adjusted Commissions" is defined as the
DoubleClick Commission less (i) a debt allowance of one percent (1 %) and (ii)
broker and agent fees payable by DoubleClick with respect to the Advertiser.
"Impression" is defined as occurring each time Advertising appears on a Page
resulting from a user accessing or visiting such Page. "Net Revenues" is
defined as the gross billings earned from Advertisers by DoubleClick less (i)
rate card and volume discounts and agency commissions, and (ii) a bad debt
allowance of 1 % of said gross billings. "Page" is defined as a page in the Web
Site designated by Company to be linked to the Service and is accepted and
approved by DoubleClick. "Paid Advertising" or "Paid Advertisement" is defined
as any Advertising which is paid for by an Advertiser. "Service" is defined as
the DoubleClick service that delivers Advertising to any Page(s) of the Web Site
in the following order and manner: For users which match the criteria selected
by an Advertiser from information currently available to DoubleClick concerning
users, a Paid Advertisement from such Advertiser will appear. If no match occurs
or a Paid Advertisement is unavailable, a Direct Advertisement will appear,
pursuant to the terms of this Agreement. If no match occurs or a Direct
Advertisement is unavailable, Advertising promoting the Service and Advertising
_________________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
8
<PAGE>
promoting charitable causes and non-profit organizations (e.g. public service
announcements) may appear on Pages. "Spot" is defined as the specific place on a
Page where Advertising may appear through the Service. "Web Site" is defined as
the Company's web site referred to above.
9
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.23
STRATEGIC ALLIANCE AGREEMENT
----------------------------
This Strategic Alliance Agreement (the "Agreement") is entered into this
15th day of June, 1998, by and between ENDEAVOR TECHNOLOGIES, INC., a Georgia
corporation ("Endeavor"), and ENVOY CORPORATION, a Tennessee corporation (the
"Company").
WHEREAS, Endeavor is engaged in, among other things, the business of
promoting, selling and providing under its "WebMD/SM/" brand name certain
Internet-based information and communications services ("WebMD");
WHEREAS, the Company is engaged, directly and through its affiliates, in
the business of promoting, selling and providing healthcare-related services
(the "Company Services"); and
WHEREAS, the parties to this Agreement desire to enter into a strategic
alliance pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. MARKETING AND PROMOTION OF WebMD. Endeavor grants the Company a
--------------------------------
nonexclusive, nontransferrable, nonassignable and limited right to market WebMD
solely as set forth in this Agreement and pursuant to the following obligations
and goals:
(a) Endeavor's Obligations.
----------------------
(i) Consultation. Endeavor will consult with and advise
the Company regarding strategies for marketing and selling WebMD,
both directly and through various third party channels, and will,
at the Company's request and at Endeavor's expense, hold up to
five seminars in Atlanta, Georgia or other mutually agreeable
locations, for the Company's sales personnel regarding the
features, uses and pricing of WebMD.
(ii) Resources. At no cost to the Company, Endeavor will
make marketing materials available to assist the Company in
marketing WebMD.
(iii) Fulfillment. Endeavor agrees to allow WebMD
subscribers who are enrolled by Endeavor through the Company's
marketing efforts (the "Subscribers") to subscribe to WebMD at
the prices set forth on Exhibit A hereto.
(iv) Endeavor agrees to use ENVOY's EDI Services
exclusively during the term of the Agreement as an integrated
product with WebMD. No competitive services will be permitted
unless otherwise agreed to by ENVOY. ENVOY and WebMD will
mutually agree to the form and contract of End User's Agreements
for the EDI Services with WebMD. The exclusive integration and
branding of the ENVOY EDI Services in WebMD shall be subject to
the following conditions. Should ENVOY fail to be successful in
obtaining the first
<PAGE>
milestone (*** per Subscriber Target December 31, 1998 - Exhibit
B), Endeavor shall have the right to give the Company written
notice within 30 days that it deems ENVOY behind schedule and
that Endeavor is not satisfied with results to date. In that
event, ENVOY shall have a cure period of 180 days to not only
achieve the first milestone but to bring current the pro rata
second milestone (an additional *** units by that date). Should
ENVOY fail to cure, at Endeavor's option, the WebMD browser and
site may be additionally branded and integrated with other EDI
services. Should Endeavor choose to allow other EDI services
branded and integrated with its browser and site, it will use its
best efforts to require such services to use ENVOY as the back
end switch.
(b) Company Obligations.
-------------------
(i) Channels and Strategies. The Company agrees to use
commercially reasonable efforts to market WebMD and to enroll
subscribers to WebMD by employing the following marketing
strategies:
(A) Direct Sales. Use the Company's direct and indirect
sales personnel who are currently marketing the Company
Services to market WebMD and enroll subscribers to WebMD
and, in connection therewith, to cause the Company's direct
and indirect sales personnel to be educated on the features,
uses and pricing of WebMD.
(B) Web Site. Promote WebMD on all Web sites maintained
by the Company.
(C) Direct Mail and Telemarketing. At the Company's
option and with the consent of Endeavor, promote WebMD using
direct mail and/or telemarketing.
(D) Partner Programs. When and if commercially
reasonable, market WebMD to its strategic partners and
encourage such strategic partners to market WebMD through
such strategic partners' direct and indirect sales
personnel.
(ii) Goals. The Company agrees to use commercially
reasonable efforts to enroll the number of new subscribers to
WebMD that are specified on Exhibit B hereto, within the
respective time periods set forth on Exhibit B, it being
understood and agreed that the targets set forth on Exhibit B
merely constitute a good faith estimate by the Company of the
number of WebMD subscribers that it expects to enroll during the
specified time periods and that the
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
-2-
<PAGE>
failure to meet the targets set forth on Exhibit B shall not by
itself constitute a breach of this Agreement by the Company.
2. PAYMENT TERMS. Endeavor shall remit to the Company a one-time
-------------
incentive commission per new paid Subscriber as indicated on Exhibit C hereto
within 30 days of Endeavor's receipt of the initial monthly fee from such
Subscriber. Fees pursuant to Section 1(a)(iii) hereof shall be payable by the
Subscriber within 30 days following the end of each calendar month in which such
fees accrue.
3. WARRANTIES AND LIMITATION OF LIABILITY.
--------------------------------------
(a) THE PARTIES MAKE NO EXPRESS OR IMPLIED WARRANTIES TO EACH
OTHER, SUBSCRIBERS OR ANY THIRD PARTY WITH RESPECT TO WebMD OR ANY UPDATES,
REVISIONS OR ADDITIONS THERETO, OR ANY COPIES THEREOF, OR OTHERWISE
REGARDING THIS AGREEMENT, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY, THE
IMPLIED WARRANTY AGAINST INFRINGEMENT AND THE IMPLIED WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT THE OTHER PARTY
SHALL HAVE NO LIABILITY TO THE PARTY OR ANY THIRD PARTY IN WARRANTY,
CONTRACT, NEGLIGENCE, STRICT LIABILITY, TORT OR OTHERWISE REGARDING ANY
DESIGN, DEVELOPMENT, PRODUCTION, PERFORMANCE, COMPATIBILITY, USE OF OR
INABILITY TO USE WebMD OR ANY UPDATES, REVISIONS OR ADDITIONS THERETO, OR
ANY COPIES THEREOF, OR OTHERWISE REGARDING THIS AGREEMENT.
(c) IN NO EVENT WILL EITHER PARTY'S LIABILITY FOR ANY DAMAGES TO
THE OTHER PARTY OR ANY THIRD PARTY EVER EXCEED THE AMOUNT OF COMMISSIONS OR
OTHER FEES PAID BY ENDEAVOR TO THE COMPANY HEREUNDER, REGARDLESS OF THE
FORM OF ACTION, WHETHER IN CONTRACT, NEGLIGENCE, STRICT LIABILITY, TORT,
PRODUCTS LIABILITY OR OTHERWISE.
(d) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY BE LIABLE, DIRECTLY OR INDIRECTLY, FOR SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS OR LOSS OF
GOODWILL, REGARDLESS OF CAUSE OF ACTION, ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE PERFORMANCE THEREOF, EVEN IF THE PARTY WAS AWARE OF AND
WAS NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
-3-
<PAGE>
(e) The provisions of this Section 3 shall survive the
termination or expiration of this Agreement.
4. ADVERTISING, TRADEMARKS AND COPYRIGHTED MATERIALS.
-------------------------------------------------
(a) Endeavor hereby grants the Company a revocable license to
use any Endeavor service mark, trademark, trade name and logo associated
with WebMD (the "Endeavor Marks") solely in the advertisement and promotion
of WebMD during the term of this Agreement. The Company shall not use any
mark, name or logo to identify WebMD other than the Endeavor Marks without
Endeavor's prior written consent. The Company acknowledges that the
Endeavor Marks are valid service marks, trademarks, trade names and logos
and the sole property of Endeavor, and the Company shall not disparage or
challenge the validity of the Endeavor Marks during the term of this
Agreement. The Company shall promptly notify Endeavor of any actual or
alleged infringements of Endeavor Marks of which the Company becomes aware
during the term. Nothing contained herein shall be construed to authorize
the Company: (i) to use any Endeavor Marks as a mark, name or logo or as
part of the mark, name or logo of any firm, partnership or corporation;
(ii) to apply any Endeavor Mark to any goods or to use any Endeavor Mark in
connection with any services except as set forth in this Agreement; or
(iii) at any time after the termination of this Agreement, to apply any
Endeavor Mark to goods or to otherwise use any Endeavor Mark in any manner
whatsoever.
(b) The Company hereby grants Endeavor a revocable license to
use any of the Company's service marks, trademarks, trade names and logos
(the "Company Marks") solely in the advertisement and promotion of WebMD
during the term of this Agreement as set forth in this Section 4(b).
Endeavor may use the Company Marks, mention the Company's name and mention
and/or describe the strategic relationship between the Company and Endeavor
in print and online advertisements, marketing materials, registration
statements and other reports that are filed with the Securities and
Exchange Commission (pursuant to which Endeavor may also file this
Agreement as an exhibit) and other information; provided, however, that the
-------- -------
Company shall be given five days prior written notice of Endeavor's
intention to use the Company Marks, and the Company shall not have
reasonably objected to Endeavor's use of the Company Marks prior to the
expiration of such five-day period. Endeavor acknowledges that the Company
Marks are valid service marks, trademarks, trade names and logos of the
Company and the sole property of the Company, and Endeavor shall not
disparage or challenge the validity of the Company Marks during the term of
this Agreement. Endeavor shall promptly notify the Company of any actual or
alleged infringements of the Company Marks of which Endeavor becomes aware
during the term of this Agreement.
-4-
<PAGE>
5. CONFIDENTIALITY.
---------------
(a) For purposes of this Section 5, the following terms shall
have the meanings as specified below:
(i) "Trade Secrets" means information which: (A) derives
economic value, actual or potential, from not being generally known
and not being ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (B) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
(ii) "Confidential Information" means information, other than
Trade Secrets, that is of value to its owner and is treated as
confidential.
(iii) "Proprietary Information" means Trade Secrets and
Confidential Information.
(b) Each party ("Receiving Party") agrees to hold the
Proprietary Information of the other party ("Disclosing Party") in
strictest confidence and not to, directly or indirectly, copy, reproduce,
distribute, duplicate, reveal, report, publish, disclose, cause to be
disclosed, or otherwise transfer the Proprietary Information of the
Disclosing Party to any third party, or utilize the Proprietary Information
of the Disclosing Party for any purpose whatsoever other than as
specifically authorized by this Agreement. With regard to the Trade
Secrets, this obligation shall continue for so long as such information
constitutes a trade secret under applicable law. With regard to the
Confidential Information, this obligation shall continue for the term of
this Agreement and for a period of five years thereafter. The Receiving
Party acknowledges and agrees that the Proprietary Information of the
Disclosing Party is and shall at all times remain the sole and exclusive
property of the Disclosing Party and in the event of termination or
expiration of this Agreement for any reason, the Receiving Party shall
return immediately to the Disclosing Party all Proprietary Information of
the Disclosing Party and any copies thereof in its possession or under its
control. Upon the return of such Proprietary Information, the Receiving
Party shall provide the Disclosing Party with a signed written statement
certifying that it has returned all Proprietary Information of the
Disclosing Party and any copies thereof to the Disclosing Party.
(c) Without limiting the general obligations specified in
subparagraph (b) above, the Receiving Party agrees to implement the
following security steps in order to protect the confidentiality and
security of the Proprietary Information of the Disclosing Party:
(i) Implement internal procedures to limit, control and
supervise the use of the Proprietary Information of the Disclosing
Party.
-5-
<PAGE>
(ii) Make the Proprietary Information of the Disclosing Party
available only to full-time employees of the Receiving Party who have
executed written agreements requiring them to recognize the
proprietary and confidential nature of the Proprietary Information of
the Disclosing Party and to comply with the nondisclosure obligations
set forth herein.
(iii) Notify the Disclosing Party in writing of any suspected or
known breach of the obligations and/or restrictions set forth in this
Section 5.
(iv) Use those security procedures it uses for its own
proprietary information which it protects against unauthorized
disclosure, appropriation or use.
(d) The obligations imposed on a Recipient Party with respect
to Confidential Information shall not apply to Confidential Information
disclosed to it hereunder which (a) the Recipient Party can demonstrate is
at the time of disclosure already known to the Recipient Party, (b) is or
becomes generally known to the public or is otherwise deemed to be in the
public domain through no wrongful act of the Recipient Party, (c) is
received from a third party which the Recipient Party reasonably believes
has the legal right to so furnish such Confidential Information, or (d) the
Recipient Party can demonstrate is independently developed by or for the
Recipient Party without use of Confidential Information.
6. NOTICES. All notices, consents, requests, instructions, approvals, and
-------
other communications made, required or permitted hereunder (each herein, a
"Notice") shall be given in writing and delivered to the receiving party to its
respective address set forth below (i) by personal delivery to a responsible
officer of such party, (ii) by certified or registered mail (return receipt
requested), (iii) by a nationally recognized courier service or (iv) by
facsimile transmission (such to be confirmed by mail). The effective date of
such Notice shall be deemed to be the date upon which any such Notice is
personally delivered or, if it is given by mail, courier service or facsimile
transmission, the date upon which it is received by the addressee. Any party
hereto may change its address set forth below by written notice to the other
party hereto in accordance with the terms of this Section 6.
If to Endeavor:
Endeavor Technologies, Inc.
3399 Peachtree Road NE
400 The Lenox Building
Atlanta, GA 30326
Attn: Mr. Jeffrey T. Arnold
Facsimile: (404) 479-7651
-6-
<PAGE>
With a copy to (which shall not constitute notice):
Nelson Mullins Riley & Scarborough, LLP
First Union Plaza, Suite 1400
999 Peachtree Street
Atlanta, GA 30309
Attn: Glenn W. Sturm, Esq.
Facsimile: (404) 817-6050
If to the Company:
ENVOY Corporation
Two Lakeview Place
15 Century Boulevard, Suite 600
Nashville, TN 37214
Attn: Mr. Jim D. Kever
Facsimile: (615) 231-4965
With a copy to (which shall not constitute notice):
ENVOY Corporation
Two Lakeview Place
15 Century Boulevard, Suite 600
Nashville, TN 37214
Attn: Gregory T. Stevens, Esq.
Facsimile: (615) 231-4965
7. REPRESENTATIONS AND WARRANTIES. Each party represents and warrants that
------------------------------
it is under no obligation or restriction which would prohibit it from entering
or performing this Agreement, or cause it to be in breach of this Agreement.
Each party to this Agreement represents and warrants to the other party that
this Agreement, when signed on behalf of it, constitutes the legal, valid and
binding obligation of such party enforceable in accordance with its terms.
8. REPORTS. Each party shall provide the other party with such reports as
-------
reasonably requested in order to facilitate each party's obligations under this
Agreement.
9. TERM AND TERMINATION.
--------------------
(a) Term; Renewal Term. This Agreement shall take effect on the
------------------
date first set forth above and shall continue until the fifth anniversary
thereof. Thereafter, this Agreement shall automatically renew for
successive one-year periods (each, a
-7-
<PAGE>
"Renewal Term") unless either party gives the other party written notice of
termination at least 90 days in advance of the beginning of a Renewal Term.
(b) Termination for Breach. Upon a material breach of any
----------------------
provision of this Agreement, the non-breaching party shall give notice of
such breach to the breaching party. The breaching party shall have 60 days
from the receipt of said notice to cure the breach described in the notice.
If the breach is not cured within said 60-day period, the non-breaching
party shall have the right, thereafter, to terminate this Agreement by
giving written notice thereof to the breaching party.
(c) Termination for Insolvency. Upon notice, either party may
--------------------------
terminate this Agreement with immediate effect: (i) upon the institution
by the other party of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by the other party to institution of bankruptcy
or insolvency proceedings against it or the filing by the other party of a
petition or answer or consent seeking reorganization or release under the
Federal Bankruptcy Act, or any other applicable Federal or state law, or
the consent by the other party to the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee, or other similar
official of the other party or of any substantial part of its property, or
the making by the other party of an assignment for the benefit of
creditors; (ii) if, within 60 days after the commencement of an action
against the other party seeking any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar relief under any present or future law
or regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the
other party stayed, or if the stay of any such order or proceeding shall
thereafter be set aside; or if, within 60 days after the appointment
without the consent or acquiescence of the other party of any trustee
receiver or liquidator or similar official of the other party, or of all or
any substantial part of the property of the other party, such appointment
shall not have been vacated.
(d) Effect of Termination. Termination or expiration of this
---------------------
Agreement shall not relieve the parties of any liability which accrued
hereunder prior to the effective date of such termination nor preclude
either party from pursuing all rights and remedies it may have hereunder or
at law or in equity with respect to any breach of this Agreement.
10. ASSIGNMENTS. This Agreement shall be binding upon and inure solely to
-----------
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party hereto.
-8-
<PAGE>
11. GEORGIA LAW. This Agreement shall be governed by and construed in
-----------
accordance with the laws of the State of Georgia applicable to agreements
entirely made and performed within the State.
12. INDEPENDENT PRINCIPALS. Endeavor and the Company are independent
----------------------
principals in all relationships and actions under and contemplated by this
Agreement. This Agreement shall not be construed to create any employment,
partnership, joint venture or agency relationship between the parties or to
authorize the Company to enter into any commitment or agreement binding on
Endeavor. The Company shall not make any warranties, guarantees or any other
commitment on behalf of Endeavor.
13. MISCELLANEOUS.
-------------
(a) No party shall be liable for a delay in the performance of
its obligations and responsibilities under this Agreement due to causes
beyond its reasonable control, including, but not limited to, prohibitions
or requirements of applicable laws, failures or delays in transportation or
communication, failure or substitutions of equipment, labor disputes,
accidents, shortages of labor, fuel, raw materials or equipment or
technical failures, provided that the delayed party has taken reasonable
measures to notify the other, in writing, of the delay. The time for
completion of any obligation to which this provision applies shall be
extended for a period equivalent to the delay.
(b) No failure or delay (in whole or in part) on the part of any
party to exercise any right or remedy shall operate as a waiver thereof,
nor affect any other right or remedy. All rights and remedies hereunder
are cumulative and are not exclusive of any other rights or remedies
provided hereunder or by law.
(c) If any provision contained in this Agreement is or becomes
invalid, illegal, or unenforceable in whole or in part, such invalidity,
legality, or unenforceability shall not affect the remaining provisions and
portions of this Agreement.
(d) The headings in this Agreement are for convenience only and
shall not affect the construction or interpretation of this Agreement.
(e) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
or contemporaneous oral or written understandings or agreements among the
parties which relate to the subject matter hereof. No modification or
amendment of this Agreement or any of its provisions shall be binding upon
any party unless made in writing and duly executed by authorized
representatives of the parties; provided, however, that Endeavor may, in
-------- -------
its sole discretion, amend Exhibit A and/or Exhibit C hereto upon 180 days
prior notice to the Company; provided further that Endeavor may not
increase the prices
-9-
<PAGE>
specified in Exhibit A during the initial term of the subscription
agreements which are in effect on the effective date of the price increase;
and provided further that if Endeavor amends Exhibit A or Exhibit C, the
Company may terminate this Agreement within 30 days after receiving written
notice of such amendment.
(f) This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
together shall constitute one instrument notwithstanding that all parties
are not signatories to the same counterparts.
-10-
<PAGE>
IN WITNESS WHEREOF, Endeavor and the Company, intending to be legally bound
by the terms of this Agreement, have caused this Agreement to be executed by
their duly authorized representatives.
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
------------------------------------------
Name: W. Michael Heekin
----------------------------------------
Title: Chief Operating Officer
---------------------------------------
ENVOY CORPORATION
By: /s/ Gregory T. Stevens
------------------------------------------
Name: Gregory T. Stevens
----------------------------------------
Title: Vice President and General Counsel
---------------------------------------
-11-
<PAGE>
EXHIBIT A
WEBMD PRICING SCHEDULE
Endeavor will provide the following WebMD service offerings:
1. Promotional Package - $***/month/physician office:
a. Online EDI Services - provided by ENVOY Corporation for
electronic eligibility verifications and referrals.
b. Subscription to WebMD.
c. Virtual Receptionist - integrated messaging platform which is
fully accessible via telephone or Internet, featuring 800-access
voice mail, text-to-speech e-mail, fax on demand, conference
calling, calling card and contact manager.
d. Personal Physician Internet home page supplied in conjunction
with the Virtual Receptionist service offering.
e. Network Computer Hardware Package - including terminal, monitor
and printer.
f. Unlimited Local Dial-up Internet Access - provided via an ISP
facilitated by Endeavor.
The Promotional Package requires a three-year enrollment commitment by
Subscriber and is not terminable. In addition, only one Promotional Package may
be placed per physician office site.
2. Basic Package - $***/month/Subscriber:
a. Online EDI Services.
b. Subscription to WebMD.
c. Virtual Receptionist.
d. Customized Physician Internet Home Page - supplied in conjunction
with the templated Web site service offering.
e. Patient Advice Lines library - accessible via physician Internet
home page.
The Basic Package requires a one-year enrollment commitment by Subscriber
and is terminable upon 90 days prior written notice to the Company.
3. Plus Package - $***/month/Subscriber:
a. Online EDI Services.
b. Subscription to WebMD.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
c. Virtual Receptionist.
d. Customized Physician Internet Home Page.
e. Network Computer Hardware Package.
f. Unlimited Local Dial-up Internet Access.
g. Patient Advice Lines Library.
4. Premium Package - $***/month/Subscriber:
a. Online EDI Services.
b. Subscription to WebMD.
c. Virtual Receptionist.
d. Customized Physician Internet Home Page.
e. Network Computer Hardware Package.
f. Unlimited Local Dial-up Internet Access.
g. Patient Advice Lines Library.
h. Endeavor OnCall physician-only answering service.
The Plus and Premium Packages require a three-year enrollment
commitment by Subscriber, terminable upon 90 days written notice, with a
cancellation charge equal to $*** per month times the number of months remaining
in the original three-year contract. A one-time set-up fee of $***/Subscriber
is required for the Plus and Premium Package.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
13
<PAGE>
EXHIBIT B
SUBSCRIBER TARGETS
An aggregate of *** WebMD Subscribers enrolled by the Company on or before
December 31, 1998.
An additional *** WebMD Subscribers enrolled by the Company on or before
December 31, 1999.
An additional *** WebMD Subscribers enrolled by the Company on or before
December 31, 2000.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
EXHIBIT C
INCENTIVE COMMISSION SCHEDULE
(ONE-TIME PAYMENT PER NEW PAID SUBSCRIBER)
1. Basic Package: $***
2. Plus Package: $***
3. Premium Package: $***
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.24
FIRST AMENDED AND RESTATED
--------------------------
SITEMAN INTERACTIVE AND SUPPORT SERVICES AGREEMENT
--------------------------------------------------
(INCLUDING NON-EXCLUSIVE LICENSE)
This First Amended and Restated Siteman Interactive and Support Services
Agreement (including Non-Exclusive License) (the "Agreement") is made and
entered into as of the 17th day of June, 1998, by and between iXL, Inc., a
Delaware corporation ("iXL"), and Endeavor Technologies, Inc. a Georgia
corporation ("Endeavor"). This Agreement restates and replaces the agreement
originally signed by the parties on June 17, 1998, clarifying certain provisions
of that agreement.
RECITALS
WHEREAS, Endeavor desires to retain iXL (a) to provide interactive services
using iXL's proprietary software Siteman (defined below) in developing a Web-MD
Program (defined below) that will allow healthcare professionals who are
customers of Endeavor and who participate in the Web-MD Program ("Healthcare
Professionals") to create web sites on-line without assistance from iXL
personnel; (b) to develop certain Custom Works (defined below), including for
example, a basic template and five styles for web sites created under the Web-MD
Program; and (c) to provide significant support and system
maintenance/administration services and other services as required under the
Statement of Work (defined below); and
WHEREAS, iXL is willing to provide such services on the terms described
herein;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
described in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, capitalized terms shall have
-----------
the following meanings:
"Basic Template" means the template to be designed or developed under this
--------------
Agreement as described on the attached Statement of Work. For purposes of
this Agreement, the "Basic Template" will not include any Siteman-specific
tags or code embedded in such templates, which will be considered Code for
purposes of this Agreement.
"Change Order" is defined in Section 3 below and shall be substantially in
------------
the form attached hereto as Exhibit A.
"Code" means computer programming/formatting code or operating instructions
----
either previously developed by iXL or developed pursuant to this Agreement
and used in connection with Siteman, used to create any portion of the Custom
Works or a Healthcare Professional Web Site, incorporated into a Custom Work
or Healthcare Professional Web Site, or used to operate a Custom Work,
Healthcare Professional Web Site, or a Web Server in connection with a Custom
Work or Healthcare Professional Web Site (such as, for example, HTML, Perl,
C, C++, Java, Java Script, UNIX Shell, Visual Basic Script, and VRML code).
Code shall include (a) any files necessary to make forms, check-boxes, and
1
<PAGE>
similar functions and underlying technology or components, such as animation
templates, interface programs which link multimedia and other programs,
customized graphics manipulation engines, and menu utilities, whether in
database form or dynamically driven; (b) navigational elements, including
buttons, graphics, synchronization gateways, links, PERL and CGI scripts; (c)
configuration profiles; (d) Siteman-specific tags or code added to templates
in order for them to be used; (e) Siteman-specific tags that assign relational
attributes to data elements allowing such elements to be used as "smart
content"; (f) dynamic content calls embedded in the HTML; and (g) all source
code related to any of the items described in the preceding clauses (a)
through (f) or otherwise related to Siteman.
"Corporate Siteman" shall mean Siteman 2.0 as generally available to iXL
------------------
customers as of the date of execution of this Agreement without any features
developed on a custom basis for specific customers of iXL. Corporate Siteman
shall also include patches, revisions and maintenance releases by iXL that do
not substantially alter the basic functionality of the Code for Corporate
Siteman (the "Improvements").
"Custom Works" shall mean the graphic design for the Basic Template and for
------------
the five Styles.
"Deliverables" means each form of (a) the Custom Works described as being
------------
designed hereunder; and (b) the Healthcare Professional Web Sites described as
being made available to Healthcare Professionals in the "Project Timetable and
Deliverables Schedule" in the Statement of Work. "Deliverables" for purposes
of this Agreement will not include any Third Party Software, Web Browsers, or
hardware.
"Endeavor and Healthcare Professional Content" means all graphics,
--------------------------------------------
photographic images, marks, logos, data, text, and information provided by
Endeavor, Healthcare Professionals, or any party in connection with the Web-MD
Program other than iXL, including all design elements provided by Endeavor,
Healthcare Professionals, or their agents in connection with the Custom Works
or Healthcare Professional Web Sites to be developed hereunder. "Endeavor and
Healthcare Professional Content" for the purposes of this Agreement will not
include any Code.
"Endeavor and Healthcare Professional Marks" mean any and all trademarks,
------------------------------------------
logos, or similar matters relating to Endeavor or Healthcare Professionals for
inclusion in any Custom Works or Healthcare Professional Web Sites or for use
in connection with the Web-MD Program.
"Endeavor Siteman" means the copy of Siteman and the Custom Works to be
----------------
delivered to Endeavor on the date of the launch as contemplated under Exhibit
B.
"Error" means any error, problem, or defect resulting from: (a) an incorrect
-----
functioning of Code that affects the functionality of a Deliverable; or (b)
any failure of a Deliverable to meet the specifications in the Statement of
Work or the Phase I Engineering Requirements Document to be developed
thereunder.
"Final Deliverable" means the final version of any Custom Work or Healthcare
-----------------
Professional Web Site that will be delivered to Endeavor or made available to
the applicable Healthcare Professional after successful completion of iXL's
final testing and quality assurance procedures.
2
<PAGE>
"Healthcare Professional Web Sites" shall mean the static HTML pages produced
---------------------------------
for each Healthcare Professional by that Healthcare Professional's use of
Siteman hereunder prior to termination or the expiration of the Term of this
Agreement.
"Improvements" are defined in the definition of Corporate Siteman above.
------------
"Initial License Fee" is set forth in Section 2 of Statement of Work No. 1.
-------------------
"Internet" means the world-wide network of computers which provides access to
--------
the World Wide Web.
"Permitted Uses" shall mean use by a Healthcare Professional (a) to generate,
--------------
maintain, and modify the Healthcare Professional Web Site developed for that
Healthcare Professional hereunder prior to termination of this Agreement; and
(b) to make the Healthcare Professional Web Site available on the Internet
both before and after termination of this Agreement. "Permitted Uses" will
also include Endeavor's allowing Healthcare Professionals access to Corporate
Siteman's user interface solely for the purposes described in the preceding
sentence. "Permitted Uses" shall not include any use of Siteman (i) as a
platform for subsequent development of products or projects that are beyond
the scope of this Agreement; or (ii) at a time when licensing fees or other
compensation due to iXL hereunder have not been paid. Permitted Uses will not
include any decompiling, preparation of derivative works, or re-engineering of
any portion or any version of Siteman, Corporate Siteman, or Endeavor Siteman.
"Phase I Document" is defined in Section 6 of this Agreement.
----------------
"Phase II" is defined in the attached Statement of Work.
--------
"Siteman" means iXL's proprietary software, including Corporate Siteman.
-------
"Statement of Work" shall include Statement of Work No. 1, which is defined in
-----------------
Section 3 below, and any additional Statements of Work attached to this
Agreement with the written consent of both iXL and Endeavor.
"Styles" means the five options to be developed for use with the Basic
------
Template as described in the Statement of Work.
"Term" is defined in Section 19 below.
----
"Third Party Software" means any software or other material (for example, a
--------------------
standard authoring program or platform or off-the-shelf software) which is
specifically identified in the Statement of Work as being owned by a company
or individual other than iXL, will be used under this Agreement pursuant to a
license or other arrangement, and is generally available to the public,
including Endeavor, under published licensing terms.
"Web Browser" means software designed to allow interactive access to the World
-----------
Wide Web, including Navigator, Explorer, Mosaic, MacWeb/WinWeb, Cello, and
Lynx.
"Web-MD Program" means the program described in more detail in the attached
--------------
Statement of Work.
3
<PAGE>
"Web Server" means a computer operated by or for Endeavor (a) that iXL or
----------
others use in making the Healthcare Professional Web Sites available on the
Internet or intranet; or (b) that has a non-live version of a Healthcare
Professional Web Site and that is used for making and testing content or
other changes to the Healthcare Professional Web Site prior to making such
changes available to the public over the Internet or intranet.
"World Wide Web" means all of the Web Pages that are accessible to a typical
--------------
computer user with appropriate access to the Internet using a Web Browser.
The definitions in this section will apply to all plural and singular forms
of the defined terms used in this Agreement.
2. DEVELOPMENT SERVICES.
---------------------
(a) CUSTOM WORKS (BASIC TEMPLATE DESIGN AND STYLES) AND SITEMAN SET-UP. iXL's
------------------------------------------------------------------
proprietary software known as Siteman includes an automated set of
software tools which will allow Endeavor to offer its Healthcare
Professionals the opportunity to build and maintain their own web sites
using the Basic Template and five pre-defined Styles. Each participating
Healthcare Professional will be able to customize a home page for that
Healthcare Professional's web site within certain parameters. In
connection with the Program hereunder, Endeavor hereby retains iXL to
develop the Basic Template design and the five Styles. iXL is not
obligated to provide any integration services or to develop any special
interfaces or links for the Web-MD Program, unless such services are
expressly required under an attached Statement of Work. iXL shall use all
reasonable commercial efforts to complete its work on the development
phases described in the attached Statement of Work, provide any
Deliverables described therein to Endeavor, and complete the set-up of
Siteman for debut of the Web-MD Program according to the goals set forth
in the Statement of Work, as modified by any applicable Change Order. In
exchange for such initial development work and the set-up of Siteman,
Endeavor will pay iXL fees as described in the attached Statement of Work
in accordance with the payment terms set forth therein and in this
Agreement.
(b) SET-UP OF HEALTHCARE PROFESSIONAL WEB SITES. Each Healthcare Professional
-------------------------------------------
will be responsible for creating the web sites, editing content, and
scanning photographs under the Web-MD Program using Siteman's on-line
capabilities. iXL will have no responsibility for assisting the
Healthcare Professionals in creating or modifying web site, scanning
images, or inputting content and no responsibility for hosting of the
Healthcare Professional Web Sites, unless the parties agree to include
such services in Phase II hereunder, or unless covered by a hosting
agreement to be entered into by the parties.
(c) DOMAIN REGISTRATION. iXL will have no responsibility for registering or
-------------------
maintaining domain names on behalf of Healthcare Professionals, unless
the parties agree to include such services in Phase II hereunder.
(d) SUPPORT OF CORPORATE SITEMAN. The Siteman web site rendering engine and
----------------------------
the Siteman content database will be hosted at an iXL facility with
support by iXL personnel. iXL agrees to provide support and system
maintenance/administrative
4
<PAGE>
services for Corporate Siteman as described in the attached Statement of
Work in return for payment of the fees described therein.
3. STATEMENT OF WORK; CHANGE ORDERS; ADMINISTRATION. Attached hereto as
------------------------------------------------
Exhibit B is a more detailed description of the Web-MD Program and the
interactive and support services to be provided hereunder, including the
goals for completion of the Deliverables ("Statement of Work No. 1"). If
there is any difference between the terms of the Statement of Work attached
hereto and any other portion of this Agreement, the terms of the Statement of
Work shall control, with the exception of Section 10(a) (concerning iXL's
ownership of Siteman, Corporate Siteman, and Code) and Section 22 (which
confirms that no joint venture, partnership or other relationship has been
created in connection with this Agreement). In the event of a conflict
between Sections 10(a) and 22 of this Agreement and any language in a
Statement of Work, Sections 10(a) and 22 of this Agreement shall control.
Any modifications to the specifications in the Statement of Work or to a
Custom Work after acceptance by Endeavor hereunder shall require execution of
a written change order by both parties to this Agreement (a "Change Order").
Each Change Order complying with this section shall be deemed to be an
amendment to the applicable Statement of Work and will become part of this
Agreement.
In the attached Statement of Work, Endeavor and iXL have each designated a
qualified individual as project manager to serve as the point of contact for
all communications relating to the performance under this Agreement.
4. COMPENSATION; EXPENSES; INVOICES. Endeavor shall pay iXL the amounts set
--------------------------------
forth in the "Project Timetable and Deliverables Schedule" in the Statement
of Work.
Except for amounts due upon execution of this Agreement, iXL will submit to
Endeavor invoices for the amounts payable to iXL as described herein and in
the applicable Statement of Work. Unless otherwise provided in the applicable
Statement of Work, Endeavor will pay to iXL the amount of each invoice
immediately. Any invoice not paid within thirty (30) days of receipt by
Endeavor will be subject to a finance charge of one and one-half percent (1-
1/2%) per month which is an annual percentage rate of eighteen (18%) percent
to be applied to the unpaid balance of the invoice. Invoices will be deemed
to have been received on the earlier of the date of actual receipt or five
(5) days after mailing to Endeavor. If Endeavor disputes an invoice, Endeavor
is required to pay the undisputed portion of the invoice according to the
terms of this Section and to give notice to iXL that specifies in detail the
disputed items and the reason for the dispute.
5. SOURCE OF CERTAIN MATERIALS. All Endeavor and Healthcare Professional
---------------------------
Content and Endeavor and Healthcare Professional Marks used in the Custom
Works, the Healthcare Professional Web Sites, or otherwise in connection with
this Agreement will be obtained and supplied by Endeavor, the Healthcare
Professionals, or their agents other than iXL.
Operation of the Web-MD Program may involve use of Third Party Software.
Endeavor will be responsible for payment for, and entering into appropriate
licensing agreements concerning, use of such Third Party Software to the
extent indicated on the Statement of Work.
5
<PAGE>
6. GENERAL SPECIFICATIONS. The initial technical specifications applicable
----------------------
hereunder appear in the attached Statement of Work and will be refined in the
Phase I Engineering Requirements Document to be developed thereunder (the
"Phase I Document").
7. METHOD OF PERFORMING SERVICES. Unless otherwise set forth in the Statement
-----------------------------
of Work, iXL shall determine the method, details, and means of performing the
services to be performed hereunder, subject to the standards set forth in the
Statement of Work. During the Term and thereafter, iXL shall retain the right
to perform any and all services for other clients, including clients in the
healthcare field, and Endeavor shall retain the right to cause work of the
same or a different kind to be performed by its own personnel or other
contractors.
8. TIMETABLE FOR COMPLETION. iXL will provide interactive services on the
------------------------
timetable established in the "Project Timetable and Deliverables Schedule" in
the Statement of Work (the "Project Timetable").
Endeavor will provide to iXL the media elements, materials, timely approvals,
and assistance necessary for iXL to complete the Custom Works and other
services on the Project Timetable. Any delay by Endeavor in providing
materials, approvals, and assistance to iXL shall extend the deadline for the
subsequent tasks of iXL under the Project Timetable by a period at least
equal to Endeavor's delay. In addition, for any Endeavor obligation described
as time-sensitive or critical in the Statement of Work, failure of Endeavor
to meet its deadline will entitle iXL to prepare a revised Project Timetable
based on a realistic estimate of the effect of the delay on the completion of
the project, taking into account other work scheduled by iXL.
In addition to providing progress reports and arranging project planning
meetings to the extent required under the Project Timetable, iXL agrees that
the current prototype of the Custom Works shall be accessible to Endeavor
throughout the development phase at the URL identified in the Statement of
Work.
9. DELIVERY AND ACCEPTANCE. Unless otherwise provided in a Statement of Work,
-----------------------
the following provisions will apply for delivery and acceptance of the design
for the Basic Template, the Styles, and iXL's set-up of Siteman for use in
the Web-MD Program:
(a) Endeavor will accept or reject the initial version and any corrected
version within thirty (30) business days of receipt, notifying iXL in
writing of the specific nature of any Error, deficiencies or inadequacies
in the initial draft. If Endeavor does not reject the initial version or
corrected version of any Deliverable in writing in the manner and time
period described herein, it will be deemed to be accepted.
(b) If Endeavor rejects the initial version or any corrected version, iXL
shall have a period of ten (10) business days from receipt of the written
rejection to correct all Errors, deficiencies or inadequacies specified
by Endeavor and submit a revised version. Unless Endeavor rejects the
revised version in writing in the manner and time period described in
paragraph (a) above, it will be deemed to be accepted.
10. ALLOCATION OF INTELLECTUAL PROPERTY RIGHTS. The various aspects of
------------------------------------------
ownership and rights to use Siteman, Corporate Siteman, Endeavor Siteman,
Code, the Custom Works, the Healthcare Professional Web Sites, Endeavor and
Healthcare Professional Content,
6
<PAGE>
Endeavor and Healthcare Professional Marks, and Third Party Software shall
be governed by this Section 10.
(a) RIGHTS CONCERNING SITEMAN, CORPORATE SITEMAN, ENDEAVOR SITEMAN, AND
-------------------------------------------------------------------
CODE. Siteman, Corporate Siteman, Code, and all rights therein including
----
any patent, copyright, trademark, trade secret or any other intellectual
property right associated with Siteman, Corporate Siteman, or Code shall be
owned exclusively by iXL. Neither Endeavor nor any of the Healthcare
Professionals shall have any claim of ownership in, or any patent,
copyright, trademark, trade secret, or any other intellectual property
rights in connection with, Siteman, Corporate Siteman, or Code, except for
the limited license described in Section 10(d) below. Endeavor shall own
the copy of Endeavor Siteman delivered to it at the launch as contemplated
under Exhibit B, subject to iXL's rights concerning, and ownership of, Code
and subject to Endeavor Siteman's being used by Endeavor and its agents
only for Permitted Uses described herein.
(b) RIGHTS IN THE WORKS (WORKS FOR HIRE AND ASSIGNMENT). Subject to certain
---------------------------------------------------
rights of iXL described in Sections 10(a), 10(e), and 10(g) below, (i)
Endeavor Siteman and the Custom Works shall constitute "works made for
hire" for Endeavor and each Healthcare Professional Web Site shall
constitute a "work made for hire" for the applicable Healthcare
Professional as that concept is defined in Sections 1010 and 201 of the
Copyright Act of 1976 (Title 17, United States Code); (ii) Endeavor shall
be considered the author and shall be the copyright owner of the Custom
Works; and (iii) each Healthcare Professional shall be considered the
author and shall be the copyright owner of the applicable Healthcare
Professional Web Site.
If Endeavor Siteman or any of the Custom Works or Healthcare Professional
Web Sites do not qualify for treatment as "works for hire" or if iXL
retains any interest in the Custom Works or Healthcare Professional Web
Sites for any other reason, iXL hereby grants, assigns and transfers (i) to
Endeavor, ownership of all United States and international copyrights and
all other intellectual property rights in Endeavor Siteman and the Custom
Works, subject to certain rights of iXL described in Sections 10(a),
10(e), and 10(g) of this Agreement; and (ii) to the applicable Healthcare
Professional ownership of all United States and international copyrights
and all other intellectual property rights in the Healthcare Professional
Web Site developed hereunder for that Healthcare Professional, subject to
certain rights of iXL described in Sections 10(a), 10(e), and 10(g) of this
Agreement. The ownership rights assigned under the preceding sentence
shall include all the rights of use with respect thereof which are intended
to be conferred upon Endeavor and Healthcare Professionals under this
Agreement, free and clear of any and all claims for royalties or other
compensation except as stated in this Agreement.
(c) RIGHTS IN CONTENT AND MARKS. Endeavor represents and warrants to iXL that
---------------------------
iXL is authorized to use and publish as contemplated hereunder (i) all
Endeavor and Healthcare Professional Content; and (ii) all Endeavor and
Healthcare Professional Marks. iXL acknowledges that the Endeavor and
Healthcare Professional Marks and any goodwill appurtenant thereto shall be
owned exclusively by Endeavor or Healthcare Professionals, as applicable.
(d) LIMITED LICENSE TO HEALTHCARE PROFESSIONALS AND ENDEAVOR FOR USE OF
-------------------------------------------------------------------
CORPORATE SITEMAN AND CODE. In exchange for payment of the Initial License
--------------------------
Fee, iXL hereby
7
<PAGE>
grants to each Healthcare Professional and to Endeavor a limited,
perpetual, non-exclusive, worldwide, royalty-free license to use
Corporate Siteman and the Code for Permitted Uses hereunder. This
license does not give any Healthcare Professional or Endeavor any right
to alter, add to, subtract from, arrange, rearrange, revise, modify,
change, adapt, decompile, or re-engineer Siteman, Corporate Siteman, or
Endeavor Siteman or prepare any derivative works therefrom other than
the Healthcare Professional Web Sites consistent with Permitted Uses
hereunder.
(e) LIMITED LICENSE TO iXL IN CONNECTION WITH ITS PERFORMANCE HEREUNDER.
-------------------------------------------------------------------
Endeavor hereby grants to iXL the limited, nonexclusive right and
license to copy, distribute, transmit, display, perform, create
derivative works, modify and otherwise use and exploit the Custom Works,
the Healthcare Professional Web Sites, any Endeavor and Healthcare
Professional Content, and any Endeavor and Healthcare Professional Marks
provided hereunder solely for the purposes of rendering iXL's services
and as otherwise authorized under this Agreement consistent with the
Statement of Work. Such limited right and license shall extend to no
other materials and for no other purposes.
(f) THIRD PARTY SOFTWARE. If applicable, iXL has identified in the
--------------------
Statement of Work certain Third Party Software which may be used in
connection with the Web-MD Program. Except to the extent described in a
Statement of Work, iXL represents and warrants to Endeavor that there
are no restrictions or royalty terms applicable to use of such Third
Party Software as contemplated under this Agreement.
(g) NON-EXCLUSIVE ARRANGEMENT; DEVELOPMENT OF OTHER WEB SITES AND PROJECTS
----------------------------------------------------------------------
BY iXL. iXL shall retain the right to reuse or incorporate Code,
------
Siteman, Corporate Siteman, and Endeavor Siteman, including Code
developed before or after execution of this Agreement, in developing web
sites or interactive, multimedia, or other projects for other clients,
including clients in the healthcare field, provided that iXL shall not
provide a lower rate to Endeavor's direct medical competitors.
11. DEFENSE OF INFRINGEMENT ACTIONS. If any action, claim, suit or proceeding
-------------------------------
is brought against Endeavor or any Healthcare Professionals, alleging that
any of the Custom Works, Healthcare Professional Web Sites, Code, or any
portion thereof (other than any Endeavor and Healthcare Professional
Content, Endeavor and Healthcare Professional Marks, or the Third Party
Software) infringes on a patent, copyright, trademark, trade secret, or
other intellectual property rights of any third party, iXL will defend such
action, claim, suit or proceeding at its own expense and shall indemnify and
hold Endeavor and the Healthcare Professionals harmless from and against all
damages, liabilities, losses, expenses and costs incurred by Endeavor or any
Healthcare Professionals arising in connection therewith.
If any action, claim, suit or proceeding is brought against iXL, alleging
that any of the Endeavor and Healthcare Professional Content or Endeavor and
Healthcare Professional Marks used in the Custom Works, Healthcare
Professional Web Sites, or otherwise by iXL as permitted under this
Agreement infringes on a patent, copyright, trademark, trade secret, or
other intellectual property rights of any third party, Endeavor will defend
such action, claim, suit or proceeding at its own expense and shall
indemnify and hold iXL harmless from and against all damages, liabilities,
losses, expenses and costs incurred by iXL or arising in connection
therewith.
8
<PAGE>
12. DELIVERABLES. Within ten (10) business days after Endeavor's approval of
------------
an item described as a Deliverable on the Statement of Work, iXL will
deliver a copy thereof to Endeavor or make the Deliverable available to the
applicable Healthcare Professional. Transfer of electronic materials will be
accomplished by copying them to media to be supplied by Endeavor or the
Healthcare Professional or by modem, FTP transfer, LapLink, or electronic
mail transfer. iXL shall maintain its back-ups and one set of the
Deliverables provided to Endeavor and Healthcare Professionals for a period
of six (6) months after the approval of each Final Deliverable.
13. DEMONSTRATION OF CUSTOM WORKS AND HEALTHCARE PROFESSIONAL WEB SITES. In
-------------------------------------------------------------------
connection with the Program, (i) iXL may list Endeavor as a client of iXL on
iXL's Web Site and in all other iXL marketing materials; (ii) iXL will be
authorized to create screen shots of the Custom Works and of Healthcare
Professional Web Sites and incorporate those screen shots into iXL's digital
and print marketing materials; (iii) iXL will be authorized to demonstrate
the Custom Works and the Healthcare Professional Web Sites in presentations
to other or potential clients; (iv) a credit and logo will be included on
Custom Works and on the bottom of the home page of Healthcare Professional
Web Sites similar to "created by iXL's Siteman"; and (v) unless otherwise
provided in the Statement of Work, iXL may include either a URL or plain
text link to the Custom Works and/or Healthcare Professional Web Sites on
iXL's Web Site, which may, at iXL's option include Endeavor and Healthcare
Professional Marks. For the purposes of this Section 13, iXL shall include
iXL, Inc. and its affiliates. In the event that a Healthcare Professional
substantially changes a Healthcare Professional Web Site using its own
employees or a company other than iXL, that Healthcare Professional may
notify iXL that the rights under this Section 13 shall not apply to the new
version of the Healthcare Professional Web Site.
14. CONFIDENTIAL INFORMATION. In connection with iXL's performance of its
------------------------
duties hereunder, iXL and Endeavor may gain access to certain information
concerning the business, affairs, operations, products, intellectual
property, employees or clients of the other party to this Agreement that is
of a nonpublic, confidential, or proprietary nature (the "Confidential
Information"). Each party after receiving such Confidential Information (in
such role, the "Recipient Company") agrees on behalf of itself and on behalf
of its directors, officers, employees, and agents (collectively, "Related
Parties") that it will (a) treat the Confidential Information as strictly
confidential; (b) use the Confidential Information solely for the purpose of
performing under this Agreement and not, directly or indirectly, for any
other purpose; (c) not disclose any Confidential Information to any person
or entity (other than its Related Parties to the extent required for
performance hereunder) without the prior written consent of the other party;
and (d) not copy any Confidential Information other than as required to
perform under this Agreement.
For purposes of this Agreement, Confidential Information shall mean
information that is maintained in confidence by the other party to this
Agreement or any of its Related Parties and that is not generally known by
persons other than the other party or its Related Parties or, if known by
any other such persons, is maintained in confidence by them. Confidential
Information shall include, without limitation, the specifications delivered
hereunder or contemplated hereby.
The restrictions in this Section 14 shall not be construed to apply to (i)
information generally available to the public, (ii) information generally
released by the other party to this Agreement without restriction; (iii)
information independently developed by a Recipient
9
<PAGE>
Company or its Related Parties without reliance in any way on confidential
information of the other party to this Agreement or acquired from a third
party without similar restriction, without breach of this Agreement, and
with no reason to believe the third party has breached any similar
confidentiality agreement; or (iv) information that the other party to this
Agreement agrees in writing is approved for the use and disclosure of the
Recipient Company or its Related Parties without restriction.
Notwithstanding the foregoing restrictions, a Recipient Company and its
Related Parties may use and disclose any information to the extent required
by an order of any court or other governmental authority but only after the
other party to this Agreement has been notified in writing sufficiently in
advance of the date of compliance to permit the other party to seek
reasonable protection for such information in connection with such
disclosure.
15. NON-SOLICITATION. During the Term and for two (2) years after the
----------------
termination of this Agreement, neither party shall directly or indirectly,
induce or attempt to induce any employee of the other party to leave the
employ thereof or hire any employee of the employing party other than an
employee whose employment was terminated by the employing party. For
purposes of this Section 15, "party" shall include the party and its
affiliates.
16. iXL'S REPRESENTATIONS AND WARRANTIES. iXL represents and warrants to
------------------------------------
Endeavor that:
(a) With the exception of any Endeavor and Healthcare Professional Content
or Endeavor and Healthcare Professional Marks included therein, any and
all Custom Works delivered to Endeavor under this Agreement and any and
all Healthcare Professional Web Sites prepared under this Agreement will
be prepared by iXL or iXL employees and agents as "works for hire";
(b) With the exception of any Endeavor and Healthcare Professional Content
or Endeavor and Healthcare Professional Marks included therein, all
Deliverables delivered to Endeavor or to Healthcare Professionals
hereunder do not and will not infringe any patents, copyrights,
trademarks, or other intellectual property rights, including trade
secrets, privacy or similar rights of any person or entity, nor has any
claim of such infringement been threatened or asserted against iXL;
(c) The Custom Works accepted by Endeavor will comply with the
specifications in the "Scope of Work" section of the Statement of Work,
the Phase I Document, and any Change Orders;
(d) All services iXL performs under this Agreement or related to the Program
will be performed in a workmanlike manner in accordance with applicable
industry standards for software development, software support, and
customer service;
(e) iXL will provide Corporate Siteman upgrades and major product revisions
on a when and if available basis as part of the maintenance provided
during the Term of this Agreement; and
(f) iXL represents and warrants to Endeavor that the design of Corporate
Siteman and the other Code developed hereunder allows and will allow
processing of 4-digit years and that their design is and will be,
accordingly, Year 2000 compliant on the server and with
10
<PAGE>
the applications being used by iXL. iXL does not make any representation
or warranty hereunder concerning (i) the extent to which data maintained
by Endeavor, Healthcare Professionals, or their agents and any Endeavor
and Healthcare Professional Content provided for input into, or display
in connection with, the Custom Works or Healthcare Professional Web
Sites includes 2-digit or 4-digit years, or (ii) whether Corporate
Siteman, Endeavor Siteman, Code, the Custom Works, or the Healthcare
Professional Web Sites will operate in a manner that is Year 2000
compliant after any modifications are made to the Endeavor and
Healthcare Professional Content, to the type of equipment on which the
Custom Works or Healthcare Professional Web Sites are hosted or
accessed, or to the applications used in connection with Corporate
Siteman, Endeavor Siteman, the Code, the Custom Works, or the Healthcare
Professional Web Sites.
17. ENDEAVOR'S RESPONSIBILITIES; REPRESENTATIONS AND WARRANTIES;
------------------------------------------------------------
INDEMNIFICATION. Endeavor hereby agrees to take full responsibility for
---------------
obtaining clearances and authorizations from Healthcare Professionals and
all other parties in connection with the following material to be provided
to iXL for use in connection with the Program: (i) any and all Endeavor and
Healthcare Professional Content; and (ii) any and all Endeavor and
Healthcare Professional Marks.
Endeavor represents and warrants to iXL that:
(a) Endeavor is fully authorized to enter into and fully able to perform
under this Agreement, to furnish the materials and to grant the rights
and licenses provided for in this Agreement, and Endeavor is not subject
to any conflicting obligations that will or might prevent Endeavor from
furnishing such materials or from granting the rights and licenses
provided for in this Agreement.
(b) Endeavor either owns or has the right to authorize the use as
contemplated herein of the Endeavor and Healthcare Professional Content
and the Endeavor and Healthcare Professional Marks. Endeavor further
represents and warrants that use of the Endeavor and Healthcare
Professional Content and of the Endeavor and Healthcare Professional
Marks as contemplated hereunder does not and will not infringe upon or
violate any patent, copyright, trademark, trade secret, or other
proprietary or intellectual property rights of any third party.
Endeavor hereby indemnifies and holds iXL harmless from any claims that use
of any such Endeavor and Healthcare Professional Content or Endeavor and
Healthcare Professional Marks was infringing or not authorized.
18. NO REPRESENTATIONS OR WARRANTIES RELATING TO e-COMMERCE. The parties
-------------------------------------------------------
acknowledge and agree that Endeavor has made all decisions concerning
whether and how the Custom Works will operate and that each Healthcare
Professional will make all decisions concerning whether and how its
Healthcare Professional Web Site will operate, if any of the Custom Works or
Healthcare Professional Web Sites involve on-line commercial transactions.
Endeavor and Healthcare Professionals accept the inherent risks involved
with on-line commercial transactions and the responsibility for approving
all encryption and other security measures that will be used. iXL will not
be responsible for, or have any liability in connection with, the operation
of any of the Custom Works or Healthcare Professional Web Sites with respect
to on-line commercial transactions and shall not have any responsibility or
liability for misuse of or failure to protect credit card or other
information provided by
11
<PAGE>
customers of Endeavor or patients or customers of the Healthcare
Professionals in connection with the Web-MD Program. In addition, Endeavor
assumes the risk of loss and absolves iXL of any liability due to (a)
Endeavor's or Healthcare Professionals' offering any products for sale in
connection with this Program that constitute "soft" goods, for example,
telephone usage cards, for which customers are given authorization codes
that are effective with or without physical delivery of the goods sold; or
(b) Endeavor's or Healthcare Professionals' maintaining personal
identification numbers or other authorization codes in connection with any
of the Custom Works or the Healthcare Professional Web Sites.
19. TERM AND TERMINATION.
--------------------
Unless terminated earlier pursuant to this Article 19, the term of this
Agreement (the "Term") shall begin on the date hereof (the "Effective
Date"), continue for a two-year period after the Effective Date.
(a) TERMINATION FOR BREACH. In addition to such other rights and remedies
----------------------
as may be available in law or in equity, each party shall have the right
to terminate this Agreement by written notice to the other party if the
other party has materially breached any provision of this Agreement and
such breach remains uncured for a period of ninety (90) days after
written notice of such breach is received by such other party.
(b) TERMINATION DUE TO FORCE MAJEURE. Either party may terminate this
--------------------------------
Agreement upon thirty days written notice due to an act of nature or
force majeure event (Act of God, labor controversy, natural disaster,
civil disturbance, etc.) which materially affects such party's ability
to fulfill its obligations under this Agreement.
(c) EFFECT OF TERMINATION; SURVIVAL. Termination will terminate each
-------------------------------
party's obligations under this Agreement (except for the provisions
concerning allocation of intellectual property rights in Section 10,
defense of infringement actions in Section 11, demonstration of the
Custom Works and Healthcare Professional Web Sites and related matters
in Section 13, Confidential Information under Section 14, non-
solicitation of employees under Section 15, representations and
warranties in Sections 16, 17, 18, and 23, indemnification, damages, and
attorney's fees in Section 20, and the relationship of the parties in
Section 20, all of which shall survive termination). Unless otherwise
provided in the applicable Statement of Work, upon termination by either
iXL or Endeavor, Endeavor shall be obligated to compensate iXL for all
work to date, and Endeavor shall be entitled to receive copies of all
Deliverables in existence at that point for which iXL has been fully
compensated.
20. Indemnification; Damages; Attorney's Fees. Each party (the "Indemnifying
-----------------------------------------
Party") will indemnify and hold the other party and its affiliates,
officers, directors, employees, agents and representatives harmless from and
against all damages, costs, expenses, and liabilities arising as a direct
result of a breach of this Agreement by the Indemnifying Party, including
without limitation, reasonable attorneys' fees and expenses, and provided,
--------
that, in no event shall the Indemnifying Party's liability under this
Section or under Section 11 exceed the total amount of payment due under the
Statement of Work under which Endeavor's claim is made. IN ADDITION, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL,
SPECIAL, OR PUNITIVE DAMAGES OF ANY KIND OR NATURE, REGARDLESS WHETHER
EITHER
12
<PAGE>
PARTY HAS WARNED OR BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS
OR DAMAGE.
21. NOTICE. Any notice required or permitted to be given under this Agreement
------
shall be in writing and deemed given and effective upon delivery if sent by
personal delivery or by facsimile transmission or five (5) days after
posting if sent by certified United States mail, return receipt requested,
with postage pre-paid and addressed as follows:
If to iXL: iXL, Inc.
1888 Emery Street, N.W.
Atlanta, Georgia 30318
Attn: Blake Patton
Fax: (404) 267-3801
With a copy to: Minkin & Snyder
One Buckhead Plaza
3060 Peachtree Road
Suite 1100
Atlanta, Georgia 30305
Attn: James S. Altenbach, Esq.
Fax: (404) 233-5824
If to Endeavor: Endeavor Technologies, Inc.
3399 Peachtree Road, Suite 400
Atlanta, GA 30326
Attn: Jeffrey T. Arnold
Fax: (404) 479-7651
A copy to: Endeavor Technologies, Inc.
3399 Peachtree Road, Suite 400
Atlanta, GA 30326
Attn: Michael Heekin
Fax: (404) 479-7651
22. RELATIONSHIP BETWEEN PARTIES. The parties intend that an independent
----------------------------
contractor relationship shall be created by this Agreement. Nothing in this
Agreement shall be construed as establishing a partnership, joint venture,
or employer-employee relationship between the parties or between either of
the parties and any of the Healthcare Professionals.
23. EXCLUSION OF IMPLIED WARRANTIES. iXL has made certain express warranties
-------------------------------
concerning the Custom Works and Healthcare Professional Web Sites in the
preceding sections of this Agreement. APART FROM THE SPECIFIC WARRANTIES SET
OUT HEREIN OR IN THE STATEMENT OF WORK ATTACHED HERETO, ALL IMPLIED
WARRANTIES AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
CORRESPONDENCE WITH DESCRIPTION, AND ANY OTHER IMPLIED OR EXPRESS
WARRANTIES, ARE HEREBY DISCLAIMED AND EXCLUDED WITH RESPECT TO ALL GOODS AND
SERVICES PROVIDED UNDER THIS AGREEMENT.
13
<PAGE>
24. MISCELLANEOUS.
-------------
(a) BINDING EFFECT. This Agreement shall be binding on, inure to the
--------------
benefit of, and be enforceable by the parties and their respective
heirs, successors and valid assigns.
(b) GOVERNING LAW. This Agreement shall be governed by, construed under and
-------------
enforced in accordance with the laws of the State of Georgia.
(c) COUNTERPARTS. This Agreement may be executed in multiple counterparts
------------
and by facsimile, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(d) ASSIGNMENT. This Agreement may be assigned by either party only with
----------
the prior written consent of the other party, which shall not be
unreasonably withheld.
(e) ENTIRE AGREEMENT. This Agreement, including the attached Statement of
----------------
Work, supersedes and cancels all prior negotiations, communications,
understandings and agreements between iXL and Endeavor. No oral
agreements, before or after execution of this Agreement, shall be
binding until they are in writing and signed by an authorized officer of
both iXL and Endeavor.
(f) SEVERABILITY. In the event that any provision of this Agreement is held
------------
void or unenforceable, the entire balance of this Agreement shall remain
in full force and effect.
(g) HEADINGS. The section and subsection headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
14
<PAGE>
IN WITNESS WHEREOF, this Agreement was executed by the parties as of the
date first written above.
iXL, Inc.
By: /s/ Bertram Ellis, Jr.
----------------------
Name: U. Bertram Ellis, Jr.
---------------------
Title: Chairman and Chief Executive Officer
------------------------------------
Endeavor Technologies, Inc.
By: /s/ W. Michael Heekin
---------------------
Name: W. Michael Heekin
-----------------
Title: Chief Operating Officer
-----------------------
15
<PAGE>
EXHIBIT A
CHANGE ORDER TO STATEMENT OF WORK NO. 1 TO
SITEMAN INTERACTIVE AND SUPPORT SERVICES AGREEMENT
(INCLUDING NON-EXCLUSIVE LICENSE)
BETWEEN iXL, INC. AND ENDEAVOR, INC.
DATED JUNE 17, 1998
(THE "STATEMENT OF WORK")
Date of this Change Order:
---------------------------------------------------
The parties agree that the Statement of Work is hereby modified as follows and
that this Change Order shall be attached as an exhibit to and incorporated in
the Statement of Work.
Resulting changes to "Project Timetable and Deliverables Schedule" in the
Statement of Work:
iXL, Inc.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Endeavor Technologies, Inc.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
16
<PAGE>
EXHIBIT B
STATEMENT OF WORK NO. 1
TO SITEMAN INTERACTIVE AND SUPPORT SERVICES AGREEMENT
(INCLUDING NON-EXCLUSIVE LICENSE)
BETWEEN iXL, INC. AND ENDEAVOR TECHNOLOGIES, INC.
The following is Statement of Work No. 1 (the "Statement"), made as of June 17,
1998, to the Siteman Interactive and Support Services Agreement (including Non-
Exclusive License) (the "Agreement") executed on June 17, 1998, between iXL,
Inc. ("iXL") and Endeavor, Inc. ("Endeavor"). Except as specifically stated
herein, each capitalized term used in this Statement shall have the same meaning
as is assigned to it in the Agreement.
1. GENERAL DESCRIPTION OF SERVICES, THE WEB-MD PROGRAM, AND HEALTHCARE
-------------------------------------------------------------------
PROFESSIONALS. In addition to the work and services to be performed by iXL
-------------
pursuant to the Agreement and any other Statements of Work existing under
the Agreement, iXL shall perform services as specified below. Such services
shall be rendered in accordance with and shall be deemed rendered pursuant
to the terms and conditions of the Agreement.
This Statement does not include any integration with other applications such
as Web-MD, OCR, or Orchestrate. Such integration will be covered by
execution of a Change Order or additional Statement of Work if the parties
agree on a Web-MD Phase II retainer agreement ("Phase II").
(a) WEB-MD PROGRAM. The main features and goals of the Web-MD Program are:
--------------
making an economical program available to participating Healthcare
Professionals based on the Healthcare Professionals having the
responsibility for creating their own web sites, editing content, and
scanning photographs by using Siteman's on-line features. When
completed, each Healthcare Professional Web Site will be FTP'd from the
iXL Siteman application to the hosting facility (discussed below) by
direct access.
Endeavor and the Healthcare Professionals may generate and maintain up
to ***sites/editors in the Web-MD Program under this Statement. Adding
any additional sites over ***will require prior written agreement
between iXL and Endeavor, for example, execution of a Change Order or a
Statement of Work for Phase II.
(b) THE HEALTHCARE PROFESSIONALS. All Healthcare Professionals enrolled as
----------------------------
clients of Endeavor will be entitled to participate in the Web-MD
Program.
2. PAYMENT. Subject to the terms herein and those contained in the Agreement,
-------
ENDEAVOR agrees to pay iXL (a) upon execution of the Agreement, the template
design fee, the Siteman set-up fee, and the initial license fee described
below; and (b) on a monthly basis, the system administration/maintenance fee
based on the number of sites/editors as described below. ENDEAVOR will also
be responsible for certain miscellaneous charges in connection with the Web-
MD Program as set forth below.
__________________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
17
<PAGE>
TEMPLATE DESIGN FEE: $***
SITEMAN SET-UP FEE: $***
INITIAL LICENSE FEE: $***
*Subject to adjustment based on spreadsheet pricing as discussed by the
parties.
MINIMUM TEMPLATE DEVELOPMENT: Endeavor commits to development of one
template, at the basic Template Design Fee plus the Siteman Set-Up Fee as set
forth above.
MONTHLY SYSTEM ADMINISTRATION/MAINTENANCE FEES: In addition, ENDEAVOR will
pay iXL the following monthly charges for system administration/maintenance
so long as the Siteman system is used or made available by Endeavor: ***per
site/editor* per month based on the actual number of sites/editors in the
Web-MD Program during that month, UP TO A MAXIMUM OF ***SITES/EDITORS. AT THE
END OF THE TERM, ENDEAVOR SHALL HAVE THE OPTION OF RENEWING SYSTEM
ADMINISTRATION/MAINTENANCE BY iXL AT $*** PER SITE/EDITOR* PER MONTH, AFTER
ADJUSTMENT FOR INFLATION SINCE THE EXECUTION OF THIS AGREEMENT AND ANY
INCREASES IN iXL'S DIRECT COST ASSOCIATED WITH PROVIDING SUCH SYSTEM
ADMINISTRATION/MAINTENANCE. THE PAYMENT FOR RENEWED SERVICES WILL BE BASED ON
THE ACTUAL NUMBER OF SITES/EDITORS IN THE WEB-MD PROGRAM DURING THE
APPLICABLE MONTH, UP TO A MAXIMUM OF ***SITES/EDITORS.
iXL is not obligated under this Statement to allow more than ***sites/editors
under the Web-MD Program. If the number of sites/editors exceed that number,
the parties agree to attempt to negotiate in good faith a Change Order to
establish system administration/maintenance fees for the larger number.
OTHER CHARGES: ENDEAVOR will incur the cost of all Third Party Software and
access charges for Healthcare Professionals when editing sites hereunder. iXL
will incur the cost of all hardware and bandwidth hereunder.
3. START DATE. iXL's services shall begin on the Effective Date.
----------
4. SCOPE OF WORK.
-------------
The scope and definition of services to be provided under the Agreement and
this Statement will be more clearly defined in the Phase I engineering
requirements document to be developed by iXL hereunder. At that time, the
allocation of specific resources and costs may be reassigned with the consent
of both parties to meet the terms and scope of the overall project.
(a) CUSTOM WORKS. iXL will develop the following Custom Works for Endeavor
hereunder:
. BASIC TEMPLATE DESIGN - at a one-time fixed cost, contingent upon a
spreadsheet pricing model, iXL will develop the design for the Basic
Template to be used in the Web-MD Program.
- -----------------------
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
18
<PAGE>
. STYLES - In connection with iXL's set-up of Siteman for the debut of
the Web-MD Program, iXL will provide five styles to be used with the
Basic Template which will be integrated based on art direction from
Endeavor.
(b) SYNCHRONIZATION GATEWAYS AND/OR LINKS. iXL is not required to develop
any synchronization gateways and/or links between the Custom Works or
Healthcare Professional Web Sites and legacy databases or other programs.
Such integration may, however, be included in Phase II, if the parties
reach agreement on Phase II.
(c) SPECIFICATIONS FOR HEALTHCARE PROFESSIONAL WEB SITES. Described below
are details related to the development of Healthcare Professional Web
Sites under this Program, including, for example, information relating to
proposed content, navigation, specific features and functions, back-end
functionality, databases, Web Servers, and operating systems:
Each Healthcare Professional Web Site hereunder will have a maximum of 8
pages and will be prepared based on the basic Template Design and five
Styles discussed above.
(d) OTHER INTERACTIVE SERVICES. iXL is not obligated to perform any
--------------------------
additional interactive services in connection with the Web-MD Program.
(e) SUPPORT; SYSTEM MAINTENANCE/ADMINISTRATION. iXL will provide support as
------------------------------------------
described below in exchange for the maintenance/administration fees set
out herein:
Maintenance--Agreed Assumptions
. Siteman maintenance of system for 2 full years: Server, Database,
System, etc. including
. Daily monitoring of the Siteman application and servers
. Looking at daily traffic and system performance and reporting
problems to Siteman development team
. Problem analysis / resolution
. Communication of status/problem resolution with Endeavor project
leader(s)
. Evening and weekend coverage
. Developing system manual and assisting the team leader in developing
a master Endeavor policy manual
. Handling all network connectivity issues and basic troubleshooting
. Troubleshooting the Siteman application and servers (notify
development team if bigger problems arise)
. Responsible for backup of data and data integrity (backs up data
nightly and takes off site)
. Maintenance of system passwords
. Reconfiguration of the system, upgrading the system and servers
. Changing user attributes such as login and password
. Changing access privileges
. Control of (add/delete) client names and accounts and contact info
. Personnel trained in MSCE, SQL, C++, Java, JavaScript, HTML
. Routine dB and system maintenance
19
<PAGE>
. Resolution of problems associated with Netscape, UNIX and/or NT
software when not operating properly
. On call resource for problems with the system, down time and system
errors
. iXL will provide Corporate Siteman upgrades and major product
revisions on a when and if available basis as part of the maintenance
provided during the Term of the Agreement
General Service Agreements for Siteman License and Hardware/Database
Maintenance
. Up to *** sites can be maintained under this agreement. Adding
additional sites over *** will require prior agreement between iXL and
Endeavor.
. iXL INCURS ALL THE DATABASE BANDWIDTH CHARGES
. iXL will train 5 Endeavor users for 1 day and will videotape the
training for future use by Endeavor. iXL will also provide one week of
free technical support after the training.
. Additional training will be billed to Endeavor at the then-current iXL
rate card rates on a per-hour basis.
. iXL will provide a dedicated phone number for emergency technical
support.
(f) HOSTING. The Siteman web site rendering engine and the Siteman content
-------
database will be hosted on a server in an iXL facility with maintenance,
monitoring, and support by iXL personnel. The Healthcare Professional
Web Sites will be hosted by Sprynet, and iXL will not have any
obligations in connection with hosting of any Healthcare Professional
Web Sites hereunder.
(g) ESCROW OF CORPORATE SITEMAN. iXL, Inc. has placed and will maintain a
---------------------------
copy of Corporate Siteman in escrow with Lincoln-Parry Soft Escrow or
another similar escrow service acceptable to iXL and will name Endeavor
and the Healthcare Professionals as beneficiaries of that escrow for the
following purposes: for completion of any Healthcare Professional Web
Site being generated or modified at the time this Agreement is
terminated for any reason or in the event of bankruptcy if iXL ceases to
support the Program, so long as Endeavor and the applicable Healthcare
Professional are current in any fees due hereunder and so long as
Endeavor and the applicable Healthcare Professional use Corporate
Siteman and any Code obtained from the escrow only for Permitted Uses
hereunder.
__________________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
20
<PAGE>
5. CONTENT AND DESIGN INPUT FROM ENDEAVOR. As soon as possible after execution
of the Agreement, Endeavor or its representatives will provide iXL with the
following:
<TABLE>
<CAPTION>
MATERIALS TO BE PROVIDED IMMEDIATELY BY ENDEAVOR
(CONTENT, GRAPHICS, MARKS)
- -----------------------------------------------------------------------------------------------------------------------------
Specify Whether for Basic Required Detailed Party Responsible Date Due
Template, Styles, or Content Description Format
Set-Up
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
6. THIRD PARTY SOFTWARE. Listed below are any items of software from third
parties required for any other purpose in connection with the Program until
termination of the Agreement. Unless otherwise noted, license fees for this
software are not included in the payments to iXL under this Statement and
will be the responsibility of Endeavor:
------------------------------------------------------------------------
NONE REQUIRED AT THIS TIME.
7. PROJECT TIMETABLE AND DELIVERABLES SCHEDULE. The major milestones,
-------------------------------------------
Deliverables, and goals for their completion are described below:
<TABLE>
<CAPTION>
MILESTONE DESCRIPTION OF MILESTONE DELIVERABLES GOAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Execution of Development process begins; Endeavor Not applicable
Siteman provides graphics, design, and
Interactive creative direction.
Services
Agreement
- ----------------------------------------------------------------------------------------------------------------------
Quick Look Endeavor feedback on Basic Template Basic Template; five Styles
and Styles; final Endeavor approval for use in iXL's set-up; Phase
of all engineering specifications I Engineering Requirements
and systems. Document.
- ----------------------------------------------------------------------------------------------------------------------
Alpha Completion Presentation of entire static Graphics Design; Prototype
version of Siteman as set-up for
Web-MD Program; some portions may
have limited functionality;
incorporation of Endeavor-approved
creative direction.
- ----------------------------------------------------------------------------------------------------------------------
Beta Completion/ Final working version of Siteman as Prototype (with engineering
Quality Assurance set-up with Basic Template and components)
Styles for Web-MD Program, including
significant engineering
functionality and revisions based on
Endeavor feedback on Alpha Version.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
MILESTONE DESCRIPTION OF MILESTONE DELIVERABLES GOAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Launch of Program Debut of Siteman set-up with Basic Final Deliverable of Endeavor
Template and Styles; work on Siteman and Basic Template and
promotional issues relating to debut five Styles
of the Program.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
8. COMPLETION DATE. iXL agrees to use all reasonable commercial efforts to
---------------
complete the Custom Works on the timetable agreed to above.
9. DELIVERABLES. Each item listed in the "Deliverables" column in the chart
------------
for "Custom Works" in Section 7 above will be subject to delivery and
acceptance by the Endeavor under the terms of the Agreement.
10. DEVELOPMENT SITE. The URL for the development site which Endeavor may use
----------------
to review progress under this Statement is: [URL]
11. PROJECT CONTACTS.
----------------
iXL Project Manager:
Endeavor Project Manager:
12. SITE INDEXING. The payment to iXL under this Statement does not include
-------------
submitting the Healthcare Professional Web Sites to index sites or other
similar marketing services except to the extent specifically described in
the "Scope of Work" section above.
13. iXL'S HOURLY RATES AND OUT-OF-POCKET EXPENSES. Any work performed by iXL
---------------------------------------------
for Endeavor or Healthcare Professionals that is outside the Scope of Work
hereunder will be paid for by Endeavor on a time and materials basis in
accordance with iXL's then current rate card.
Endeavor further agrees to reimburse iXL for certain out-of-pocket expenses
as follows: (a) travel with the Endeavor's previous approval, based on coach
fares when available, and reasonable meals and lodging; and (b) overnight
courier and other expedited delivery costs, not to exceed a total of $300
for all deliveries under this Statement without prior approval of Endeavor.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Statement of Work No. 1 as of the date stated
above.
iXL, Inc.
By: /s/ U. Bertram Ellis, Jr.
-------------------------
Name: U. Bertram Ellis, Jr.
---------------------
Title: Chairman and Chief Executive Officer
------------------------------------
Endeavor Technologies, Inc.
By: /s/ W. Michael Heekin
---------------------
Name: W. Michael Heekin
-----------------
Title: Chief Operating Officer
-----------------------
23
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.25
iLEARN DEVELOPMENT AND INTERACTIVE SERVICES AGREEMENT
-----------------------------------------------------
This iLearn Development and Interactive Services Agreement (the
"Agreement") is made and entered into this 17th day of June, 1998, by and
between iXL, Inc., a Delaware corporation ("iXL"), and Endeavor Technologies,
Inc., a Georgia corporation ("Endeavor").
RECITALS
WHEREAS, Endeavor desires to retain iXL to provide interactive services
using iXL's proprietary software iLearn (defined below) in developing:
A. A knowledge management system or engine for on-line Web-MD training that
will include an administration/tracking system (the "Knowledge Management
System"); and
B. Content for multimedia, on-line training courses for healthcare
professionals (the "Web-MD Courses") as described in more detail herein;
and
WHEREAS, iXL is willing to provide such services on the terms described
herein and in performing such services will:
A. Refine and develop a content integration system (the "iLearn Content
Integration System") that will allow iXL to process and convert a large
number of courses relatively quickly for use in a multimedia format on
engines similar to the Knowledge Management System; and
B. Develop certain generic production templates that will be used with the
iLearn Content Integration System (the "iLearn Templates") in processing or
converting existing course content; and
WHEREAS, iXL, with input from Endeavor, will develop a graphic design for
the iLearn Templates for use by Endeavor with the Knowledge Management System
(the "Web-MD Template Design");
NOW, THEREFORE, in consideration of the mutual covenants and benefits
described in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, capitalized terms shall have
-----------
the following meanings:
"CHANGE ORDER" is defined in Section 3 below and shall be substantially in
--------------
the form attached hereto as Exhibit A.
1
<PAGE>
"CODE" means computer programming/formatting code or operating instructions
------
either previously developed by iXL or developed pursuant to this Agreement
and used in connection with iLearn, used to create any portion of the
Custom Works, incorporated into a Custom Work, or used to operate a Custom
Work or a Web Server in connection with a Custom Work (such as, for
example, HTML, Perl, C, C++, Java, Java Script, UNIX Shell, Visual Basic
Script, and VRML code). Code shall include (a) any files necessary to make
forms, check-boxes, and similar functions and underlying technology or
components, such as animation templates, interface programs which link
multimedia and other programs, customized graphics manipulation engines,
and menu utilities, whether in database form or dynamically driven; (b)
navigational elements, including buttons, graphics, synchronization
gateways, links, PERL and CGI scripts; (c) configuration profiles; (d) tags
or code added to templates in order for them to be used; (e) tags that
assign relational attributes to data elements allowing such elements to be
used as "smart content"; (f) dynamic content calls embedded in the HTML;
(g) all code related to the administrative, tracking, and other functions
of the Knowledge Management System; and (h) all source code related to any
of the items described in the proceeding clauses (a) through (f) or
otherwise related to iLearn.
"CONTENT" means all graphics, photographic images, marks, logos, data,
---------
text, and information provided by Endeavor or any party other than iXL, in
connection with the Web-MD Courses. "Content" for the purposes of this
Agreement will not include any Code.
"CUSTOM WORKS" shall mean (a) the Knowledge Management System (excluding
--------------
all Code developed by iXL that relates to the administrative, tracking, and
other functions of the Knowledge Management System); (b) the Content of the
finished multimedia form of the Web-MD Courses produced by iXL under this
Agreement; and (c) the graphic design for the Web-MD Template Design.
"DELIVERABLES" means each form of (a) the Custom Works described as being
--------------
designed hereunder; and (b) the Physician Web Sites described as being made
available to Physicians in the "Project Timetable and Deliverables
Schedule" in the Statement of Work. "Deliverables" for purposes of this
Agreement will not include any Third Party Software, Web Browsers, or
hardware.
"ENDEAVOR MARKS" mean any and all trademarks, logos, or similar matters
----------------
relating to Endeavor or Web-MD provided by Endeavor or its agents to iXL
for use in any Custom Works or otherwise hereunder.
"ERROR" means any error, problem, or defect resulting from: (a) an
-------
incorrect functioning of Code that affects the functionality of a
Deliverable; or (b) any failure of a Deliverable to meet the specifications
in the Statement of Work or the Phase I Engineering Requirements Document
to be developed thereunder.
2
<PAGE>
"FINAL DELIVERABLE" means the final version of any Custom Work that will be
-------------------
delivered to Endeavor after successful completion of iXL's final testing
and quality assurance procedures.
"iLEARN" means iXL's proprietary software for multimedia on-line learning,
--------
course development, and management and shall include (a) iXL's Content
Integration System; (b) the iXL Templates to be developed hereunder; and
(c) all Code related to the administration, tracking, and other functions
of the Knowledge Management System.
"iLEARN CONTENT INTEGRATION SYSTEM" is defined in the recitals of this
-----------------------------------
Agreement.
"iLEARN TEMPLATES" are defined in the recitals of this Agreement.
------------------
"INTERNET" means the world-wide network of computers which provide access
----------
to the World Wide Web.
"KNOWLEDGE MANAGEMENT SYSTEM" is defined in the recitals of this Agreement.
-----------------------------
"PERMITTED USES" shall mean use by Endeavor in providing on-line training
----------------
to health care professionals through (a) use and modification of the
Knowledge Management System, including making it available on the Internet
to such health care professionals; (b) use, display, copying, and
modification of the Web-MD courses; and (c) use of any other courses
developed by other parties for Endeavor for health care professionals
consistent with the terms of this Agreement. iXL will use reasonable
commercial efforts to effect a strategic alliance between Endeavor and the
Thomson Corporation ("Thomson") or terms that are reasonably acceptable to
Endeavor. Endeavor will keep iXL advised of the progress of the
relationships with Thomson and, if possible, work with iXL to develop any
educational or training content. "Permitted Uses" shall not include (i)
any use of iLearn, Code or the Knowledge Management System or (ii) at a
time when fees or other compensation due to iXL hereunder have not been
paid. "Permitted Uses" will not include any decompiling, preparation of
derivative works, or re-engineering of any portion or any version of iLearn
or Code.
"PHASE I DOCUMENT" is defined in Section 6 of this Agreement.
------------------
"STATEMENT OF WORK" shall include Statement of Work No. 1, which is defined
-------------------
in Section 3 below, and any additional Statements of Work attached to this
Agreement with the written consent of both iXL and Endeavor.
"THIRD PARTY SOFTWARE" means any software or other material (for example, a
----------------------
standard authoring program or platform or off-the-shelf software) which is
specifically identified in the Statement of Work as being owned by a
company or individual other than iXL, will be used under this Agreement
pursuant to a license or other arrangement, and is generally available to
the public, including Endeavor, under published licensing terms.
3
<PAGE>
"WEB BROWSER" means software designed to allow interactive access to the
-------------
World Wide Web, including Navigator, Explorer, Mosaic, MacWeb/WinWeb,
Cello, and Lynx.
"WED-MD COURSES" are defined in the recitals of this Agreement.
----------------
"WEB-MD TEMPLATE DESIGN" is defined in the recitals of this Agreement.
------------------------
"WORLD WIDE WEB" means all of the Web Pages that are accessible to a
----------------
typical computer user with appropriate access to the Internet using a Web
Browser.
The definitions in this section will apply to all plural and singular forms
of the defined terms used in this Agreement.
2. DEVELOPMENT AND INTERACTIVE SERVICES.
------------------------------------
(a) DEVELOPMENT OF CUSTOM WORKS. Endeavor hereby retains iXL to develop
---------------------------
the Knowledge Management System, the graphic design for the Web-MD
Template Design, and the Web-MD Courses as described in the attached
Statement of Work. Endeavor agrees to pay iXL fees for such services
as described in the attached Statement of Work in accordance with the
payment terms set forth therein and in this Agreement.
(b) USE OF iLEARN FEATURES. In performing the services required under
----------------------
this Agreement, iXL will use iLearn, the iLearn Content Integration
System, and the iLearn Templates providing the functionality described
in the attached Statement of Work.
(c) VERTICAL MARKETS. iXL will have no obligation under State of Work
----------------
No. 1 or the Phase I Document to be developed thereunder in connection
with adaptation of courses for vertical markets.
3. STATEMENT OF WORK; CHANGE ORDERS; ADMINISTRATION. Attached hereto as
------------------------------------------------
Exhibit B is a more detailed description of the development and interactive
services to be provided hereunder ("Statement of Work No. 1"). If there is
any difference between the terms of the Statement of Work attached hereto
and any other portion of this Agreement, the terms of the Statement of Work
shall control, with the exception of Section 10(a) (concerning iXL's
ownership of iLearn, the iLearn Content Integration System, the iLearn
Templates, and Code) and Section 22 (which confirms that no joint venture,
partnership or other relationship has been created in connection with this
Agreement). In the event of a conflict between Sections 10(a) and 22 of
this Agreement and any language in a Statement of Work, Sections 10(a) and
22 of this Agreement shall control.
4
<PAGE>
Any modification to the specifications in the Statement of Work or to a
Custom Work after acceptance by Endeavor hereunder shall require execution
of a written change order by both parties to this Agreement (a "Change
Order"). Each Change Order complying with this section shall be deemed to
be an amendment to the applicable Statement of Work and will become part of
this Agreement.
In the attached Statement of Work, Endeavor and iXL have each designated a
qualified individual as project manager to serve as the point of contact
for all communications relating to the performance under this Agreement.
4. COMPENSATION; EXPENSES; INVOICES. Endeavor shall pay iXL the amounts set
--------------------------------
forth in the Statement of Work.
Except for amounts due upon execution of this Agreement, iXL will submit to
Endeavor invoices for the amounts payable to iXL as described herein and in
the applicable Statement of Work. Unless otherwise provided in the
applicable Statement of Work, Endeavor will pay to iXL the amount of each
invoice immediately. Invoices will be deemed to have been received on the
earlier of the date of actual receipt or five (5) days after mailing to
Endeavor. If Endeavor disputes an invoice, Endeavor is required to pay the
undisputed portion of the invoice according to the terms of this Section
and to give notice to iXL that specifies in detail the disputed items and
the reason for the dispute.
5. SOURCE OF CERTAIN MATERIALS. The Content for the Web-MD Courses and the
---------------------------
Endeavor Marks used in the Custom Works or otherwise in connection with
this Agreement will be obtained and supplied by Endeavor or its agents
other than iXL.
Development and operation of the Knowledge Management System and the Web-MD
Courses may involve use of Third Party Software. Endeavor will be
responsible for payment for, and entering into appropriate licensing
agreements concerning, use of such Third Party Software unless otherwise in
the Statement of Work.
6. GENERAL SPECIFICATIONS. The initial technical specifications applicable
----------------------
hereunder appear in the attached Statement of Work and will be refined in
the Phase I Engineering Requirements Document to be developed thereunder
(the "Phase I Document").
7. METHOD OF PERFORMING SERVICES. Unless otherwise set forth in the Statement
-----------------------------
of Work, iXL shall determine the method, details, and means of performing
the services to be performed hereunder, subject to the standards set forth
in the Statement of Work. During the Term and thereafter, iXL shall retain
the right to perform any and all services for other clients, including
clients in the healthcare field, and Endeavor shall retain the right to
cause work of the same or a different kind to be performed by its own
personnel or other contractors.
5
<PAGE>
8. TIMETABLE. iXL and Endeavor will develop a mutually agreeable "Project
---------
Timetable and Deliverables Schedule" as contemplated in Section 7 in
Statement of Work No. 1 (the "Project Timetable") as soon as practicable
after execution of this Agreement.
Endeavor will provide to iXL the media elements, materials, timely
approvals, and assistance necessary for iXL to complete the Custom Works
and other services on the Project Timetable. Any delay by Endeavor in
providing materials, approvals, and assistance to iXL shall extend the
deadline for the subsequent tasks of iXL under the Project Timetable by a
period at least equal to Endeavor's delay. In addition, for any Endeavor
obligation described as time-sensitive or critical in the Statement of
Work, failure of Endeavor to meet its deadline will entitle iXL to prepare
a revised Project Timetable based on a realistic estimate of the effect of
the delay on the completion of the project, taking into account other work
scheduled by iXL.
In addition to providing progress reports and arranging project planning
meetings to the extent required under the Project Timetable, iXL agrees
that the current prototype of the Custom Works shall be accessible to
Endeavor throughout the development phase at the URL identified in the
Statement of Work.
9. DELIVERY AND ACCEPTANCE. Unless otherwise provided in the Statement of
-----------------------
Work, the following provisions will apply for delivery and acceptance of
(i) the prototype, alpha and beta versions, and Final Deliverable for the
Knowledge Management System; (ii) the graphic design for the Web-MD
Template Design; and (iii) each of the Web-MD courses developed or
processed hereunder:
(a) Endeavor will accept or reject the initial version and any corrected
version within ten (10) business days of receipt, notifying iXL in
writing of the specific nature of any Error, deficiencies or
inadequacies in the initial draft. If Endeavor does not reject the
initial version or corrected version of any Deliverable in writing in
the manner and time period described herein, it will be deemed to be
accepted.
(b) If Endeavor rejects the initial version or any corrected version, iXL
shall have a period of ten (10) business days from receipt of the
written rejection to correct all Errors, deficiencies or inadequacies
specified by Endeavor and submit a revised version. Unless Endeavor
rejects the revised version in writing in the manner and time period
described in paragraph (a) above, it will be deemed to be accepted.
10. ALLOCATION OF INTELLECTUAL PROPERTY RIGHTS. The various aspects of
------------------------------------------
ownership and rights to use iLearn, the Knowledge Management System, the
iLearn Content Integration System, the iLearn Templates, Code, the Custom
Works, the Endeavor Marks, Third Party Software, and Content of the Web-MD
Courses shall be governed by this Section 10.
6
<PAGE>
(a) RIGHTS CONCERNING iLEARN AND iLEARN FEATURES. iLearn, all Code
--------------------------------------------
relating to the administrative, tracking, and other functions of the
Knowledge Management System, the iLearn Content Integration System,
the iLearn Templates, all other Code, and all rights therein including
any patent, copyright, trademark, trade secret or any other
intellectual property right associated with iLearn, all Code relating
to the administrative, tracking, and other functions of the Knowledge
Management System, the iLearn Content Integration System, the iLearn
Templates, or Code shall be owned exclusively by iXL. Except as stated
herein, Endeavor shall have no claim of ownership in, or any patent,
copyright, trademark, trade secret, or any other intellectual property
rights in connection with, iLearn, all Code relating to the
administrative, tracking, and other functions of the Knowledge
Management System, the iLearn Content Integration System, the iLearn
Templates, or Code, except for the limited license described in
Section 10(d) below. Endeavor (ETI) retains the rights to reuse or
adopt the software. iXL and ETI agree not to give, market or license
the software to any direct competitor of either party. Both parties
will exercise reasonable commercial efforts to jointly market within
the healthcare industry.
(b) RIGHTS IN THE WORKS (WORKS FOR HIRE AND ASSIGNMENT). Subject to
---------------------------------------------------
certain rights of iXL described in Sections 10(a), 10(e), and 10(g)
below, (i) the Custom Works shall constitute "works made for hire" for
Endeavor as that concept is defined in Sections 1010 and 201 of the
Copyright Act of 1976 (Title 17, United States Code); and (ii)
Endeavor shall be considered the author and shall be the copyright
owner of the Custom Works.
If any of the Custom Works does not qualify for treatment as a "work
for hire" or if iXL retains any interest in the Custom Works for any
other reason, iXL hereby grants, assigns and transfers to Endeavor,
ownership of all United States and international copyrights and all
other intellectual property rights in the Custom Works, subject to
certain rights of iXL described in Sections 10(a), 10(e), and 10(g) of
this Agreement. The ownership rights assigned under the preceding
sentence shall include all the rights of use with respect thereof
which are intended to be conferred upon Endeavor under this Agreement,
free and clear of any and all claims for royalties or other
compensation except as stated in this Agreement.
(c) RIGHTS IN CONTENT AND MARKS. Endeavor represents and warrants to iXL
---------------------------
that iXL is authorized to copy, use, modify and publish as
contemplated hereunder (i) all Endeavor Content; and (ii) all Endeavor
Marks and to make derivative works using such content and marks as
contemplated hereunder. iXL acknowledges that the Endeavor Marks and
any goodwill appurtenant thereto shall be owned exclusively by
Endeavor.
(d) LIMITED LICENSE TO ENDEAVOR FOR USE OF iLEARN, iLEARN FEATURES, AND
-------------------------------------------------------------------
CODE. iXL hereby grants to Endeavor a limited, non-exclusive,
----
worldwide
7
<PAGE>
license. Endeavor's limited license hereunder will allow it to use
iLearn, the iLearn Templates, and Code solely for Permitted Uses
hereunder. This limited license gives Endeavor any right to alter, add
to, subtract from, arrange, rearrange, revise, modify, change, adapt,
decompile, or re-engineer iLearn, the iLearn Templates, or any portion
of the Code or to prepare any derivative works therefrom. Endeavor
(ETI) retains the rights to reuse or adopt the software. iXL and ETI
agree not to give, market or license the software to any direct
competitor of either party. Both parties will exercise reasonable
commercial efforts to jointly market within the healthcare industry.
(e) LIMITED LICENSE TO iXL IN CONNECTION WITH ITS PERFORMANCE HEREUNDER.
-------------------------------------------------------------------
Endeavor hereby grants to iXL the limited, nonexclusive right and
license to copy, distribute, transmit, display, perform, create
derivative works, modify and otherwise use and exploit the Custom
Works, any Endeavor Content, and any Endeavor Marks provided hereunder
solely for the purposes of rendering iXL's services and as otherwise
authorized under this Agreement consistent with the Statement of Work.
Such limited right and license shall extend to no other materials and
for no other purposes.
(f) THIRD PARTY SOFTWARE. If applicable, iXL has identified in the
--------------------
Statement of Work certain Third Party Software which may be used in
connection with the Knowledge Management System or otherwise
hereunder. Except to the extent described in the Statement of Work,
iXL represents and warrants to Endeavor that there are no restrictions
or royalty terms applicable to use of such Third Party Software as
contemplated under this Agreement so long as Endeavor pays all
required license fees.
(g) NON-EXCLUSIVE ARRANGEMENT; DEVELOPMENT OF OTHER WEB SITES AND PROJECTS
----------------------------------------------------------------------
BY iXL. iXL shall retain the right to reuse or incorporate iLearn,
------
the iLearn Content Integration System, the iLearn Templates, Code,
including Code developed before or after execution of this Agreement
and including, without limitation, Code used in the Knowledge
Management System for administration, tracking and other functions, in
interactive, multimedia, or other projects for other clients,
including clients in the healthcare field, provided that iXL shall use
for the benefit of other clients the engine for on-line Web-MD
training to be developed hereunder, or the Code developed therefor
after the execution of this Agreement as long as the service is not
provided for a direct competitor of Endeavor or Web-MD. iXL shall
refer any clients seeking to develop online medical training courses
to Endeavor for inclusion in and participation in Web-MD. No fees,
royalties, or other compensation will be owed by iXL to Endeavor in
connection with the right described in this paragraph.
(h) ENDEAVOR'S EXCLUSIVE RIGHTS CONCERNING CONTENT OF WEB-MD COURSES.
----------------------------------------------------------------
Endeavor shall have the exclusive ownership of the Content of the Web-
MD Courses produced hereunder, including the right to modify, re-use,
or create
8
<PAGE>
derivative works based on such Content, subject only to iXL's limited
rights described in Sections 10(e) and 13 of this Agreement.
11. DEFENSE OF INFRINGEMENT ACTIONS. If any action, claim, suit or proceeding
-------------------------------
is brought against Endeavor, alleging that any of the Custom Works, iLearn
Code, or any portion thereof (other than any Endeavor Content, Endeavor
Marks, or Third Party Software) infringes on a patent, copyright,
trademark, trade secret, or other intellectual property rights of any third
party, iXL will defend such action, claim, suit or proceeding at its own
expense and shall indemnify and hold Endeavor harmless from and against all
damages, liabilities, losses, expenses and costs incurred by Endeavor
arising in connection therewith.
If any action, claim, suit or proceeding is brought against iXL, alleging
that any of the Endeavor Content or Endeavor Marks used in the Custom Works
or otherwise by iXL as permitted under this Agreement infringes on a
patent, copyright, trademark, trade secret, or other intellectual property
rights of any third party, Endeavor will defend such action, claim, suit or
proceeding at its own expense and shall indemnify and hold harmless from
and against all damages, liabilities, losses, expenses and costs incurred
by iXL or arising in connection therewith.
12. DELIVERABLES. Within ten (10) business days after Endeavor's approval of
------------
an item described as a Deliverable on the Statement of Work, iXL will
deliver a copy thereof or make the Deliverable available to Endeavor.
Transfer of electronic materials will be accomplished by copying them to
media to be supplied by Endeavor or by modem, FTP transfer, LapLink, or
electronic mail transfer. iXL shall maintain its back-ups and one set of
the Deliverables provided to Endeavor for a period of six (6) months after
the approval of each Final Deliverable.
13. DEMONSTRATION OF CUSTOM WORKS. In connection with the Program, (i) iXL
------------------------------
may list Endeavor as a client of iXL on iXL's Web Site and in all other iXL
marketing materials; (ii) iXL will be authorized to create screen shots of
the Custom Works and incorporate those screen shots into iXL's digital and
print marketing materials; (iii) iXL will be authorized to demonstrate the
Custom Works in presentations to other or potential clients; (iv) a credit
and logo will be included on each of the Custom Works similar to "developed
by iXL" or "developed using iLearn" and (v) unless otherwise provided in
the Statement of Work, iXL may include either a URL or plain text link to
the Custom Works on iXL's web site, which may, at iXL's option include
Endeavor Marks. For the purposes of this Section 13, iXL shall include iXL,
Inc. and its affiliates. In the event that Endeavor substantially changes a
Custom Work using its own employees or a company other than iXL, Endeavor
may notify iXL that the rights under this Section 13 shall not apply to the
new version of that Custom Work.
14. CONFIDENTIAL INFORMATION. In connection with iXL's performance of its
------------------------
duties hereunder, iXL and Endeavor may gain access to certain information
concerning the business, affairs, operations, products, intellectual
property, employees or clients of the
9
<PAGE>
other party to this Agreement that is of a nonpublic, confidential, or
proprietary nature (the "Confidential Information"). Each party after
receiving such Confidential Information (in such role, the "Recipient
Company") agrees on behalf of itself and on behalf of its directors,
officers, employees, and agents (collectively, "Related Parties") that it
will (a) treat the Confidential Information as strictly confidential; (b)
use the Confidential Information solely for the purpose of performing under
this Agreement and not, directly or indirectly, for any other purpose; (c)
not disclose any Confidential Information to any person or entity (other
than its Related Parties to the extent required for performance hereunder)
without the prior written consent of the other party; and (d) not copy any
Confidential Information other than as required to perform under this
Agreement.
For purposes of this Agreement, Confidential Information shall mean
information that is maintained in confidence by the other party to this
Agreement or any of its Related Parties and that is not generally known by
persons other than the other party or its Related Parties or, if known by
any other such persons, is maintained in confidence by them. Confidential
Information shall include, without limitation, the specifications delivered
hereunder to contemplated hereby.
The restrictions in this Section 14 shall not be construed to apply to (i)
information generally available to the public, (ii) information generally
released by the other party to this Agreement without restriction; (iii)
information independently developed by a Recipient Company or its Related
Parties without reliance in any way on confidential information of the
other party to this Agreement or acquired from a third party without
similar restriction, without breach of this Agreement, and with no reason
to believe the third party has breached any similar confidentiality
agreement; or (iv) information that the other party to this Agreement
agrees in writing is approved for the use and disclosure of the Recipient
Company or its Related Parties without restriction.
Notwithstanding the foregoing restrictions, a Recipient Company and its
Related Parties may use and disclose any information to the extent required
by an order of any court or other governmental authority but only after the
other party to this Agreement has been notified in writing sufficiently in
advance of the date of compliance to permit the other party to seek
reasonable protection for such information in connection with such
disclosure.
15. NON-SOLICITATION. During the Term and for two (2) years after the
----------------
termination of this Agreement, neither party shall directly or indirectly,
induce or attempt to induce any employee of the other party to leave the
employ thereof or hire any employee of the employing party, other than an
employee whose employment was terminated by the employing party. For
purposes of this Section 15, "party" shall include the party and its
affiliates.
16. iXL'S REPRESENTATIONS AND WARRANTIES. iXL represents and warrants to
------------------------------------
Endeavor that:
10
<PAGE>
(a) With the exception of any Endeavor Content or Endeavor Marks included
therein, any and all Custom Works delivered to Endeavor under this
Agreement and any and all Physician Web Sites prepared under this
Agreement will be prepared by iXL or its employees or agents on a
"work for hire" basis;
(b) With the exception of any Endeavor Content or Endeavor Marks included
therein, all Deliverables delivered to Endeavor or to Physicians
hereunder do not and will not infringe any patents, copyrights,
trademarks, or other intellectual property rights, including trade
secrets, privacy or similar rights of any person or entity, nor has
any claim of such infringement been threatened or asserted against
iXL;
(c) The Final Deliverable of the Knowledge Management System will
function, on the dates of delivery and acceptance and throughout the
Term of this Agreement with properly configured Web Browsers described
in the Statement of Work;
(d) The Custom Works accepted by Endeavor will comply with the
specifications in the "Scope of Work" section of the Statement of
Work, the Phase I Document, and any Change Orders;
(e) all services iXL performs under this Agreement will be performed in a
workmanlike manner in accordance with applicable industry standards
for development and interactive services; and
(f) iXL represents and warrants to Endeavor that the design of the
Knowledge Management System and the Web-MD Courses developed hereunder
will allow processing of 4-digit years and that their design is and
will be, accordingly, Year 2000 compliant on the server and with the
applications being used when iXL delivers those Custom Works for
acceptance hereunder. iXL does not make any representation or warranty
hereunder concerning (i) the extent to which data maintained by
Endeavor or its agents and any Endeavor Content provided for input
into, or display in connection with, the Custom Works includes 2-digit
or 4-digit years, or (ii) whether the Knowledge Management System and
the Web-MD Courses will operate in a manner that is Year 2000
compliant after any modifications are made to the Endeavor Content, to
the type of equipment on which the Knowledge Management System and the
Web-MD Courses are hosted or accessed, or to the applications used in
connection with the Knowledge Management System or the Webb-MD
Courses.
17. ENDEAVOR'S RESPONSIBILITIES; REPRESENTATIONS AND WARRANTIES;
------------------------------------------------------------
INDEMNIFICATION. Endeavor hereby agrees to take full responsibility for
---------------
obtaining clearances and authorizations from all necessary parties in
connection with the following material to be provided to iXL for use in
connection with the Program: (i) any and all Endeavor Content; and (ii) any
and all Endeavor Marks.
11
<PAGE>
Endeavor represents and warrants to iXL that:
(a) Endeavor is fully authorized to enter into and fully able to perform
under this Agreement, to furnish the materials and to grant the rights
and licenses provided for in this Agreement, and Endeavor is not
subject to any conflicting obligations that will or might prevent
Endeavor from furnishing such materials or from granting that the
rights and licenses provided for in this Agreement.
(b) Endeavor either owns or has the right to authorize the use as
contemplated herein of the Endeavor Content and the Endeavor Marks.
Endeavor further represents and warrants that use of the Endeavor
Content and of the Endeavor Marks as contemplated hereunder does not
and will not infringe upon or violate any patent, copyright,
trademark, trade secret, or other proprietary or intellectual property
rights of any third party.
Endeavor hereby indemnifies and holds iXL harmless from any claims
that use of any such Endeavor Content or Endeavor Marks was infringing
or not authorized.
18. NO REPRESENTATIONS OR WARRANTIES RELATING TO E-COMMERCE. The parties
-------------------------------------------------------
acknowledge and agree that no electronic commerce features will be included
in the Phase I Document. Endeavor has made all decisions concerning whether
and how the Custom Works will operate. If Endeavor decides to add e-
commerce features under subsequent phases, Endeavor accepts the inherent
risks involved with on-line commercial transactions and the responsibility
for approving all encryption and other security measures that will be used.
iXL will not be responsible for, or have any liability in connection with,
the operation of any of the Custom Works with respect to on-line commercial
transactions and shall not have any responsibility or liability for misuse
of or failure to protect credit card or other information provided by
customers of Endeavor in connection with the Customer Works. In addition,
Endeavor assumes the risk of loss and absolves iXL of any liability due to
(a) Endeavor's offering any products for sale in connection with the Custom
Works that constitute "soft" goods, for example, telephone usage cards, for
which customers are given authorization codes that are effective with or
without physical delivery of the goods sold; or (b) Endeavor's maintaining
personal identification numbers or other authorization codes in connection
with any of the Custom Works.
19. TERM AND TERMINATION.
--------------------
Unless terminated earlier pursuant to this Article 19, the term of this
Agreement (the "Term") shall begin on the date hereof (the "Effective
Date"), continue for a one-year period after the Effective Date.
12
<PAGE>
(a) TERMINATION FOR BREACH. In addition to such other rights and remedies
----------------------
as may be available in law or in equity, each party shall have the
right to terminate this Agreement by written notice to the other party
if the other party has materially breached any provision of this
Agreement and such breach remains uncured for a period of ninety (90)
days after written notice of such breach is received by such other
party.
(b) FORCE MAJEURE. Neither party shall be liable to the other for failure
-------------
or delay in the performance of a required obligation if such failure
or delay is caused by strike, riot, fire, flood, natural disaster, or
other similar cause which, in the exercise of prudent business
practices, is beyond such party's reasonable control, provided that
such party gives prompt written notice of such condition and resumes
its performance as soon as possible, and provided further that the
other party may terminate this Agreement if such condition continues
for a period of 180 days.
(c) EFFECT OF TERMINATION; SURVIVAL. Termination will terminate each
-------------------------------
party's obligations under this Agreement (except for the provisions
concerning allocation of intellectual property rights in Section 10,
defense of infringement actions in Section 11, demonstration of the
Custom Works and related matters in Section 13, Confidential
Information under Section 14, non-solicitation of employees under
Section 15, representations and warranties in Sections 16, 17, 18, and
23, indemnification, damages, and attorney's fees in Section 20, and
the relationship of the parties in Section 20, all of which shall
survive termination). Unless otherwise provided in the applicable
Statement of Work, upon termination by either iXL or Endeavor,
Endeavor shall be obligated to compensate iXL for all work to date,
and Endeavor shall be entitled to receive copies of all Deliverables
in existence at that point for which iXL has been fully compensated.
20. INDEMNIFICATION; DAMAGES; ATTORNEY'S FEES. Each party (the "Indemnifying
-----------------------------------------
Party") will indemnify and hold the other party and its affiliates,
officers, directors, employees, agents and representatives harmless from
and against all damages, costs, expenses, and liabilities arising as a
direct result of a breach of this Agreement by the Indemnifying Party,
including without limitation, reasonable attorneys' fees and expenses, and
provided, that, in no event shall either party's liability under this
--------
Section or under Section 11 exceed the total amount of payment due under
the Statement of Work under which Endeavor's claim is made. IN ADDITION,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF ANY KIND OR NATURE,
REGARDLESS WHETHER EITHER PARTY HAS WARNED OR BEEN WARNED OF THE
POSSIBILITY OF ANY SUCH LOSS OR DAMAGE.
21. NOTICE. Any notice required or permitted to be given under this Agreement
------
shall be in writing and deemed given and effective upon delivery if sent by
personal delivery or by
13
<PAGE>
facsimile transmission or five (5) days after posting if sent by certified
United States mail, return receipt requested, with postage pre-paid and
addressed as follows:
If to iXL: iXL, Inc.
1888 Emery Street, N.W.
Atlanta, Georgia 30318
Attn: Doug Pendergast
Fax: (404) 267-3801
With a copy to: Minkin & Snyder
One Buckhead Plaza
3060 Peachtree Road
Suite 1100
Atlanta, Georgia 30305
Attn: James S. Altenbach, Esq.
Fax: (404) 233-5824
If to Endeavor: Endeavor Technologies, Inc.
3399 Peachtree Road, Suite 400
Atlanta, Georgia 30326
Attn: Jeffrey T. Arnold
Fax: (404) 479-7651
A copy to: ETI
3399 Peachtree Road, Suite 400
Atlanta, Georgia 30326
Attn: Michael Heekin
Fax: (404) 479-7651
22. RELATIONSHIP BETWEEN PARTIES. The parties intend that an independent
----------------------------
contractor relationship shall be created by this Agreement. Nothing in this
Agreement shall be construed as establishing a partnership, joint venture,
or employer-employee relationship between the parties.
23. EXCLUSION OF IMPLIED WARRANTIES. iXL has made certain express warranties
-------------------------------
concerning the Custom Works in the preceding sections of this Agreement.
APART FROM THE SPECIFIC WARRANTIES SET OUT HEREIN OR IN THE STATEMENT OF
WORK ATTACHED HERETO, ALL IMPLIED WARRANTIES AS TO MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR CORRESPONDENCE WITH DESCRIPTION, AND ANY OTHER
IMPLIED OR EXPRESS WARRANTIES, ARE HEREBY DISCLAIMED AND EXCLUDED WITH
RESPECT TO ALL GOODS AND SERVICES PROVIDED UNDER THIS AGREEMENT.
14
<PAGE>
24. MISCELLANEOUS.
-------------
(A) BINDING EFFECT. This Agreement shall be binding on, inure to the
--------------
benefit of, and be enforceable by the parties and their respective
heirs, successors and valid assigns.
(B) GOVERNING LAW. This Agreement shall be governed by, construed under
-------------
and enforced in accordance with the laws of the State of Georgia.
(C) COUNTERPARTS. This Agreement may be executed in multiple counterparts
------------
and by facsimile, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(D) ASSIGNMENT. This Agreement may be assigned by either party only with
----------
the prior written consent of the other party, which shall not be
unreasonably withheld.
(E) ENTIRE AGREEMENT. This Agreement, including the attached Statement of
----------------
Work, supersedes and cancels all prior negotiations, communications,
understandings and agreements between iXL and Endeavor. No oral
agreements, before or after execution of this Agreement, shall be
binding until they are in writing and signed by an authorized officer
of both iXL and Endeavor.
(F) SEVERABILITY. In the event that any provision of this Agreement is
------------
held void or unenforceable, the entire balance of this Agreement shall
remain in full force and effect.
(G) HEADINGS. The section and subsection headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-----------------------------------
15
<PAGE>
IN WITNESS WHEREOF, this Agreement was executed by the parties as of the
date first written above.
iXL, Inc.
By: /s/ Steve Floyd
---------------
Name: Steve Floyd
-----------
Title: President, iXL Learning
-----------------------
Sr. Vice President, iXL
Endeavor Technologies, Inc.
By: /s/ W. Michael Heekin
---------------------
Name: W. Michael Heekin
-----------------
Title: Chief Operating Officer
-----------------------
16
<PAGE>
EXHIBIT A
CHANGE ORDER TO STATEMENT OF WORK NO. 1 TO
iLEARN DEVELOPMENT AND INTERACTIVE SERVICES AGREEMENT
BETWEEN iXL, INC. AND ENDEAVOR, INC.
DATED JUNE ___, 1998
(THE "STATEMENT OF WORK")
Date of this Change Order:
---------------------------------------------------
The parties agree that the Statement of Work is hereby modified as follows and
that this Change Order shall be attached as an exhibit to and incorporated in
the Statement of Work.
Resulting changes to "Project Timetable and Deliverables Schedule" in the
Statement of Work.
iXL, Inc.
By: /s/ Steve Floyd
---------------
Name: Steve Floyd
-----------
Title: President, iXL Learning
-----------------------
Sr. Vice President, iXL
Endeavor Technologies, Inc.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
17
<PAGE>
EXHIBIT B
STATEMENT OF WORK NO. 1
TO iLEARN DEVELOPMENT AND INTERACTIVE SERVICES AGREEMENT
BETWEEN iXL, INC. AND ENDEAVOR TECHNOLOGIES, INC.
The following is Statement of Work No. 1 (the "Statement"), made as of June ___,
1998, to the iLearn Development and Interactive Services Agreement (the
"Agreement") executed on June ___, 1998, between iXL, Inc. ("iXL") and Endeavor,
Inc. ("Endeavor"). Except as specifically stated herein, each capitalized term
used in this Statement shall have the same meaning as is assigned to it in the
Agreement.
1. GENERAL DESCRIPTION OF SERVICES AND BASIC TERMS. This agreement describes
-----------------------------------------------
the basic concept for the Endeavor on-line training and education project.
iXL will design and create online training content and provide an
administration/tracking system. While iXL's initial focus will be to
provide accredited CME/CEU courses to enhance Endeavor's healthcare service
(WebMD), iXL also proposes to provide the content management/production
templates and build online content that could be used in Endeavor's
subsequent vertical market initiatives, which are beyond the scope of work
for this Statement.
BASIC TERMS
. This pricing assumes no exclusivity for iLearn or Code which may be used
by iXL for other clients in the healthcare industry. However, Endeavor
will have exclusive rights to the on-line training content itself.
. The initial HTML text-based CME/CEU content will already be accredited.
Any additional accreditation fees required after conversion to online
multimedia courses or for obtaining accreditation for new or original
content will be paid separately by Endeavor or the content provider and
will not be considered part of iXL's compensation hereunder or affect
delivery and acceptance of Web-MD Courses hereunder.
. iXL will use reasonable commercial efforts to effect a strategic
alliance between Endeavor and the Thomson Corporation ("Thomson") on
terms that are reasonably acceptable to Endeavor. Endeavor will keep iXL
advised of the progress of its relationships with Thomson and, if
possible, work with iXL to develop any educational or training content.
. Any electronic commerce solutions required for the online sale of
educational content will be built and charged separately and are beyond
the scope of this Statement of Work.
18
<PAGE>
. Any system development, licensing fees or maintenance costs for the
hardware, system software, or hosting of the online courses for
distribution/delivery will be the responsibility of Endeavor.
. After the initial management/tracking engine and production templates are
built, the content creation model could apply to other vertical markets
with some modification to the original engine/templates. (Such
modification goes beyond the scope of work under this Statement and will
not be included in the Phase I Document).
. Any unique Web-MD specific hardware, software or net work licenses,
equipment and support needed for development will be provided by
Endeavor.
2. PAYMENT. Subject to the terms herein and those contained in the Agreement,
-------
Endeavor agrees to pay iXL the following amounts:
(a) Upon execution of this Agreement, the up front portion of $ ***
the contract amount
(b) Seven monthly payments on remainder of the $ *** $ ***
amount (beginning on June 1, 1998, and ending with
payment on December 1, 1998)
The contract amount under this Statement was based on the following
analysis and estimates of the fixed and variable costs of this project and
performance hereunder by iXL.
- ------------
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
19
<PAGE>
ESTIMATED FIXED COSTS TO BUILD WEB-MD
INTERFACE, iLEARN CONTENT INTEGRATION SYSTEM,
AND KNOWLEDGE MANAGEMENT SYSTEM
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Initial Costs Annual Costs Number of
(updates, enhancements) Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Design and creation of $ *** per vertical $ *** per interface 2*
Endeavor training interface
templates
- ---------------------------------------------------------------------------------------------------
Development of a content $ *** $ *** 2*
integration system to
standardize and streamline
the creation or conversion of
the courses to iLearn format
- ---------------------------------------------------------------------------------------------------
Development and licensing of $ *** $ *** 2*
knowledge management system
for tracking, testing, and
administration of training
content
- ---------------------------------------------------------------------------------------------------
Subtotal $ *** $ *** 2*
- ---------------------------------------------------------------------------------------------------
</TABLE>
- ------------
* At Endeavor's option, iXL will update and enhance the Knowledge and
Management System at the fees set forth above; 2 years from the initial
agreement, Endeavor and iXL will review and possibly renegotiate these fees
for new Internet technology and playback/distribution hardware that will be
available.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
20
<PAGE>
ESTIMATED VARIABLE COSTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Source of Content
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Design and creation of online-enabled Existing/HTML Text-based New Online Courses from
training content existing print content
(i.e. Thomson, Emory, etc.)
- --------------------------------------------------------------------------------------------------
- - Audio, text and graphics only $ ***/hour of training $ ***/hour of training
- --------------------------------------------------------------------------------------------------
- - Video, audio, text, and graphics $ ***/hour of training $ ***/hour of training
- --------------------------------------------------------------------------------------------------
Development of "local" online training $ ***/hour of training $ ***/hour of training
programs (iLearn Templates)
- --------------------------------------------------------------------------------------------------
</TABLE>
In exchange for the payments described above, the scope of work hereunder
shall include:
50 hours of training content in 1998, includes access to iLearn Content
Integration System and Knowledge Management System.
1998 50 hours of course content at $ ***/hour (all audio and all
conversion of existing content)
$ ***/year for converting and building new courses
$ *** for engine/template development
Subtotal: $ ***
Contract total: $ ***
3. START DATE. iXL's services shall begin on the Effective Date.
----------
4. SCOPE OF WORK. The scope and definition of services to be provided under
-------------
the Agreement and this Statement will be more clearly defined in the Phase
I engineering requirements document to be developed by iXL hereunder. At
that time, the allocation of specific resources and costs may be reassigned
with the consent of both parties to meet the terms and scope of the overall
project.
At this time, the parties have agreed on the following description of the
services and functionality to be provided hereunder:
- ------------
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
21
<PAGE>
DETAILED DESCRIPTION OF SERVICES
iLEARN FUNCTIONALITY
The content for CME/CEU training for Web MD will be delivered using Java
Applets and Servlets, allowing for any computer, NC or Desktop, to be able
to access the online training.
The iLearn functionality that will be available to users of each of the Web
MD training courses are:
. Secure Login Environment
. Graphically branded environment
. Online driven Menu Navigator
. Content delivered via timed slides and Streaming Audio
. FAQs
. Glossary
. Threaded discussion
. Accredited Testing
. Search capabilities within the course
KNOWLEDGE MANAGEMENT SYSTEM
There are three distinct components to the future Endeavor Training system:
. The server component that stores the training content and is primarily
responsible for the management and delivery of the content
. The client component, whether browser-based, player-based or some
hybrid thereof, that serves as the user interface that the Trainee
uses for training
. A Knowledge Management System, the component that is primarily
responsible for the tracking of delivered content to the extent
defined in this document. Other responsibilities of Knowledge
Management System include validating users before they begin training
sessions, determining the training modules that are available or
mandatory for a user, etc.
The Knowledge Management System will run as a database application on a
central server. This implies that all end-users must have connectivity, and
the required level of access to the Knowledge Management System.
Endeavor subscribers may also take training from non-hospital locations,
such as their homes, by dialing in. In order to enable the transfer of
content as well tracking data between the server and client, the dial-in
user must remain connected to the Internet for the duration of the Lesson.
The Knowledge Management System administration Web content developed must
work with Netscape Navigator 3.0 and Microsoft Internet Explorer 3.02 or
greater.
22
<PAGE>
The Knowledge Management System will capture and store CME/CEU training
information. The following information should be captured:
. Trainee ID
. Course name
. Course description
. Name of offering institution
. Date/time started
. Date/time ended
. Name of certificate or degree
. Score or grade received
. Credit hours received
. Additional comments
The Knowledge Management System will allow a standard reporting solution
for accreditation purposes for those taking the courses. In addition, it
will provide reports for content publishers and providers to monitor the
usage of their courses.
5. CONTENT AND DESIGN INPUT FROM ENDEAVOR. As soon as possible after
--------------------------------------
execution of the Agreement, Endeavor or its representatives will provide
iXL with the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
MATERIALS TO BE PROVIDED IMMEDIATELY BY ENDEAVOR
(CONTENT, GRAPHICS, MARKS)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Specify Whether for Required Content Detailed Format Party Date Due
Knowledge Management Description Responsible
System, iLearn
Template, Web-MD
Template Design, or
Web-MD Courses
- --------------------------------------------------------------------------------------------------------------
Information on volume Detail concerning Endeavor July 1, 1998
issues concurrent access
- --------------------------------------------------------------------------------------------------------------
Sample of Content Most complex training Endeavor July 1, 1998
- --------------------------------------------------------------------------------------------------------------
Network Topology Information on Endeavor July 1, 1998
whether it is a
controlled environment
- --------------------------------------------------------------------------------------------------------------
Client Platforms All NC machines or Endeavor July 1, 1998
desktops?
- --------------------------------------------------------------------------------------------------------------
Bandwidth How will content be Endeavor July 1, 1998
served?
- --------------------------------------------------------------------------------------------------------------
</TABLE>
6. THIRD PARTY SOFTWARE. Listed below are any items of software from third
--------------------
parties required for any other purpose in connection with the Program until
termination of the Agreement. Unless otherwise noted, license fees for
this software are not included in the payments to iXL under this Statement
and will be the responsibility of Endeavor:
23
<PAGE>
Estimated license fees to be provided by iXL as soon as practicable
after execution of this Agreement.
7. PROJECT TIMETABLE AND DELIVERABLES SCHEDULE. The parties will agree on a
-------------------------------------------
mutually acceptable timetable for major milestone and completion of
Deliverables hereunder as soon as practicable after execution of the
Agreement.
8. COMPLETION DATE. iXL agrees to use all reasonable commercial efforts to
---------------
complete the Custom Works on the timetable agreed to above.
9. DELIVERABLES. "Deliverables" that will be subject to delivery and
------------
acceptance by the Endeavor under the terms of the Agreement are: (a) the
graphic design for the Web-MD Template Design; (b) the Phase I Engineering
Requirements Documents; (c) the Graphics Design, first Prototype (Alpha
version), Prototype with engineering components (Beta version), and Final
Deliverable of the Knowledge Management System; and (d) a draft and Final
Deliverable for each Web-MD Course developed hereunder.
10. DEVELOPMENT SITE. The URL for the development site which Endeavor may use
----------------
to review progress under this Statement is: [URL]
11. PROJECT CONTACTS.
----------------
iXL Project Manager:
Endeavor Project Manager:
12. SITE INDEXING. The payment to iXL under this Statement does not include
-------------
any submissions to index sites or other similar marketing services.
13. iXL'S HOURLY RATES AND OUT-OF-POCKET EXPENSES. Any work performed by iXL
---------------------------------------------
for Endeavor that is outside the Scope of Work hereunder will be paid for
by Endeavor on a time and materials basis in accordance with iXL's then
current rate card.
Endeavor further agrees to reimburse iXL for certain out-of-pocket
expenses as follows: (a) travel with the Endeavor's previous approval,
based on coach fares when available, and reasonable meals and lodging;
and (b) overnight courier and other expedited delivery costs, not to
exceed a total of $300 for all deliveries under this Statement without
prior approval of Endeavor.
24
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Statement of Work No. 1 as of the date stated
above.
iXL, Inc.
By: /s/ Steve Floyd
---------------
Name: Steve Floyd
-----------
Title: President, iXL Learning
-----------------------
Sr. Vice President, iXL
Endeavor Technologies, Inc.
By: /s/ W. Michael Heekin
---------------------
Name: W. Michael Heekin
-----------------
Title: Chief Operating Officer
-----------------------
25
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.26
LICENSE AGREEMENT
This License Agreement ("Agreement") is between Network Computer, Inc., 1000
Bridge Parkway, Redwood Shores, California 94065 ("NCI") and Endeavor
Technologies, Inc., 3399 Peachtree Road, Suite 400, Atlanta, Georgia 30326
("ENDEAVOR"). The parties agree as follows:
1. DEFINITIONS
1.1 "INTERNET SERVICES" shall mean the Internet applications and services
offered to Subscribers (as defined below) by ENDEAVOR through ENDEAVOR's
server or by ENDEAVOR through an ISP Partner's server, which applications
and services utilize the NCI Server Software and which applications and/or
services are described on Exhibit A.
1.2 "ISP PARTNER" shall mean a third party internet service provider that has
previously entered into a separate written license agreement with NCI for
the NCI Server Software to provide the Internet Services to Subscribers to
whom Subscriptions are granted by ENDEAVOR. ISP Partners shall have no
right to grant Subscriptions hereunder.
1.3 "HOSPITALS" shall mean non-contiguous in-patient medical facilities or
single main in-patient medical facilities with Satellites that are validly
licensed to provide the Web-MD Hospital Services (as defined below)
pursuant to Hospital Sublicense Agreements (as defined below).
"Satellites" shall mean in-patient medical facilities which in total have
less than fifty percent (50%) of the bed capacity of the main in-patient
medical facility and share the same computer data network as the main in-
patient medical facility.
1.4 "NC CARD" shall mean a card which may be distributed to Subscribers through
which Subscribers are authorized to access the Internet Services. ENDEAVOR
shall control the look of the NC Cards provided to ENDEAVOR provided that
such look shall be subject to the review and approval of NCI consistent
with the then-current NCI NC Card Elements and Usages guidelines (which
approval shall not be unreasonably withheld). ENDEAVOR acknowledges that,
once activated for a Subscriber, NC Cards may not be reused and/or
reactivated for another Subscriber.
1.5 "NCI APPROVED NETWORK COMPUTER DEVICE" shall mean a network computer device
distributed under a Network Computer Manufacturer's and/or ENDEAVOR's label
which is approved by NCI as conforming to the applicable NCI set-top box
design standards and contains a validly licensed copy of the software
identified as NCI Client Software on Exhibit A hereto.
1.6 "NETWORK COMPUTER MANUFACTURERS" shall mean third parties, excluding ISP
Partners, authorized in advance by NCI who manufacture and distribute NCI
Approved Network Computer Devices.
1.7 "NCI SOFTWARE" shall mean, collectively, the NCI Custom Connect
Server(TM) software (the "NCI Server Software") described on Exhibit A
attached hereto, as may be amended by the parties from time to time; the
user guides and manuals for use of the software provided to ENDEAVOR
hereunder ("Software Documentation"); and Updates provided to ENDEAVOR
hereunder. Unless expressly provided herein, references to the NCI Server
Software shall not include the SDKs or Betas (as defined below).
1.8 "PROGRAM ERRORS" shall mean one or more reproducible deviations in the NCI
Server Software or SDKs from the applicable functional specifications set
forth in the Software Documentation or SDK Documentation, as applicable.
1.9 "SDKS" shall mean, collectively, (i) NCI Server Software development kit,
(ii) the NCI TV Navigator software development kit, which shall be modified
by NCI to connect to ENDEAVOR's, a Hospital's, and/or ISP Partner's
website, (iii) the NCI TV Navigator Content development kit; (iv) the user
guides and manuals for use of the SDKs provided to ENDEAVOR hereunder ("SDK
Documentation"); and (v) Updates provided to ENDEAVOR hereunder. Unless
expressly provided herein, references to the SDKs shall not include the
Betas (as defined below).
1.10 "SUBSCRIBER" shall mean each end user customer that acquires a
Subscription from ENDEAVOR to access the NCI Server Software using the NCI
Client Software through the NC Card and/or through an NCI Approved Network
Computer Device as part of the Internet Services or Web-MD Hospital
Services (as defined below). ENDEAVOR shall only grant Subscriptions to
Subscribers located in the Territory.
1
<PAGE>
1.11 "SUBSCRIPTION" shall mean a nonexclusive, nontransferable, cancelable
right granted by ENDEAVOR to a Subscriber to access the NCI Server
Software using the NCI Client Software through the NC Card and/or through
an NCI Approved Network Computer Device solely as part of the Internet
Services or Web-MD Hospital Services.
1.12 "TECHNICAL SUPPORT" shall mean the technical support provided by NCI
solely to ENDEAVOR under NCI's standard policies in effect during the term
hereof, a current copy of which is attached hereto as Exhibit C.
1.13 "TERRITORY" shall be the United States, Canada and Mexico.
1.14 "UPDATE" shall mean minor updates of the NCI Server Software and/or SDKs
which are made generally commercially available by NCI to its customers for
no additional fee.
1.15 "WEB-MD HOSPITAL SERVICES" shall mean the Internet applications and
services offered to Subscribers in the Hospital's in-patient rooms by a
Hospital through such Hospital's server which applications and services are
tailored for Hospital patients utilize the NCI Server Software and which
applications and/or services are described on Exhibit A.
2. LICENSES GRANTED/HARDWARE ACQUISITION ASSISTANCE
2.1 NCI SDK LICENSES
Subject to the terms and conditions of this Agreement, NCI hereby grants to
ENDEAVOR a license to use, solely at the address set forth above, five (5)
NCI Custom Connect Server SDK developer seats, three (3) NCI TV Navigator
SDK developer seats and the NCI TV content development kit in accordance
with the terms and conditions set forth herein and in the applicable SDK
license agreements as included with the applicable SDK, and incorporated
herein by reference. ENDEAVOR shall have no rights to market and/or
distribute the SDKs.
2.2 NCI SERVER SOFTWARE LICENSE
Subject to the terms and conditions of this Agreement and in consideration
of the fees set forth herein, NCI grants ENDEAVOR a nonexclusive,
nontransferable license in the Territory to use NCI Server Software:
(a) for internal testing and demonstration purposes solely in
connection with the Internet Services and Web-MD Hospital Services on
NCI Approved Network Computer Devices;
(b) to copy, install, and use copies of the NCI Server Software for
purposes of deployment of the Internet Services on NCI Approved
Network Computer Devices (and deployment of the Web-MD Hospital
Services on NCI Approved Network Computer Devices in connection with
2.2(c) below), and to grant Subscriptions to access the NCI Server
Software to Subscribers optionally through NC Cards and as set forth
herein (including, without limitation, as set forth in Section 2.2);
and
(c) to sublicense (subject to Hospital Sublicense Agreements
described in Section 2.5 below) solely to Hospitals the right to (i)
to copy, install, and use copies of the NCI Server Software for
purposes of deployment of Web-MD Hospital Services on NCI Approved
Network Computer Devices in such Hospital's in-patient rooms and (ii)
to grant Subscriptions to allow Subscribers who are patients in the
Hospital to access the Web-MD Hospital Services through the NCI Server
Software.
NCI shall deliver to ENDEAVOR's address following execution of this
Agreement, a master copy of the NCI Server Software and the SDKs. ENDEAVOR
shall be responsible for, and shall ensure that the Hospitals are
responsible for, copying and deploying the NCI Server Software as part of
the Internet Services and the Web-MD Hospital Services, respectively.
ENDEAVOR shall, and shall require each Hospital to, grant Subscriptions to
Subscribers in the Territory with respect to the NCI Software solely
through written agreements (e.g., written shrinkwrap or electronic wrapper
agreements) as provided in this paragraph ("Subscription Agreements").
Upon NCI's request, ENDEAVOR shall, and shall require that each Hospital,
provide NCI with copies of ENDEAVOR's standard Subscription Agreement.
Every Subscription Agreement shall include, at a minimum, contractual
provisions which:
1. Prohibit title to the NCI Software from passing to the Subscriber or
any other party;
2. Disclaim, to the extent permitted by applicable law, NCI's liability
for any damages, whether direct, indirect, incidental or consequential,
arising from the use of the NCI Software;
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
2
<PAGE>
3. Prohibit the reverse engineering, disassembly or decompilation of the
NCI Software by either the Subscriber or any other party; and
4. Require the Subscriber, at the termination of the relevant
Subscription Agreement, to discontinue use of the NCI Software and either
destroy the NCI Software or return the NCI Software to ENDEAVOR.
ENDEAVOR shall not grant access to the NCI Server Software through any
process other than Subscription as described herein.
2.3 ADDITIONAL LICENSE
Subject to the terms and conditions of this Agreement and in consideration
of the fees specified in Article 4, NCI grants ENDEAVOR a nonexclusive,
nontransferable license in the Territory, and ENDEAVOR hereby agrees, to
distribute to Subscribers, directly or indirectly through ISP Partners and
Hospitals, the resulting NCI client software and updates thereto created by
ENDEAVOR using the NCI TV Navigator SDK pursuant to the applicable SDK
license.
2.4 BETA LICENSE
NCI may, at its discretion deliver ENDEAVOR experimental versions of the
NCI Software or SDKs in the form of beta or pre-release versions ("Betas")
subject to the following terms:
(i) Subject to all restrictions set forth in this Agreement, NCI
grants solely to ENDEAVOR a limited, non-exclusive and non-transferable
license to use the Betas solely at address set forth above and only for the
purpose of evaluating and testing such Betas. Except as expressly set forth
herein, the license granted to ENDEAVOR in this Section 2.4 ("Beta
License") shall not be for any other purpose, and any other use by ENDEAVOR
shall constitute a material breach of this Agreement.
(ii) ENDEAVOR will supply NCI with an evaluation report every two
(2) weeks, with the first evaluation report due two (2) weeks after NCI
delivers the applicable Beta (collectively, the "Evaluation Reports"). The
Evaluation Reports shall set forth in reasonable detail the tests
performed, the results of those tests, problems or deficiencies encountered
in the testing process, suggested solutions to the problems and recommended
action for modification of the Betas based on ENDEAVOR's test results. The
Evaluation Reports shall be delivered via electronic mail to the following
email address: [email protected] (or as otherwise agreed to by the parties).
(iii) ENDEAVOR shall cease using and destroy all copies of any Betas
provided hereunder upon the earlier of (a) NCI's delivery of the production
version of such software; (b) NCI's written notice to ENDEAVOR; and (c)
termination of this Agreement.
2.5 HOSPITAL SUBLICENSE AGREEMENTS
All sublicenses by ENDEAVOR to Hospitals shall be subject to written
agreements executed by ENDEAVOR and such Hospital ("Hospital Sublicense
Agreements") and shall include the minimum terms and conditions set forth
on Exhibit G hereto and terms at least as restrictive and protective of
NCI's rights as the following Sections: 2.2 ("NCI Server Software
License"), 2.5 ("Hospital Sublicense Agreements"), 2.6 ("Title"), 2.7
("Limitations on Use"), 6.4 ("Effect of Termination"), 7 ("Indemnities,
Warranties, Remedies"), and 8 ("General Terms"). ENDEAVOR shall, and shall
require each Hospital to, protect NCI's proprietary rights, shall enforce
each Hospital Sublicense Agreement, and shall use, and shall require each
Hospital to use, commercially reasonable efforts to enforce each
Subscription Agreement. ENDEAVOR shall notify NCI, and shall require each
Hospital to notify ENDEAVOR, in writing of any breach of a material
obligation under a Hospital Sublicense Agreement or a Subscription
Agreement affecting the NCI Software, the SDKs, Software Documentation or
SDK Documentation of which ENDEAVOR or the Hospital, as applicable, is
aware or should be aware. ENDEAVOR will reasonably cooperate, and will
require each Hospital and ISP Partner to reasonably cooperate, with NCI in
any legal action to prevent or stop unauthorized use, reproduction or
distribution of the NCI Software, SDKs, Software Documentation or SDK
Documentation.
2.6 TITLE
NCI shall retain all title, copyright, and other proprietary rights in the
NCI Logo, the NCI Software, the SDKs, the Betas, and any modifications or
translations thereof. None of ENDEAVOR, the Hospitals, the ISP Partners or
the Subscribers acquire any rights in the NCI Logo, the NCI Software, the
SDKs or the Betas other than those specified in this Agreement.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
3
<PAGE>
2.7 LIMITATIONS ON USE
A. ENDEAVOR shall not use or duplicate the NCI Software, the SDKs or the Betas
for any purpose other than as specified in this Agreement or make the NCI
Software, the SDKs or the Betas available to unauthorized third parties.
ENDEAVOR shall not, and shall ensure that the Hospitals do not, cause or
permit the reverse engineering, disassembly, or decompilation of the NCI
Software. ENDEAVOR may copy the NCI Server Software, the SDKs and the
Betas solely for archival or backup purposes.
B. In marketing the Internet Services and Web-MD Hospital Services, ENDEAVOR
shall not, and shall take commercially reasonable steps to ensure that the
Hospitals do not, engage in any deceptive, misleading, or illegal practices
that may be detrimental to NCI or to the NCI Software and shall not make
any representations, warranties, or guarantees to Subscribers concerning
the NCI Software that are inconsistent with or in addition to those made in
this Agreement or by NCI.
C. ENDEAVOR shall not, and shall take commercially reasonable steps to ensure
that the Hospitals do not, make any representations with respect to the
content and/or ownership of the NCI Software, the SDKs or the Betas.
D. ENDEAVOR shall, and shall require that the Hospitals, provide the following
disclaimer to each Subscriber: This service/product is not fault-tolerant
and is not designed, manufactured or intended for use or resale as on-line
control equipment in hazardous environments requiring fail-safe
performance, such as in the operation of nuclear facilities, aircraft
navigation or communications systems, air traffic control, direct life
support machines, or weapons systems, in which the failure of this product
could lead directly to death, personal injury, or severe physical or
environmental damage.
2.8 HARDWARE ACQUISITION ASSISTANCE
***
3. TECHNICAL SERVICES
3.1 TECHNICAL SUPPORT
NCI shall provide only to ENDEAVOR the Technical Support services with
respect to the NCI Software and SDKs specified in Exhibit B and in Exhibit
C which are ordered by ENDEAVOR, subject to the payment by ENDEAVOR of the
fees set forth in Exhibit B and pursuant to the procedures set forth in
Section 4.2 below. ENDEAVOR is solely responsible for providing all
technical support to Hospitals and all Subscribers.
3.2 TRAINING OR CONSULTING SERVICES
NCI will provide training services as described in Exhibit B hereto,
subject to NCI's terms and conditions in effect when ordered by ENDEAVOR
and subject to NCI's training class schedule. All training shall be held at
NCI's facilities. NCI or NCI's agent will provide consulting services as
described in Exhibit B hereto, subject to NCI's or NCI's agent's terms and
conditions in effect when ordered by ENDEAVOR and subject to availability
of appropriate personnel of NCI or NCI's agent.
4. FEES AND PAYMENTS
4.1 LICENSE FEE, REPORTS AND FORECASTS
A. LICENSE FEE
In consideration of the rights granted by NCI to ENDEAVOR under this
Agreement, ENDEAVOR shall pay NCI the non-cancellable, non-refundable
license fees and activation fees as set forth in Exhibit B hereto.
ENDEAVOR shall not be relieved of its obligation to pay fees owed to NCI by
the nonpayment of such fees by Subscribers. All activation fees due to NCI
hereunder shall be paid to NCI Quarterly in arrears based on the number of
active Subscribers during the previous Quarter.
The parties acknowledge and agree that ENDEAVOR is free to determine
unilaterally its own price to all Subscribers, Hospitals, and ISP Partners.
B. REPORTS
Within thirty (30) days after the end of each calendar quarter ("Quarter"),
ENDEAVOR shall send NCI a report detailing (a) the total number of active
Subscribers for each month during such Quarter broken out by ENDEAVOR, ISP
Partner and Hospital; (b) the Max Subs Current Quarter (as defined below).
(c) the Max Subs Previous Quarters (as defined below), (d) the Net-New
Subscriptions (as defined below), (e) the number of NC Cards activated by
ENDEAVOR during such Quarter broken out by ENDEAVOR, ISP Partner and
Hospital;(f) the total fees broken out by types of fees (e.g., license
fees, fees for Technical Support, etc.) due (the "Subscription Report").
At the time it provides this report, ENDEAVOR shall also pay all fees due
under such Subscription Report.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
4
<PAGE>
C. NC CARD FORECASTS
In addition, beginning with the first day of the third month after the
month of the Effective Date and on the first day of each month thereafter,
ENDEAVOR shall provide to NCI (i) written rolling forecast information with
regard to the anticipated volume of NC Cards that ENDEAVOR anticipates
purchasing over the following four (4) month period; (ii) the amount of NC
Cards that ENDEAVOR commits to purchase on the date sixty (60) days from
the relevant report (the "Commitment Amount") provided that each such
Commitment Amount must be at least five thousand (5,000) NC Cards; and
(iii) the final artwork (as described in Section 1.4) for the NC Cards for
the relevant Commitment Amount. All artwork for NC Cards requires a lead
time of at least sixty (60) days. The amount payable by ENDEAVOR with
regard to each Commitment Amount shall be non-cancelable. ENDEAVOR shall
purchase and pay for the NC Card fees specified in Section 4.2.C for each
Commitment Amount within thirty (30) days following delivery of such
Commitment Amount.
4.2 TECHNICAL SUPPORT FEES, SERVICES FEES AND NC CARD FEES
A. TECHNICAL SUPPORT FEES
ENDEAVOR shall pay to NCI the non-cancellable, non-refundable Technical
Support fees set forth in Exhibit B hereto in accordance with the terms set
forth therein. In the event that ENDEAVOR discontinues Technical Support
for the NCI Server Software and/or any of the SDKs and subsequently desires
to reinstate Technical Support, such reinstatement is subject to NCI's
Technical Support reinstatement fees in effect on the date Technical
Support is re-ordered.
B. SERVICE FEES
ENDEAVOR shall pay NCI the non-cancellable, non-refundable service fees for
training and consulting services set forth in Exhibit B. For any agreed
upon services to be provided by NCI at any location other than NCI
facilities, ENDEAVOR shall reimburse NCI for reasonable travel and other
expenses incurred, including meals.
C. NC CARD FEES
NCI will provide the NC Cards to ENDEAVOR at NCI's cost for such NC Cards;
plus any costs associated with all artwork (as described in Section 1.4) on
the NC Card including additional charges required for any artwork over and
above four (4) colors; and NCI administrative expenses (such as shipping
charges) related to procurement of the NC Cards for ENDEAVOR.
4.3 GENERAL PAYMENT TERMS
Fees and royalties due by ENDEAVOR shall not be subject to set off for any
claims against NCI. Except as otherwise provided in this Agreement, all
payments made shall be in U.S. currency, at NCI at the following address:
Network Computer, Inc., Dept. 44224, P.O. Box 44000, San Francisco,
California, 94144-4224 or at such other address as NCI may from time to
time indicate by proper written notice hereunder, and shall be made without
deductions based on any taxes or withholdings, except where such deduction
is based on gross income. Any amounts payable by ENDEAVOR hereunder which
remain unpaid after the due date shall be subject to a late charge equal to
1.25% per month from the due date until such amount is paid. ENDEAVOR
agrees to pay applicable media and shipping charges. All invoices shall be
sent to ENDEAVOR at the address set forth above Attn: Chief Financial
Officer (Rob Draughon). All wire transfer information shall be sent to
ENDEAVOR at the address set forth above Attn: Chief Financial Officer (Rob
Draughon).
4.4 TAXES
Fees listed in this Agreement do not include taxes; if NCI is required to
pay sales, use, value-added, or other similar taxes based on the licenses
granted under this Agreement or the Subscriptions granted by ENDEAVOR, then
such taxes shall be billed to and paid by ENDEAVOR.
5. RECORDS
5.1 RECORDS INSPECTION
ENDEAVOR shall maintain correct and accurate books and records in
connection with activity under this Agreement. Such records shall include,
without limitation, the information required in or related to the
Subscription Reports. NCI may audit the relevant books and records of
ENDEAVOR to ensure compliance with the terms of this Agreement upon
reasonable notice to ENDEAVOR. Any such audit shall be conducted during
regular business hours at ENDEAVOR's offices and shall not interfere
unreasonably with ENDEAVOR's business activities. If an audit reveals that
ENDEAVOR has underpaid fees to NCI, ENDEAVOR shall
5
<PAGE>
be invoiced for such underpaid fees and ENDEAVOR shall remit payment of
such invoice within thirty (30) days of the date of such invoice. If the
results of such audit establish that inaccuracies in ENDEAVOR's books and
records have resulted in an underpayment to NCI in an audited Quarter of
more than the greater of five percent (5%) of the amount actually owed per
audited Quarter or fifteen thousand dollars ($15,000) of the amount
actually owed per audited Quarter, ENDEAVOR shall bear the reasonable out-
of-pocket costs of the audit as to that Quarter.
6. TERM AND TERMINATION
6.1 TERM
This Agreement shall become effective on the Effective Date of this
Agreement and shall continue for a period of three (3) year(s) (the
"Term"), unless terminated as provided in the Agreement. Any renewal of
this Agreement shall be subject to renegotiation of terms and fees.
6.2 TERMINATION FOR MATERIAL BREACH
Either party may terminate this Agreement upon forty-five (45) days written
notice to the other party of a material breach of this Agreement, the
breaching party fails to cure such material breach during the forty-five
(45) day period following delivery of such notice. Such notice shall
include, in reasonable detail, the alleged material breach, and the start
and end dates of the forty-five (45) day cure period. Any termination of
this Agreement shall not relieve either party of its obligations as
specified in Section 6.4.
6.3 FORCE MAJEURE
Neither party shall be liable to the other for failure or delay in the
performance of a required obligation if such failure or delay is caused by
strike, riot, fire, flood, natural disaster, or other similar cause which,
in the exercise of prudent business practices, is beyond such party's
reasonable control, provided that such party gives prompt written notice of
such condition and resumes its performance as soon as possible, and
provided further that the other party may terminate this Agreement if such
condition continues for a period of 180 days.
6.4 EFFECT OF TERMINATION
A. Upon expiration of this Agreement or termination by ENDEAVOR of this
Agreement in accordance with Section 6.2, (i) all ENDEAVOR's rights to
market and grant Subscriptions to new Subscribers for the NCI Software
shall cease, and (ii) provided ENDEAVOR continues to pay to NCI the
Technical Support Fees as set forth in Section 2 of Exhibit B, all licenses
granted herein to ENDEAVOR shall continue solely for the purposes of
providing the Internet Services and Web-MD Hospital Services to Post
Termination Subscribers for the duration of the term of such Post
Termination Subscribers' Subscription Agreement. A "Post Termination
Subscriber" shall mean a Subscriber who, as of the effective date of such
expiration or termination of this Agreement, has executed, and is not in
breach of, a valid non-renewable Subscription Agreement. As of the
effective date of such expiration or termination of this Agreement by
ENDEAVOR, all Subscriptions shall become non-transferable and shall not be
permitted to be transferred from one Subscriber to another Subscriber.
Thereafter, upon the termination of any Subscription Agreement, ENDEAVOR
shall require the applicable Subscriber to cease using the NCI Software.
After all of the Subscription Agreements have terminated, all licenses
granted herein shall terminate and ENDEAVOR shall cease using the NCI
Software, the SDKs, and the Betas and shall require the Hospitals to cease
using the NCI Software and shall either destroy or return to NCI, at NCI's
option, all copies in all forms of the NCI Software, the SDKs, and the
Betas.
B. Upon termination by NCI of this Agreement, in accordance with Section 6.2
all licenses granted herein shall terminate and ENDEAVOR's rights to
fulfill, market and grant Subscriptions for the NCI Software (as set forth
in this Agreement) shall cease, and ENDEAVOR shall cease using the NCI
Software, the SDKs, and the Betas and shall require all Subscribers and
Hospitals to cease using the NCI Software and shall either destroy or
return to NCI, at NCI's option, all copies in all forms of the NCI
Software, the SDKs, and the Betas.
C. The termination of this Agreement or any license shall not limit either
party from pursuing any other remedies available to it, including
injunctive relief, nor shall such termination relieve ENDEAVOR's obligation
to pay all fees that have accrued or that ENDEAVOR has agreed to pay under
this Agreement, any ordering document under this Agreement, or any
Subscription Reports required.
D. The parties' rights and obligations under
6
<PAGE>
Sections 2.6, 2.7 and Articles 4, 5, 6, 7 and 8, excluding 8.3, shall
survive termination of this Agreement.
7. INDEMNITY, WARRANTIES, REMEDIES
7.1 INFRINGEMENT INDEMNITY
NCI will defend and indemnify ENDEAVOR against a claim that the NCI Server
Software or the SDKs infringe a copyright, provided that: (a) ENDEAVOR
notifies NCI in writing within ten (10) days of ENDEAVOR's receipt of a
written claim and within a reasonable period after notification of a verbal
claim; (b) NCI has sole control of the defense and all related settlement
negotiations; and (c) ENDEAVOR provides NCI with the reasonable assistance,
information and authority necessary to perform NCI's obligations under this
Section. Reasonable out-of-pocket expenses incurred by ENDEAVOR in
providing such assistance will be reimbursed by NCI. NCI shall have no
liability for any claim of infringement based on (x) use of a superseded or
altered release of the NCI Software if the infringement would have been
avoided by the use of a current unaltered release of the NCI Software which
NCI provides to ENDEAVOR, (y) the combination, operation or use of the NCI
Software or SDKs with software, hardware or other materials not furnished
by NCI if such infringement would have been avoided by the use of the NCI
Software or SDKs without such software, hardware or other materials; or (z)
related to the Betas in any way. In the event that portions of the NCI
Software are held or are believed by NCI to infringe, NCI shall have the
option, at its expense, to (i) modify the NCI Software to be noninfringing;
(ii) obtain for ENDEAVOR a license to continue using the NCI Software. If
NCI is unable to effect either (i) or (ii) above, NCI may, in its
discretion, terminate the license for the infringing NCI Software and
refund to ENDEAVOR all amounts paid hereunder with respect to the
infringing NCI Software, reduced on a straight-line pro-rata basis over
five (5) years from the Effective Date. This Section states NCI's entire
liability and ENDEAVOR's exclusive remedy for infringement.
7.2 WARRANTIES AND DISCLAIMERS
NCI warrants only to ENDEAVOR for *** (***) days from delivery of the NCI
Software that it will be capable of performing the functions substantially
as described in the Software Documentation when operated as described in
the Software Documentation. NCI warrants only to ENDEAVOR that the
Technical Support and consulting services will be performed consistent with
generally accepted industry standards, which shall be valid for ninety (90)
days from performance of service. THE SDKS AND THE BETAS ARE PROVIDED "AS
IS." THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY, NONINFRINGEMENT, AND FITNESS FOR A PARTICULAR PURPOSE.
ENDEAVOR shall not make any warranty on behalf of NCI.
7.3 EXCLUSIVE REMEDIES
For any breach of the warranty for the Technical Support services and
consulting services, ENDEAVOR's sole and exclusive remedy, and NCI's entire
liability, shall be, in NCI's discretion, either the reperformance of the
applicable services or a refund of the portion of the fees paid to NCI
applicable to such services. For any breach of the warranty for the NCI
Software, ENDEAVOR's sole and exclusive remedy, and NCI's entire liability,
shall be, at NCI's option: correction of the Program Errors that cause
breach of the warranty, or termination of this Agreement and a refund to
ENDEAVOR of the portion of the fees paid to NCI with respect to affected
NCI Software.
7.4 INDEMNIFICATION OF NCI
ENDEAVOR will defend and indemnify NCI against: (a) all claims and damages
to NCI arising from any use by ENDEAVOR, ISP Partners, Hospitals and/or
Subscribers of any product or service not provided by NCI but used in
combination with the NCI Software if such claim would have been avoided by
the exclusive use of the NCI Software; and (b) all claims and damages to
NCI caused by ENDEAVOR's failure to include the required contractual terms
set forth in Section 2.5 ("Hospital Sublicense Agreements") hereof in each
Hospital Sublicense Agreement, or ENDEAVOR's or a Hospital's failure to
include in each Subscription Agreement the required contractual terms set
forth in Section 2.2; (c) all claims and damages to NCI caused by a
Hospital's breach of any of the applicable provisions required by 2.6
("Hospital Sublicense Agreements") or Exhibit G hereto;
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
7
<PAGE>
and all claims and damages to NCI caused by a Subscriber's breach of the
Subscription Agreement.
8. GENERAL TERMS
8.1 NONDISCLOSURE
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the NCI Software, the SDKs,
the Betas, the terms and pricing under this Agreement, and all other
information clearly identified as confidential.
A party's Confidential Information shall not include information that: (a)
is or becomes a part of the public domain through no act or omission of the
other party; (b) was in the other party's lawful possession prior to the
disclosure and had not been obtained by the other party either directly or
indirectly from the disclosing party; (c) is lawfully disclosed to the
other party by a third party without restriction on disclosure; or (d) is
independently developed by the other party. In the event a party is
required by law to disclose the other party's Confidential Information, the
receiving party shall provide the disclosing party with reasonable notice
to allow the disclosing party to obtain a protective order. In the event
that ENDEAVOR is required to disclose the terms of this Agreement pursuant
to the rules of the Securities Exchange Commission ("SEC"), ENDEAVOR shall
promptly notify NCI in writing and ENDEAVOR shall use best efforts to
obtain confidential treatment of the terms which NCI reasonably designates
as confidential. All pricing terms, including without limitation,
activation fees, license fees, Technical Support fees and training and
consulting services fees shall be deemed confidential terms.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of two years
after termination of this Agreement. The parties agree, unless required by
law, not to make each other's Confidential Information available in any
form to any third party. Each party agrees to take all reasonable steps to
ensure that Confidential Information is not disclosed or distributed by its
employees or agents in violation of the terms of this Agreement.
8.2 COPYRIGHTS
The NCI Software, the SDKs and the Betas are copyrighted by NCI or its
licensor(s). ENDEAVOR shall, and shall require that the Hospitals, (i)
retain all NCI copyright notices on the NCI Software, the SDKs and the
Betas used by ENDEAVOR under the licenses granted hereunder, and (ii)
comply with all third party licensor restrictions, a current list of which
is set forth on Exhibit E hereto. ENDEAVOR shall include a reproduction of
NCI's copyright notice on all copies of the NCI Software, the SDKs and the
Betas deployed by ENDEAVOR in whatever form.
Such notices (i) shall be placed on the bottom of the introductory splash
screen for the Internet Services and the Web-MD Hospital Services in a
readable font which may be smaller than the font for the rest of the page
and (ii) shall provide a click-through to a page where all relevant notices
may be included. Notwithstanding any copyright notice by ENDEAVOR to the
contrary, the copyright to the NCI Software included in any such Internet
Services and the Web-MD Hospital Services shall remain in NCI.
8.3 TRADEMARKS
NCI trademarks, logo and tradename set forth on Exhibit A hereto
(collectively, the "NCI Logo") belong to NCI; ENDEAVOR will have no rights
in such marks except as expressly set forth herein and as specified in
writing from time to time. ENDEAVOR shall use and is hereby granted a non-
transferable, non-exclusive, non-assignable and restricted license (with
the right to sublicense solely to the Hospitals) during the term of this
Agreement and in the Territory, to use the NCI Logo on all uses and/or
copies of the NCI Software and Software Documentation made in accordance
with this Agreement and on all marketing and promotional materials
referencing the NCI Software, Internet Services or Web-MD Hospital
Services, subject to NCI's prior written approval in each instance.
ENDEAVOR shall use, and shall require that the Hospital use, the NCI Logo
shall be in accordance with (i) NCI's Signature Guidelines in effect at the
time as updated from time to time by NCI, a current version of which is set
forth in Exhibit D attached hereto and (ii) NCI's branding requirements in
effect at the time as updated from time to time by NCI. . ENDEAVOR shall
not, and shall ensure that the Hospitals do not, use the NCI Logo or any
NCI trademarks or any other
8
<PAGE>
mark likely to cause confusion with the NCI trademarks as any portion of
ENDEAVOR's
9
<PAGE>
tradename, trademark for the NCI Software, or trademark for any other
products of ENDEAVOR. All such usage shall inure to NCI's benefit. ENDEAVOR
shall not, and shall ensure that the Hospitals do not, register any NCI
Logos without NCI's express prior written consent. ENDEAVOR shall not, and
shall ensure that the Hospitals do not, contest NCI's ownership of, or
rights in, the NCI Logos. From time to time, at NCI's request, ENDEAVOR
shall, and shall require the Hospitals to, supply a reasonable number of
samples of the NCI Software, Software Documentation, and all other
materials bearing any of the NCI Logo so that NCI may conduct quality
control reviews to ensure that usage of the NCI Logo complies with the
terms of this section including, without limitation, NCI's trademark
policies, branding requirements and other NCI standards for such usage. In
the event that NCI notifies ENDEAVOR that ENDEAVOR or a Hospital(s) has
failed to comply as set forth herein, ENDEAVOR shall, and/or shall ensure
that the Hospital, suspend distribution and use of the NCI Software until
ENDEAVOR has satisfied NCI that the foregoing requirements have been met.
ENDEAVOR agrees with respect to each registered trademark of NCI, to
include, and shall require the Hospitals to include, in each advertisement,
brochure, or other such use of the trademark, the trademark symbol "circle
R" and the following statement:
______is a registered trademark of Network Computer, Inc., Redwood Shores,
California Unless otherwise notified in writing by NCI, ENDEAVOR agrees
with respect to the NCI Logo trademark of NCI and to every other trademark
of NCI, to include, and shall require the Hospitals to include, in each
advertisement, brochure, or other such use of the trademark, the symbol
"TM" and the following statement:
__(NCI Logo/trademark)__ is a trademark of Network Computer, Inc., Redwood
Shores, California
ENDEAVOR shall not, and shall ensure that the Hospitals do not, market the
NCI Software in any way which implies that the NCI Software is the
proprietary product of ENDEAVOR or of any party other than NCI. NCI shall
not have any liability to ENDEAVOR or the Hospitals for any claims made by
third parties relating to ENDEAVOR's or the Hospitals use of NCI's
trademarks.
8.4 PUBLIC ANNOUNCEMENTS
NCI and ENDEAVOR shall cooperate with each other so that each party may
issue a public announcement concerning this Agreement within thirty (30)
days following the Effective Date of this Agreement; provided, that both
parties approve any such public announcement in writing prior to its
release. Such public announcement shall include a quote attributable to an
executive officer of each party.
8.5 MARKETING
NCI will use reasonable good faith efforts to participate and/or facilitate
the promotional activities set forth on Exhibit F.
8.6 RELATIONSHIP BETWEEN PARTIES
In all matters relating hereto, ENDEAVOR and NCI will act as independent
contractors to each other. The relationship between NCI and ENDEAVOR is
that of licensor/licensee. Neither party will represent that it has any
authority to assume or create any obligation, express or implied, on behalf
of the other, nor to represent the other as agent, employee, franchisee, or
in any other capacity. Nothing in this Agreement shall be construed to
limit either party's right to independently develop or distribute software
which is functionally similar to the other party's product, so long as
proprietary information of the other party is not included in such
software.
8.7 ASSIGNMENT
Neither party may assign or otherwise transfer, any rights under this
Agreement without the other party's prior written consent, such consent not
to be unreasonably withheld, except in the event of a merger, acquisition
or sale of all or substantially all of such party's assets in which case
prior written consent is not required for such assignment. The parties
acknowledge and agree that it is reasonable for a non-assigning party to
withhold consent in the event the assigning party wishes to assign this
Agreement to a direct competitor of the non-assigning party.
Notwithstanding the foregoing, prior written consent will not be required
in the event of an initial public offering.
8.8 NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given when
deposited in first class mail to the address of the applicable party listed
above. To expedite order processing,
10
<PAGE>
ENDEAVOR agrees that NCI may treat documents faxed by ENDEAVOR to NCI as
original documents; nevertheless, either party may require the other to
exchange original signed documents.
ENDEAVOR will promptly notify NCI's legal department, (Attention: General
Counsel)in writing of any claim or proceeding involving the NCI Software
that comes to its attention and any material change in the management or
control of ENDEAVOR.
8.9 GOVERNING LAW
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the substantive and procedural laws of the
State of California without regard to the conflicts of laws provisions
thereof.
8.10 SEVERABILITY, WAIVER
In the event any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions of this Agreement will remain in
full force and effect. The waiver by either party of any default or breach
of this Agreement shall not constitute a waiver of any other or subsequent
default or breach.
8.11 EXPORT
ENDEAVOR agrees to, and shall require the Hospitals to, comply fully with
all relevant export laws and regulations of the U.S and any other
applicable jurisdiction, as promulgated from time to time ("Export Laws")
to assure that the NCI Software, the SDKs, the Betas and any direct product
thereof, are not (a) exported, directly or indirectly, in violation of
Export Laws; and (b) intended to be used for any purposes prohibited by the
Export Laws, including, without limitation, nuclear, chemical, or
biological weapons proliferation.
8.12 LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES FOR LOSS OF PROFITS, REVENUE, DATA OR USE,
INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN
CONTRACT OR TORT, EVEN IF THE OTHER PARTY OR ANY OTHER PERSON HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NCI'S LIABILITY FOR A CLAIM FOR
DAMAGES SHALL IN NO EVENT EXCEED ***. NCI'S CUMULATIVE LIABILITY FOR
DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED US$***. The provisions of this
Agreement allocate the risks between NCI and ENDEAVOR. NCI's pricing
reflects this allocation and the limitation of liability specified herein.
8.13 SEGMENTATION
ENDEAVOR acknowledges that any services acquired hereunder were bid by NCI
separately from any NCI products. ENDEAVOR understands that ENDEAVOR has
the right to acquire any services without acquiring any NCI products, and
that ENDEAVOR has the right to acquire the services and any NCI products
separately.
8.14 ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties and
supersedes all prior or contemporaneous agreements or representations,
written or oral, concerning the subject matter of this Agreement. The Beta
Program and Evaluation Agreement shall be incorporated herein by reference,
and to the extent that there is any conflict between the terms of this
Agreement and the terms of the Beta Program and Evaluation Agreement, the
terms of the Beta Program and Evaluation Agreement shall control. This
Agreement may not be modified or amended except in a writing signed by an
authorized representative of each party; no other act, document, usage or
custom shall be deemed to amend or modify this Agreement. It is expressly
agreed that the terms of this Agreement shall supersede the terms in any
ENDEAVOR purchase order or other ordering document.
9. YEAR 2000
For a period three (3) years following the Effective Date, NCI warrants
only to ENDEAVOR that the NCI Software will include year fields of data
codes that are in a four digit format and calculations which permit the
software to accurately handle date information for the change of the
century.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
11
<PAGE>
The Effective Date of this Agreement shall be May 29, 1998.
------
<TABLE>
<S> <C>
Executed by ENDEAVOR: Executed by NCI:
Authorized Signature: /s/ W. Michael Heekin Authorized Signature: /s/ David Roug
---------------------- ---------------
Name: W. Michael Heekin Name: David Roug
-------------------------------------- --------------------------------
Title: Chief Operating Officer Title: Chief Executive Officer
------------------------------------- -------------------------------
</TABLE>
12
<PAGE>
EXHIBIT A
NCI SERVER SOFTWARE:
- -------------------
NCI CUSTOM CONNECT SERVER(TM) software, Version 1.2
Designated System: Sun Solaris
SDKS:
- ----
NCI CUSTOM CONNECT SERVER(TM)SDK Version 1.2
Designated System: Sun Solaris
Development Seats - 5
NCI TV Navigator SDK, Version 1.1
Designated System: Windows NT
Development Seats - 3
NCI TV Navigator Content Development Kit
Designated System: Windows NT
INTERNET SERVICES/WEB-MD HOSPITAL SERVICES
- ------------------------------------------
Internet Services and Web-MD Hospital Services shall each refer to those
Internet, and ENDEAVOR's services (utilizing the NCI Server Software) and
content accessible by Subscribers. "NCI Client Software" shall mean the NCI TV
Navigator(TM) software. ENDEAVOR hereby represents and warrants that the
Internet Services and the Web-MD Hospital Services (and related customer
support) provided to Subscribers by ENDEAVOR shall be of equal or greater
quality, availability, and responsiveness as all other similar services provided
by or on behalf of ENDEAVOR (and in no case less than the comparable industry
standards) and (ii) shall be consistent with NCI's reasonable criteria as
determined by periodic quality evaluations performed from time to time by or on
behalf of NCI based on industry standards and comparable applications and
services, if any.
NCI LOGO
- --------
NCI(TM)
n|c design logo
NCI Custom Connect Server(TM)
NCI TV Navigator(TM)
13
<PAGE>
EXHIBIT B
ROYALTIES AND FEES
1. LICENSE FEES
------------
A: INTERNET SERVICES:
A.1 INITIAL LICENSING: ENDEAVOR shall pay to NCI a non-refundable, non-
cancellable license fee of *** dollars ($***) upon execution of this Agreement
via wire transfer for:
(i) The three (3) NCI TV Navigator SDK developer seats;
(ii) The five (5) NCI Custom Connect Server SDK developer
seats; and
(iii) The one-time activation fee for the first *** (***)
Subscriptions granted by ENDEAVOR to access the Internet
Services, through ENDEAVOR's server or through an ISP
Partner's server
A.2 ADDITIONAL SDK DEVELOPER SEATS: ENDEAVOR may license additional NCI TV
Navigator SDK developer seats and additional NCI Server Software SDK developer
seats at a cost of $*** each, not including Technical Support with respect
thereto.
A.3 SUBSCRIPTION ACCOUNTING:
At any time during the Term of this Agreement, ENDEAVOR shall license from NCI
at least as many Subscriptions as ENDEAVOR grants to Subscribers of the
Internet Services at any given time. However, once a Subscription activation fee
has been paid by ENDEAVOR to NCI, that Subscription can be re-assigned to a new
Subscriber if the original Subscriber's Subscription Agreement has been
terminated and the new Subscriber executes a Subscription Agreement..
"Max Subs Current Quarter" shall mean the maximum number of active Subscriptions
during the just-ended Quarter. "Max Subs Previous Quarters" shall mean the
greater of the maximum number of Subscriptions activated during any previous
Quarter, or ***. "Net-New Subscriptions" shall mean Max Subs Current Quarter
*less* Max Subs Previous Quarters. If Net-New Subscriptions is greater than
zero, then an additional Subscription activation fees shall be due to NCI as
outlined below. If New-New Subscriptions is equal to or less than zero at any
time, then no fees are due to NCI and no refunds shall be provided to ENDEAVOR.
A.4 ADDITIONAL SUBSCRIPTION ACTIVATION FEE: When the number of Subscriptions
exceeds ***, and during the term of this Agreement, ENDEAVOR may activate
additional Subscriptions to access the Internet Services as follows:
(i) Through an ISP Partner's Server: For any Subscriptions
activated by ENDEAVOR to access the Internet Services
through the ISP Partner's servers, ENDEAVOR shall pay NCI a
non-refundable, non-cancellable activation fee in the amount
of *** dollars ($***) per Net-New Subscription.
(ii) Through ENDEAVOR's Servers: For any Subscriptions
activated by ENDEAVOR to access the Internet Services
through ENDEAVOR's servers, ENDEAVOR shall pay NCI a non-
refundable, non-cancellable activation fee as follows:
14
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
MAX SUBS PREVIOUS ACTIVATION FEE PER EACH NET-NEW
QUARTERS SUBSCRIPTION
<S> <C>
-----------------------------------------------------------------
*** $***
-----------------------------------------------------------------
*** $***
-----------------------------------------------------------------
*** $***
-----------------------------------------------------------------
*** $***
-----------------------------------------------------------------
</TABLE>
In addition, one (1) NCI Server Software training class
credit (one (1) ENDEAVOR customer service and technical
services employee per class credit) shall be provided for
every *** Net-New Subscription activation fees paid after
the first *** Subscriptions, and subject to a maximum of ten
(10) training class credits.
B. ENDEAVOR's WEB-MD HOSPITAL SERVICES:
For the licenses granted pursuant to Section 2.2(c), ENDEAVOR shall pay NCI the
non-refundable, non-cancellable license fees set forth below. ENDEAVOR shall
receive one (1) NCI Server Software training class credit (one (1) ENDEAVOR
customer service and technical services employee per class credit) for every
third NCI Server Software license licensed by ENDEAVOR.
(i) ***dollars ($***) for a NCI Server Software license which
supports the first seven hundred fifty (750) Average Daily
Census in each Hospital; and
(ii) ***dollars ($***) for each additional NCI Server Software
license supporting five hundred (500) Average Daily Census
in the same Hospital.
"Average Daily Census" shall mean the daily average count of in-patients at a
particular Hospital for the prior calendar year.
2. TECHNICAL SUPPORT FEES
----------------------
A. In consideration for the Technical Support to ENDEAVOR provided hereunder,
ENDEAVOR shall pay to NCI a fee in the amount of *** dollars ($***) per
Subscriber per month, which amounts shall be paid to NCI Quarterly in arrears.
B. In consideration for the Technical Support to ENDEAVOR provided hereunder
for the NCI Server Software, ENDEAVOR shall pay to NCI a non-refundable, non-
cancellable annual fees, in advance, equal to *** percent (***%) of license fees
for NCI Server Software as set forth in this Exhibit B (which fees shall be pro-
rated as applicable).
3. SERVICE FEES
------------
CONSULTING SERVICES:
ENDEAVOR commits to pay to NCI a non-refundable, non-cancellable
consulting services fee in the amount of ***dollars ($***) within the
one (1) year immediately following the Effective Date of the
Agreement. All such consulting services provided by NCI shall be
charged against the $*** commitment set forth above at $***per day
plus reasonable travel and expenses for a standard consultant, which
amounts shall be payable within thirty (30) days of the date of NCI's
invoice. At the end of such one (1) period, ENDEAVOR shall pay to NCI
the difference, if any, between $***and the amounts invoiced for such
consulting services. All such consulting services shall be mutually
agreed upon in writing in advance and shall be provided by NCI or
NCI's designated agent and all such consulting services shall expire
if ENDEAVOR fails to use them within eighteen (18) months after the
Effective Date: As part of such consulting services, NCI may establish
a consulting team in Atlanta or another city designated by NCI, in
NCI's sole discretion, to reasonably assist with consulting services
mutually agreed upon by NCI and ENDEAVOR. The following services are
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
15
<PAGE>
examples of consulting services that may be provided by NCI and are in
no way to be construed as deliverables by NCI:
. Development of technical rollout plans, including: Setting up the Web-
MD ENDEAVOR "NCI Custom Connect Server(TM) Hospital Package" for
deployment of in-hospital, Web-MD NC-based services;
. Implementation of and support for ENDEAVOR's customer
service systems;
. Implementation of and support ENDEAVOR's billing systems;
. Implementation of and support ENDEAVOR's enrollment and
system maintenance;
. Connectivity to existing legacy systems such as hospital
accounting, food service, etc.
NCI shall provide additional consulting services at NCI's then current
standard rates, which amounts shall be payable within thirty (30) days
of the date of NCI's invoice.
TRAINING: In the event ENDEAVOR requires training in addition to the
NCI Server Software training set forth in Section 1 of this Exhibit B,
NCI will provide such additional training for a fee of ***dollars
($***) per person per training class credit to ENDEAVOR's customer
service and technical personnel, which amounts shall be payable within
thirty (30) days of the date of NCI's invoice.
4. *** Pricing
-----------
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
16
<PAGE>
EXHIBIT C
TECHNICAL SUPPORT
1. Maintenance and SDK Updates. In consideration of the Technical Support Fees
----------------------------
set forth in Exhibit B, during the one year term of this Technical Support
addendum, NCI will provide to ENDEAVOR (i) any Updates to the NCI Server
Software and the SDKs made generally commercially available by NCI and (ii) the
Technical Support set forth in Article II below.
2. Technical Support. NCI will provide ENDEAVOR with NCI's back-end technical
------------------
support services, as further described herein.
a) Back-end Support. NCI will provide back-end support to ENDEAVOR for
----------------
Programs Errors not resolved by ENDEAVOR pursuant to ENDEAVOR's support policies
and in accordance with subsection (b) below. This support includes efforts to
identify defective source code and to provide corrections, workarounds and/or
patches to correct Program Errors. NCI will provide ENDEAVOR with a telephone
number and an e-mail address which ENDEAVOR may use to report Program Errors
during NCI's local California business hours (8am-5pm Pacific time). For
priority 1 or 2 failures, ENDEAVOR agrees to notify NCI via both telephone and
e-mail. ENDEAVOR will identify two (2) members of its customer support staff and
an alternate to act as the primary technical liaisons responsible for all
communications with NCI's technical support representatives. Such liaisons will
have sufficient technical expertise, training and/or experience for ENDEAVOR to
perform its obligations hereunder. Within one (1) week after the Effective Date,
ENDEAVOR will designate its liaison(s). Notification will be in writing and/or
e-mail to NCI. ENDEAVOR may substitute contacts at any time by providing to NCI
one (1) week's prior written and/or electronic notice thereof.
NCI will use all reasonably diligent efforts to correct significant Program
Errors that ENDEAVOR identifies, classifies and reports to NCI and that NCI
substantiates. NCI may reclassify Program Errors if it reasonably believes
that ENDEAVOR's classification is incorrect. ENDEAVOR will provide
sufficient information to enable NCI to duplicate the Program Error before
NCI's response obligations will commence. NCI will not be required to
correct any Program Error caused by (a) ENDEAVOR's incorporation or
attachment of a feature, program, or device to the NCI Software, or any
part thereof; (b) any nonconformance caused by accident, transportation,
neglect, misuse, alteration, modification, or enhancement of the NCI
Software; (c) the failure to provide a suitable installation environment;
(d) use of the NCI Software for other than the specific purpose for which
the NCI Software are designed; (e) use of the NCI Software; (f) ENDEAVOR's
use of defective media or defective duplication of the NCI Software; or (g)
ENDEAVOR's failure to incorporate any Updates previously provided to
ENDEAVOR that corrects such Program Errors.
Provided Program Errors reports are received by NCI during NCI's local
California business hours (8am-5pm Pacific time), NCI will use its
commercially reasonable efforts to communicate with ENDEAVOR about the
Program Error via telephone or e-mail within the following targeted
response times:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Priority Failure Description Response Time
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Severe Impact (functionality disabled): errors which result in a lack of 24 California business hours
application functionality or cause severe system failure (8am-5pm Pacific time)
-------------------------------------------------------------------------------------------------------------------------------
2 Degraded Operations: errors causing malfunction of non-critical functions 5 working days
-------------------------------------------------------------------------------------------------------------------------------
3 Minimal Impact attributes and/or options to utility programs do not Future release, on business
operate as stated justifiable basis
-------------------------------------------------------------------------------------------------------------------------------
4 Enhancement Request When applicable
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NCI will use all reasonably diligent efforts to resolve each significant
Program Error by providing either a reasonable workaround, an object code
patch, or a specification plan for how NCI will address the problem and an
estimate of how long it will take to rectify the defect. NCI reserves the
right to charge ENDEAVOR additional fees at its then-standard rates for
services performed in connection with reported Program Errors which are
later determined to have been due to hardware or software not supplied by
NCI. Notwithstanding the foregoing, NCI has no obligation to perform
services in connection with Program Errors (i) resulting from hardware or
software not supplied by NCI; or (ii) which occur in the NCI Software
release which is not the then-current release.
b) Front-line Support. ENDEAVOR, and not NCI, will provide front-line, or
first and second level, technical support to Subscribers. Such support
includes call receipt, call screening, installation assistance, problem
identification and diagnosis, efforts to create a repeatable demonstration
of the Program Error and, if applicable, the distribution of any defective
media or minor updates. ENDEAVOR agrees that any end user documentation
distributed by ENDEAVOR will clearly and conspicuously state that end users
should call ENDEAVOR for technical support for the Internet Services/ Web-
MD Hospital Services and NCI Software. NCI will have no obligation to
furnish any assistance, information or Software Documentation with respect
to the NCI Software to any Subscriber or other end user. If NCI customer
support
17
<PAGE>
representatives are being contacted by a significant number of ENDEAVOR's
Subscribers or other end users then, upon NCI's request, ENDEAVOR and NCI
will cooperate to minimize such contact.
18
<PAGE>
EXHIBIT D
NCI BRANDING REQUIREMENTS
1. On ENDEAVOR's default root page, default personalized root page, and
bookmark lists, the NCI n|c design logo or other NCI Logo designated by NCI as a
selectable icon shall be placed in a prominent location and shall be visible at
all times without further navigation and, if the background is dynamic, must be
visible for at least 30 seconds each visit or until the user leaves the page. A
prominent location is defined as not requiring the user to scroll or otherwise
navigate in order to see the logo on entrance to the root page.
2. The content provided through the NCI selectable icon or NCI Content Portals
(TV Bar) shall not be blocked or restricted in any fashion except by user-
elected restrictions (e.g. parental control filters).
3. On all NC Cards distributed by ENDEAVOR targeting an NCI Approved Network
Computer Device, the NC Card will display the NCI n|c design logo or other NCI
Logo designated by NCI on the top side of the card in accordance with the then-
current NCI signature guidelines.
4. On all major marketing and communication materials presented by ENDEAVOR
that specifically target NCI Approved Network Computer Device ENDEAVOR will
include the NCI n|c design logo or other NCI Logo designated by NCI in a
prominent location in accordance with the then-current NCI signature guidelines.
5. Whenever a navigational or application toolbar is displayed in conjunction
with a NCI application, the NCI Logo shall be present on such toolbar. The NCI
Logo that is displayed will be presented in a form that is in accordance with
the NCI signature guidelines.
19
<PAGE>
EXHIBIT E
THIRD PARTY RESTRICTIONS
The following third party restrictions apply to Internet Services and Web-MD
Hospital Services to the extent that they incorporate any of the third party
software listed below. Any capitalized terms that are not defined herein have
the same definition as in the Agreement.
1. REGARDING BITSTREAM SOFTWARE - In the event that the Internet Services/Web-MD
----------------------------
Hospital Services include Bitstream software sublicensed from NCI, you must
comply with the following restrictions and obligations:
1.1. Licensee must reproduce each Bitstream copyright, trademark and/or
patent notice, as applicable in its entirety, in the same location as
it appears, in electronic or printed form, on the NCI Software or
SDK(s) as delivered to Licensee.
2. REGARDING RSA SOFTWARE - In the event that the Internet Services/Web-MD
----------------------
Hospital Services includes RSA software sublicensed from NCI, you must comply
with the following restrictions and obligations:
2.1. Licensee should include within the splash screens, user documentation,
printed product collateral, product packaging and advertisements for
the Internet Services/ Web-MD Hospital Services, the RSA "Licensee
Seal" from the form attached hereto as Appendix "A" along with a
statement that the Internet Services/ Web-MD Hospital Services contains
the RSA Software. Licensee agrees not to remove or destroy any
proprietary, trademark or copyright markings or notices placed upon or
contained within the software or documentation provided by NCI.
2.2. Licensee must in all proposals and agreements with the United States
government identify and license the Internet Services/ Web-MD Hospital
Services, including any RSA object Code, as follows: (i) for
acquisition by or on behalf of civilian agencies, as necessary to
obtain protection as "commercial computer software" and related
documentation in accordance with the terms of NCI's or Licensee's
customary license, as specified in 48 C.F.R. 12.212 of the Federal
Acquisition Regulations and its successor regulations, or (ii) for
acquisition by or on behalf of units of the Department of Defense, as
necessary to obtain protection as "commercial computer software" as
defined in 48 C.F.R. 227.7014(a)(1) of the Department of Defense
Federal Acquisition Regulation Supplement (DFARS) and related
documentation in accordance with the terms of NCI's or Licensee's
customary license, as specified in 48 C.F.R. 227.7202.1 of DFARS and
its successor regulations.
2.3. In the event that Licensee includes an "About Box" or similar reference
in the Internet Services/ Web-MD Hospital Services, Licensee agrees to
insert and maintain in the "About Box" (1) the RSA "Licensee Seal"
indicated in Appendix "A", and (2) a hypertext link to RSA's homepage
at an RSA-designated URL (currently www.rsa.com), which logo and
pointer shall appear on the first page of such "About Box" and in no
less prominent location and size than any other third party logo
included therein.
2.4. Licensee further agrees to include in any Security Advisory made
available to third parties, whether in printed or electronic format,
the RSA "Licensee Seal" indicated in Exhibit "A" and a brief
description of the RSA software sublicensed hereunder and its relevant
applicability to the subject matter of the Security Advisory. For the
purposes of the Agreement, "Security Advisory" means any tutorial, FAQ
or similar manual or instructional documentation describing data
security used by or available in the Internet Services/Web-MD Hospital
Services.
3. REGARDING HEADSPACE SOFTWARE - In the event that the Internet Services/Web-MD
----------------------------
Hospital Services include Headspace MIDI software or music content
sublicensed from NCI, you must comply with the following restrictions and
obligations:
3.1. In the event that the Internet Services/Web-MD Hospital Services
includes an "About Box" or similar reference, Licensee must include
references to Headspace, Inc. and the RMF logo, as well as a link to
the Headspace, Inc. web site, in the area designated by Licensee for
such "About Box". The RMF logo is included as Appendix "B", attached
hereto, and incorporated herein by this reference.
4. REGARDING PROGRESSIVE NETWORKS SOFTWARE - In the event that the Internet
---------------------------------------
Services/Web-MD Hospital Services includes Progressive Networks software
sublicensed from NCI, you must comply with the following restrictions and
obligations:
4.1. Licensee must use Progressive Networks' (PN) marks in accordance with
PN's usage policies attached hereto as Appendix "C" and incorporated
herein by this reference. Such marks may be used solely in connection
with Licensee's advertising, marketing and distribution of the Internet
Services/ Web-MD Hospital Services incorporating PN's software.
4.2. To the extent the Internet Services/Web-MD Hospital Services includes
an implementation of an "About Box" or similar reference, Licensee must
include a reference to "Progressive Networks" and "Real Audio" as
follows:
"The RealAudio Player is included under license from Progressive
Networks, Inc. Copyright 1995-1997, Progressive Networks, Inc.
RealAudio and the RealAudio logo are registered trademarks of
Progressive Networks, Inc. All rights reserved."
4.3. Licensee acknowledges that use, duplication or disclosure of the PN
software by the Government is subject to restrictions set forth in
subparagraphs (a) through (d) of the Commercial Computer-Restricted
Rights clause at FAR 52.227-19 when applicable, or in subparagraph
(c)(1)(ii) of the Rights in Technical Data and Computer Software clause
at DFARS 252.227-7013, or in similar clauses in the NASA FAR
supplement. Contractor/manufacturer is Progressive
20
<PAGE>
Networks, Inc.; 1111 Third Avenue; Suite 500; Seattle, Washington,
98101.
5. REGARDING JAVA SOFTWARE--In the event that the Internet Services/Web-MD
-----------------------
Hospital Services include Java Software from Sun Microsystems, Inc. ("Sun")
or Javasoft, you must comply with the following restrictions and obligations:
5.1. The Internet Services/Web-MD Hospital Services containing Java software
that you distribute shall include in the documentation, or in other
terms and conditions of sale, notices substantially similar to those
contained on and in the NCI Software, SDKs and related documentation.
You shall require an end user license agreement for each unit of the
product providing access to the Internet Services/Web-MD Hospital
Services shipped, including without limitation, warranty, limitation of
liability, restricted rights for government, no transfer of title, High
Risk Activities, etc. If you use a package design for the Internet
Services/Web-MD Hospital Services, such package design shall include an
acknowledgment of Sun as the source of the Java software and such other
notices as specified below.
5.2. Java Applets in any hypertext markup language (HTML) or standard
generalized markup language (SGML)-based browser which is shipped as
part of the Internet Services/Web-MD Hospital Services shall use the
Document Type Definition ("DTD") as specified by Sun Microsystems..
5.3. The following disclaimer must be provided to each user of the Internet
Services/Web-MD Hospital Services:
This product is not fault-tolerant and is not designed, manufactured or
intended for use or resale as on-line control equipment in hazardous
environments requiring fail-safe performance, such as in the operation
of nuclear facilities, aircraft navigation or communications systems,
air traffic control, direct life support machines, or weapons systems,
in which the failure of this product could lead directly to death,
personal injury, or severe physical or environmental damage.
5.4. The following notices and acknowledgments must be provided to each user
of the Internet Services/Web-MD Hospital Services as described below:
5.4.1. On Licensee's web site that describes such Internet
Services/Web-MD Hospital Services, Licensee must include the
following: Java logo, Java Applet Interoperability Mark*, and
message "Powered by Java (TM) from Sun Microsystems, Inc." with
a hypertext link to `http://java.sun.com'.
5.4.2. In any Internet Services documentation, splash screen or other
location where notices, attribution and proprietary markings
are listed, Licensee must include the following: Java logo,
Java Applet Interoperability Mark, the message "Powered by
Java(TM) technology from Sun Microsystems, Inc." and applicable
copyright notices associated with a hypertext link to the
`http://java.sun.com'. The splash screen, if any, should be a
minimum size of twelve (12) square inches.
5.5. Licensee shall not remove any copyright notices, trademark notices or
other proprietary legends of Sun or its suppliers contained on or in
the software or any documentation provided by NCI. Licensee shall
comply with all reasonable requests by Sun to include Sun's copyright
and/or other proprietary rights notices on the Internet Services/Web-MD
Hospital Services, documentation or related materials as specified in
this section.
5.6. Licensee must comply with Sun's standard Trademark and Logo Usage
Policies. Specifically, Sun's marks must only be used in the text of
any materials (not in headlines or graphics) and in the same typesize
and typestyle as the surrounding text; the marks must be used as
adjectives, not as nouns; and Sun's marks must be identified with the
applicable (R) or (TM) notices and attributed to Sun in an appropriate
location in any materials, as stated above. Information regarding Sun's
web logo trademark policies can be found at
www.sun.com/logos/trademark.html.
*The Java Applet Interoperability Mark has not been designed by Sun
Microsystems, Inc. but may include such designation as "Java 1.0 Applet
Compatible." Sun may change such logo, message and hypertext link on reasonable
advance notice.
21
<PAGE>
APPENDIX "A" TO EXHIBIT E
RSA SEAL AND TRADEMARKS
RSA Licensee Seal:
[LOGO]
You are also permitted to use the following RSA trademarks, as applicable, in
ads, product packaging, documentation or collateral materials, provided that you
use the correct trademark designator, depicted below, and identify RSA as the
owner of the mark.
RC2(R) Symmetric Block Cipher, RC4(R) Symmetric Stream Cipher
RC5(TM) Symmetric Block Cipher
BSAFE(TM), TIPEM(TM)
RSA Public Key Cryptosystem(TM)
MD(TM), MD2(TM), MD4(TM), MD5(TM)
RSA has reserved the right to update this Appendix "A" from time to time upon
reasonable notice to you.
22
<PAGE>
APPENDIX "B" TO EXHIBIT E
RMF LOGO
[LOGO]
23
<PAGE>
APPENDIX "C" TO EXHIBIT E
PROGRESSIVE NETWORKS TRADEMARK USAGE POLICY
REALAUDIO(R) (text form)
PN(R) (text form)
PROGRESSIVE NETWORKS(R) (text form)
REALMEDIA(TM) (text form)
REALVIDEO(TM) (text form)
REALPLAYER(TM) (text form)
WEBACTIVE (R) (text from)
1. When using a Progressive Networks' trademark ("PN Mark"), use the
registered trademark symbol (R) or the (TM) symbol, as indicated in the above
example, on the most prominent (or if none is prominent, the first) appearance
of a PN Mark. For any PN Mark that is not registered, the (TM) symbol should be
used in place of the registered trademark symbol (R). Once marked, it is not
normally necessary to mark subsequent appearances of the trademark in the piece.
Every appearance of PN Logos in stylized form should always appear with the
appropriate (R) or (TM) symbol, and may be used only under license with PN
unauthorized use is strictly prohibited. Shown above are a list of current PN
Marks that reflects the registration status of the PN Marks. This list will be
updated from time to time.
2. When using a PN Mark, never vary the spelling, add or delete hyphens, make
one word two, or use a possessive or plural form of the PN Mark. PN word marks
must always be used as adjectives followed by a generic term (such as "software"
or "system"), and never as nouns or verbs.
3. Progressive Networks is the owner of all right, title, and interest in the
PN Marks and Licensee agrees that it will not challenge the validity of
Progressive Networks' ownership of the PN Marks. Licensees shall not reproduce
or use (or authorize the reproduction or use of) the PN Marks in any manner
other than expressly authorized by Progressive Networks.
4. Progressive Networks may from time to time modify the PN Marks. Progressive
Networks will use commercially reasonable efforts to give licensees advance
notice of such modifications.
5. In order to assure compliance, you will, upon request from Progressive
Networks, provide samples of any marketing and advertising materials that
include the PN Marks.
6. In any place where they appear together, the PN Marks and any associated
text must be at least as large as the trademark and text of another vendor.
IMPORTANT INFORMATION ABOUT USING THE TEXT FORM
OF THE WORD REALAUDIO(R)
1. When using the word RealAudio, use the registered trademark symbol (R)
symbol, as indicated in the above example, on the most prominent (or if none is
prominent, the first) appearance of its use on a page. For any PN Mark that is
not registered, the (TM) symbol should be used in place of the registered
trademark symbol (R). Once marked with the (R) symbol, it is not normally
necessary to mark subsequent appearances of the trademark in the piece.
2. When using the word RealAudio, never vary the spelling, add or delete
hyphens, make one word two, or use a possessive or plural form of the word.
RealAudio must always be used as an adjective followed by a generic term (such
as "software" or "system"), and never as a noun or verb.
24
<PAGE>
EXHIBIT F
PROMOTIONAL ACTIVITIES
1. Cooperate with each other to coordinate mutually agreed upon joint
visits with ENDEAVOR's senior management and NCI's senior management to
Hospitals such as National Jewish Research and Medical Center l in Denver.
2. Introduce ENDEAVOR to third parties that NCI, in its sole discretion,
determines may be interested in ENDEAVOR's healthcare-based content.
3. Notify ENDEAVOR of Oracle Corporation initiatives, such as Oracle
Promise Foundation, of which NCI is aware.
25
<PAGE>
EXHIBIT G
MINIMUM TERMS AND CONDITIONS FOR HOSPITAL SUBLICENSE AGREEMENTS
In addition to the terms and conditions set forth in the Agreement,
ENDEAVOR shall include, at a minimum, the following terms and conditions in
the Hospital Sublicense Agreements:
1. The Hospital acknowledges that, once activated for a Subscriber, NC
Cards may not be reused and/or reactivated for another Subscriber.
2. Hospitals shall only grant Subscriptions to Subscribers located in the
Territory. Once a Subscription is granted to an end user, such
Subscription is specific to such end user and shall not be regranted or
reused in any way.
3. The Hospital shall have no right to market and/or distribute the SDKs.
4. The Hospital is granted a non-exclusive, non-transferable license (i)
to copy, install, and use copies of the NCI Server Software for purposes of
deployment of the Internet Services and or the Web-MD Hospital Services on
the NCI Approved Network Computer Device in the Territory, and (ii) to
grant Subscriptions to access the Internet Services through the NCI Server
Software to Subscribers in the Territory optionally through NC Cards and as
otherwise limited in this Agreement.
5. The Hospital shall not grant access to the NCI Server Software through
any process other than Subscription as described in this Agreement.
6. Neither the Hospital nor the Subscribers acquire any rights in the NCI
Logo, the NCI Software other than those rights specified in this
Agreement.
7. The Hospital disclaims, to the extent permitted by applicable law,
NCI's liability for any damages, whether direct, indirect, incidental or
consequential, arising from the use of the NCI Software.
8. The Hospital shall not use or duplicate the NCI Software for any
purpose other than as specified in this Agreement or make the NCI Software
available to unauthorized third parties.
9. The Hospital shall not use the NCI Software for its internal data
processing or for processing customer data except as required to facilitate
the Internet Services and/or the Web-MD Hospital Services and only as
specified under this Agreement.
10. The Hospital shall not cause or permit the reverse engineering,
disassembly or decompilation of the NCI Software by either the Subscriber
or any other party.
11. The Hospital must account to ENDEAVOR Quarterly and shall provide the
following information within 20 days following the end of each Quarter: a)
the total number of active Subscribers for each month during such Quarter;
(b) the number of NC Cards activated by Hospital during such Quarter (c)
the total activation fees due, (d) and any other information reasonably
requested by NCI.
12. The Hospitals shall purchase all NC Cards in accordance with the terms
set forth in this Agreement
13. NCI is a named third party beneficiary of all Hospital Sublicense
Agreements.
14. Upon termination of this Agreement each Hospital shall either destroy
or return to NCI, at NCI's option, all copies in all forms of the NCI
Software.
15. The Hospital shall not make any warranty on behalf of NCI.
16. The Hospital shall include a reproduction of NCI's copyright notice on
all copies of the NCI Software deployed by the Hospital in whatever form.
17. The Hospital represents and warrants that the Internet Services and
the Web-MD Hospital Services (and related customer support) provided to
Subscribers by the Hospitals shall be of equal or greater quality,
availability, and responsiveness as all other similar services provided by
or on behalf of the Hospitals (and in no case less than the comparable
industry standards) and (ii) shall be consistent with NCI's reasonable
criteria as determined by periodic quality evaluations performed from time
to time by or on behalf of NCI.
18. The Hospital Sublicense Agreements cannot be assigned.
19. The Hospitals agree to comply fully with all Export Laws.
26
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.27
AMENDMENT NO. 1
to the
LICENSE AGREEMENT
This Amendment No. 1 ("Amendment No. 1") to the License Agreement between
Network Computer, Inc. ("NCI") and Endeavor Technologies, Inc. (now known as
WebMD, Inc.) ("CUSTOMER") dated May 29, 1998 (the "License Agreement"), is made
and entered into between NCI and CUSTOMER as of this 11th day of November, 1998
(the "Amendment No. 1 Effective Date").
RECITALS
A. CUSTOMER has been granted a license to certain NCI technology under
the terms and subject to the conditions set forth in the License
Agreement.
B. The parties agree to amend the License Agreement as set forth in this
Amendment No. 1.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Exhibit B, Section 3 ("Service Fees") of the License Agreement is hereby
amended by inserting the following after the second sentence of the
definition of Consulting Services:
"Notwithstanding the foregoing, all consulting services provided by
NCI from September 1, 1998 to the end of one (1) year immediately
following the Effective Date shall be recouped against the $***
commitment set forth above at the following rates plus reasonable
travel and expenses. Such amounts shall be payable within thirty (30)
days of CUSTOMER's receipt of NCI's invoice, which shall mean the
earlier of (a) actual receipt by CUSTOMER of NCI's invoice or (b) five
(5) business days after NCI deposits the invoice in the mail, postage
prepaid. NCI's invoices will include the following back-up materials:
consultant time sheets and expense reports in a mutually agreed upon
format.
Senior Consultant $*** per hour
Junior Consultant $*** per hour
Trainee $*** per hour"
2. CUSTOMER represents and warrants to NCI that it has changed its name from
Endeavor Technologies, Inc. to WebMD, Inc. The parties hereby agree that
all
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
references to Endeavor Technologies, Inc. or CUSTOMER in the Agreement and
in this Amendment No. 1 shall now be interpreted to include references to
WebMD, Inc.
3. CUSTOMER hereby acknowledges that it has received from NCI a Windows NT
version of NCI's Custom Connect Server software, that use of such software
is for testing purposes only, and that upon CUSTOMER's deployment of the
Solaris version of NCI's Custom Connect Server software, CUSTOMER shall
promptly return the Windows NT version and any copies thereof to NCI.
4. All capitalized terms not defined herein shall have the meanings given them
in the License Agreement. This Amendment No. 1 shall be deemed to be
incorporated into the License Agreement and made a part thereof. All
references to the License Agreement in any other document shall be deemed
to refer to the License Agreement as modified by this Amendment No. 1.
Except as modified by this Amendment No. 1, the License Agreement shall
remain in full force and effect and shall be enforceable in accordance with
its terms. In the event that the terms of this Amendment No. 1 conflict
with the terms of the License Agreement, or its exhibits, as amended, the
terms of this Amendment No. 1 shall be deemed to govern.
5. This Amendment No. 1 may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
document.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly
executed as of the Amendment 1 Effective Date.
"NCI" "CUSTOMER"
Network Computer, Inc. WebMD, Inc.
By: /s/ David Roug By: /s/ W. Michael Heekin
---------------------------- -----------------------------
Print Name: David Roug Print Name: W. Michael Heekin
-------------------- ---------------------
Title: Chief Executive Officer Title: Chief Operating Officer
------------------------- ---------------------------
2
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.28
PHYSICIAN SERVICE
LICENSE AND SERVICE AGREEMENT
This AGREEMENT is made as of the date of signing of the Agreement, July 15, 1998
by and between Thomson Healthcare Information Company, Inc. ("THIG") as Licensor
and Endeavor Technologies, Inc. ("Endeavor") as Licensee.
Licensor: Thomson Healthcare Information Company, Inc.
Five Paragon Drive
Montvale, New Jersey 06754
(201) 358-7500
Licensee: Endeavor Technologies, Inc.
400 The Lenox Building
3399 Peachtree Road, N.E.
Atlanta, Georgia 30326
WITNESSETH
WHEREAS, THIG has developed and copyrighted certain proprietary healthcare
content ("Content"), as more fully described in Appendix A ("THIG Content"), and
in conjunction with delivery of this Content, THIG shall provide a Content
Service ("Content Service"), as more fully described in Appendix B ("Content
Service").
WHEREAS, Endeavor intends to engage in the marketing and provision of healthcare
content to physicians and wishes to license the Content, and make use of Content
Services to make the Content available through "WebMD", Endeavor's World Wide
Web site, as more fully described in Appendix C ("Endeavor Service"), and known
in this Agreement as the "Service".
WHEREAS, the parties acknowledge that the Internet is neither owned nor
controlled by any one entity; therefore, THIG can make no guarantee that any
given End-User shall be able to access the Content Service at any given time.
THIG represents that it shall make every good faith effort to ensure that its
Content Service is available as widely as possible and with as little service
interruption as possible.
DEFINITIONS
For purposes of this Agreement, the following definition of terms shall be used:
Advertising. Payments by a third party for placement of an advertisement in
- -----------
conjunction with Content.
Subscription. Payment by a third party or End-User for End-User access to
- ------------
Content.
Page 1 of 17
<PAGE>
Sponsorship. Payment by a third party for subscriptions for End-User access to
- -----------
Content involving placement of a company trademark or notification of a company
identity in conjunction with Content.
NOW, THEREFORE, in consideration of the premises, mutual covenants, and promises
set forth herein, the parties hereto agree as follows:
ARTICLE I - DUTIES OF LICENSOR
1.1 GRANT. THIG hereby grants to Endeavor for the term of this Agreement the
-----
nontransferable and nonexclusive right and license to make available the English
language editions of the Content to authorized registered "End-Users" of the
Service. "End-Users" shall be defined as physicians who are subscribers to and
continue to have access to the Service via Endeavor's World Wide Web site,
WebMD.
1.2 PROVISION OF SERVICES. THIG agrees to provide Content Services as
---------------------
described in Appendix B and undertake a Fast Start Program as described in
Appendix D.
1.3 NONEXCLUSIVITY. This Agreement does not impose any obligation of
--------------
exclusivity upon either party.
1.4 MARKETS. End-Users of Content are limited to physicians. Endeavor agrees
-------
that on an introductory Service screen which End-Users must view prior to
entering the actual Service, End-Users shall be required to agree that, as
further defined in Section 2.6 below, use of the Content in the Service is
limited to individual use and may not be recommercialized in any way for any
purpose.
1.5 ADVERTISING AND SPONSORSHIP. While advertising and sponsorship may from
---------------------------
time to time occur in conjunction with the Content, advertising and sponsorship
shall not be the primary source of Endeavor's sales revenue. Endeavor may sell
sponsorship of an entire electronic publication as listed in Appendix A after
first consulting with THIG.
1.6 DISTRIBUTION TERRITORY. Use of Content is limited to physicians in the
----------------------
United States.
1.7 ACCESS TO CONTENT. THIG grants authorized end users of the Service (see
-----------------
Section 2.1 below) access to the Content through use of an industry standard Web
browser.
1.8 SUPPORT FOR CONTENT AND CONTENT SERVICES. All support questions from
----------------------------------------
Endeavor management and technical staff regarding Content and Content Services
shall be directed to a support liaison designated by THIG from time to time.
This includes prompt reporting of unscheduled disruptions to Content Services.
THIG may designate a new Support Liaison at any time and shall promptly notify
Endeavor of any such decision in writing. THIG shall provide to Endeavor up to
twenty (20) hours of support, during the sixty (60) business days following
delivery of new or updated Content. Additional support shall be made available
at
Page 2 of 17
<PAGE>
Endeavor's reasonable request as to time, place and manner. Additional support
shall be charged by THIG to Endeavor on a time and materials basis according to
THIG's then-current rates. Notwithstanding the foregoing, THIG shall guarantee
its service rates for the first year of this Agreement at $*** per hour of
requested technical service.
1.9 UPDATES TO CONTENT. For purposes of this Agreement, any change, update,
------------------
enhancement, revision, correction or replacement of Content and/or of
Documentation released by THIG is an "Update." To provide Endeavor with fair
and equitable treatment, Updates shall be available to users of the Service
simultaneously with their release to any other commercial electronic vendor of
the Content serving the professional market. Specifications may change over
time as improvements occur in the normal course of business that require THIG to
change the layout and/or format of the Content delivered to Endeavor. In such
instances, THIG shall provide Endeavor with written notice not less than forty
five (45) days prior to the delivery of an Update to the affected Content to
Endeavor.
1.10 ACTIVITY REPORTING. THIG shall maintain and provide Endeavor with
------------------
quarterly usage statistics of Endeavor End-Users on its hosted site.
1.11 NOTICE OF CONTENT CESSATION. THIG shall have the right to cease normal
---------------------------
production or updating of any of the Content, provided that such cessation by
THIG is not with respect to Endeavor alone but is part of a program by THIG to
cease production or updating of such Content on or through other electronically
accessed networks, including but not limited to the same or similar On-line
Distributors on which the Service is available. THIG shall give Endeavor six
(6) months' written notice prior to THIG's requesting Endeavor to cease use of
any Content set, as described above. Upon receipt of such notice and subsequent
removal of the subject THIG Content from the Service, Endeavor shall have the
right in its discretion: (a) to obtain from THIG promptly substitute Content
acceptable to Endeavor and THIG as a replacement; or (b) to reduce the Payments.
In the event that THIG resumes production and/or updating of Content that THIG
previously ceased producing or updating, Endeavor shall have the right but not
the obligation to again use such formerly discontinued or non-updated Content in
the Service. If Endeavor does so, it shall be under the same terms and
conditions as such Content was formerly used hereunder.
ARTICLE II - DUTIES OF LICENSE
2.1 AVAILABILITY OF THE CONTENT TO END-USERS. Endeavor shall provide a
----------------------------------------
security mechanism to identify the End-User and authorize the use of the service
by an End-User. The security mechanism shall also deny entry to unauthorized
users.
______________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
Page 3 of 17
<PAGE>
2.2 CONTENT INTEGRITY. Endeavor shall not edit or otherwise effect an
-----------------
editorial change in the Content without THIG's consent, which shall not be
unreasonably withheld. It is agreed that GUIs created by Endeavor shall not
violate the rights of THIG hereunder. The foregoing shall in no way prohibit
Endeavor from interlinking and cross-referencing the Content with material from
other Content providers.
2.3 PROPRIETARY INTEREST. Endeavor acknowledges that THIG has proprietary
--------------------
rights in and to the Content. Endeavor shall not, by virtue of this Agreement
or by virtue of its access to the Content, obtain any proprietary rights in or
to the Content except the right specifically granted to Endeavor herein.
Endeavor shall not use or transmit the Content except as specifically authorized
by this agreement.
2.4 AUDIT AND REVIEW. As long as this Agreement is in effect, and for a one-
----------------
year period thereafter, Endeavor shall maintain and supply to THIG every
calendar quarter records that are used to calculate payments to THIG. This
includes records on use and distribution of the Content, and logs maintained by
web servers that record end user activity. THIG understands and agrees that all
of Endeavor's financial records and statements are confidential and subject to
the Confidentiality Agreement between the parties effective upon signing of this
Agreement.
(a) Upon a minimum of twenty (20) business days' notice to Endeavor, and
during business hours, THIG may itself or through an agent at its expense,
audit relevant books and records of Endeavor for the sole purpose of
determining that Endeavor is in compliance with all of the terms of this
Agreement and that the proper payment, as described in Section 3 below, has
been paid to THIG. Such an audit may not be made more frequently than once
every twelve (12) months and once within the twelve (12) month period
following conclusion or termination of this Agreement.
(b) In the event THIG determines that payments are due from Endeavor, it
shall so notify Endeavor and provide Endeavor with a calculation and
supporting explanation. Endeavor shall thereupon have fifteen (15)
business days within which to pay the claim. In the event Endeavor does
not pay the claim, the parties shall resolve their dispute by arbitration
in the City of New York in accordance with the Rules of the American
Arbitration Association. Endeavor shall promptly pay any payment thus
determined to be due and unpaid.
2.5 COPYRIGHT NOTICE. When making the Content available to End-Users as
----------------
permitted by this Agreement, Endeavor shall cause a notice comprised of the
following elements to be conspicuously displayed during every End-User session
as appropriate to protect THIG's intellectual property rights: (a) the word
"Copyright" or the symbol (C) (the letter c in a circle), (b) the year of first
publication of such document as specified by THIG, (c) the name of the copyright
holder or, if space constraints require, an abbreviation by which the name can
be recognized or a generally known alternative designation, and (d) the words
"All Rights Reserved" (or, if space constraints require, an abbreviation by
which such phrase can be recognized that is reasonably acceptable to THIG).
Page 4 of 17
<PAGE>
2.6 END-USER AGREEMENT. When making the Content available to End-Users as
------------------
permitted by this Agreement, Endeavor shall cause to have included in the terms
and conditions of the applicable End-User agreement: (a) a provision
prohibiting use of materials retrieved through the Service in any fashion that
may infringe upon any copyright or proprietary interest therein; (b) a provision
prohibiting storage of materials retrieved through the Service in a searchable,
machine-readable database; (c) a provision limiting the liability of THIG in a
manner similar to that contained in its electronic products, especially as it
applies to the use of healthcare information by professionals; (d) a provision
prohibiting use of all the Content from any commercial use, resale, or mailing
list database development, utilization or application. Endeavor shall grant
neither to On-Line Distributors, nor to any End-User of the Content or any third
party, any additional rights to reproduce the Content retrieved through the
Service (by photocopying, electronic transmission or otherwise) without THIG's
prior written consent. The Endeavor End-User Agreement shall in all manner be
consistent with, and cover the items contained in MedEc Interactives' User
Registration Agreement (see Appendix E) and its updates in the ordinary course
of business.
Furthermore, Endeavor shall place a notice relating to all the provisions
described above on one of the first introductory screens that End-Users must
view upon entering or using the Service in all available media. Such notice
shall require End-User acknowledgment and acceptance to become an authorized,
registered End-User.
ARTICLE III - PRICING AND PAYMENT TERMS
3.1 PRICING.
-------
(a) In consideration of THIG's grant to Endeavor of the right and license
to access the Content and for provision of Content Services in
accordance with Article I above, throughout the term of this Agreement
Endeavor shall pay THIG an annual minimum fee of:
$ *** for year one
$ *** for year two
$ *** for year three
(b) Plus, $ *** per month per End-User for all End-Users in excess of ***
(***) End-Users.
___________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
Page 5 of 17
<PAGE>
(c) Plus, ***% (*** percent) of all Net Revenue from advertising and
sponsorship occurring in conjunction with the Content. "Net Revenue"
shall be defined as gross receipts less any End-User credits or
commissions paid by Endeavor to third parties.
(d) Payments shall be adjusted annually and become effective upon the
Execution Date of this Agreement to reflect any escalation or decline
in costs as indicated by the change in the US Bureau of Labor
Statistics Consumer Price Index, as published by the US Department of
Labor for the most recent calendar year. THIG shall provide written
notice of any such escalation or decline 30 days prior to each
Agreement anniversary date.
3.2 PAYMENT TERMS.
--------------
(a) A first payment of $ *** due on signing of this Agreement.
(b) Pro-rata minimum payments shall be made in equal quarterly
installments of the guaranteed minimum annual totals as indicated
below:
DUE DATE AMOUNT DUE
-------- ----------
Nov. 5, 1998 $ ***
Feb. 5, 1999 $ ***
May 5, 1999 $ ***
Aug. 5, 1999 $ ***
Nov. 5, 1999 $ ***
Feb. 5, 2000 $ ***
May 5, 2000 $ ***
Aug 5, 2000 $ ***
Nov 5, 2000 $ ***
Feb 5, 2001 $ ***
May 5, 2001 $ ***
(c) Incremental payments for subscribers in excess of *** (at the rate of
$ *** per such subscriber) shall be paid on the dates noted in section
3.2.b., with a final payment during the term of this Agreement
occurring on August 5, 2001.
(d) Payments for advertising and sponsorship shall be paid on the dates
noted in section 3.2.b., with a final payment during the term of this
Agreement occurring on August 5, 2001.
__________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
Page 6 of 17
<PAGE>
3.3 NEW CONTENT. Five months (150 days) prior to the end of the first year and
-----------
each successive anniversary of the Agreement, both parties agree to meet to
determine and identify additional Content, pricing of additional Content,
and delivery of that Content to Endeavor. Both parties shall use their
best efforts to finalize an addendum for additional content to this
Agreement for the upcoming year three months (90 days) prior to the
initiation of the Agreement to allow for technical development and planning
to occur.
ARTICLE IV - TERM AND TERMINATION
4.1 TERM. This Agreement shall be effective for an initial term beginning upon
----
the Effective Date and ending July 31, 2001, unless sooner terminated pursuant
to this Article IV.
- -
4.2 FAILURE TO PERFORM. If either party to this Agreement shall fail to
------------------
perform or observe any material term, covenant, agreement or warranty, or if any
material representation contained herein is untrue, the other party may
immediately terminate this Agreement if such failure is not corrected (if
reasonably correctable) within thirty (30) days of delivery of written notice
thereof to the other party.
4.3 BANKRUPTCY AND BUSINESS TERMINATION. If either party shall cease doing
-----------------------------------
business, become insolvent, or if a petition in bankruptcy shall be filed with
respect to a party, or upon an attempted assignment not permitted under Section
6.7 below, the other party shall have the right to immediately terminate this
Agreement upon written notice to the other party. The right and license granted
by THIG to Endeavor herein with respect to the Content is deemed a software
license for purposes of Section 605(n) of the Federal Bankruptcy Act, and
Endeavor shall have the full rights of a protected licensee thereunder.
4.4 SERVICE CESSATION. Endeavor shall have the right in its sole discretion to
-----------------
cease production of the Service upon ninety (90) days prior written notice to
THIG. Upon such cessation of the Service, this Agreement shall terminate, and
neither party shall have obligation to the other under this Agreement except
Endeavor shall remit all Payments that accrued prior to such cessation.
4.5 CONDUCT UPON TERMINATION. Upon termination of this Agreement for any
------------------------
reason, Endeavor shall cease solicitation for and use of the Content.
ARTICLE V - LIABILITY LIMITATION AND INDEMNIFICATION
5.1 LIMITATION OF LIABILITY. NEITHER PARTY MAKES ANY WARRANTY, EXPRESS OR
-----------------------
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE MARKETING AND SALE OF THE Content
OR THE Service.
Page 7 of 17
<PAGE>
NEITHER PARTY SHALL HAVE ANY LIABILITY TO ANY THIRD PARTY RESULTING FROM ITS
PERFORMANCE UNDER THIS AGREEMENT OR FOR ANY FAILURE TO PERFORM HEREUNDER.
NEITHER PARTY HERETO, NOR THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS AND
EMPLOYEES, SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) INCURRED IN CONNECTION WITH
SERVICES PERFORMED OR PRODUCTS PROVIDED UNDER THIS AGREEMENT. NEITHER PARTY
SHALL BE LIABLE FOR DAMAGES CAUSED OR ALLEGEDLY CAUSED BY ANY FAILURE OF
PERFORMANCE, ERROR, OMISSION, INTERRUPTION, DELETION, DEFECT, DELAY IN OPERATION
OR TRANSMISSION, OR COMMUNICATIONS LINE FAILURE INVOLVING THE Service, AND
NEITHER PARTY SHALL BE LIABLE FOR ANY ACT OR INACTION OF END-USERS REGARDING THE
Content, INCLUDING BUT NOT LIMITED TO MISUSE, ABUSE, INFRINGEMENT, THEFT OR
DESTRUCTION OR UNAUTHORIZED ACCESS TO, ALTERATION OF, OR USE OF THE Content,
WHETHER FOR BREACH OF CONTRACT (INCLUDING BREACH OF WARRANTY, LOST PROFITS OR
OTHER ECONOMIC LOSS), TORTIOUS BEHAVIOR (INCLUDING STRICT LIABILITY) NEGLIGENCE
OR UNDER ANY OTHER CAUSE OF ACTION.
5.2 FORCE MAJEURE. Neither party shall be liable in damages for any delay or
-------------
default in performing its obligations hereunder if such delay or default is
caused by matters beyond the reasonable control of the non-performing party,
such as but not limited to power failures, wars or insurrections, acts of
government, strikes, fires, floods, earthquakes, work stoppages, embargoes
and/or inability to obtain material; provided, however, that the party
experiencing such occurrence shall notify the other party at the earliest
possible date and take reasonable steps to mitigate and/or cure the cause of
such delay.
5.3 INDEMNIFICATION.
---------------
(a) HIG shall indemnify and hold harmless Endeavor, its affiliates, and
its and their directors, officers, employees, agents, successors and
assigns against any and all judgments, settlements, penalties, costs and
expenses (including reasonable attorneys' fees) paid or incurred in
connection with claims by any party which are attributable to: THIG's
negligence or misconduct in collecting, collating and compiling the Content
from THIG's original data sources (including but not limited to drug
manufacturers); a material breach of any warranty or representation made or
obligation undertaken by THIG under this Agreement or infringement or
misappropriation by the Content of any copyright or other proprietary right
of any third party.
(b) Endeavor shall indemnify and hold harmless THIG, its affiliates and
its and their directors, officers, employees, agents, successors and
assigns against any and all judgments, settlements, penalties, costs and
expenses (including reasonable attorneys' fees) paid or incurred in
connection with claims by any party which arise from Endeavor's
distribution of the Content under this Agreement and are attributable to a
failure of the hardware or software of Endeavor's computer system (other
than the
Page 8 of 17
<PAGE>
Content) or to a material breach of any warranty or representation made or
obligation undertaken by Endeavor under this Agreement.
(c) If any claim or action is instituted or threatened by a third party
against a party to this Agreement for which it believes it is entitled to
be indemnified pursuant to this Agreement, it shall promptly give notice
thereof to the other party, and cooperate fully with the indemnifying
party. The indemnifying party shall solely control the defense and
settlement of such claims. The indemnified party shall be permitted to
participate in such defense and represent itself at its own expense and to
use counsel of its own choosing.
5.4 LAWFUL PURPOSE. Endeavor and the authorized users of the Content Service
--------------
may only use the Content Service for lawful purpose. Transmission of any
material in violation of any Federal, State or Local regulation is prohibited.
This includes, but is not limited to copyrighted material, material legally
judged to be threatening or obscene, pornographic, profane, or material
protected by trade secrets. This also includes links or any connection to such
materials.
5.5 REPRESENTATIONS AND WARRANTIES. THIG makes no warranties or
------------------------------
representations of any kind, whether expressed or implied for the Content
Service it is providing. THIG also disclaims any warranty of merchant-ability
or fitness for particular purpose and shall not be responsible for any damages
that may be suffered by Endeavor and the End-Users of the Content Service,
including loss of data resulting from delays, non-deliveries or service
interruptions by any cause or errors or omissions. Connection speed represents
the speed of a connection and does not represent guarantees of available end to
end bandwidth. THIG expressly limits its damages to the Endeavor and End-Users
of the Content Service for any non-accessibility time or other down time to a
pro-rata credit of THIG's charges during system unavailability. THIG
specifically denies any responsibilities for any damages arising as a consequent
of such unavailability.
Under no circumstances, including negligence, shall THIG, its offices, agents or
any one else involved in creating, producing, or operating the Content Service
be liable for any direct, indirect, incidental, special or consequential damages
that result from the use of or inability to use the Content Service; or that
results from mistakes, omissions, interruptions, deletion of files, errors,
defects, delays in operation, or transmission or any failure of performance,
whether or not limited to acts of God, communication failure, theft,
destruction, or unauthorized access to THIG's records, programs, or services.
Endeavor hereby acknowledges that this paragraph shall apply to all content on
the Content Service.
THIG represents and warrants that it is authorized to grant the license herein
to Endeavor, and covenants that Endeavor's exercise of the license herein shall
infringe no copyright or other right of any person or entity. If any portion of
the Content furnished to Endeavor under this Agreement becomes (or, in the good
faith judgment of THIG, is likely to become) the subject of a claim for
infringement or misappropriation, THIG may, upon notice to Endeavor, request
that Endeavor remove such portion of the Content from the Service, and Endeavor
shall
Page 9 of 17
<PAGE>
comply with such request promptly; provided however, that THIG shall not have
the right to request such removal unless such materials are required to be
removed from the services of all other similarly situated on-line vendors (if
any) to whom they are made available by THIG; and provided that in the event of
such removal, Endeavor shall have the same rights described in Section 1.10
above. THIG represents and warrants that it is not aware of any pending,
threatened or possible claim or action by any third party with respect to a
possible violation of that third party's rights.
The parties agree that Endeavor makes no warranty or representation regarding,
nor is Endeavor responsible for, the Content, which Endeavor is obtaining from
THIG under this Agreement, and as to which Endeavor has a duty not to edit or
change (Section 2.2 above).
ARTICLE VI - MISCELLANEOUS
6.1 ENTIRE AGREEMENT AND AMENDMENT. Together with all written amendments,
------------------------------
exhibits and appendices, this Agreement constitutes the entire agreement between
THIG and Endeavor with respect to the subject matter addressed herein. This
Agreement can only be modified or supplemented by writing signed by duly
authorized representatives of both parties. This Agreement shall be binding
upon the parties, their successors, legal representatives and permitted assigns.
Endeavor and THIG intend this Agreement to be a valid legal instrument and no
provision of this Agreement which shall be deemed unenforceable shall in any way
invalidate any other provision of this Agreement, all of which shall remain in
full force and effect.
During the term of this Agreement, the parties may under mutual consent reach a
new agreement on license of Content and provision of Content Services to
Endeavor. At such time, this Agreement will be amended to reflect any new
understanding between the parties.
6.2 USE OF TRADE NAMES, TRADEMARKS OR SERVICE MARKS. Neither party shall use
-----------------------------------------------
any trade name, trademark, or service mark of the other party in advertisements,
promotions, publicity releases or the like, except as expressly authorized in
writing by the other party and in conformance with the quality control
guidelines of the owner of such name or mark which have been communicated to the
other party. Endeavor acknowledges THIG's ownership of and title to the
copyrights, trademarks, and service marks of the Content. THIG shall be
attributed as the source of the Content in sales literature, in End-User
documentation (if any), and THIG shall not unreasonably withhold the
authorization to use its trade names, trademarks, and service marks by Endeavor
in connection with Endeavor's distribution of the Service. Endeavor shall be
attributed as the source of the Service in all material produced by or for THIG
where reference is made to the use of the Content as part of the Service
hereunder. Endeavor shall not unreasonably withhold authorization for use of
Endeavor's trade names, trademarks, and service marks by THIG in connection with
THIG's providing Content to Endeavor and the Service. All trade names,
trademarks, and service marks, and attendant goodwill, now owned by each party
shall remain its sole property and all rights accruing from their use shall
inure solely to the benefit of such party.
Page 10 of 17
<PAGE>
6.3 CONFIDENTIALITY. Each party shall preserve the confidential information of
---------------
or pertaining to the other party and shall not, without first obtaining the
other's written consent, disclose to any person or organization, or use for its
own benefit, any confidential information of or pertaining to the other party
during and after the term of this Agreement, unless such confidential
information is required to be disclosed by a court of competent jurisdiction or
by any governmental or self-regulatory organization or authority.
6.4 NOTICES. All notices, requests, demands and other communications or
-------
payments under this Agreement shall be in writing, and shall be deemed to have
been duly delivered if delivered by hand or sent by traceable carrier or prepaid
registered or certified mail addressed as follows (or to such other address as
may be designated by a party, in writing, pursuant hereto):
Endeavor:
Endeavor Technologies, Inc.
400 The Lenox Building
3399 Peachtree Road NE
Atlanta, Georgia 30326
Attn: Executive Vice President
THIG:
Thomson Healthcare Information Company, Inc.
Five Paragon Drive
Montvale, New Jersey 06754
Attn: Senior Vice President, Corporate Business Development
6.5 OFFER TO SELL. If at any time during the Term of this Agreement Endeavor
-------------
desires to cease production of the Service and/or sell the Service, Endeavor
shall notify THIG and permit THIG to make an offer to purchase the Service.
Endeavor shall have no obligations to sell the Service to THIG.
6.6 GOVERNING LAW. This Agreement is made and entered into in the State of New
-------------
York and shall be construed according to internal laws, and not the laws
pertaining to choice or conflict of laws, of that State. The parties hereto,
their successors and assigns, consent to the jurisdiction of the courts of the
State of New York with respect to legal proceedings that may result from a
dispute as to the interpretation or breach of any of the terms and conditions of
this Agreement.
6.7 RELATIONSHIP AND ASSIGNMENT. Nothing in this Agreement shall be deemed to
---------------------------
create an agency, joint venture, or partnership relationship between THIG and
Endeavor. Except as expressly set forth in this Agreement, neither party shall
have authority to act on behalf of or bind the other party in any way. Neither
Endeavor nor THIG may assign this Agreement or delegate any rights or
obligations hereunder without the prior written consent of the other party
except to an affiliated entity controlled by or under common control of a party
hereto. In the
Page 11 of 17
<PAGE>
event of a third party acquiring the assets of Endeavor, this Agreement is not
transferable. Any attempted assignment by either party without such consent
shall be of no effect.
6.8 DUE AUTHORIZATION. Each of Endeavor and THIG represents and warrants that
-----------------
it is authorized to enter into this Agreement and that there are no outstanding
commitments, agreements, or understandings, express or implied, which may or can
in any way defeat or modify the rights conveyed or obligations undertaken by it
under this Agreement.
6.9 HEADINGS. The heading of each Article, Section, and Appendix of this
--------
Agreement is for the purpose of convenience only and shall not affect the
interpretation of any provision hereof.
6.10 SURVIVAL OF OBLIGATIONS. Articles III, IV, V and VI shall survive the
-----------------------
termination or expiration of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officer as of the day and year first above
written.
Thomson Healthcare Information Company, Inc. Endeavor Technologies, Inc.
By: /s/ Raymond Zoeller By: /s/ Bruce A. Springer
--------------------------- -----------------------------
Printed Name: Raymond Zoeller Printed Name: Bruce A. Springer
Title: Senior Vice President Title: Executive Vice President
Date: July 15, 1998 Date: 7/16/98
Page 12 of 17
<PAGE>
APPENDIX A
THIG Content
Content to be made available to Endeavor each year for use within the Physician
Service consists of:
1. The following electronic publications available on the Medec Interactive
Website, MedecInteractive.com:
The Physician's Desk Reference (PDR)
Medical Economics
Patient Care
Contemporary OB/GYN
Contemporary Pediatrics
Internal Medicine
Drug Topics
RN
Business and Health
Directory of Hospital Personnel
HMO/PPO Directory
Red Book
The PDR Family Guide to Women's Health
The PDR Family Guide to Prescription Drugs
Stedman's
2. Content freely available on the American Health Consultants website,
AHCpub.com. Content available to the End-User on a "pay per view" basis is
not included in this Agreement.
3. One set of 50 Continuing Medical Education (CME) courses available in HTML
format. THIG shall host this material, perform testing, grading, and issue
of certificates to physicians who successfully complete a course.
Page 13 of 17
<PAGE>
APPENDIX B
CONTENT SERVICE
The THIG Content Service enriches the Content made available to Endeavor. The
THIG Content Services provides access to the Content through multiple indices,
search mechanisms, page linking, and logical and useful navigation. During the
term of this Agreement, the THIG, Content Service shall continue to be enhanced,
improved, and updated.
The THIG Content Services shall be operated and maintained by Medical Economics
with professional diligence and skill and in a manner consistent with high
industry standards. The THIG Content Service currently experiences 98%
reliability. However, server outages not related to THIG hardware,
configuration, or network are excluded from this Agreement. In order to ensure
a high level of reliability, the THIG Content Services shall be redundantly
hosted and include a "hot backup" (a fully operational server running
concurrently to the main server). This redundancy shall occur on or before
October 31, 1998. Because of the time it takes to set up this redundant
environment, THIG shall not be able to offer this as part of the Fast Start
Program (see Appendix D).
In order to improve and maintain the THIG Content Service, THIG designates time
periods ("Scheduled Maintenance Windows") during which it may limit or suspend
the availability of the hardware and/or software involved in providing its
Services and Products (an "Outage") to perform necessary maintenance or
upgrades. Scheduled Maintenance Windows currently are each Tuesday and Friday
between the hours of 4:00 am and 12 noon and the third Saturday of each month
between the hours of 4:00 am and 12 noon, Eastern Standard Time and Pacific
Standard Time. By or before the conclusion of the Fast Start Program, the
Scheduled Maintenance Window for major systems component updates shall only
occur between the hours of 1:00 am and 7:00 am, and normal content updates shall
occur only between the hours of 1:00 am and 10:00 am. THIG shall make every
reasonable effort to ensure that End-User access is maximized and disruption
minimized during the content update and systems maintenance/upgrade processes.
If planned maintenance has the possibility of making the server or servers
utilized by Endeavor inaccessible to the Internet during a Scheduled Maintenance
Window, THIG shall provide not less than twenty-four (24) hours prior electronic
mail or other notice to Endeavor of the Scheduled Maintenance Window during
which the Outage is planned. In addition, THIG reserves the right to perform
any required maintenance work outside of the Scheduled Maintenance Window with
prior notice to Endeavor.
It is the duty of Endeavor to report unscheduled service outages of the Content
Service to the Support Liaison. For the purpose of this Agreement, a service
outage means that THIG's standard hardware, software, or operating system is
functioning in a manner that prevents http message receipt by Endeavor's
Internet server. In the event of an extended Unavailability, remedies shall be
limited to the pro-rata credit specified in Section 5.5, Representation and
Warranties.
Page 14 of 17
<PAGE>
APPENDIX C
ENDEAVOR PHYSICIAN SERVICE
WebMD offers physicians a one stop, "desktop solution" to consolidate key
information and communications services necessary for optimum practice
management and patient care. WebMD is an online medical community and Internet
gateway providing access to vital information and communication services. WebMD
consolidates into a customizable Internet portal fragmented services such as:
proprietary healthcare content and publications, real time processing of
eligibility and referral authorization, answering service, customized physician
web sites, chat and bulletin board sessions, and an online universal inbox for
single source messaging.
WebMD shall offer the following services and content for use by physicians:
. Virtual receptionists, call center, centralized messaging and voice
conferencing services
. Telemedicine data; cardiac telemetry
. Specialized physician references
. Continuing medical education
. Patient education
. Electronic Data Interchange services
. Forums and affinity chat
. Custom built physician web sites and pages
These services and content are bundled into product offerings for sale to
physicians only on a subscription basis.
Page 15 of 17
<PAGE>
APPENDIX D
FAST START PROGRAM
WHEREAS, Endeavor has stated that a beta trial of WebMD shall begin on 15 July
1998, and deployment is planned on the following schedule:
. *** thin clients shall be deployed from 15 July to 15 August 1998,
. *** additional thin clients shall be deployed from 15 August to 15
. *** additional thin clients shall be deployed from 15 September to
15 October 1998.
And, THIG is willing to highly compress the time needed to provide this Content
and the associated Content Services and use its best efforts under a "Fast Start
Program". Content shall be delivered to Endeavor and the End-Users of the
Service approximately three (3) weeks from the date of signing of this
Agreement. The Fast Start Program shall provide a custom view of the web pages
housed with the Content Service to authenticated Service End-Users. The Fast
Start Program differs from delivery of Content and Content Services after
October 31st, 1998 in the following ways:
. During the Fast Start Program all content described in Appendix A,
Section One, shall be made available to authenticated Service End-
Users.
. During the Fast Start Program End User access to the Content
Service shall be granted to those End-Users who provide a valid
user name and password. Endeavor shall provide a mechanism for
supplying THIG with this user name and password. It is expected
that End-Users shall be referred to the Content Service only from
the WebMD website. A unique, user name and password shall be
authenticated by Endeavor and the End-User session shall be sent to
the Content Service. Based on the referring URL, the Content
Service shall allow the End-User access.
. During its existence, the Content Service platform has achieved
greater than 98% reliability, but lacks the redundancy to
confidentiality state that this level of reliability can be
maintained. THIG shall use its best effort to maintain 98%
reliability during the Fast Start Program and on or before October
31, 1998 THIG shall provide the level of reliability and quality of
service described in Appendix B.
____________________________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
Page 16 of 17
<PAGE>
. While Endeavor and THIG have tested the delivery of web pages
between their facilities, it is reasonable to assume that there are
undiscovered technical and management challenges, and that, despite
mutual best efforts, Content may not be available to End-Users of
the Service as expected during the course of the Fast Start Program.
NOW, THEREFORE, in consideration of the premises, mutual covenants and promises
set forth above and therein,
ENDEAVOR AND THIG agree the Fast Start Program shall initiate upon signing of
this Agreement and terminate on or before October 31, 1998. Content shall be
delivered to Endeavor and the End-Users of the Service approximately three weeks
following the execution of this Agreement.
Pages 17 of 17
<PAGE>
APPENDIX E
USER REGISTRATION
Please read the license agreement, then click the "Accept" button at the end of
the agreement to continue the registration process. Click the "Cancel" button to
terminate the registration process.
LICENSE AGREEMENT
By completing your registration to become a user of MedEc Interactive, you (the
"User") agree with Medical Economics Company, Inc. ("MECI") to be bound by the
term and conditions set forth in this Agreement. Read this Agreement carefully.
You will be bound by its terms whenever you use MedEc Interactive.
1. LICENSE
MECI grants, and the User hereby accepts, a nonexclusive, nontransferable,
revocable license to use the software, data, and documentation contained in
MedEc Interactive on the terms and conditions set forth in this Agreement.
2. TERMINATION
The User may terminate this license at any time by notifying MECI in writing.
MECI may at its sole discretion terminate this license any time, with or without
prior notification, in the event the User fails to comply with the terms and
conditions of this agreement, by deactivating the User's username and password
or suspending operation of the system.
3. COPYRIGHT AND RESTRICTIONS
All data on file in MedEc Interactive, and all documentation and software
therein, is the property of Medical Economics Company, Inc. or its Licensors,
and is protected by copyright and other intellectual property laws. Information
received through MedEc Interactive is to be used solely for individual purposes.
None of the content of MedEc Interactive may be reproduced, transcribed, stored
in a retrieval system, translated into any language or computer language,
retransmitted in any form or by any means (electronic, mechanical, photocopied,
recorded, or otherwise), resold, or redistribute without the prior written
consent of MECI, except that the User may reproduce limited excerpts of the data
for personal use only, provided that each such copy contains a copyright notice
as follows.
For information obtained from MECI sources or database:
"Copyright (C) 1998 by Medical Economics Company Inc. at Montvale, NJ 07645.
All rights reserved."
18
<PAGE>
For information obtained from Licensors the User is solely responsible for
compliance with any copyright restrictions and is referred to the publication
data appearing in bibliographic citations, as well as to the copyright notices
appearing in the original publications.
4. PROTECTION AND SECURITY
The User shall like all reasonable steps to ensure that no unauthorized person
shall have access to MedEc Interactive. The User shall not divulge, sublicense,
assign, or transfer to any third party the username and password established
during registration. The User understands that provision of the username and
password will be required prior to each use of MedEc Interactive.
5. WARRANTY DISCLAIMER
User recognizes that MedEc Interactive is to be used only as a reference aid. It
is not intended to be a substitute for the exercise of professional judgment by
the User.
Information on MedEc Interactive is generated not only through internal
resources of MECI, but also through external consultants and third party
sources. Inherent hazards of electronic distribution may result in delays,
omissions or inaccuracies in such information and MedEc Interactive.
Medicine is an ever-changing science. In view of the possibility of human error
or changes in medical science, Users are advised to confirm the information in
MedEc Interactive through independent sources.
ALL DATA, SOFTWARE, AND DOCUMENTATION IN MEDEC INTERACTIVE ARE PROVIDED "AS IS"
WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED. MECI AND ITS
AFFILIATES, AGENTS AND LICENSORS CANNOT AND DO NOT WARRANT THE ACCURACY,
COMPLETENESS, CURRENTNESS, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO MEDEC INTERACTIVE OR THE USE THEREOF.
NEITHER MECI NOR ITS LICENSORS SHALL BE LIABLE UNDER ANY CLAIM, DEMAND, OR
ACTION ARISING OUT OF OR RELATING TO THE PERFORMANCE OF MEDEC INTERACTIVE OR THE
LACK THEREOF UNDER THIS AGREEMENT FOR DIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR OTHER
DAMAGES CAUSED BY THE INABILITY TO USE MEDEC INTERACTIVE, WHETHER OR NOT MECI OR
ITS LICENSORS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH CLAIM, DEMAND, OR
ACTION. NEITHER MECI NOR ITS LICENSORS MAKES ANY WARRANTY THAT MEDEC
INTERACTIVE IS COMPATIBLE OR OPERABLE WITH THE USER'S COMPUTER EQUIPMENT OR
SOFTWARE, THAT MEDEC INTERACTIVE WILL PERFORM WITHOUT INTERRUPTION OR FREE OF
ERRORS, OR THAT THE INFORMATION CONTAINED THEREIN SATISFIES GOVERNMENT
19
<PAGE>
REGULATIONS REQUIRING DISCLOSURE OF INFORMATION ON PRESCRIPTION DRUG PRODUCTS.
No salesperson or other representative of any party involved in the distribution
of MedEc Interactive is authorized to make any warranties with respect to the
service beyond those contained in this Agreement. Oral statements do not
constitute warranties, shall not be relied upon by the User, and are not a part
of this Agreement.
6. FEES AND PAYMENTS.
If accessing MedEc Interactive through a standard subscription, User agrees to
pay all fees, and all charges incurred for MedEc Interactive in connection with
User's username and password at the rates in effect when incurred. Fees and
charges will be billed to the credit card the User designates during the
registration process. If User wishes to change the credit card to which MECI
bills for MedEc Interactive, User may call MECI at the number listed for
Customer Service at the MedEc Interactive web site.
If accessing MedEc Interactive through a physician subscription, User agrees to
pay all fees, and all charges incurred for additional cost services available
through MedEc Interactive including, but not limited to, fees and charges for
Continuing Medical Education (CME) credits, document delivery, and items ordered
through the PDR Bookstore.
MECI SHALL NOT BE LIABLE FOR ANY AMOUNTS BILLED TO USER'S CREDIT CARD BY A THIRD
PARTY
7. DATABASES MAINTAINED BY MECI
While great care has been taken in organizing and presenting the material in
MedEc Interactive, MECI does not warrant or guarantee any of the products
described, prices supplied, or medical device information contained, and does
not perform any independent analysis in connection with any of the product
descriptions. MECI does not assume, and expressly disclaims, any obligation to
obtain and include any information other than that provided to it by its third
party sources. It should be understood that by making this material available
MECI is not advocating the use of any product described in MedEc Interactive,
nor is MECI responsible for misuse of a product due to typographical error.
Additional information on any product may be obtained from the manufacturer.
8. DATABASES NOT MAINTAINED BY MECI
MEDLINE is a bibliographic database maintained by the National Library of
Medicine (NLM). NLM databases are produced by a U.S. government agency, and as
such the contents are not covered by copyright domestically. They may be
copyrighted outside the U.S. Some NLM-produced data are from copyrighted
publications of the respective copyright claimants. Users of the NLM databases
are solely responsible for compliance with any copyright restrictions and are
referred to the publication data appearing in bibliographic citations, as well
20
<PAGE>
as to the copyright notices appearing in the original publications, all of which
are incorporated herein by reference. Users should consult legal counsel before
using NLM-produced records to be certain that their plans are in compliance with
appropriate laws.
Organizations or institutions may download NLM-produced citations and reuse
these records within their organization or institution. NLM suggests that
organizations limit the number of records to 1,000 per month. Since NLM makes
corrections and enhancements to, and performs maintenance on these records at
least annually, you should plan to replace or correct the records once a year to
ensure that they are still correct and searchable as a group.
All NLM-produced records must be identified as being derived from NLM databases.
9. MEDEC INTERACTIVE FORUMS
MedEc Interactive Forums is provided solely for education and informational
purposes, and is not meant to provide professional medical advice, counseling,
or services.
MedEc Interactive does not verify the credentials of individuals representing
themselves as medical professionals, nor do the views expressed by our MedEc
Interactive members necessarily reflect the views of Medical Economics Company.
If you need medical services always contact a licensed professional in your
area. Always follow the advice of your physician or other health care
professional in regard to treatment information and considerations.
You are entirely liable for all activities conducted through any names
registered to your e-mail address ("Account"). The. following Rules apply while
using MedEc Interactive Forums.
A. You may post messages to MedEc Interactive Forums containing only content
("Content") that does not contain scandalous, libelous or unlawful matter,
is not subject to any patent, trademark, copyright or other proprietary or
privacy rights of a third party ("Rights"), or Content in which any holder
of Rights has given you express authorization for distribution on MedEc
Interactive Forum. By submitting Content to any part of MedEc Interactive
Forum, you automatically grant or warrant that the owner of such Content
has expressly granted MedEc Interactive a royalty-free, perpetual,
irrevocable, worldwide, non-exclusive right and license to use, reproduce,
modify, adapt, publish, translate, create derivative works from,
distribute, perform, transmit and display such Content (in whole or part)
and/or to incorporate it in other works in any form, media, or technology
now known or later developed for the full term of any Rights that may exist
in such Content. MECI will remove personal information that in any way
identifies the user to any third party without the registered user's
consent.
B. You and any persons who have access to your Account, must evaluate and bear
the risk associated with the accuracy, completeness, or usefulness of any
Content.
21
<PAGE>
C. In cases where you have allowed any other individual to use your Account,
or have negligently made your password publicly available, you recognize
that you are fully responsible for: (i) the online conduct of such user;
(ii) controlling the users access to and use of MedEc Interactive; and
(iii) the consequences of any misuse. You further recognize that you, as
the holder of the Account, are entirely responsible for activities
conducted through such Account.
10. PRIVACY POLICY/DISCLOSURE OF MEMBER INFORMATION TO THIRD PARTIES
For visitors to both the public and private areas of our Web site, our Web
server automatically recognizes only the consumer's domain name, but not the e-
mail address (where possible).
We collect the e-mail addresses of registered users, those who post messages to
our bulletin board, the e-mail addresses of those who communicate with us via e-
mail, aggregate information on what pages consumers access or visit and
information volunteered by the consumer, such as survey information and/or site
registrations.
The information we collect is used to improve the content of-our Web page, used
to notify consumers about updates to our Web site and used by us to contact
consumers for marketing purposes. We will not use the information in any way
that identifies registered users individually to any third party without the
registered user's consent.
MECI is not currently sharing the postal addresses, phone numbers or e-mail
addresses of users with third parties. In the future, MECI may contract with a
bulk e-mail provider who may have the right to share the e-mail addresses of
MedEc Interactive's registered users with third parties. MECI will not share
users' credit card numbers, DEA numbers, Social Security numbers, or any other
personally identifiable information.
Occasionally, MECI sends e-mail messages to registered users to inform them of
features and services available on MedEc Interactive. MECI acknowledges that
some users may not want to receive such e-mail. Future registration forms will
allow users to "opt-out" of this feature upon registration with MedEc
Interactive. In the meantime, users who do not want to receive e-mail messages
may visit the User Profile page to change their e-mail address to "nomail." E-
------------
mail cannot be delivered to this invalid address.
If you supply us with your postal address on-line you may receive periodic
mailings from us with information on new products and services or upcoming
events. If you do not wish to receive such mailings, please let us know by
sending a request via e-mail to [email protected].
---------------------------
Persons who supply us with their telephone numbers on-line may receive telephone
contact from us with information regarding orders or inquiries they have made
on-line. If you do not wish to receive such phone calls, please let us know by
sending email to medecinteractive(@medec.com.
---------------------------
22
<PAGE>
11. GENERAL
If any provision of this Agreement is determined to be invalid under any statute
or rule of law, the same shall be deemed omitted and the remaining provisions
shall continue in full force and effect.
This Agreement shall be deemed to be made in the State of New Jersey and shall
in all respects be interpreted, construed, and governed by and in accordance
with the laws of the State of New Jersey applicable to contracts executed and to
be wholly performed therein.
This Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, oral or
written, and all other communications relating to the subject matter hereof. No
amendment or modification of any provision of this Agreement will be effective
unless set forth in a document that purports to amend this Agreement and that is
accepted by both parties hereto.
This Agreement is personal to you and you may not assign your rights or
obligations to anyone.
THE ASSOCIATED PRESS USER AGREEMENT
This Service (including, but not limited to text, content, photographs, video
and audio) is for your personal, noncommercial use and is protected by a
copyright as a collective work or compilation under U.S. copyright and other
laws. You must abide by all additional copyright notices or restrictions
contained in this Service.
YOU MAY NOT COPY, REPRODUCE, DISTRIBUTE, PUBLISH, DISPLAY, PERFORM, MODIFY,
CREATE DERIVATIVE WORKS, TRANSMIT, OR IN ANY WAY EXPLOIT ANY PART OF THIS
SERVICE, EXCEPT THAT CORPORATE GOVERNMENT AND INSTITUTIONAL SUBSCRIBERS MAY USE
PORTIONS OF THE SERVICE FOR INTERNAL PRINTED COMMUNICATIONS AND MEMORANDA.
YOU MAY NOT DOWNLOAD AND STORE MATERIAL FROM THIS SERVICE IN ANY PERMANENT FORM,
WHETHER ARCHIVAL FILES, COMPUTER-READABLE FILES AND ANY OTHER MEDIUM.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, YOU MAY NOT DISTRIBUTE ANY
PART OF THIS SERVICE OVER ANY NETWORK, INCLUDING A LOCAL AREA NETWORK, NOR SELL
NOR OFFER IT FOR SALE. IN ADDITION, THESE FILES MAY NOT BE USED TO CONSTRUCT ANY
KIND OF DATABASE.
NEITHER THE ASSOCIATED PRESS NOR ANY OF ITS AFFILIATES SHALL BE LIABLE IN ANY
WAY TO YOU OR ANY THIRD PARTY OR TO ANY OTHER PERSON WHO MAY RECEIVE INFORMATION
IN THIS SERVICE, OR TO ANY PERSON WHATSOEVER, FOR ANY DELAYS, INACCURACIES,
ERRORS OR OMISSIONS
23
<PAGE>
THEREFROM OR IN THE TRANSMISSION OR DELIVERY OF ALL OR ANY PART THEREOF OR FOR
ANY DAMAGE ARISING THEREFROM OR OCCASIONED THEREBY.
IN NO EVENT, SHALL THE ASSOCIATED PRESS OR ANY OF ITS AFFILIATES OR THE THOMSON
CORPORATION OR ANY OF ITS AFFILIATES BE LIABLE FOR ANY DIRECT, CONSEQUENTIAL,
PUNATIVE, SPECIAL OR ANY OTHER DAMAGES ARISING IN ANY WAY FROM THE AVAILABILITY
OF THE SERVICE REGARDLESS OF THE FORM OF ACTION.
---------------------
Accept Cancel
---------------------
24
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.29
Virtual Internet Provider (VIP) Agreement
This Virtual Internet Provider Agreement (the "Agreement") is made in the city
of Fairfax, Virginia, this 11th day of September, 1998 (the "Effective Date"),
between UUNET Technologies, Inc., a Delaware corporation, whose address is 3060
Williams Drive, Fairfax, Virginia 22031 ("UUNET"), and WebMD, Inc., whose
address is 3399 Peachtree Road, Suite 400, Atlanta, Georgia 30326 ("Reseller").
The parties hereto agree and bind themselves as follows:
1. SERVICE. UUNET will sell, and Reseller will purchase, services for the
interconnection of Reseller's end users with the Internet. UUNET agrees that
its Internet access services provided to Reseller will be of a quality usual and
customary in the industry for similarly situated companies, and if UUNET
consistently fails to meet this standard, Reseller's sole remedy shall be to
terminate this Agreement without penalty upon 30 days' written notice if UUNET
has not improved service quality during this notice period. UUNET agrees to
provide Reseller with a toll-free number to report problems relating to network
integrity. This number is to be used only by Reseller and may not be released
to Reseller's customers. UUNET's relationship under this Agreement is solely
with Reseller and not with any of Reseller's end users. Reseller is responsible
for all end-user customer support, billing, and collections.
2. PRICING. The prices set forth in the attached Schedule A apply to PPP dial-
up traffic and VIP radius server interoperability. For all other services,
UUNET's list prices apply unless other prices have been specifically
established. Reseller agrees to pay the Minimum Amount of $/***/ as set forth in
Schedule A if billing is based on actual service charges, as calculated pursuant
to Schedule A, would be less than the Minimum Amount.
3. TERMS and CONDITIONS. Reseller agrees to comply with the Network Services
Terms and Conditions set forth in the attached Schedule B and the Technical
Agreement for Network Interoperability, as set forth in the attached Schedule C.
Reseller further agrees to require its end users to comply with and acknowledges
the terms and conditions in substance identical to those in Sections One, Two,
Three, Four and Five of Schedule B. Reseller shall defend, indemnify, and hold
harmless UUNET against any claims resulting from Reseller's or its customers'
use of UUNET's services.
4. TESTING. The full effectiveness of this Agreement will be contingent upon
the completion of technical testing to the mutual and reasonable satisfaction of
both parties during
_______________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
1
<PAGE>
the period of 15 days beginning on or after August 15, 1998. If either party
shall reasonably declare the testing results to be unsatisfactory at the
conclusion of the 15-day period, the parties shall have another ten days to
correct the problem. If such correction is not completed at the end of such ten
day period to the mutual and reasonable satisfaction of the parties, this
Agreement will terminate with no further liability to either party. If no such
declaration is made, acceptance of technical testing shall be presumed, and the
Agreement shall remain in effect. Commercial service under the Agreement shall
begin on or after September 1, 1998. Monthly minimum amounts as set forth in
Schedule A will begin to accrue from the date of the satisfactory completion of
technical testing. If testing is completed during the course of a month, the
first month's minimum amount will be prorated to reflect the number of days in
the month for which the monthly minimum amounts shall accrue.
5. TERM. The term of this Agreement is one year from the Effective Date, which
term shall be automatically renewed for additional sixty day terms, provided
that neither party has delivered to the other a written notice of intent not to
renew for the forthcoming term. Such notice of intent shall be given not less
than 60 days in advance of the end of the then-current term. In the sixty days
prior to completion of the initial term, the parties shall negotiate, in good
faith, all appropriate revisions to Schedule A as well as a possible extension
of this Agreement's term.
6. TERMINATION.
(a) For Cause. Either party may terminate this Agreement for cause without
penalty in the event that the other party breaches any material term of this
Agreement. Prior to such termination, the party intending to terminate shall
first give the other party written notice of its intent to terminate which shall
clearly describe problem(s) constituting cause. The other party will have 30
days from the date of receipt of such notice to correct the problem. If the
problem is not corrected within such period, the party intending to terminate
may terminate this Agreement on such 30th day. Reseller shall cooperate with
UUNET in enforcing the Acceptable Use Policy in Section 2 of Schedule B. If
Reseller shall violate such acceptable use policy, or permit such violation, and
does not immediately act to remedy such violation when it becomes aware of it,
UUNET may after good faith discussions of the violation with Reseller's
management, terminate this Agreement without penalty with ten days' written
notice. If any amounts due and owing by Reseller remain unpaid 60 days after
date of invoice, UUNET may terminate this Agreement immediately upon written
notice without penalty.
(b) For Convenience. Reseller may terminate this Agreement for convenience
90 days after giving UUNET written notice. In the event of such termination,
Reseller will pay UUNET *** % of the amount obtained by subtracting the charges
paid for service prior to termination from the Minimum Amount set forth in
Schedule A, in addition to paying all amounts due and owing as of such
termination.
7. CONFIDENTIALITY; NO PUBLICITY. The prices and terms of this Agreement shall
_______________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
2
<PAGE>
be held confidential by each party, as shall each party's confidential or
proprietary information, the parties' respective performance under this
Agreement, the quality of UUNET network performance, and any data provided by
UUNET to Reseller regarding performance of the UUNET network. Neither party
shall disclose any such information to third parties, except as permitted
pursuant to this Section 7, and each party shall disseminate such information
among its employees only on a need-to-know basis. To the extent a party wishes,
or is required by applicable law or regulation, to disclose the existence or
terms of this Agreement or performance thereunder, such party shall notify the
other party in advance of such disclosure and shall provide the other party, to
the maximum extent practicable, the opportunity to comment upon such proposed
disclosure. Each party shall be entitled to all available legal and equitable
remedies in the event of a breach of this Section 7. In addition, either party,
may terminate this Agreement for cause upon ten days' notice and without penalty
in the event of any breach of this Section.
8. NO USE OF UUNET TRADEMARKS. Reseller may not use the name, logo or any
other trademarks or service marks of UUNET in any advertising, signage,
marketing materials, brochures or any other materials in any medium without
UUNET's express advance written permission. Any such permitted use shall be only
within guidelines provided by UUNET. Reseller's breach of this Section 8 shall
be a material breach of this Agreement constituting cause for termination
pursuant to Section 6(a) by UUNET.
9. FORECASTS. Reseller recognizes UUNET's reliance upon the reasonable
accuracy of usage forecasts for network expansion and engineering. During the
first week of each calendar month during the term of this Agreement Reseller
shall provide UUNET with its best forecast of users and hours for the next six
months. Reseller shall also provide UUNET with any information as to marketing
programs which will be helpful in determining expected future loads,
particularly any information relevant to expected loads in particular
geographical locations POPs. Reseller's failure to provide such forecasts at
such specified times shall be a material breach of this Agreement constituting
cause for termination pursuant to Section 6(a) by UUNET in its absolute
discretion.
10. RELATIONSHIP OF PARTIES. No agency, partnership, joint venture or
employment is created as a result of this Agreement. Neither party is authorized
to bind the other in any respect whatsoever.
11. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
STATED OR IMPLIED HEREIN, NEITHER PARTY SHALL HAVE ANY LIABILITY WHATSOEVER FOR
ANY INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES SUFFERED BY THE OTHER OR BY ANY
ASSIGNEE OR OTHER TRANSFEREE OF THE OTHER, EVEN IF INFORMED IN ADVANCE OF THE
POSSIBILITY OF SUCH DAMAGES, EXCEPT IN CONNECTION WITH THE INDEMNIFICATION
PROVISIONS OF SECTION 3 OF THIS AGREEMENT AND SECTION 2 OF SCHEDULE B.
12. ASSIGNMENT. This Agreement shall not be assignable by either party hereto
without the prior written consent of the other party.
3
<PAGE>
13. BINDING EFFECT. Except as herein otherwise specifically provided, this
Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
14. FORCE MAJEUR. No party shall be liable by reason of any failure or delay in
the performance of its obligations due to strikes, riots, fires, explosions,
acts of God, war, governmental action or any other cause which is beyond the
reasonable control of such party and which such party addresses with reasonable
diligence and speed.
15. GOVERNING LAW. This Agreement and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the Commonwealth
of Virginia, excluding its laws relating to conflicts of laws.
16. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the attached Schedules
constitute the entire understanding and agreement between the parties and
supersede any and all prior or contemporaneous oral or written communications
with respect to the subject matter hereof. This Agreement shall not be modified,
amended or in any way altered except by an instrument in writing signed by the
parties.
17. WAIVER. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; no
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy granted hereby or by law.
18. NOTICE. Each notice required or permitted under this Agreement shall be
given in writing. Such notice shall be sent by first class mail, postage prepaid
and marked for delivery by certified or registered mail, return receipt
requested, addressed to the parties listed below at their respective places of
business, or at such other addresses of which notice has been given to the
addressing party:
If to Reseller: If to UUNET Technologies, Inc.:
WebMD, Inc. UUNET Technologies, Inc.
3399 Peachtree Road, Suite 400 3060 Williams Drive
Atlanta, Georgia 30326 Fairfax, Virginia 22031
Attention: General Counsel Attention: General Counsel
Fax: 404-479-7651 Fax: 703-206-5807
Such notice shall be deemed delivered upon personal delivery; five days after
deposit in the U.S. mail, one day after deposit with such overnight courier, and
upon actual confirmation of receipt of a facsimile.
19. PLURAL/GENDER. Whenever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns
4
<PAGE>
stated in the masculine, the feminine or the neuter gender shall include the
masculine, feminine and neuter. The term "person" means any individual,
corporation, partnership, trust or other entity.
20. SEVERABILITY. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
21. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which, when taken together,
shall constitute one and the same instrument. It shall not be necessary for all
parties to execute the same counterpart hereof.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first
above written.
WebMD, Inc. UUNET Technologies, Inc.
By: /s/ Bruce A. Springer By: /s/ Clint Heiden
--------------------- ----------------
Name: Bruce A. Springer Name: Clint Heiden
----------------- ------------
Title: Executive Vice President Title: Vice President Sales
------------------------ --------------------
5
<PAGE>
SCHEDULE A
Dial-Up and VIP Radius Server Interoperability Pricing; Minimum Monthly
Amount
1. Dial-Up Pricing
By the fifth calendar day of each month Reseller shall notify UUNET of the total
subscribers to Reseller's service in the prior month ("Subscribers"). Reseller
will be charged $*** per month for each Subscriber to Reseller's service as
reported by Reseller, verified by the network identifier used by UUNET and (if
necessary) ultimately confirmed by the audits provided for in Section 4 below.
If in any two consecutive calendar months the "Average Usage" derived by ***,
the parties will engage in good faith renegotiation of the pricing terms in this
schedule, and UUNET shall have the right to terminate this Agreement upon ten
days' written notice if new pricing terms are not promptly agreed upon by the
parties.
The above rates are for PPP dial-up traffic in the continental United States
only.
ISDN connectivity, toll-free access, international and non-continental US
service will be provided upon Reseller's request and only if UUNET is able to
offer such services, and pricing for such services shall be attached to this
Agreement as an additional schedule.
2. Annual Minimum Amount
Reseller agrees to pay UUNET a Minimum Amount of $*** for service provided in
the twelve months following September 1, 1998. In the event that actual service
charges during the period are less than $***, then Reseller shall pay UUNET in
September 1999 the difference between the Minimum Amount and the actual service
charges.
For purposes of determining whether billing based on actual service charges
exceeds or is less than the Minimum Amount, actual service charges will include
billing for dial-up (including international, ISDN and toll-free usage, if any),
but will not include one-time billing fees, VIP radius server interoperability
or charges related to leased lines.
3. VIP Radius Server Pricing
Reseller will pay a one-time installation charge of $*** due upon execution of
this Agreement and a $*** per month fee for Radius server interoperability
(includes use of one user realm/suffix).
_______________
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
6
<PAGE>
4. Audits
UUNET shall have reasonable access to Reseller's data and records during normal
business hours to verify that Reseller's Subscriber reports are accurate and
complete.
7
<PAGE>
SCHEDULE B
Virtual Internet Provider Terms and Conditions
1. UUNET exercises no control over the content of the information passing
through UUNET's host computers and points of presence ("UUNET's Network").
Except as otherwise provided for in Section One of the Agreement, UUNET makes no
warranties of any kind, whether express or implied, for the service it is
providing. UUNET also disclaims any warranty of merchantability or fitness for a
particular purpose. UUNET will not be responsible for any damage Reseller
suffers. This includes damages resulting from loss of data due to delays,
nondeliveries, misdeliveries, or service interruptions. Use of any information
obtained via UUNET's Network is at the user's own risk. UUNET specifically
denies any responsibility for the accuracy or quality of information obtained
through its services.
2. All use of the UUNET Network and the service must comply with the then-
current version of the UUNET Acceptable Use Policy ("Policy") available at the
following URL: www.uu.net/usepolicy. UUNET reserves the right to amend the
--------------------
Policy from time to time, effective upon posting of the revised Policy at the
URL. UUNET reserves the right to suspend the service or terminate this Agreement
effective upon notice for a violation of the Policy. Customer agrees to
indemnify and hold harmless UUNET from any losses, damages, costs or expenses
resulting from any third party claim or allegation ("Claim") arising out of or
relating to use of the service, including any Claim which, if true, would
constitute a violation of the Policy.
3. UUNET offers two B channel ISDN connectivity, but both B channels may not
be able to be used in conjunction with each other on every session.
4. Resale to other individuals and organizations is permitted, but they may
not further resell the services.
5. Payment is due 30 days after date of invoice. Accounts are in default if
payments is not received within 30 days after date of invoice. Accounts unpaid
60 days after date of invoice may have service interrupted. Only a written
request to terminate service relieves Reseller of the obligation to pay the
monthly account charge. Accounts in default are subject to an interest charge
equal to the lesser of 1.5% per month, or the maximum rate permitted by law, on
the outstanding balance.
6. These Terms and Conditions supersede all previous representations,
understandings, or agreements and shall prevail notwithstanding any variance
with terms and conditions of any order submitted. Use of UUNET's Network
constitutes acceptance of these Terms and Conditions.
8
<PAGE>
SCHEDULE C
Technical Agreement For Network Interoperability
1. Reseller agrees to secure a minimum TI connection from UUNET and operate
its own Radius server. Such server will perform user validation functions and
will be maintained in a secure environment. Reseller also will maintain this
server with reasonably current versions of the Radius protocols as provided by
UUNET.
2. Reseller agrees to use software and procedural safeguards to insure that
only accurate routing for networks to be used by Reseller's customers is
transmitted from Reseller's Radius server into UUNET's network, and to use best
efforts to immediately remedy any problems leading to transmission of incorrect
routing information.
3. Reseller agrees to assign each end user customer a unique identification
number for billing purposes, and to reasonably cooperate with UUNET in
establishing the structure of this identification number.
4. Reseller and UUNET each agree to cooperate with the other in identifying
and resolving any security infringements which involve Reseller's customers and
UUNET's Network, in accordance with UUNET's policies as in effect from time to
time.
5. Reseller acknowledges and agrees that any billing data supplied by UUNET on
an interim basis (more frequently than monthly) is an estimate and may not be
relied upon for 100% accuracy.
9
<PAGE>
EXHIBIT 10.30
(Medical Space)
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into this 16th day
of September, 1996, by and between Landlord and Tenant.
W I T N E S S E T H :
- - - - - - - - - -
1. CERTAIN DEFINITIONS. For purposes of this Lease, the following
-------------------
terms shall have the meanings hereinafter ascribed thereto:
(a) LANDLORD: PAVILION PARTNERS, L.P.
--------
(b) LANDLORD'S ADDRESS: LANDLORD'S ADDRESS FOR PAYMENTS:
------------------ -------------------------------
1100 Lake Hearn Drive 1100 Lake Hearn Drive
Atlanta, GA 30342 Atlanata, GA 30342
(c) TENANT: QUALITY DIAGNOSTIC CARDIOLOGY SERVICES, INC.
------
(d) TENANT'S ADDRESS:
----------------
1100 LAKE HEARN DRIVE
ATLANTA, GA 30326
(e) BUILDING ADDRESS:
----------------
1100 Lake Hearn Drive
Atlanta, Georgia 30342
(f) SUITE NUMBER: 370
------------
(g) RENTABLE FLOOR AREA OF THE DEMISED PREMISES: Approximately 2,093
-------------------------------------------
rentable square feet (representing 1,842 usable square feet which
shall be subject to adjustment in accordance with the Tenant
Improvement Agreement attached hereto as EXHIBIT "D").
-----------
(h) RENTABLE FLOOR AREA OF THE BUILDING (1100 AND 1150): 237,715
---------------------------------------------------
rentable square feet.
(i) TENANT'S PERCENTAGE SHARE: The proportion that the Rentable Floor
-------------------------
Area of the Demised Premises bears to ninety-five percent (95%)
of the Rentable Floor Area of the Buildings or the average
percentage of the Rentable Floor Area of the Buildings actually
leased in the Project if such average is greater than ninety-five
percent (95%) of the Rentable Floor Area of the Buildings. The
average percentage of the Rentable Area of the Buildings actually
leased shall be determined by adding together the total leased
space on the last day of each month during the calendar year in
question and dividing such sum by twelve (12).
(j) LEASE TERM. Commencing on the Commencement Date and terminating
----------
on March 31, 2001.
(k) BASE RENTAL: $18.36 per square foot of Rentable Floor Area of
-----------
Demised Premises per year.
(l) COMMENCEMENT DATE: The earlier of (x) November 1, 1996, (y) the
-----------------
date upon which Tenant takes possession and occupies the Demised
Premises or (z) the date upon which the Demised Premises are
ready for occupancy and delivered to Tenant, subject to
adjustment pursuant to the Tenant Improvement Agreement attached
hereto as EXHIBIT "D".
-----------
<PAGE>
(m) RENTAL COMMENCEMENT DATE: The Commencement Date, provided that if
------------------------
the Demised Premises are not ready for occupancy by the date set
forth in Article 1(l)(x) above, due to delays not caused by
Tenant or its employees, agents or contractors, the Rental
Commencement Date shall be postponed one (1) day for each day of
such delay.
(n) TENANT IMPROVEMENT ALLOWANCE: See Special Stipulation #1, Exhibit
----------------------------
G, page G-1.
(o) RENTAL DEPOSIT: 3,202.29 $
---------------
(p) BROKER(S): Williams-Adair Realty Corporation
--------- representing Tenant and
Meadows & Ohly, Inc. representing Landlord
(q) INCREASE MULTIPLIER: The term "Increase Multiplier" shall mean a
-------------------
fraction:
THE NUMERATOR: The Consumer Price Index, as herein defined,
-------------
published for the month which is three (3) months prior to the
month in which the Increase Multiplier is being calculated.
THE DENOMINATOR: The Consumer Price Index published for the month
---------------
which is fifteen (15) months prior to the month in which the
Increase Multiplier is being calculated, provided however, in no
event shall the Increase Multiplier be less than 1.00.
(r) CONSUMER PRICE INDEX: The revised Consumer Price Index, Atlanta,
--------------------
Georgia, All Items (1982-1984=100), issued by the U.S. Department
of Labor, Bureau of Labor Statistics. If the Consumer Price Index
published by the U.S. Bureau of Labor Statistics is discontinued,
another index recognized as authoritative shall in good faith be
substituted by Landlord.
2. LEASE OF PREMISES: Landlord, in consideration of the covenants
-----------------
and agreements to be performed by Tenant, and upon the terms and conditions
hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does
hereby rent and lease from Landlord, certain premises (the "Demised Premises")
in the building known as 1100 Lake Hearn Drive (the "Building") located on that
certain tract of land, more particularly described on EXHIBIT "A" attached
-----------
hereto and by this reference made a part hereof (the "Land"), which Demised
Premises are outlined on the floor plan attached hereto as EXHIBIT "B" and by
-----------
this reference made a part hereof, with no easement for light, view or air
included in the Demised Premises or being granted hereunder. The "Project" is
comprised of the Building, the other building located on the Land, known as 1150
Lake Hearn Drive (the "Other Building"; the Building and the Other Building
being hereinafter sometimes collectively called the "Buildings"), the Land, the
Buildings' parking facilities, any walkways, covered walkways, tunnels or other
means of access to the Building and the Buildings' parking facilities, all
common areas, including any lobbies or plazas, and any other improvements or
landscaping now or hereafter located on the Land. No rights to any parking
spaces are granted under this Lease; however, Tenant and Tenant's employees,
invitees and licensees shall be entitled to use, on a non-exclusive basis in
common with other tenants of the Building or adjacent buildings, the surface
parking facilities located from time to time adjacent to the Building and owned
by Landlord. Such use of the parking facilities shall be subject to any and all
rules and regulations established by Landlord with respect to the parking
facilities. Landlord, at Landlord's sole discretion and upon completion of a
parking deck, with ninety (90) days prior written notice, may charge parking
fees for deck parking at rates commensurate with those charged by comparable
office buildings with parking decks in the area, and Tenant and Tenant's
invitees and licensees shall be required to pay such fees, provided that surface
parking shall remain free of charge for Tenants, and invitees and licensees of
Tenant. Anything to the contrary in this Lease notwithstanding, Landlord
reserves the right and privilege to, from time to time, alter, increase and
reduce the location, structure and layout of the Project, including, but not
limited to, the parking areas and other common areas.
3. TERM. The term of this Lease (the "Lease Term") shall commence on
----
the Commencement Date, and, unless sooner terminated as provided in this Lease,
shall end on the expiration of the period designated
2
<PAGE>
in Article 1(j) above. Promptly after the Commencement Date, Landlord shall send
to Tenant a Tenant Acceptance Agreement in the form of EXHIBIT "C" attached
----------
hereto and by this reference made a part hereof, specifying the Commencement
Date, the Rental Commencement Date, the date of expiration of the Lease Term in
accordance with Article 1(j) above and certain other matters as therein set
forth.
4. POSSESSION. The obligations of Landlord and Tenant with respect
----------
to the initial leasehold improvements to the Demised Premises are set forth in
the Tenant Improvement Agreement attached hereto as EXHIBIT "D" and by this
-----------
reference made a part hereof. Tenant agrees to comply with all of the terms and
provisions of the Tenant Improvement Agreement. If, for any reason whatsoever,
the Demised Premises are not substantially completed by the Commencement Date,
or if Landlord, for any reason whatsoever, cannot deliver possession of the
Demised Premises to Tenant on the Commencement Date, this Lease shall not be
void or voidable, nor shall Landlord be liable to Tenant for any resulting loss
or damages. No delay in delivery of possession shall operate to relieve Tenant
of Tenant's obligations to Landlord, except where such delay results in an
adjustment of the Commencement Date and the Rental Commencement Date pursuant to
the Tenant Improvement Agreement. Landlord shall be deemed to have delivered
possession of the Demised Premises for Tenant's occupancy on the date upon which
Landlord has notified Tenant that the "Work", as that term is defined in the
Tenant Improvement Agreement, is substantially complete, subject only to
completion of items customarily classified as "punchlist items" in the
construction industry and delays or incomplete items caused by Tenant (such date
hereinafter referred to as the "Occupancy Date"). Within ten (10) days after
the Occupancy Date, Tenant shall execute and deliver to Landlord a Tenant
Acceptance Agreement in the form attached hereto as EXHIBIT "C". Tenant may
-----------
state in such Tenant Acceptance Agreement any defects in the Demised Premises
remaining to be repaired or completed by Landlord ("Punchlist Items"), provided,
however, that acceptance by Landlord of the Tenant Acceptance Agreement with a
statement of Punchlist Items shall not constitute the agreement of Landlord to
repair or complete any Punchlist Items not included in the "Working Drawings,"
as that term is defined in the Tenant Improvement Agreement. Upon the earlier
of delivery of the Tenant Acceptance Agreement by Tenant or occupancy of the
Demised Premises by Tenant, Tenant shall be deemed to have waived objection to
any defects not enumerated in a Tenant Acceptance Agreement, except for latent
defects not discoverable by reasonable diligence of Tenant and of which Tenant
gives Landlord written notice within one (1) year after the Occupancy Date.
Tenant shall be deemed to have waived objection to any defects of any nature if
a Tenant Acceptance Agreement is not executed and delivered within ten (10) days
after the Occupancy Date.
5. BASE RENTAL.
-----------
(a) Tenant covenants and agrees to pay to Landlord during the Lease Term
the amounts specified in Article 1(k) (as adjusted from time to time, the "Base
Rental") as base rent for the Premises. The Base Rental shall be paid in equal
monthly installments in advance, without demand, deduction or set off, on the
first (1st) day of each and every calendar month during the Lease Term. A
prorated monthly installment shall be paid in advance on the Rental Commencement
Date for any fraction of a month if the Rental Commencement Date occurs on any
day other than the first day of any month and on the first day of the final
month of the Lease Term for any fraction of a month if the Lease Term shall
expire or terminate on any day other than the last day of any month.
(b) The Base Rental for the first year of the Lease Term is set forth
in Article 1(k) above. On each anniversary of the Commencement Date, the Base
Rental shall be increased to an amount equal to the product of: (i) the amount
of Base Rental for the previous calendar year (or portion thereof adjusted to
reflect an annual rental) multiplied by (ii) the Increase Multiplier.
(c) Tenant covenants and agrees to pay to Landlord during the Lease
Term such sums as are referred to herein as "Additional Rental" when due,
without demand, deduction or set off. As used herein, the term "Rent" shall
mean Base Rental, Additional Rental, and any other amounts due from Tenant
hereunder. Any sums payable to Landlord by Tenant hereunder shall be deemed
Additional Rental, and Landlord shall have all of the remedies upon default as
it does for failure to pay Base Rental.
3
<PAGE>
6. RENTAL DEPOSIT. Landlord acknowledges that it has received from
--------------
Tenant the amount specified in Article 1(o) above (the "Rental Deposit"), which
sum shall be retained by Landlord, without obligation for interest, as security
for the performance of Tenant's covenants and obligations under this Lease.
Landlord shall have no obligation to segregate such Rental Deposit from any
other funds of Landlord. The Rental Deposit shall be returned to Tenant within
thirty (30) days after the expiration of the Lease Term, if Tenant has fully
performed its obligations hereunder. Landlord shall have the right to apply any
part of said Rental Deposit to cure any default of Tenant and if Landlord does
so, Tenant shall upon demand deposit with Landlord the amount so applied so that
Landlord shall have the full Rental Deposit on hand at all times during the
Lease Term. If there is a sale or lease of the Building subject to this Lease,
Landlord shall transfer the Rental Deposit to the vendee or lessee, and Landlord
shall be released from all liability for the return of such Rental Deposit.
Tenant shall look solely to the successor Landlord for the return of said Rental
Deposit. This provision shall apply to every transfer or assignment made of the
Rental Deposit to a successor Landlord. The Rental Deposit shall not be
assigned or encumbered by Tenant without the prior consent of Landlord and any
such unapproved assignment or encumbrance shall be void.
7. ADDITIONAL RENTAL. Tenant shall pay, as Additional Rental, Tenant's
-----------------
Percentage Share of the amount, if any, by which Operating Expenses (as
hereinafter defined) for any calendar year exceed $1,545,147.50 ($6.50/rentable
square foot of the Buildings). The Additional Rental payable pursuant to this
paragraph shall be determined, and paid in accordance with the following
procedures:
(i) During each December of the Lease Term, or as soon thereafter as
practicable, Landlord shall give Tenant written notice of its estimate of
Additional Rental payable under this Article 7 for the ensuing calendar year.
On or before the first day of each month during the ensuing calendar year,
Tenant shall pay to Landlord one-twelfth (1/12) of such estimated amounts
together with the Base Rental, provided that if such notice is not given in
December, Tenant shall continue to pay such Additional Rental during the ensuing
calendar year on the basis of the amounts payable during the calendar year just
ended, until the month after such notice is given.
(ii) As soon as practicable after the close of each calendar year
during the Lease Term, Landlord shall deliver to Tenant a statement of the
adjustments to be made for the calendar year just ended. Such statement shall be
final and binding upon Landlord and Tenant absent manifest error. If on the
basis of such statement Tenant's Percentage Share of the actual increase in
Operating Expenses for such calendar year is an amount that is less than the
estimated payments actually made by Tenant for such calendar year, Landlord
shall credit such excess to the next payments of Additional Rental coming due.
If on the basis of such statement Tenant's Percentage Share of the actual
increase in Operating Expenses for such calendar year is an amount greater that
the estimated payments actually made by Tenant, Tenant shall pay as Additional
Rental the deficiency to Landlord within thirty (30) days after delivery of the
statement.
(iii) If this Lease shall commence, expire or terminate on a day other
than the last day of a calendar year, the amount of Additional Rental payable
during the first or final calendar year of the Lease Term, as the case may be,
shall be prorated based on the actual number of days of the Lease Term during
such calendar year. The expiration or termination of this Lease shall not
affect the obligations of Landlord and Tenant to be performed after such
expiration or termination, pursuant to this Article 7.
8. OPERATING EXPENSES. For purposes of this Lease, "Operating Expenses"
------------------
shall mean all costs and expenses of the ownership operation, maintenance,
repair, ad valorem taxes, management, and security of the Project of every kind
and nature (including, without limitation, all amounts, including interest
thereon if such amounts are borrowed, spent by Landlord to reduce Operating
Expenses, comply with government regulations, promote safety or maintain the
status of the Project, calculated on an accrual basis. Operating Expenses shall
specifically include an annual replacement reserve ("Annual Replacement
Reserve"). For the calendar year 1995, the Annual Replacement Reserve shall be
$142,629.00 ($.60/rentable square foot of the Buildings). Each calendar year
thereafter the Annual Replacement Reserve shall be increased by the Increase
Multiplier. Operating Expenses shall not include (i) depreciation on the
Buildings and personal property, (ii) Tenant Costs (as defined in
4
<PAGE>
the Tenant Improvement Agreement), (iii) payments by Landlord of interest and
principal on any mortgage secured by the Project or any portion thereof, (iv)
the cost of special services rendered to a particular tenant of the Buildings,
which are paid or reimbursed by such tenant, and (v) leasing commissions. If the
average occupancy level was less than ninety five percent (95%) of the total
Rentable Floor Area of the Buildings during a calendar year, the Operating
Expenses for that calendar year shall be adjusted to an amount equal to
Landlord's computation of Operating Expenses had ninety-five percent (95%) of
the total Rentable Floor Area of the Buildings been occupied, and the amount so
computed shall be deemed to be "Operating Expenses" for the purpose of computing
Additional Rental.
9. SERVICES BY LANDLORD. Landlord agrees to provide to Tenant the
--------------------
following services:
(a) General cleaning and janitorial service required as a result of
normal, prudent use of the Demised Premises and only on Mondays through Fridays,
inclusive, with New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day and such other holidays which are observed
locally by national banks (herein collectively called the "Holidays") excepted.
(b) Heating and air-conditioning service daily on Monday through Fridays,
inclusive, with Holidays excepted, from 8:00 A.M. to 6:00 P.M. and on Saturdays,
if not a Holiday, from 8:00 A.M. to 1:00 P.M. Landlord reserves the right to
prohibit the use of machines and equipment that generate excessive heat in their
operation. Should Tenant desire either heating or air-conditioning at times
when such services are not furnished by Landlord under the terms of this Lease,
Landlord will furnish such services as requested by Tenant upon not less than 24
hours notice from Tenant, at Tenant's expense and at such hourly charge as is
from time to time determined by Landlord. Payments for such additional services
shall be deemed Additional Rental due from Tenant and shall be due and payable
on demand;
(c) Elevator service daily on Mondays through Fridays, inclusive, with
Holidays excepted, and 8:00 A.M. to 6:00 P.M. and on Saturdays, if not a
Holiday, from 8:00 A.M. to 1:00 P.M. At least one elevator shall be operative
at all other hours; and
(d) Electric current for lighting and reasonable facilities for furnishing
usual and normal electric power for medical office space. Tenant shall not,
without Landlord's prior written consent, use any equipment, including,
diagnostic equipment, X-ray machines, or any other machines which use electric
current in excess of 110 volts, which will increase the amount of electricity
ordinarily furnished for the use of the Premises as medical office space or
which requires clean circuits or other special distribution circuits.
Landlord's consent for Tenant's use of such equipment shall be conditioned upon
Tenant and Landlord agreeing upon the amount Tenant shall pay each month for
increased electrical consumption.
(e) Water shall be provided to the Demised Premises in an amount
sufficient for private toilets and for hand washing. The cost of any water used
in excess of such amount shall be reimbursed to Landlord on demand as Additional
Rental, with the amount and cost of such excess determined by Landlord in its
reasonable discretion.
(f) Landlord reserves the right to install separate metering devices, at
Tenant's expense, and to charge Tenant for the cost of all excess or after-hours
use of services.
10. TENANT TAXES. Tenant shall pay promptly when due all taxes directly
------------
or indirectly imposed or assessed upon Tenant's gross sales, business
operations, machinery, equipment, trade fixtures and other personal property or
assets, whether such taxes are assessed against Tenant, Landlord or the Project.
In the event that such taxes are imposed or assessed against Landlord or the
Project, Landlord shall furnish Tenant with all applicable tax bills, public
charges and other assessments or impositions and Tenant shall forthwith pay the
same either directly to the taxing authority or, at Landlord's option, to
Landlord.
5
<PAGE>
11. PAYMENTS. All payments of Rent and other payments to be made to
--------
Landlord shall be made on a timely basis and shall be payable to Landlord or as
Landlord may otherwise designate. All such payments shall be mailed or
delivered to Landlord's Address for payments designated in Article 1(b) above or
at such other place as Landlord may designate from time to time in writing. If
mailed, all payments shall be mailed in sufficient time and with adequate
postage thereon to be received in Landlord's account by no later than the due
date for such payment. Tenant agrees to pay to Landlord Fifty Dollars ($50.00)
for each check presented to Landlord in payment of any obligation of Tenant
which is not paid by the bank on which it is drawn, together with interest from
and after the due date for such payment at the rate of eighteen percent (18%)
per annum on the amount due.
12. LATE CHARGES. Any Rent or other amounts payable to Landlord under
------------
this Lease, if not paid by the fifth day of the month for which such Rent is
due, or by the due date specified on any invoices from Landlord for any other
amounts payable hereunder, shall incur a late charge of Fifty Dollars ($50.00)
for Landlord's administrative expense in processing such delinquent payment and
in addition thereto shall bear interest at the rate of eighteen percent (18%)
per annum from and after the due date for such payment. Notwithstanding
anything to the contrary contained in this Lease, in no event shall the rate of
interest payable on any amount due under this Lease exceed the legal limits for
such interest enforceable under applicable law.
13. USE RULES.
---------
(a) The Demised Premises shall be used for executive, general
administrative and office space purposes and no other purposes and in accordance
with all applicable laws, ordinances, rules and regulations of governmental
authorities and the Rules and Regulations attached hereto as EXHIBIT "E" and the
----------
Building Moving Policy attached hereto as EXHIBIT "F" and made a part hereof.
-----------
Tenant covenants and agrees that it will, at its expense, comply with all laws,
ordinances, orders, directions, requirements, rules and regulations of all
governmental authorities (including Federal, State, county and municipal
authorities), now in force or which may hereafter be in force, which shall
impose any duty upon Landlord or Tenant with respect to the use, occupancy or
alteration of the Demised Premises (including, without limitation, the Americans
With Disabilities Act ["ADA"]) or any unique aspect of Tenant's use, occupancy
or alteration thereof, and of all insurance bodies applicable to the Demised
Premises or to the Tenant's use, occupancy or alteration thereof. Tenant
covenants and agrees to abide by the Rules and Regulations and the Building
Moving Policy in all respects as now set forth and attached hereto or as
hereafter promulgated by Landlord. Landlord shall have the right at all times
during the Lease Term to publish and promulgate and thereafter enforce such
rules and regulations or changes in the existing Rules and Regulations as it may
reasonably deem necessary in its sole discretion to protect the tenantability,
safety, operation, and welfare of the Demised Premises and the Project.
(b) No rights to any parking spaces are granted under this Lease; however,
Tenant and Tenant's employees, invitees and licensees shall be entitled to use,
on a non-exclusive basis in common with other tenants of the Building or
adjacent buildings, the parking facilities located from time to time adjacent to
the Building and owned by Landlord. Such use of the parking facilities shall be
subject to any and all rules and regulations established by Landlord with
respect to the parking facilities. Landlord, at Landlord's sole discretion and
upon completion of a parking deck, with ninety (90) days prior written notice,
may charge parking fees for deck parking at rates commensurate with those
charged by comparable medical office buildings with parking decks in the area,
provided that surface parking shall remain free of charge for Tenant and
Tenant's invitees and licensees.
14. ALTERATIONS. Except for any initial improvement of the Demised
-----------
Premises pursuant to Exhibit "D", which shall be governed by the provisions of
-----------
said Exhibit "D", Tenant shall not make, suffer or permit to be made any
-----------
alterations, additions or improvements to or of the Demised Premises or any part
thereof, or attach any fixtures or equipment thereto, without first obtaining
Landlord's written consent. Any such alterations, additions or improvements to
the Demised Premises consented to by Landlord shall be made by Landlord or under
Landlord's supervision for Tenant's account and Tenant shall reimburse Landlord
for all costs thereof (including a reasonable charge for Landlord's overhead),
as Rent, within ten (10) days after receipt of a statement. All such
alterations, additions and improvements, shall become Landlord's property at the
expiration or earlier termination of the Lease Term and shall remain on the
Demised Premises without compensation to Tenant unless Landlord
6
<PAGE>
elects by notice to Tenant to have Tenant remove such alterations, additions and
improvements, in which event, notwithstanding any contrary provisions respecting
such alterations, additions and improvements contained in Article 32 hereof,
Tenant shall promptly restore, at its sole cost and expense, the Demised
Premises to its condition prior to the installation of such alterations,
additions and improvements, normal wear and tear excepted.
15. REPAIRS.
-------
(a) Landlord shall maintain in good order and repair, subject to normal
wear and tear and subject to casualty and condemnation, the Building (excluding
the Demised Premises and other portions of the Building leased to other
tenants), the Building parking facilities, the public areas and the landscaped
areas. Notwithstanding the foregoing obligation, the cost of any repairs or
maintenance to the foregoing necessitated by the intentional acts or negligence
of Tenant or its agents, contractors, employees, invitees, licensees, tenants or
assigns, shall be borne solely by Tenant and shall be deemed Rent hereunder and
shall be reimbursed by Tenant to Landlord upon demand. Landlord shall not be
required to make any repairs or improvements to the Demised Premises except
structural repairs necessary for safety and tenantability, the necessity for
which (i) Landlord is notified in writing by Tenant, and (ii) is not brought
about by any act or neglect of Tenant, its agents, employees or contractors,
licensees, or invitees.
(b) Tenant covenants and agrees that it will take good care of the Demised
Premises and all alterations, additions and improvements thereto and will keep
and maintain the same in good condition and repair, except for normal wear and
tear. Tenant shall at once report, in writing, to Landlord any defective or
dangerous condition known to Tenant. Landlord's liability with respect to any
defects, repairs or maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of such repairs or
maintenance or the curing of such defect. Landlord shall not be liable to
Tenant for damage to person or property caused by any latent defects in the
Building or the Demised Premises, defects in the cooling, heating, electric,
water, elevator or other apparatus or systems or by water discharged from
sprinkler systems, if any, in the Building or the Demised Premises, nor for the
theft, mysterious disappearance, or loss of the Building. To the fullest extent
permitted by law, Tenant hereby waives all rights to make repairs at the expense
of Landlord or in lieu thereof to vacate the Demised Premises as may be provided
by any law, statute or ordinance now or hereafter in effect. Landlord has no
obligation and has made no promise to alter, remodel, improve, repair, decorate
or paint the Demised Premises or any part thereof, except as specifically and
expressly herein set forth.
(c) Tenant shall at its own cost and expense keep and maintain the Demised
Premises and all parts thereof in good repair and tenantable condition and
indemnify Landlord against any loss, damage, or expense arising by reason of any
failure of Tenant so to keep the Demised Premises in good repair and tenantable
condition or due to any act or neglect of Tenant, its agents, employees,
contractors, invitees, or licensees. If Tenant fails to perform, or cause to be
performed, such maintenance and repairs, then at the option of Landlord, in its
sole discretion, any such maintenance or repair may be performed or caused to be
performed by Landlord and the cost and expense thereof shall be charged to
Tenant, and Tenant shall pay the amount thereof to Landlord on demand as
Additional Rental. Tenant shall not install X-ray machines or other equipment
which emits radiation in the Demised Premises without Landlord's approval, which
approval shall not be unreasonably withheld. Landlord's withholding of consent
shall not be unreasonable if, by way of illustration and not limitation,
adequate protection for the safety of people is not installed in connection with
such equipment. Tenant hereby accepts the risks of and all responsibility for
any injury or damage which may result from the operation or failure of operation
of any such X-ray equipment or other equipment which emits radiation. All
equipment owned or operated by Tenant must be installed and protected in a
manner satisfactory to Landlord and in compliance with all governmental
regulations. Tenant will be obligated to obtain and maintain at its expense any
permits, licenses or approvals required in connection with its use of the
Demised Premises or in connection with any equipment of Tenant in the Demised
Premises.
All repairs, replacements and clearing of stoppages from plumbing fixtures
within the Demised Premises, as well as repair or replacement of special or non-
standard electrical fixtures, lights and light bulbs within the
7
<PAGE>
Demised Premises (other than standard 2x4 lights), and the furnishing of toilet
paper and paper towels to toilets and sinks located within the Demised Premises
shall be at Tenant's expense.
(d) Tenant agrees to conform to Landlord's signage program for the
Building; however, all costs and expenses for any sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall obtain the written
approval of Landlord prior to placing and maintaining, or causing or permitting
to be placed and maintained, any sign, advertising matter or other thing of any
kind, on the exterior of the Demised Premises, or any decorating, lettering or
advertising matter on any exterior door to the Demised Premises. Tenant shall
not affix or attach anything to windows in the Demised Premises.
16. LANDLORD'S RIGHT TO ENTRY. Landlord shall retain duplicate keys to
-------------------------
all doors of the Demised Premises, and Landlord and its agents, employees and
independent contractors shall have the right to enter the Demised Premises at
reasonable hours to inspect and examine same, to make repairs, additions,
alterations and improvements, to exhibit the Demised Premises to mortgagees,
prospective mortgagees, purchasers or tenants, and to inspect the Demised
Premises to ascertain that Tenant is complying with all of its covenants and
obligations hereunder, all without being liable to Tenant in any manner
whatsoever for any damages arising therefrom; provided, however, that Landlord
shall, except in case of emergency, afford Tenant such prior notification of an
entry into the Demised Premises as shall be reasonably practicable under the
circumstances. Landlord shall be allowed to take into and through the Demised
Premises any and all materials that may be required to make such repairs,
additions, alterations or improvements. During such time as such work is being
carried on, in or about the Demised Premises, the Rent provided herein shall not
abate, and Tenant waives any claim or cause of action against Landlord for
damages by reason of interruption of Tenant's business or loss of profits
therefrom because of the prosecution of any such work or any part thereof.
Tenant shall give written notice to Landlord at least thirty (30) days prior to
vacating the Demised Premises.
17. INSURANCE. Tenant shall procure at its expense and maintain
---------
throughout the Lease Term a policy or policies of commercial property insurance,
issued on an "all risks" basis insuring the full replacement cost of its
furniture, equipment, supplies and other property owned, leased, held or
possessed by it and contained in the Demised Premises, together with the excess
value of the improvements to the Demised Premises over the Tenant Improvement
Allowance (with a replacement cost endorsement sufficient to prevent Tenant from
becoming a co-insurer), and workmen's compensation insurance as required by
applicable law. Tenant shall also procure at its expense and maintain
throughout the Lease Term a policy or policies of commercial general liability
insurance, written on an occurrence basis and insuring Tenant, Landlord and any
other person designated by Landlord, against any and all liability for injury to
or death of a person or persons and for damage to property occasioned by or
arising out of any construction work being done on the Demised Premises, or
arising out of the condition, use or occupancy of the Demised Premises, or in
any way occasioned by or arising out of the activities of Tenant, its agents,
contractors, employees, guests or licensees in the Demised Premises, or other
portions of the Building or the Project, the limits of such policy or policies
to be in combined single limits for both damage to property and personal injury
and in amounts not less than Three Million Dollars ($3,000,000.00) for each
occurrence. Such insurance shall, in addition, extend to any liability of
Tenant arising out of the indemnities provided for in this Lease. Tenant shall
also carry such other types of insurance in form and amount which Landlord shall
reasonably deem to be prudent for Tenant to carry. All insurance policies
procured and maintained by Tenant pursuant to this Article 17 shall name
Landlord and any additional parties designated by Landlord as additional
insured, shall be carried with companies licensed to do business in the State of
Georgia reasonably satisfactory to Landlord and shall be non-cancelable and not
subject to material change except after twenty (20) days' written notice to
Landlord. Such policies or duly executed certificates of insurance with respect
thereto, accompanies by proof of payment of the premium therefor, shall be
delivered to Landlord prior to the Rental Commencement Date, and renewals of
such policies shall be delivered to Landlord at least thirty (30) days prior to
the expiration of each respective policy term.
18. WAIVER OF SUBROGATION. Landlord and Tenant shall each have included
---------------------
in all policies of commercial property insurance, and business interruption and
other property insurance respectively obtained by them covering the Demised
Premises, the Building and contents therein, a waiver by the insurer of all
right of
8
<PAGE>
subrogation against the other in connection with any loss or damage thereby
insured against. Any additional premium for such waiver shall be paid by the
primary insured. To the full extent permitted by law, Landlord and Tenant each
waives all right of recovery against the other for, and releases the other from
liability for, loss or damage to the extent such loss or damage is covered by
valid and collectable insurance in effect at the time of such loss or damage or
would be covered by the insurance required to be maintained under this Lease by
the party seeking recovery.
19. DEFAULT.
-------
(a) The following events shall be deemed to have events of default by
Tenant under this Lease: (i) Tenant shall fail to pay any installment of Rent
or any other chare or assessment against Tenant pursuant to the terms hereof
within five (5) days after the due date thereof; (ii) Tenant shall fail to
comply with any term, provision, covenant or warranty made under this Lease by
Tenant, other than the payment of the Rent or any other charge or assessment
payable by Tenant, and shall not cure such failure within forty-five (45) days
after notice thereof to Tenant; (iii) Tenant or any guarantor of this Lease
shall make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts as they become due, or shall file a
petition in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or
shall file a petition in any proceeding seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, or shall file an answer admitting,
or fail timely to contest the material allegations of a petition filed against
it in any such proceeding; (iv) a proceeding is commenced against Tenant or any
guarantor of this Lease seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, and such proceeding shall not have been
dismissed within fifteen (15) days after the commencement thereof; (v) a
receiver or trustee shall be appointed for the Demised Premises or for all or
substantially all of the assets of Tenant or of any guarantor of this Lease;
(vi) Tenant shall abandon or vacate all or any portion of the Demised Premises
or fail to take possession thereof as provided in this Lease; (vii) Tenant shall
do or permit to be done anything which crates a lien upon the Demised Premises
or the Project and such lien is not removed or discharged within fifteen (15)
days after the filing thereof; (viii) Tenant shall fail to return a properly
executed instrument to Landlord in accordance with the provisions of Article 27
hereof within the time period provided for such return following Landlord's
request for same as provided in Article 27; or (ix) Tenant shall fail to return
a properly executed estoppel certificate to Landlord in accordance with the
provisions of Article 28 hereof within the time period provided for such return
following Landlord's request for same as provided in Article 28.
(b) Upon the occurrence of any of the aforesaid events of default,
Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever: (i) terminate this Lease, in
which event Tenant shall immediately surrender the Demised Premises to Landlord
and if Tenant fails to do so, Landlord my without prejudice to any other remedy
which it may have for possession or arrearages in Rent, enter upon and take
possession of the Demised Premises and expel or remove Tenant and any other
person who may be occupying said Demised Premises or any part thereof, by force,
if necessary, without being liable for prosecution or any claim of damages
therefor; Tenant hereby agreeing to pay to Landlord on demand the amount of all
loss and damage which Landlord may suffer by reason of such termination, whether
through inability to relet the Demised Premises on satisfactory terms or
otherwise; (ii) terminate Tenant's right of possession (but not this Lease) and
enter upon and take possession of the Demised Premises and expel or remove
Tenant and any other person who may be occupying said Demised Premises or any
part thereof, by entry (including the use of force, if necessary), dispossessory
suit or otherwise, without thereby releasing Tenant from any liability
hereunder, without terminating this Lease, and without being liable for
prosecution or any claim of damages therefor and, if Landlord so elects, make
such alteration, redecorations and repairs as, in Landlord's judgment, may be
necessary to relet the Demised Premises, and Landlord may, but shall be under no
obligation to do so, relet the Demised Premises or any portion thereof in
Landlord's or Tenant's name, but for the account of Tenant, for such term or
terms (which may be for a term extending beyond the Lease Term) and at such
rental or rentals and upon such other terms as Landlord may deem advisable, with
or without advertisement, and by private negotiations, and receive the rent
therefor, Tenant hereby agreeing to pay to Landlord the deficiency, if any,
between all Rent reserved hereunder and the total rental applicable to the Lease
Term hereof obtained by Landlord
9
<PAGE>
re-letting, and Tenant shall be liable for Landlord's expenses in redecorating
and restoring the Demised Premises and all costs incident to such re-letting,
including broker's commissions and lease assumptions, and in no event shall
Tenant be entitled to any rentals received by Landlord in excess of the amounts
due by Tenant hereunder; or (iii) enter upon the Demised Premises by force, if
necessary, without being liable for prosecution or any claim of damages
therefor, and do whatever Tenant is obligated to do under the terms of this
Lease; and Tenant agrees to reimburse Landlord on demand for any expenses
including, without limitation, reasonable attorneys' fees which Landlord may
incur in thus effecting compliance with Tenant's obligations under this Lease
and Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action, whether caused by negligence of Landlord
or otherwise. If this Lease is terminated by Landlord as a result of the
occurrence of an event of default, Landlord may declare the entire amount of
Rent and other charges and assessments which in Landlord's reasonable
determination would become due and payable during the remainder of the Lease
Term (including, but not limited to, increases in Rent pursuant to Article 7
hereof), discounted to present value by using a discount factor of eight percent
(8%) per annum, to be due and payable immediately. Upon the acceleration of such
amounts, Tenant agrees to pay the same at once, together with all Rent and other
charges and assessments theretofore due, at Landlord's address as provided
herein; provided, however, that such payment shall not constitute a penalty or
forfeiture but shall constitute liquidated damages for Tenant's failure to
comply with the terms and provisions of this Lease (Landlord and Tenant agreeing
that Landlord's actual damages in such an event are impossible to ascertain and
that the amount set forth above is a reasonable estimate thereof). Upon making
the entire such payment, Tenant shall receive from Landlord all rents received
by Landlord from other tenants renting the Demised Premises or any portion
thereof during the Lease Term (with appropriate allocations of such rents in the
event such other tenants lease space in addition to the Demised Premises),
provided that the monies to which Tenant shall so become entitled shall in no
event exceed the entire amount actually paid by Tenant to Landlord pursuant to
the preceding sentence, less all of Landlord's costs and expenses (including,
without limitation, Landlord's expenses in redecorating and restoring the
Demised Premises and all costs incident to such reletting, including broker's
commissions and lease assumptions) incurred in connection with or in any way
related to the reletting of the Demised Premises.
(c) Pursuit of any of the foregoing remedies shall not preclude pursuit of
any other remedy herein provided or any other remedy provided by law or at
equity, nor shall pursuit of any remedy herein provided constitute an election
of remedies thereby excluding the later election of an alternate remedy, or a
forfeiture or waiver of any Rent or other charges and assessments payable by
Tenant and due to Landlord hereunder or of any damages accruing to Landlord by
reason of violation of any of the terms, covenants, warranties and provisions
herein contained. No reentry or taking possession of the Demised Premises by
Landlord or any other action taken by or on behalf of Landlord shall be
construed to be an acceptance of a surrender of this Lease or an election by
landlord to terminate this Lease unless written notice of such intention is
given to Tenant. Forbearance by Landlord to enforce one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default. In determining the amount of loss or
damage which Landlord may suffer by reason of termination of this Lease or the
deficiency arising by reason of any reletting of the Demised Premises by
Landlord as above provided, allowance shall be made for the expense of
repossession. Tenant agrees to pay to Landlord all costs and expenses incurred
by Landlord in the enforcement of this Lease, including without limitation, the
fees of Landlord's attorneys as provided in Article 25 hereof.
20. WAVIER OF BREACH. No waiver of any breach of the covenants,
----------------
warranties, agreements, provisions, or conditions contained in this Lease shall
be construed as a waiver of said covenant, warranty, provision, agreement or
condition or of any subsequent breach thereof, and if any breach shall occur and
afterwards be compromised, settled or adjusted, this Lease shall continue in
full force and effect as if no breach occurred.
21. ASSIGNMENT AND SUBLETTING. Tenant shall not, without prior written
-------------------------
consent of Landlord, assign this Lease or any interest herein or in the Demised
Premises, or mortgage, pledge, encumber, hypothecate or otherwise transfer or
sublet the Demised Premises or any part thereof or permit the use of the Demised
Premises by any party other than Tenant. Consent to one or more such transfers
or subleases shall not destroy or waive this provision, and all subsequent
transfers and subleases shall likewise be made only upon obtaining the
10
<PAGE>
prior written consent of Landlord. Without limiting the foregoing prohibition,
in no event shall Tenant assign this Lease or any interest herein, whether
directly, indirectly or by operation of law, or sublet the Demised Premises or
any part thereof or permit the use of the Demised Premises or any part thereof
by any party if such proposed assignment, subletting or use would contravene any
restrictive covenant (including any exclusive use) granted to any other tenant
of the Building or would contravene the provision of Article 13 of this Lease.
Subleasees, assignees or transferees of the Demised Premises for the balance of
the Lease Term shall become directly liable to Landlord for all obligations of
Tenant hereunder, without relieving Tenant or any guarantor of Tenant's
obligations hereunder) of any liability therefor, and Tenant shall remain
obligated, as a principal and not as surety, for all liability to Landlord
arising under this Lease during the entire remaining Lease Term including any
extensions thereof, whether or not authorized herein. If Tenant is a partnership
or limited liability company, a withdrawal or change, whether voluntary,
involuntary or by operation of law, of partners or members owning a controlling
interest in the Tenant shall be deemed a voluntary assignment of this Lease and
subject to the foregoing provisions. If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, or the
sale or transfer of a controlling interest in the capital stock of Tenant,
whether in a single transaction or in a series of transactions, shall be deemed
a voluntary assignment of this Lease and subject to the foregoing provisions.
Landlord may, as a prior condition to considering any request for consent to an
assignment or sublease, require Tenant to obtain and submit current financial
statements of any proposed subtenant or assignee and such other financial
documentation relative to the proposed subtenant or assignee as Landlord may
reasonably require. In the event Landlord consents to an assignment or sublease,
Tenant shall pay to the Landlord a fee to cover Landlord's accounting costs plus
any legal fees incurred by Landlord as a result of the assignment or sublease.
The consent of Landlord to any proposed assignment or sublease may be withheld
by Landlord in its sole and absolute discretion. Landlord may require an
additional security deposit from the assignee or subtenant as a condition of its
consent. Any consideration, in excess of the Rent and other charges and sums due
and payable by Tenant under this Lease, paid to Tenant by any assignee of this
Lease for its assignment, or by any sublessee under or in connection with its
sublease, or otherwise paid to Tenant by another party for use and occupancy of
the Demised Premises or any portion thereof, shall be promptly remitted by
Tenant to Landlord as additional rent hereunder and Tenant shall have no right
or claim thereto as against Landlord. No assignment of this Lease consented to
by Landlord shall be effective unless and until Landlord shall receive an
original assignment and assumption agreement, in form and substance satisfactory
to Landlord, signed by Tenant and Tenant's proposed assignee, whereby the
assignee assumes due performance of this Lease to be done and performed for the
balance of the then remaining Lease Term of this Lease. No subletting of the
Demised Premises, or any part thereof, shall be effective unless and until there
shall have been delivered to Landlord an agreement, in form and substance
satisfactory to Landlord, signed by Tenant and the proposed sublessee, whereby
the sublessee acknowledges the right of Landlord to continue or terminate any
sublease, in Landlord's sole discretion, upon termination of this Lease, and
such sublessee agrees to recognize and attorn to Landlord in the event that
Landlord elects under such circumstances to continue such sublease. Upon
Landlord's receipt of a request by Tenant to assign this Lease or any interest
herein or in the Demised Premises or to transfer or sublet the Demised Premises
or any part thereof or permit the use of the Demised Premises by any party other
than Tenant, Landlord shall have the right, at Landlord's option, to exercise in
writing any of the following options: (a) to terminate this Lease as to the
portion of the Demised Premises proposed to be assigned or sublet; (b) to
consent to the proposed assignment or sublease, subject to the other terms and
conditions set forth in this Article 21; or (c) to refuse to consent to the
proposed assignment or sublease, which refusal shall be deemed to have been
exercised unless Landlord gives Tenant written notice providing otherwise.
22. DESTRUCTION.
-----------
(a) If the Demised Premises are damaged by fire or other casualty, the same
shall be repaired or rebuilt as speedily as practical under the circumstances at
the expense of Landlord, unless this Lease is terminated as provided in this
Article 22, and during the period required for restoration, a just and
proportionate part of Base Rental shall be abated until the Demised Premises are
repaired or rebuilt.
(b) If (i) the Demised Premises or the Project are damaged to such an
extent that repairs cannot, in Landlord's judgment, be completed within one
hundred eighty (180) days after the date of the commencement of
11
<PAGE>
repair of the casualty, or (ii) the Demised Premises or the Project are damaged
or destroyed as a result of a risk which is not insured under the insurance
policies required hereunder, or (iii) the Demised Premises are damaged or
destroyed during the last twelve (12) months of the Lease Term, or (iv) if the
Project is damaged in whole or in part (whether or not the Demised Premises are
damaged) to such an extent that the Project cannot, in Landlord's judgment, be
operated economically as an integral unit, then and in any such event Landlord
may at its option terminate this Lease by notice in writing to Tenant within
sixty (60) days after the day of such occurrence. If the Demised Premises are
damaged to such an extent that repairs cannot, in Landlord's judgment, be
completed within one hundred eighty (180) days after the date of the
commencement of repair of the casualty or if the Demised Premises are
substantially damaged during the last twelve (12) months of the Lease Term, then
in either such event Tenant may elect to terminate this Lease by notice in
writing to Landlord within fifteen (15) days after the date of such occurrence.
Unless Landlord or Tenant elects to terminate this Lease as hereinabove
provided, this Lease will remain in full force and effect and Landlord shall
repair such damage at its expense to the extent required under subparagraph (c)
below as expeditiously as possible under the circumstances.
(c) If Landlord should elect or be obligated pursuant to subparagraph (a)
above to repair or rebuild because of any damage or destruction, Landlord's
obligation shall be limited to the original Building and any other work or
improvements which were originally performed or installed at Landlord's expense
as described in Exhibit "D" hereto or with the proceeds of the Tenant
-----------
Improvement Allowance. If the cost of performing such repairs exceeds the
actual proceeds of insurance paid or payable to Landlord on account of such
casualty, or if Landlord's mortgagee or the lessor under a ground or underlying
lease shall require that any insurance proceeds from a casualty loss be paid to
it, Landlord may terminate this Lease unless Tenant, within fifteen (15) days
after demand therefor, deposits with Landlord a sum of money sufficient to pay
the difference between the cost of repair and the proceeds of the insurance
available to Landlord for such purpose.
(d) In no event shall Landlord be liable for any loss or damage substained
by Tenant by reason of casualties mentioned hereinabove or any other accidental
casualty. In no event shall Landlord be required to rebuild, repair, or replace
any tenant improvements or any personal property, equipment, or trade fixtures
which belong to Tenant.
(e) Any insurance which may be carried by Landlord or Tenant against loss
or damage to the Building or the Demised Premises shall be for the sole benefit
of the party carrying such insurance.
(f) If any such casualty stated in this Article 22 occurs, Landlord shall
not be liable to Tenant for inconvenience, annoyance, loss of profits, expenses,
or any other type of injury or damage resulting from the repair of any such
damage, or from any repair, modification, arranging, or rearranging of any
portion of the Demised Premises or any part or all of the Building or for
termination of this Lease as provided in this Article 22.
(g) Anything in this Article 22 to the contrary notwithstanding, for
purposes of this Article 22, Landlord shall not be obligated to commence any
repair or restoration unless and until insurance proceeds are actually received
by Landlord, and Landlord's restoration obligations shall be limited to the
extent of the insurance proceeds actually received by Landlord therefor and
which the holder of any mortgage or deed to secure debt encumbering any portion
of the Building, or the ground lessor under any ground lease affecting any
portion of the Building, permit Landlord to apply toward the restoration of the
Building.
23. LANDLORD'S LIEN. Landlord shall at all times have a valid first lien
---------------
upon all of the personal property of Tenant situated in the Demised Premises to
secure payment of Rent and other sums and charges due hereunder from Tenant to
Landlord and to secure the performance by Tenant of each and all of the
covenants, warranties, agreements and conditions hereof. Said personal property
shall not be removed from the Demised Premises without the consent of Landlord
until all arrearage in Rent and other charges as well as any and all other sums
of money due hereunder shall first have been paid and discharged and until this
Lease and all of the covenants, conditions, agreements and provision hereof have
been fully performed by Tenant. Tenant shall from time to time execute any
financing statements and other instruments necessary to perfect the security
interest granted herein. The lien herein granted may be foreclosed in the
manner and form provided by law for the
12
<PAGE>
foreclosure of security instruments or chattel mortgages, or in any other manner
provided by law. This Lease is intended as and constitutes a security agreement
within the meaning of the Uniform Commercial Code of the State of Georgia.
24. NOT USED.
--------
25. ATTORNEY'S FEES AND HOMESTEAD. If any Rent or other debt owing by
-----------------------------
Tenant to Landlord hereunder is collected by or through an attorney-at-law,
Tenant agrees to pay an additional amount equal to fifteen percent (15%) of such
sum as attorneys' fees. If Landlord uses the services of any attorney in order
to secure compliance with any other provisions of this Lease, to recover damages
for any breach or default of any other provisions of this Lease, or to terminate
this Lease or evict Tenant, Tenant shall reimburse Landlord upon demand for any
and all attorneys' fees and expenses so incurred by Landlord. Tenant waives all
homestead rights and exemptions which it may have under any law as against any
obligation owing under this Lease, and assigns to Landlord its homestead and
exemptions to the extent necessary to secure payment and performance of its
covenants and agreements hereunder.
26. TIME. Time is of the essence of this Lease and whenever a certain day
----
is stated for payment or performance of any obligation of Tenant or Landlord,
the same enters into and becomes a part of the consideration hereof.
27. SUBORDINATION AND ATTORNMENT.
----------------------------
(a) Tenant agrees that this Lease and all rights of Tenant hereunder are
and shall be subject and subordinate to any ground or underlying lease which may
now or hereafter be in effect regarding the Project or any component thereof, to
any mortgage now or hereafter encumbering the Demised Premises or the Project or
any component thereof, to all advances made or hereafter to be made upon the
security of such mortgage, to all amendments, modifications, renewals,
consolidations, extensions and restatements of such mortgage, and to any
replacements and substitutions for such mortgage. The terms of this provision
shall be self-operative and no further instrument of subordination shall be
required. Tenant, however, upon request of any party in interest, shall execute
promptly such instrument or certificates as may be reasonably required to carry
out the intent hereof, whether said requirement is that of Landlord or any other
party in interest, including, without limitation, any mortgagee. Landlord is
hereby irrevocably vested with full power and authority as attorney-in-fact for
Tenant and in Tenant's name, place and stead, to subordinate Tenant's interest
under this Lease to the lien or security title of any mortgage and to any future
instrument amending, modifying, renewing, consolidating, extending, restating,
replacing or substituting any such mortgage.
(b) If any mortgagee or lessee under a ground or underlying lease elects
to have this Lease superior to its mortgage or ground lease and signifies its
election in the instrument creating its lien or lease or by separate recorded
instrument, then this Lease shall be superior to such mortgage or lease, as the
case may be. The term "mortgage", as used in this Lease, includes any deed to
secure debt, deed of trust or security deed and any other instrument creating a
lien in connection with any other method of financing or refinancing. The term
"mortgagee", as used in this Lease, refers to the holder(s) of the indebtedness
secured by a mortgage.
(c) In the event any proceedings are brought for the foreclosure of, or in
the event of exercise of the power of sale under, any mortgage covering the
Demised Premises or the Project, or in the event the interests of Landlord under
this Lease shall be transferred by reason of deed in lieu of foreclosure or
other legal proceedings, or in the event of termination of any lease under which
Landlord may hold title, Tenant shall, at the option of the transferee or
purchase at foreclosure or under power of sale, or the lessor of the Landlord
upon such lease termination, as the case may be (sometimes hereinafter call
"such person"), attorn to such person and shall recognize and be bound and
obligated hereunder to such person as the Landlord under this Lease; provided,
however, that no such person shall be (i) bound by any payment of Rent for more
than one (1) month in advance, except prepayments in the nature of security for
the performance by Tenant of its obligations under this Lease
13
<PAGE>
(and then only if such prepayments have been deposited with and are under the
control of such person); (ii) bound by any amendment or modification of this
Lease made without the express written consent of the mortgagee or lessor of the
Landlord, as the case may be; (iii) obligated to cure any defaults under this
Lease of any prior landlord (including Landlord); (iv) liable for any act or
omission of any prior landlord (including Landlord); (v) subject to any offsets
or defenses which Tenant might have against any prior landlord (including
Landlord); or (vi) bound by any warranty or representation of any prior landlord
(including Landlord) relating to work performed by any prior landlord (including
Landlord) under this Lease. Tenant agrees to execute any attornment agreement
not in conflict herewith requested by Landlord, the mortgagee or such person.
Tenant's obligation to attorn to such person shall survive the exercise of any
such power of sale, foreclosure or other proceeding. Tenant agrees that the
institution of any suit, action or other proceeding by any mortgagee to realize
on Landlord's interest in the Demised Premises or the Project, or any portion
thereof pursuant to the powers granted to a mortgagee under its mortgage, shall
not, by operation of law or otherwise, result in the cancellation or termination
of the obligations of Tenant hereunder. Landlord and Tenant agree that
notwithstanding that this Lease is expressly subject and subordinate to any
mortgages, any mortgagee, its successors and assigns, or other holder of a
mortgage or of a note secured thereby, may sell the Demised Premises or the
Project, or any portion thereof in the manner provided in the mortgage and may,
at the option of such mortgagee, its successors and assigns, or other holder of
the mortgage or note secured thereby, make such sale of the Demised Premises or
Project subject to this Lease.
28. ESTOPPEL CERTIFICATES. Within ten (10) days after request therefor
---------------------
by Landlord, Tenant agrees to execute and deliver to Landlord in recordable form
an estoppel certificate addressed to Landlord, any mortgagee or assignee of
Landlord's interest in, or purchaser of, the Demise Premises or the Project or
any part thereof, certifying (if such be the case) that this Lease is unmodified
and is in full force and effect (and if there have been modifications, that the
same is in full force and effect as modified and stating said modifications);
that there are no defenses or offsets against the enforcement thereof or stating
those claimed by tenant; and stating the date to which Rent and other charges
have been paid. Such certificate shall also include such other information as
may reasonably be required by such mortgagee, proposed mortgagee, assignee,
purchaser or Landlord. Any such certificate may be relied upon by Landlord, any
mortgagee, proposed mortgagee, assignee, purchaser and any other party to whom
such certificate is addressed.
29. NO ESTATE. This Lease shall create the relationship of landlord and
---------
tenant only between Landlord and Tenant and no estate shall pass out of
Landlord. Tenant shall have only an usufruct, not subject to levy and sale and
not assignable in whole or in part by Tenant except as herein provided.
30. CUMULATIVE RIGHTS. All rights, power and privilege conferred
-----------------
hereunder upon the parties hereto shall be cumulative to, but not restrictive
of, or in lieu of those conferred by law.
31. HOLDING OVER. If Tenant remains in possession after expiration or
------------
termination of the Lease Term with or without Landlord's written consent, Tenant
shall become a tenant-at-sufferance, and there shall be no renewal of this Lease
by operation of law. During the period of any such holding over, all provisions
of this Lease shall be and remain in effect except that the monthly rental shall
be double the amount of Rent (including any adjustments as provided herein)
payable for the last full calendar month of the Lease Term including renewals or
extensions. The inclusion of the preceding sentence in this Lease shall not be
construed as Landlord's consent for Tenant to hold over.
32. SURRENDER OF PREMISES. Upon the expiration or other termination of
---------------------
this Lease, Tenant shall quit and surrender to Landlord the Demised Premises and
every part thereof and all alterations, additions and improvements thereto,
broom clean and in good condition and state of repair, reasonable wear and tear
only excepted. If Tenant is not then in default, Tenant shall removal all
personalty and equipment not attached to the Demised Premises which it has
placed upon the Demised Premises and which Tenant is entitled to remove in
accordance with the provisions of this Lease, and Tenant shall restore the
Demised Premises to the condition immediately preceding the time of placement
thereof. If Tenant shall fail or refuse to remove all of Tenant's
14
<PAGE>
effects, personalty and equipment from the Demised Premises upon the expiration
or termination of this Lease for any cause whatsoever or upon Tenant being
dispossessed by process of law or otherwise, such effects, personalty and
equipment shall be deemed conclusively to be abandoned and may be appropriated,
sold, store, destroyed or otherwise disposed of by Landlord without written
notice to Tenant or any other party and without obligation to account for them.
Tenant shall pay Landlord on demand any and all expenses incurred by Landlord in
the removal of such property, including, without limitation, the cost of
repairing any damage to the Building or Project caused by the removal of such
property and storage charges (if Landlord elects to store such property). The
covenants and conditions of this Article 32 shall survive any expiration or
termination of this Lease.
33. NOTICES. All notices required or permitted to be given hereunder
-------
shall be in writing and shall be deemed to have been fully given, whether
actually received or not, when delivered in person, or deposited with an
overnight commercial courier, or deposited, postage prepaid, in the United
States Mail, certified, return receipt requested, and addressed to Landlord or
Tenant at their respective address set forth hereinabove or at such other
address as either party shall have theretofore given to the other by notice as
herein provided. Tenant hereby designates and appoints as its agent to receive
notice of all distraint proceedings and all other notices required under this
Lease, the person in charge of the Demised Premises at the time said notice is
given or occupying said Demised Premises at said time; and, if no person is in
charge of or occupying the said Demised Premises, then such service or notice
may be made by attaching the same, in lieu of mailing, on the main entrance to
the Demised Premises.
34. DAMAGE OR THEFT OF PERSONAL PROPERTY. All personal property brought
------------------------------------
into the Demised Premises by Tenant, or Tenant's employees, agents, or business
visitors, shall be at the risk of Tenant only, and Landlord shall not be liable
for theft thereof or any damage thereto occasioned by any act of co-tenants,
occupants, invitees or other users of the Building or any other person.
Landlord shall not at any time be liable for damage to any property in or upon
the Demised Premises, which results from gas, smoke, water, rain, ice or snow
which issues or leaks from or forms upon any part of the Building or from the
pipes or plumbing work of the same, or from any other place whatsoever.
35. EMINENT DOMAIN.
--------------
(a) If all or part of the Demised Premises shall be taken for any public
or quasi-public use by virtue of the exercise of the power of eminent domain or
by private purchase in lieu thereof, this Lease shall terminate as to the part
so taken as of the date of taking, and, in the case of a partial taking,
Landlord shall have the right to terminate this Lease as to the balance of the
Demised Premises by written notice to Tenant if, in Landlord's judgment, the
taking would prevent or materially impair the use of the Project or the Demised
Premises or if an adequate award is not made available to Landlord for
restoration. If title to so much of the Project is taken that a reasonable
amount of reconstruction thereof will not in Landlord's sole discretion result
in the Building being a practical improvement and reasonably suitable for use
for the purpose for which it is designed, then this Lease shall terminate on the
date that the condemning authority actually takes possession of the part so
condemned or purchased.
(b) If this Lease is terminated under the provisions of this Article 35,
Rent shall be apportioned and adjusted as of the date of termination. Tenant
shall have no claim against Landlord or against the condemning authority for the
value of any leasehold estate or for the value of the unexpired Lease Term
provided that the foregoing shall not preclude any claim that Tenant may have
against the condemning authority for the unamortized cost of leasehold
improvements, to the extent the same were installed at Tenant's expense (and not
with the proceeds of the Tenant Improvement Allowance), or for loss of business,
moving expenses or other consequential damages, in accordance with subparagraph
(d) below.
(c) If there is a partial taking of the Project and this Lease is not
thereupon terminated under the provisions of this Article 35, then this Lease
shall remain in full force and effect, and Landlord shall, within a reasonable
time thereafter, repair or reconstruct the remaining portion of the Building to
the extent necessary to
15
<PAGE>
make the same a complete architectural unit; provided, that in complying with
its obligations hereunder, Landlord shall not be required to expend more than
the net proceeds of the condemnation award which are paid to Landlord, to the
extent the holder of any mortgage or ground lessor under any ground lease
permits such award to be applied to restoration. Upon any such partial taking,
Landlord shall have the right to reduce the rent-stop figure described in
Article 7 hereof by an amount equal to the product of (x) the amount of tax
savings arising from such partial taking, as determined by Landlord in its sole
but reasonable discretion, divided by the number of square feet of Rentable
Floor Area of the Building, multiplied by (y) the number of square feet of
Rentable Floor Area of the Demised Premises.
(d) All compensation awarded or paid to Landlord upon a total or partial
taking of the Demised Premises or the Project shall belong to and be the
property of Landlord without any participation by Tenant. Nothing herein shall
be construed to preclude Tenant from prosecuting any claim directly against the
condemning authority for loss of business, for damage to, and cost of removal
of, trade fixtures, furniture and other personal property belonging to Tenant,
and for the unamortized cost of leasehold improvements to the extent the same
were installed at Tenant's expense (and not with the proceeds of the Tenant
Improvement Allowance); provided, however, that no such claim shall diminish or
adversely affect Landlord's award.
(e) Notwithstanding anything to the contrary contained in this Article 35,
if, during the Lease Term, the use or occupancy of any part of the Project or
the Demised Premises shall be taken or appropriated temporarily for any public
or quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, this Lease shall be and remain unaffected by such
taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Lease Term. In the event of any such
temporary appropriation or taking, tenant shall be entitled to receive that
portion of any award which represents compensation for the loss of use or
occupancy of the Demised Premises during the Lease Term, and Landlord shall be
entitled to receive that portion of any award which represents the cost of
restoration and compensation for the loss of use or occupancy of the Demised
Premises after the end of the Lease Term.
36. PARTIES. The term "Landlord", as used in this Lease, shall include
-------
Landlord and its successors and assigns. It is hereby covenanted and agreed by
Tenant that should Landlord's interest in the Demised Premises cease to exist
for any reason during the Lease Term, then notwithstanding the happening of such
event, this Lease nevertheless shall remain in full force and effect, and Tenant
hereby agrees to attorn to the then owner of the Demised Premises. The term
"Tenant" shall include Tenant and its heirs, legal representatives and
successors, and shall also include Tenant's assignees and sublessees, if this
Lease shall be validly assigned or the Demised Premises sublet for the balance
of the Lease Term or any renewals or extensions thereof. In addition, Landlord
and Tenant covenant and agree that Landlord's right to transfer or assign
Landlord's interest in and to the Demised Premises, or any part or parts
thereof, shall be unrestricted, and that in the event of any such transfer or
assignment by Landlord which includes the Demised Premises, Landlord's
obligations to Tenant hereunder shall cease and terminate, and Tenant shall look
only and solely to Landlord's assignee or transferee for performance thereof.
37. LIABILITY OF TENANT. Tenant hereby indemnifies Landlord from and
-------------------
agrees to hold Landlord harmless against, any and all liability, loss, cost,
damage or expense, including, without limitation, court costs and reasonable
attorneys' fees, imposed on Landlord by any person whomsoever, caused in whole
or in part by any act or omission of Tenant, or any of its employees,
contractors, servants, agents, subtenants, assignees, representatives or
invitees, or otherwise occurring in connection with any default of Tenant
hereunder. The provisions of this Article 37 shall survive any termination of
this Lease.
38. RELOCATION OF THE PREMISES. Landlord reserves the right at any time
--------------------------
or from time to time, at its option and upon giving not less than thirty (30)
days' prior written notice to Tenant, to transfer and remove Tenant from the
Demised Premises herein specified to any other available rooms and offices in
the Project (or other building in the development of which the Building is a
part). Landlord shall bear the expense of said removal together with the
reasonable expense of replacement business cards and stationery and the expense
of any necessary renovation or alterations to said substituted space, as
calculated by Landlord. If Landlord exercises
16
<PAGE>
such option, then the substituted space shall for all purposes hereof be deemed
to be and to constitute the Demised Premises under this Lease and all terms,
conditions, covenants, warranties, agreements and provisions of this Lease
including but not limited to the same Base Rental Rate per square foot of
Rentable Floor Area shall continue in full force and effect and shall apply to
the substituted space. Tenant agrees to vacate the Demised Premises herein
specified and relocate to said substituted space promptly after the substituted
space is ready for Tenant's occupancy as provided herein, and Tenant's failure
to do so shall constitute an event of default by Tenant under this Lease. If
Tenant has not relocated its premises within sixty (60) days after Landlord
first notifies Tenant of Landlord's desire to relocate Tenant, Landlord shall
have the right to terminate this Lease by giving notice of such termination to
Tenant. Such termination shall be effective upon any date selected by Landlord
in the Termination Notice which is at least ten (10) days after the Termination
Notice is given by Landlord to Tenant. Tenant hereby further covenants and
agrees to promptly execute and deliver to Landlord any lease amendment and other
such document appropriate to reflect the changes in the Lease described or
contemplated above.
39. FORCE MAJEURE. In the event of strike, lockout, labor trouble, civil
-------------
commotion, Act of God, or any other cause beyond a party's control (collectively
"force majeure") resulting in Landlord's inability to supply the services or
perform the other obligations required of Landlord hereunder, Landlord's
performance shall be excused for the period of force majeure, this Lease shall
not terminate and Tenant's obligation to pay Rent and all other charges and sums
due and payable by Tenant shall not be affected or excused and Landlord shall
not be considered to be in default under this Lease. If, as a result of force
majeure, Tenant is delayed in performing any of its obligations under this
Lease, other than Tenant's obligation to take possession of the Demised Premises
on or before the Rental Commencement Date and to pay Rent and all other charges
and sums payable by Tenant hereunder, Tenant's performance shall be executed for
a period equal to such delay and Tenant shall not during such period be
considered to be in default under this Lease with respect to the obligation,
performance of which has thus been delayed.
40. LANDLORD'S LIABILITY. Landlord shall have no personal liability with
--------------------
respect to any of the provisions of this Lease. If Landlord is in default with
respect to its obligations under this Lease, Tenant shall look solely to the
equity of Landlord in and to the Building and the Land for satisfaction of
Tenant's remedies, if any. It is expressly understood and agreed that
Landlord's liability under the terms of this Lease shall in no event exceed the
amount of its interest in and to said Land and Building. In no event shall any
partner of Landlord nor any joint venturer in Landlord, nor any officer,
director or shareholder of Landlord or any such partner or joint venturer of
Landlord be personally liable with respect to any of the provisions of this
Lease. In any action or proceeding brought to enforce this obligation of
Landlord to Tenant under this Lease, Landlord and Tenant agree that any final
judgment or decree shall be enforceable against Landlord only to the extent of
Landlord's interest in the Building, as aforesaid, and any such judgement or
decree shall not be capable of execution against, nor be a lien on, any assets
of Landlord other than its interest in the Building, as aforesaid.
41. LANDLORD'S COVENANT OF QUIET ENJOYMENT. Provided Tenant performs the
--------------------------------------
terms, conditions and covenants of this Lease, and subject to the terms and
provisions hereof, Landlord covenants and agrees to take all necessary steps to
secure and to maintain for the benefit of Tenant the quiet and peaceful
possession of the Demised Premises, for the Lease Term, without hindrance, claim
or molestation by Landlord or any other person lawfully claiming under Landlord.
42. GUARANTY. In order to induce Landlord to execute this Lease, and for
--------
other consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned parties identified as "Guarantors" on the
signature page of this Lease (collectively, jointly and severally referred to as
the Guarantors") agree to enter into and simultaneously with the execution of
this Lease have entered into a Guaranty in the form attached hereto as Exhibit
-------
"H".
- ---
43. HAZARDOUS SUBSTANCES. Tenant hereby covenants and agrees that Tenant
--------------------
shall not cause or permit any "Hazardous Substances" (as hereinafter defined) to
be generated, placed, held, stored, used, located or
17
<PAGE>
disposed of at the Project or any part thereof, except for Hazardous Substances
as are commonly and legally used or stored as a consequence of using the Demised
Premises for general office and administrative purposes, but only so long as the
quantities thereof do not pose a threat to public health or to the environment
or would necessitate a "response action", as that term is defined in CERCLA (as
hereinafter defined), and so long as Tenant strictly complies or causes
compliance with all applicable governmental rules and regulations concerning the
use or production of such Hazardous Substances. For purposes of this Article 43,
"Hazardous Substances" shall mean and include those elements or compounds which
are contained in the list of Hazardous Substances adopted by the United States
Environmental Protection Agency (EPA) or in any list of toxic pollutants
designated by Congress or the EPA or which are defined as hazardous, toxic,
pollutant, infectious or radioactive by any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability (including, without limitation, strict
liability) or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereinafter in effect
(collectively "Environmental Laws"). Tenant hereby agrees to indemnify Landlord
and hold Landlord harmless from and against any and all losses, liabilities,
including strict liability, damages, injuries, expenses, including reasonable
attorneys' fees, cost of settlement or judgment and claims of any and every kind
whatsoever paid, incurred or suffered by, or asserted against, Landlord by any
person, entity or governmental agency for, with respect to, or as a direct or
indirect result of, the presence in, or the escape, leakage, spillage,
discharge, emission or release from, the Demised Premises of any Hazardous
Substance (including, without limitation, any losses, liabilities, including
strict liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment or claims asserted or arising under
the Comprehensive Environmental Response, Compensation and Liability Act
["CERCLA"], any so-called federal, state or local "Superfund" or "Superlien"
laws or any other Environmental Law); provided, however, that the foregoing
indemnity is limited to matters arising solely from Tenant's violation of the
covenant contained in this Article. The obligations of Tenant under this Article
shall survive any expiration or termination of this Lease.
44. SUBMISSION OF LEASE. The submission of this Lease for examination
-------------------
does not constitute an offer to lease and this Lease shall be effective only
upon execution hereof by Landlord and Tenant and Guarantors.
45. SEVERABILITY. If any clause or provision of the Lease is illegal,
------------
invalid or unenforceable under present or future laws, the remainder of this
Lease shall not be affected thereby, and in lieu of each clause or provision of
this Lease which is illegal, invalid or unenforceable, there shall be added as a
part of this Lease a clause or provision as nearly identical to the said clause
or provision as may be legal, valid and enforceable.
46. ENTIRE AGREEMENT. This Lease contains the entire agreement of the
----------------
parties and no representations, inducements, promises or agreements, oral or
otherwise, between the parties not embodied herein shall be of any force or
effect. No failure of Landlord to exercise any power given Landlord hereunder,
or to insist upon strict compliance by Tenant with any obligation of Tenant
hereunder, and no custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant. This
Lease is not in recordable form, and Tenant agrees not to record or cause to be
recorded this Lease or any short form or memorandum thereof.
47. HEADINGS. The use of headings herein is solely for the convenience of
--------
indexing the various paragraphs hereof and shall in no event be considered in
construing or interpreting any provision of this Lease.
48. BROKER. Broker(s) (as defined in Article 1[p] is [are] entitled to a
-------
leasing commission from Landlord by virtue of this Lease, which leasing
commission shall be paid by Landlord to Broker(s) in accordance with the terms
of a separate agreement between Landlord and Broker(s). Tenant hereby
authorizes Broker(s) and Landlord to identify Tenant as a tenant of the Building
and to state the amount of space leased by Tenant in advertisement and
promotional materials relating to the Building. Tenant represents and warrants
to Landlord that (except with respect to any Broker[s] identified in Article
1[p] hereinabove, which has [have] acted as agent for Tenant [and not for
Landlord] in this transaction) no broker, agent, commission salesperson, or
other person has
18
<PAGE>
represented Tenant in the negotiations for and procurement of this Lease and of
the Demised Premises and that (except with respect to any Broker[s] identified
in Article 1[p] hereinabove) no commissions, fees or compensation of any kind
are due and payable in connection herewith to any broker, agent, commission
salesperson or other person as a result of any act or agreement of Tenant.
Tenant agrees to indemnify and hold Landlord harmless for all loss, liability,
damage, claim, judgment, cost or expense (including reasonable attorneys' fees
an court costs) suffered or incurred by Landlord as a result of a breach by
Tenant of the representation and warranty contained in the immediately preceding
sentence or as a result of Tenant's failure to pay commissions, fees or
compensation due to any broker who represented Tenant, whether or not disclosed,
or as a result of any claim for any fee, commission or similar compensation with
respect to this Lease made by any broker, agent or finder (other than the
Broker[s] identified in Article 1[p] hereinabove) claiming to have dealt with
Tenant, whether or not such claim is meritorious. The parties hereto do hereby
acknowledge and agree that Meadows & Ohly, Inc. has acted as agent for Landlord
in this transaction and shall be paid a commission by Landlord in connection
with this transaction pursuant to the terms of a separate written commission
agreement. Meadows & Ohly, Inc. has not acted as agent for Tenant in this
transaction. Landlord hereby warrants and represents to Tenant that Landlord has
not dealt with any broker, agent or finder other than Meadows & Ohly, Inc. in
connection with this Lease and, Landlord hereby agrees to indemnify and hold
Tenant harmless from and against any and all loss, damage, liability, claim,
judgment, cost or expense (including, but not limited to, reasonable attorneys'
fees and court costs) that may be incurred or suffered by Tenant because of any
claim for any fee, commission or similar compensation with respect to this Lease
made by any broker, agent or finder claiming to have represented Landlord.
49. GOVERNING LAW. The laws of the State of Georgia shall govern the
-------------
validity, performance and enforcement of this Lease.
50. AUTHORITY. If Tenant executes this Lease as a corporation, each of
---------
the persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that Tenant is a duly incorporated or duly qualified (if a
foreign corporation) corporation and if fully authorized and qualified to do
business in the State in which the Demised Premises are located, that the
corporation has full right and authority to enter into this Lease, and that each
person signing on behalf of the corporation is an officer of the corporation and
is authorized to sign on behalf of the corporation. If Tenant signs as a
partnership, joint venture or sole proprietorship or other business entity (each
being herein called "Entity"), each of the person executing on behalf Tenant
does hereby covenant and warrant that Tenant is a duly authorized and existing
Entity, that Tenant has full right and authority to enter into this Lease, that
all persons executing this Lease on behalf of the Entity are authorized to do so
on behalf of the Entity, and that such execution is fully binding upon the
Entity and its partners, joint venturers or principals, as the case may be.
Upon the request of Landlord, Tenant shall deliver to Landlord documentation
satisfactory to Landlord evidencing Tenant's compliance with this Article, and
Tenant agrees to promptly execute all necessary and reasonable applications or
documents as reasonably requested by Landlord, required by the jurisdiction in
which the Demised Premises is located, to permit the issuance of necessary
permits and certificates for Tenant's use and occupancy of the Demised Premises.
51. JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
---------------------------
person, corporation, partnership or other entity, the liability hereunder of all
such persons, corporations, partnerships or other entities shall be joint and
several.
52. SPECIAL STIPULATIONS. The special stipulations attached hereto as
--------------------
Exhibit "G" are hereby incorporated herein by this reference as though fully set
- -----------
forth (if none, so state). To the extent the special stipulations conflict with
or are inconsistent with the foregoing provisions of this Lease or any exhibit
to this Lease, the special stipulations shall control.
19
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day, month and year first above written.
LANDLORD:
PAVILION PARTNERS, L.P.
By: Bentley Investments, Inc., general partner
By: /s/ Katherine D. Andres
-------------------------------------------
Title: Secretary
-------------------------------------------
[CORPORATE SEAL]
TENANT:
QUALITY DIAGNOSTIC CARDIOLOGY SERVICES, INC.
By: /s/ Jeffrey T. Arnold
-------------------------------------------
President
[CORPORATE SEAL]
(if appropriate)
GUARANTORS:
(SEAL)
Name: /s/ Jeffrey T. Arnold
-------------------------------------------
(SEAL)
Name: ___________________________________________
20
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
TRACT ONE:
----------
All that tract or parcel of land lying and being in Land Lot 17 of the 17th
District, Fulton County, Georgia, and being more particularly described as
follows:
To find the point of beginning, begin at a point located at the intersection of
the northern right of way line of Lake Hearn Drive (60-foot right of way) and
the line dividing Land Lot 17 of the 17th District, Fulton County, Georgia, and
Land Lot 329 of the 18th District, DeKalb County, Georgia; thence running along
the northern right of way line of Lake Hearn Drive south 89 degrees 39 minutes
30 seconds west, 254.49 feet to a point and the point of beginning; thence
running along the northern right of way line of Lake Hearn Drive south 89
degrees 39 minutes 30 seconds west, 590.38 feet to an iron pin; thence leaving
the northern right of way line of Lake Hearn Drive and running north 00 degrees
01 minutes 35 seconds west, 420.26 feet to an iron pin located on the
southeastern right of way line of Interstate Highway No. 285; thence running
along the southeastern right of way line of Interstate Highway No. 285 the
following courses and distances: north 56 degrees 56 minutes 10 seconds east,
86.42 feet to a point; north 69 degrees 19 minutes 30 seconds east, 184.42 feet
to a point; north 69 degrees 20 minutes 30 seconds east, 89.0 feet to a point;
north 69 degrees 32 minutes east, 290.8 feet to an iron pin; and south 76
degrees 29 minutes 30 seconds east, 54.11 feet to a point; thence leaving said
right of way line of Interstate Highway No. 285 and running south 21 degrees 12
minutes 15 seconds west, 66.10 feet to a point; thence running south 00 degrees
25 minutes 28 seconds east, 466.17 feet to a point; thence running south 58
degrees 48 minutes 27 second west, 50.14 feet to a point; thence running south
00 degrees 22 minutes 59 seconds east, 95.70 feet to the point of beginning.
All as is more particularly described and delineated in that survey prepared by
Watts & Browning Engineers, dated December 5, 1985, last revised November 8,
1993, bearing the seal of G.M. Gillespie, Georgia registered land surveyor no.
2121.
Together with those easements as set forth in that Easement and Maintenance
Agreement Peachtree Dunwoody Pavilion, dated August 31, 1992, by and between
Trustees under Declaration of Trust, dated October 8, 1984, as amended, of EQK
Realty Investors I, a Massachusetts Business Trust, and Computer Generation
Incorporated, a Delaware Corporation, recorded at Deed Book 15695, commencing at
page 208, records of the Clerk of the Superior Court, Fulton County, Georgia.
21
<PAGE>
EXHIBIT "B"
FLOOR PLAN
----------
22
<PAGE>
EXHIBIT "C"
TENANT ACCEPTANCE AGREEMENT
---------------------------
This Agreement made this _____ day of __________, 199___ between PAVILION
PARTNERS, L.P., a Georgia limited partnership (hereinafter referred to as
"Landlord") and QUALITY DIAGNOSTIC CARDIOLOGY SERVICES, INC. (hereinafter
referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into a Lease, dated ____________, 199____,
(hereinafter referred to as the "Lease") for Suite 370 (hereinafter referred to
as the "Premises") in the building located at 1100 Lake Hearn Drive, Atlanta,
Georgia 30342.
NOW, THEREFORE, pursuant to the provisions of the Lease, Landlord and Tenant
mutually agree as follows:
Capitalized terms not defined herein shall have the meanings set forth in the
Lease.
The Commencement Date of the Lease Term is November 1, 1996. The Expiration
Date of the Lease Term is March 31, 2001. The Rentable Area of the Premises is
2,093 Square Feet.
Tenant is in possession of, and has accepted, the Premises demised by the Lease,
and acknowledges that all the work (including the Work) to be performed by the
Landlord in the Premises as required by the terms of the Lease has been
satisfactorily completed, except for the items set out on the attached Exhibit
C-1. Tenant further certifies that all conditions of the Lease required of
Landlord as of this date have been fulfilled and there are no defenses or
setoffs against the enforcement of the Lease by Landlord.
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed this
Agreement, as of the date and year first above stated.
LANDLORD:
PAVILION PARTNERS, L.P.
By: Bentley Investments, Inc., its general partner
By: _____________________________________
Title: ______________________________
(CORPORATE SEAL)
23
<PAGE>
TENANT:
QUALITY DIAGNOSTIC CARDIOLOGY SERVICES, INC.
By: _____________________________________
Jeffrey T. Arnold
Title: President
----------------------------------
Attest:__________________________________
Title:___________________________________
(CORPORATE SEAL)
24
<PAGE>
EXHIBIT "C-1"
As of this _______ day of ___________, 199___, the following punchlist items
remain to be completed: (If "none", so state.)
Tenant Name: Initial:
-------
QUALIT DIAGNOSTIC CARDIOLOGY SERVICES, INC. ________Landlord
Suite Number: 370 ________Tenant
25
<PAGE>
EXHIBIT "D"
TENANT IMPROVEMENT AGREEMENT
----------------------------
THIS AGREEMENT made as of the 16th day of September, 1996 between Pavilion
Partners, L.P., Georgia Limited Partnership ("Landlord") and Quality Diagnostic
Cardiology Services, Inc. ("Tenant").
Reference is made to the Lease Agreement dated September 16, 1996 (the
"Lease") for premises known as Suite 370 (the "Premises"), located at 1100 Lake
Hearn Drive, which property is more particularly described in the Lease.
The terms "Plans", "Work", "Space Plan", "Working Drawings", "Finish
Selections" and "Landlord's Space Planner" are defined in Section XIII, below.
Capitalized terms not defined in this Agreement shall have the meanings set
forth in the Lease.
I. BASIC TERMS
A. Space Planner: Helmer Ropp Design Associates, Inc.
B. Date to Complete Planning: September 15, 1996 (including any
Space Plan, Working Drawings and Finish Selections).
C. Date to Substantially Complete Work: Commencement Date under
the Lease, as adjusted pursuant to this Agreement.
D. Improvement Allowance Provided by Landlord: As per Paragraph
1(n) of the herein Lease.
E. Number of Space Plan Revisions included in the Improvement
Allowance: Two.
F. Number of Working Drawing Revisions included in the Improvement
Allowance: One.
II. BASIC AGREEMENT. On or before the "Date To Complete Planning"
described above, Tenant shall: (a) provide Space Planner with all information
concerning Tenant's requirements in order for Space Planner to prepare the
Plans, and (b) arrange for Space Planner to prepare the Plans, and obtain
Landlord's written approval thereof. However, Tenant shall not be responsible
for delays caused solely by Landlord or Landlord's Space Planner, as further
described in Section III, below.
On or before the Commencement Date set forth in Article 1 of the Lease,
Landlord shall substantially complete the Work shown on the final approval
Plans. However, Landlord shall not be responsible for delays caused by Tenant
or Tenant's agents or employees and as further described in Section IV, below.
As a part of the Improvement Allowance, Landlord shall bear the cost of the
Plans (including any engineering reports, or other studies or tests in
connection therewith, but excluding any furniture planning) provided that the
cost of the Plans together with the costs of Space Plan Revisions (as stipulated
I.E. above) and Working Drawing Revisions (as stipulated in I.F. above) shall
not exceed the Improvement Allowance. Tenant shall bear any costs of the Plans
over the Improvement Allowances set out above, all costs in connection with
designing non-building standard items, and all costs of subsequent changes,
additions, and modifications to the plans.
Landlord shall bear the cost of the Work (including the cost of building
permits and sales tax) up to the Improvement Allowance described above (if any),
less that part of the Improvement Allowance (if any) applied to the cost of the
Plans, and Tenant shall bear any costs over such amounts.
26
<PAGE>
III. DELAYS IN PLANNING. The Commencement Date under the Lease shall be
postponed on a day for day basis by the number of days occurring after the "Date
to Complete Planning" described above until the date the Final Plans, including
any revisions reasonably required by Landlord pursuant to Section V and
revisions by Tenant to reduce Tenant's Cost pursuant to Section IX, are approved
(collectively called "Delays in Planning"). However, the Rental Commencement
Date shall be postponed only to the extent that substantial completion of the
Work is delayed beyond the Commencement Date set forth in the Lease Summary of
the Lease as a result of one or more of the following events (collectively
called "Landlord Delays"):
A. Landlord takes more than five (5) working days to approve or
disapprove the Plans or revisions thereof after receiving the
same (or such longer time as may be reasonably required in order
to obtain any engineering or HVAC report or due to other special
or unusual features of the Work or Plans);
B. Landlord's Space Planner takes more than five (5) working days
to meet with Tenant after receiving a written request for a
meeting, or takes more than seven (7) working days to prepare or
revise the Plans after meeting with Tenant and receiving all
information from Tenant required in order to do so (provided
this provision shall apply only if Tenant uses "Landlord's Space
Planner" as described in Section XIV below to prepare the
Plans); or
C. Landlord takes more than thirty (30) working days to provide
Tenant with cost estimates after receiving Plans sufficiently
detailed for such purposes (provided this provision (c) shall
only apply if Landlord elects to provide cost estimates under
Section IX below).
IV. DELAYS IN CONSTRUCTION.
A. Lease shall be postponed for each day that Landlord fails to
substantially complete the Work thereby as a result of strikes, acts of God,
shortages of materials or labor, governmental approvals or requirements, the
various causes set forth below, or any other causes beyond Landlord's reasonable
control.
B. The Commencement Date, but not the Rental Commencement Date,
shall be postponed as a result of one or more of the following (collectively
called "Tenant Delays"):
(1) Delays in Planning as described above (except for Landlord
Delays);
(2) Tenant's requests for changes to the Work or Change Orders under
Section VIII, or
(3) Tenant's failure to furnish an amount equal to Landlord's
reasonable estimate of Tenant's Cost (if any) within 10 days, as
described in Section IX (which shall give Landlord the absolute
right to postpone the Work until such amount is furnished to
Landlord);
(4) Tenant's requirement of any upgrades, special work or other non-
building standard items, or items not customarily provided by
Landlord to office tenants, to the extent that the same involve
longer lead times, installation times, delays or difficulties in
obtaining building permits, requirements for any governmental
approval, permit or action beyond the issuance of normal
building permits (as described in Section VI), or other delays
not typically encountered in connection with Landlord's standard
office improvements;
(5) The performance by Tenant or Tenant's agents or employees of any
work at or about the Premises, or
27
<PAGE>
(6) any act or omission of Tenant or Tenant's agents or employees,
or any breach by Tenant of any provision contained in this
Agreement or in the Lease, or any failure of Tenant to cooperate
with Landlord or otherwise act in good faith in order to cause
the Work to be designed and performed in a timely manner.
V. LANDLORD'S APPROVAL OF PLANS. Landlord shall either approve any
Plans or revisions submitted pursuant to this Agreement or disapprove the same
with suggestions for making the same acceptable within the time required under
Section III. Except as otherwise provided herein, Landlord shall not
unreasonably withhold approval if the Plans provide for a customary office
layout, with finishes and materials generally conforming to building standard
finishes and materials currently being used by Landlord at the Building, are
compatible with the Building's shell and core construction, and if no
modifications will be required for the Building's electrical, heating, air-
conditioning, ventilation, plumbing, fire protection, life safety, or other
systems or equipment, and will not require any structural modifications to the
Building, whether required by heavy loads or otherwise. Landlord may request
that Tenant approve Landlord's suggested changes in writing (such approval not
to be unreasonably withheld), or Landlord may arrange directly with Space
Planner for revised Plans to be prepared incorporating such suggestions (in
which case, Tenant shall sign or initial the revised Plans and/or Landlord's
notice) concerning the suggested changes, if requested by Landlord). Landlord's
approval of the Plans shall not be deemed a warranty as to the adequacy or
legality of the design, and Landlord hereby disclaims any responsibility or
liability for the same. Anything to the contrary notwithstanding, Landlord may
in its absolute discretion elect to disapprove any proposed Plans which show (i)
the rentable area of the Premises being more than ten percent (10%) smaller than
the Rentable Floor Area of Demised Premises, as defined in Article 1 of the
Lease; and (ii) any reduction in the rentable area of the Premises from the
Rentable Floor Area of the Demised Premises indicated in Article 1 of the Lease
where such reduction results in a space remaining between Tenant's space and any
other party wall, exterior wall or corridor partition, which in the sole opinion
of Landlord, would leave an unusable or unleaseable area due to its size,
configuration or location. Furthermore, in the event that the proposed Plans
show a rentable area of the Premises greater than the Rentable Floor Area of the
Demised Premises as set forth in Article 1 of the Lease, Landlord may, in its
absolute discretion, elect to disapprove such Plans if the configuration of the
Premises shown on such Plans infringes on any area of the Building reserved for
others, being designed for others, or being constructed for others, or to the
extent that such increase leaves a remaining unleased area which, in the sole
opinion of Landlord, would be unleaseable due to its location, size or
configuration.
VI. GOVERNMENTAL APPROVAL OF PLANS. Landlord shall apply for any normal
building permits required for the Work which are issued pursuant to a local
building code as a ministerial matter. If the Plans must be revised in order to
obtain such building permits, Landlord shall promptly notify Tenant. In such
case, Tenant shall promptly arrange for the plans to be revised to satisfy the
building permit requirements and shall submit the revised Plans to Landlord for
approval as a Change Order under Section VIII. Landlord shall have no obligation
to apply for any zoning, parking or sign code amendments, approvals, permits or
variances, or any other governmental approval, permit or action (except normal
building permits as described above). If any such other matters are required,
Tenant shall promptly seek to satisfy such requirements or revise the Plans to
eliminate such requirements. Delays in substantially completing the Work by the
Commencement Date as a result of requirements for building permits or other
governmental approvals, permits or actions shall affect the Commencement Date
and the Rental Commencement Date to the extent provided in Section IV(B).
VII. CHANGES AFTER PLANS ARE APPROVED. If Tenant shall desire any
changes, alterations, or additions to the final Plans after they have been
approved by Landlord, Tenant shall submit a detailed written request or revised
Plans (the "Change Order") to Landlord for approval. If reasonable and
practicable and generally consistent with the Plans theretofore approved,
Landlord shall not unreasonably withhold approval, but all costs in connection
therewith, including without limitation construction costs, permit fees, and any
additional plans, drawing and engineering reports or other studies or tests, or
revisions of such existing items, shall be paid for by Tenant as a Tenant's Cost
under Section IX.
28
<PAGE>
VIII. UNUSED IMPROVEMENT ALLOWANCE. If all or any portion of any
Improvement Allowance shall not be used, Tenant shall be entitled to the savings
and Tenant shall receive a credit therefor to Base Rental.
IX. TENANT'S COST.
A. Any amounts that Tenant is required to pay under this Agreement
shall be referred to as "Tenant's Costs" herein. Tenant's Cost shall be deemed
Additional Rental under the Lease. Tenant shall deposit the estimated amount of
such Additional Rental with Landlord within 10 days after requested by Landlord.
In connection with submitting any cost analysis to Tenant under this Section,
Landlord may request Tenant's written approval of such analysis. Tenant shall
not unreasonably withhold such approval, and shall approve or disapprove the
same in writing within five (5) days after requested by Landlord. If Tenant
reasonably disapproved any such analysis, Tenant shall meet with the Space
Planner and eliminate or substitute items in order to reduce Tenant's Cost.
B. Any cost analysis based on a Space Plan or so-called "pricing
plan" will be preliminary in nature to the extent that: (1) Tenant thereafter
makes changes in the Working Drawings or the Work, (2) overtime labor is
required in order to substantially complete the Work by the Work Completion
Date, (3) concealed conditions are encountered on the job site, (4) new legal
requirements become effective following preparation of the estimate, or (5)
there are strikes, acts of God, shortages of materials or labor, or other causes
beyond Landlord's reasonable control.
X. COMPLETION.
A. Landlord shall be deemed to have "substantially completed" the
Work for purposes hereof if Landlord has caused all of the Work to be completed
substantially except for Punchlist Items.
B. Landlord reserves the right to substitute comparable or better
materials and items for those shown in the Plans, so long as they do not
materially and adversely affect the appearance or function of the Premises.
XI. WORK PERFORMED BY TENANT. Landlord, at Landlord's discretion, may
permit Tenant and Tenant's agents and contractors to enter the Premises prior to
completion of the Work in order to make the Premises ready for Tenant's use and
occupancy. If Landlord permits such entry prior to completion of the Work, then
such permission is conditioned upon Tenant and Tenant's agents, contractors,
workmen, mechanics, suppliers and invitees working in harmony and not
interfering with Landlord and Landlord's contractors in doing the Work or with
other tenants and occupants of the Building. If at any time such entry shall
cause or threaten to cause such disharmony or interference, Landlord shall have
the right to withdraw such permission upon twenty-four (24) hours oral or
written notice to Tenant. Tenant agrees that any such entry into the Premises
shall be deemed to be under all of the terms, covenants, condition and
provisions of the Lease (including, without limitation, all insurance
requirements), except as to the covenant to pay Rent thereunder, and further
agrees that Landlord shall not be liable in any way for any injury, loss or
damage which may occur to any items of work constructed by Tenant or to other
property of Tenant that may be placed in the Premises prior to completion of the
Work, the same being at Tenant's sole risk.
XII. LIABILITY. The parties acknowledges that Landlord is not an
architect or engineer, and that the Work will be designed and performed by
independent architects, engineers and contractors. Accordingly, Landlord does
not guarantee or warrant that the Plans will be free from errors or omissions,
nor that the Work will be free from defects, and Landlord shall have no
liability therefor.
XIII. CERTAIN DEFINITIONS.
A. "Work" herein means the construction of the improvements shown
on the final approved Plans, and any demolition, preparation or other work
required in connection therewith, including
29
<PAGE>
without limitation, any work required to be performed outside the Premises in
order to obtain building permits for the work to be performed within the
Premises (if Landlord elects to perform such work outside the Premises).
B. "Landlord's Space Planner" herein means the space planner (if
any) regularly used by Landlord and with whom Landlord has a written contractual
arrangement for space planning services at the Building.
C. "Finish Selections" herein means the type and color of floor and
wall coverings, wall paint and any other finishes.
D. "Plans" herein means, collectively, any Space Plan, Working
Drawings, or other plans, drawings or specifications, and Finish Selections (and
in the event of any inconsistency between any of the same, or revisions thereto,
the latest dated item approved by Landlord shall control). The Plans shall be
signed or initialed by Tenant, if requested by Landlord.
E. "Space Plan" herein means a preliminary floor plan, generally
showing demising walls, corridor doors, interior partition walls and interior
doors. The term "Space Plan" for purposes of this Agreement shall also refer to
any so-called "pricing plan", i.e. a more detailed Space Plan, drawn to scale,
showing: (1) any special walls, glass partitions or corridor doors, (2) any
restrooms, kitchens, computer rooms, file rooms and other special purpose rooms,
and any sinks or other plumbing facilities, or other special facilities or
equipment, (3) communications system, indicating telephone and computer outlet
locations, and (4) any other details or features reasonably required in order to
obtain preliminary cost estimate as described in Section IX above, or otherwise
reasonably requested by Landlord or Landlord's Space Planner.
F. "Working Drawings" herein means fully dimensioned architectural
construction drawings and specifications, and any required engineering drawings
(including mechanical, electrical, plumbing, air conditioning, ventilating and
heating), and shall include any applicable items described above for the Space
plan, and if applicable; (1) electrical outlet locations, circuits and
anticipated usage therefor, (2) reflected ceiling plan, including lighting,
switching, and any special ceiling specifications, (3) duct locations for
heating, ventilating and air conditioning equipment, (4) details of all
millwork, (5) dimensions of all equipment and cabinets to be built in, (6)
furniture plan showing details of space occupancy, (7) keying schedule, (8)
lighting arrangement, (9) location of print machines, equipment in lunch rooms,
concentrated file and library loadings and any other equipment or systems (with
brand names wherever possible) which require special consideration relative to
air conditioning, ventilation, electrical, plumbing, structural, fire
protection, life - fire safety system, or mechanical systems, (10) special
heating, ventilating and air conditioning equipment and requirements, (11)
weight and location of heavy equipment, and anticipated loads for special usage
rooms, (12) demolition plan, (13) partition construction plan, (14) Finish
Selections, and any other details or features reasonably required in order to
obtain a more firm cost estimate as described in Section IX, above, or otherwise
reasonably requested by Landlord or Landlord's Space Planner.
XIV. INCORPORATION INTO LEASE; DEFAULT. THE PARTIES AGREE THAT THE
PROVISIONS OF THIS AGREEMENT ARE HEREBY INCORPORATED BY THIS REFERENCE INTO THE
LEASE FULLY AS THOUGH SET FORTH THEREIN. In the event of any express
inconsistencies between the Lease and this Agreement, the latter shall govern
and control. Any default by a party hereunder shall constitute a default by that
party under the Lease and said party shall be subject to the remedies and other
provisions applicable thereto under the Lease.
30
<PAGE>
LANDLORD:
PAVILION PARTNERS, L.P.
By: Bentley Investments, Inc., its general partner
By: /s/ Katherine D. Andres
-----------------------------------------------
Title: Secretary
---------------------------------------------
(CORPORATE SEAL)
TENANT: QUALITY DIAGNOSTIC
CARDIOLOGY SERVICES, INC.
By: /s/ Jeffrey T. Arnold
-----------------------------------------------
Jeffrey T. Arnold
Title: President
--------------------------------------------
Attest: /s/ A. Nichols
-------------------------------------------
Title: Secrertary
---------------------------------------------
(CORPORATE SEAL)
31
<PAGE>
EXHIBIT "E"
RULES AND REGULATIONS
---------------------
1. No sign, picture, advertisement or notice visible from the exterior of the
Demised Premises shall be installed, affixed, inscribed, painted or otherwise
displayed by Tenant on any part of the Demised Premises or the Building unless
the same is first approved by Landlord. Any such sign, picture, advertisement
or notice approved by Landlord shall be painted or installed for Tenant at
Tenant's cost by Landlord or by a party approved by Landlord. No awnings,
curtains, blinds, shares or screens shall be attached to or hung in, or used in
connection with any window or door of the Demised Premises without the prior
consent of Landlord, including approval by Landlord of the quality, type,
design, color and manner of attachment.
2. Tenant agrees that its use of electrical current shall never exceed the
capacity feeders, risers or wiring installation.
3. The Demised Premises shall not be used for storage of merchandise held for
sale to the general public. Tenant shall not do or permit to be done in or about
the Demised Premises or Project anything which shall increase the rate of
insurance on said Project or obstruct or interfere with the rights of other
lessees of Landlord or annoy them in any way, including, but not limited to,
using any musical instrument, making loud or unseemly noises, or singing, etc.
The Demised Premises shall not be used for sleeping or lodging. No cooking or
related activities shall be done or permitted by Tenant in the Demised Premises
except with permission of Landlord. Tenant will be permitted to use for its own
employees within the Demised Premises a small microwave oven and Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar
beverages, provided that such use is in accordance with all applicable federal,
state, county and city laws, codes, ordinances, rules and regulations. No
vending machines of any kind will be installed, permitted or used on any part of
the Demised Premises without the prior consent of Landlord. No part of said
Project or Demised Premises shall be used for gambling, immoral or other
unlawful purposes. No intoxicating beverage shall be sold in said or around the
Project or Demised Premises without the prior written consent of Landlord. No
area outside of the Demised Premises shall be used for storage purposes at any
time.
4. No birds or animals of any kind shall be brought into the Building (other
than trained seeing-eye dogs required to be used by the visually impaired). No
bicycles, motorcycles or other motorized vehicles shall be brought into the
Building.
5. The sidewalks, entrances, passages, corridors, halls, elevators and
stairways in the Building shall not be obstructed by Tenant or used for any
purposes other than those for which same were intended as ingress and egress. No
windows, floors or skylights that reflect or admit light into the Building shall
be covered or obstructed by Tenant. Toilets, wash basins and sinks shall not be
used for any purpose other than those for which they were constructed, and no
sweeping, rubbish or other obstructing or improper substances shall be thrown
therein. Any damage resulting to them, or to heating apparatus, from misuse by
Tenant or its employees, shall be borne by Tenant.
6. Only one (1) key for the Demised Premises will be furnished to Tenant
without charge. Landlord may make a reasonable charge for any additional keys.
Only one (1) access card for the Building will be furnished to Tenant without
charge. Landlord may make a reasonable charge for any additional access cards.
No additional lock, latch or bolt of any kind shall be placed upon any door nor
shall any changes be made in existing locks without written consent of Landlord
and Tenant shall in each such case furnish Landlord with a key for any such
lock. At the termination of the Lease, Tenant shall return to Landlord all keys
and access cards furnished to Tenant by Landlord, or otherwise procured by
Tenant, and in the event of loss of any keys or access cards so furnished,
Tenant shall pay to Landlord the cost thereof.
7. Landlord shall have the right to prescribe the weight, position, and manner
of installation of heavy articles such as safes, machines and other equipment
brought into the Building. No safes, furniture, boxes, large
32
<PAGE>
parcels or other kind of freight shall be taken to or from the Demised Premises
or allowed in any elevator, hall or corridor except at times allowed by
Landlord. No deliveries shall be made in passenger elevators. Tenant shall make
prior arrangements with Landlord for use of freight elevator for the purpose of
transporting such articles and such articles may be taken in or out of said
Building only between or during such hours as may be arranged with and designed
by Landlord. The persons employed to move the same must be approved by Landlord.
No hand trucks, except those equipped with rubber tires and side guards, shall
be permitted in the Building. No hand trucks shall be permitted in any passenger
elevator. In no event shall any weight to be placed upon any floor by Tenant so
as to exceed the design conditions of the floors at the applicable locations.
8. Tenant shall not cause or permit any gases, liquids or odors to be produced
upon or permeate from the Demised Premises, and no flammable, combustible or
explosive fluid, chemical, substance or item (including, without limitation,
natural Christmas trees) shall be brought into the Building.
9. Every person, including Tenant, its employees and visitors, entering and
leaving the Building may be questioned by watchman as to that person's business
therein and may be required to sign such person's name on a form provided by
Landlord for registering such person; provided that, except for emergencies or
other extraordinary circumstances, such procedures shall not be required between
the hours of 7:00 a.m. and 6:00 p.m., on all days except Saturdays, Sunday, and
Holidays. Landlord may also implement a card access security system to control
access during such other times. Landlord shall not be liable for excluding any
person from the Building during such other times, or for admission of any person
to the Building at any time, or for damages or loss or theft resulting therefrom
to any person, including Tenant.
10. Unless agreed to in writing by Landlord, Tenant shall not employ any person
other than Landlord's contractors for the purpose of cleaning and taking care of
the Demised Premises. Cleaning service will not be furnished on nights when
rooms are occupied after 6:30 p.m., unless, by agreement in writing, services is
extended to a later hour for specifically designated rooms. Landlord shall not
be responsible for any loss, theft, mysterious disappearance of or damage to,
any property, however occurring. Only persons authorized by Landlord may furnish
ice, drinking water, towels, and other similar services within the Building and
only at hours and under regulations fixed by Landlord.
11. No connection shall be made to the electric wires or gas or electric
fixtures, without the consent in writing on each occasion of Landlord. All
glass, locks and trimmings in or upon the doors and windows of the Demised
Premises shall be kept whole and in good repair. Tenant shall not injure,
overload or deface the Building, the woodwork or the walls of the Demised
Premises, nor permit any noisome, noxious, noisy or offensive business.
12. If Tenant requires wiring for a bell or buzzer system, such wiring shall be
done by the electrician of Landlord only, and no outside wiring persons shall be
allowed to do work of this kind unless by the written permission of Landlord or
its representatives. If telegraph or telephonic service is desired, the wiring
for same shall be approved by Landlord, and no boring or cutting for wiring
shall be done unless approved by Landlord or its representatives, as stated. The
electric current shall not be used for power or heating unless written
permission to do so shall first have been obtained from Landlord or its
representatives in writing, and at an agreed cost to Tenant.
13. Tenant and its employees and invitees shall observe and obey all parking
and traffic regulations as imposed by Landlord. All vehicles shall be parked
only in areas designated therefor by Landlord.
14. Canvassing, peddling, soliciting and distribution of handbills or any other
written materials in the Building are prohibited, and Tenant shall cooperate to
prevent the same.
15. Landlord shall have the right to change the name of the Building and/or the
Project and to change the street address of the Building, provided that in the
case of a change in the street address, Landlord shall give Tenant not less that
180 days' prior notice of the change, unless the change is required by
governmental authority.
33
<PAGE>
16. The directory of the Building will be provided for the display of the name
and location of the tenants. And additional name which Tenant shall desire to
place upon said directory must first be approved by Landlord, and if so
approved, a reasonable charge will be made therefor.
17. Tenant, in order to obtain maximum effectiveness of the cooling system,
shall lower and close the blinds (at not less than a 45 degrees angle) or drapes
when the sun's rays are directly in windows of the Demised Premises. Tenant
shall not remove the standard blinds installed in the Demised Premises. Tenant
shall not place items on window sills in the Demised Premises.
18. Smoking is prohibited in the main building lobby, public corridors,
elevator lobbies, service elevator vestibules, stairwells, restrooms and other
common areas within the Building.
19. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular lessee, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
lessee, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the other lessees of the Building.
20. These Rules and Regulations are supplemental to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of any premises in the Building.
21. Landlord reserves the right to make such other and reasonable Rules and
Regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Buildings and the Land, and for the preservation of
good order therein.
34
<PAGE>
EXHIBIT "F"
BUILDING MOVING POLICY/RULES AND REGULATIONS
--------------------------------------------
The following rules pertain to (i) moving Tenant's furniture, equipment and
supplies into or out of the Building, and (ii) the delivery of substantial
amounts of equipment, furniture or supplies to existing tenants in the Building.
Any movers that do not adhere to the following rules will not be allowed to
enter the Building or will be required to discontinue the move.
1. No move into or out of the Building shall take place during normal
business hours of the Building. Moves must be scheduled after 5:30 p.m. on
weekdays or during weekends and holidays.
2. Building management must be notified at least ten (10) days prior to
your proposed moving date in order to coordinate dates and the details of the
move. A representative of the moving company must contact the management office
at least five (5) days prior to the proposed moving date. The service elevator,
which must be used for your move, will be available only if the management
office has been timely notified.
3. All moving company employees should be in uniform or wear some form of
identification. All moving company employees must be bonded.
4. There will be no smoking inside of the building by any employee of the
moving company.
5. Prior to the move, the moving company must submit a Certificate of
Insurance naming Landlord as an additional insured. The moving company must
carry insurance with at least the following coverage:
(a) Worker's compensation insurance in the amount of $100,000.
(b) Comprehensive General Liability insurance shall include coverage for
hazards on premises-operation, elevators, products and completed operations
and also personal injury coverage and contractual liability coverage
designating the assumption of liability under performance of the act of
moving. Such insurance shall be in limits no less than $500,000 per person
bodily; and $500,000 per occurrence for property damage. Property damage
insurance shall be in broad form, including completed operations.
(c) An umbrella policy with a limit of $1,000,000 per occurrence.
Each moving company transporting supplies, furniture, and/or equipment
through the Building shall secure and present to the building manager a
certificate reflecting these coverages at least twenty-four (24) hours before
the move takes place. Please make sure your moving company meets the above
requirements so they will be permitted to move your practice to the Building.
6. The route to be followed in the Building during the move must be
approved by Landlord. The moving company must provide and install adequate
protective coverings on all vulnerable corners, walls, door facings, elevator
cabs and other areas along the route to be followed during the move. These areas
will be inspected for damage after the move.
7. Clean masonite sections must be used as runners on all finished floor
areas where heavy furniture or equipment is being moved with wheel or skid type
dollies. The masonite must be at least one-fourth inch think. All sections of
masonite should be taped to prevent sliding.
8. Do not stick duct tape onto the floors, walls, door jambs, or doors.
9. All vendor and moving company boxes and cartons are to be removed from
the premises by the vendor or moving company. They are not to be disposed of in
the dumpster.
35
<PAGE>
10. It is the Tenant's responsibility to notify Landlord of items to be
moved which are unusually large or heavy (in excess of 3,500 pounds) or which
may require review by Landlord. Dimensions and weight may prohibit the safe
transport and placement within acceptable structural guidelines. Any large items
that cannot be placed in the service elevator will require special hoisting
arrangements which will be made through the Landlord. Tenant's Moving company
should include in the bid price to the Tenant any additional charges required
for extra services which may need to be provided by the moving company to hoist
large items.
11. Access control personnel will be notified as to the move-in schedule
and will monitor the progress of the move. Any changes in the move-in schedule
must be reported to Landlord or Landlord's representative immediately. An
emergency phone number will be required by the access control personnel for the
moving company's supervisor and for the Tenant's representative responsible for
coordinating the move.
12. When ordering equipment, furniture, supplies, etc. at any time before
or after your move, please specify "Inside Delivery" to your suite, because
Landlord is not responsible for deliveries to your suite.
36
<PAGE>
EXHIBIT "G"
SPECIAL STIPULATIONS
--------------------
1. Tenant Improvement Allowance. Landlord shall provide a Tenant Improvement
----------------------------
Allowance in the amount of $0.208 per usable square foot of space per month
of the Lease term occurring from and after the Commencement Date. For
example, if the Commencement Date is November 1, 1996, the Tenant
Improvement Allowance will be Twenty Thousand, Three Hundred Six and 21/100
Dollars ($20,306.21) [$20,306.21 = 1,842 u.s.f. x $0.208/u.s.f./month of
term x 53 months]. The Tenant Improvement Allowance shall be applied to
the cost of space planning and for construction improvements. Any
additional costs of the Tenant Improvements or Space Planning shall be
payable by Tenant. The payment to be made by Landlord pursuant to this
paragraph 1 shall be deemed to satisfy in full Landlord's obligation to
provide a Tenant Improvement Allowance under the Lease.
37
<PAGE>
EXHIBIT "H"
STATE OF GEORGIA
COUNTY OF FULTON
GUARANTY
--------
KNOW ALL MEN BY THESE PRESENTS:
In consideration of the letting by Pavilion Partners, L.P.
("Landlord") to QUALITY DIAGNOSTIC CARDIOLOGY SERVICES, INC. ("Tenant") pursuant
to a Lease Agreement dated _________________________ (the "Lease") of premises
described therein, the delivery of which lease is conditioned upon the execution
and delivery of this Guaranty, and the payment of One Dollar ($1.00) to the
undersigned by Landlord, the receipt and sufficiency of which are hereby
acknowledged by the undersigned, the undersigned (hereinafter collectively
called the "Guarantor") does hereby unconditionally guarantee the full, prompt
and complete performance by Tenant of all of the terms, covenants, conditions
and agreements contained in the Lease on the part of Tenant to be performed,
including specifically, without limitation, the obligation to pay all rents and
any other charges or obligations therein set forth, together with any and all
renewal or renewals, extension or extensions, modification or modifications
thereof, and substitution or substitutions therefor( all such obligations being
hereinafter called the "Obligations").
Guarantor waives presentment, demand, dishonor, notice of dishonor,
protest, and all other notices whatsoever, including, without limitation,
notices of acceptance hereof, of the existence or creation of the Obligations,
and of all defaults, disputes or controversies with Tenant, and of the
settlement, compromise or adjustment thereof. Guarantor agrees that Landlord
shall have full authority, without obtaining the consent of, giving notice to,
or affecting the liability of Guarantor, to make changes of terms, to extend
time to pay, to release the whole or any part of the Obligations, to settle or
compound differences for less than the full amount owing under the Lease, to
accept notes, trade acceptances or any other form of obligation for the
Obligations, to make arrangements or settlements in or out of court in the case
of receivership, liquidation, readjustment, bankruptcy, reorganization,
arrangement or an assignment for the benefit of creditors and to do anything,
whether or not herein specified, which may be done or waived by or between
Landlord and Tenant. The making of such arrangements, settlements, compromises,
adjustments, extensions of time and so forth shall not diminish, discharge,
modify, reduce extinguish or otherwise affect the liability of Guarantor
hereunder for the full amount owing under the Lease. Guarantor further agrees
that no act or omission on the part of Landlord shall in any way affect, impede
or impair this guaranty.
This guaranty shall be enforceable without Landlord having (i) to
proceed against Tenant (any right to require Landlord to take action against
Tenant as required by O.C.G.A. (S) 10-7-24 being hereby expressly waived) or
--------
against any security for any payments due under the Lease, or (ii) to exercise
any of Landlord's remedies under the Lease; and shall be effective regardless of
the solvency or insolvency of Tenant, any reorganization, merger or
consolidation of Tenant, any change in the composition, nature, personnel or
location of Tenant, or any bankruptcy, receivership, liquidation, reorganization
or other proceeding involving Tenant.
This guaranty shall be binding upon and enforceable against each
person and entity executing this guaranty and upon the respective heirs, legal
representatives, successors and assigns of each such person and entity. The
liability of each person and entity executing this guaranty and the heirs, legal
representatives, successors and assigns of each such entity and person hereunder
is joint and several, primary and unconditional, and shall not be subject to any
claim of offset, counterclaim or defense of Tenant.
This guaranty shall be irrevocable, absolute and unconditional and
shall remain in full force and effect as to Guarantor until such time as all of
the Obligations shall have been paid or satisfied in full. No delay or failure
on the part of Landlord in the exercise of any right or remedy shall operate as
a waiver thereof, and no single or partial exercise by Landlord of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other right or remedy. Guarantor agrees that this guaranty shall not be
affected by reason of
38
<PAGE>
assertion by Landlord against Tenant of any rights or remedies reserved to
Landlord in the Lease, or by reason of any summary or other proceedings against
Tenant, or by the amendment or modification of the Lease with or without notice
to, or consent of, the Guarantor.
This guaranty shall remain in full force and effect, and Guarantor
shall continue to be liable for the payment of all amounts owing under the Lease
in accordance with the original terms of the documents and instruments
evidencing the same, notwithstanding the commencement of any bankruptcy,
reorganization or other debtor relief proceeding by or against Tenant, and
notwithstanding any modification, discharge or extension of the Obligations, any
modification or amendment of any document or instrument evidencing any of the
Obligations, any stay of the exercise by Landlord of any of its rights and
remedies against Tenant with respect to any of the Obligations, or any cure of
any default by Tenant under any document or instrument evidencing any of the
Obligations, which may be effected in connection with any such proceeding,
whether permanent or temporary, and notwithstanding any assent thereto by
Landlord.
Landlord may, without notice of any kind, sell, assign or transfer the
Lease, and in such event each and every immediate and successive assignee,
transferee or holder of the Lease shall have the right to enforce this guaranty,
by suit or otherwise, for the benefit of such assignee, transferee or holder, as
fully as if such person were herein by name specifically give such rights,
powers and benefits, but Landlord shall have an unimpaired right to enforce this
guaranty for its benefit as to so much of the Obligations as Landlord has not
sold, assigned, or transferred.
This guaranty has been made and delivered in the State of Georgia and
shall be governed by, construed under and interpreted and enforced in accordance
with the laws of the State of Georgia. Wherever possible, each provision of
this guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this guaranty shall be prohibited
by or be invalid under such law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this guaranty.
Guarantor hereby submits to personal jurisdiction in the State of
Georgia for the enforcement of this guaranty and waives any and all personal
rights under the laws of the State of Georgia or the United States to object to
jurisdiction within the State of Georgia for the purposes of litigation to
enforce this guaranty. In the event that such litigation is commenced,
Guarantor agrees that service of process may be made, and personal jurisdiction
over Guarantor obtained, by the serving of a copy of the summons and complaint
upon Guarantor at the following address:
________________________________
344 DeClaire Way
--------------------------------
Marietta, GA 30067
--------------------------------
Nothing contained herein shall prevent Landlord from bringing any action or
exercising any rights against any security given to Landlord by Tenant or
Guarantor, or against Guarantor personally, or against any property of
Guarantor, within any other state. Commencement of any such action or
proceeding in any other state shall not constitute a waiver of the agreement
that the laws of the State of Georgia shall govern the rights and obligations of
Guarantor and Landlord hereunder or of the submission made by Guarantor to
personal jurisdiction within the State of Georgia. The aforesaid means of
obtaining personal jurisdiction and perfecting service of process are not
intended to be exclusive but are cumulative and in addition to all other means
of obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the State of Georgia.
Guarantor warrants and represents to Landlord that any financial
statements heretofore delivered by Guarantor to Landlord were true and correct
in all respects as of the date delivered to Landlord. At any time this Guaranty
is in effect, Guarantor shall, upon ten (10) days prior written notice from
Landlord, provide
39
<PAGE>
Landlord with a current financial statement and financial statements of two (2)
years prior to the current financial statement year. Such statements shall be
prepared in accordance with generally accepted accounting principles and, if
such is the normal practice of Guarantor, shall be audited by an independent
certified public accountant.
Guarantor agrees that Guarantor shall have no right to recover against
Tenant by way of subrogation to the rights of Landlord on account of any payment
by Guarantor to Landlord until all of the Obligations have been paid and
satisfied in full, and Guarantor hereby waives, releases and relinquishes any
such rights of subrogation to such extent.
If Guarantor is a corporation, Guarantor and the persons executing
this guaranty as officers of the Guarantor represent that Guarantor has full
corporate authority to execute this guaranty and that the officers executing
this guaranty are duly authorized to execute this guaranty on behalf of the
corporation, and that there is no provision in its charter or bylaws that in any
way conflicts with or prevents the execution, delivery or performance of this
guaranty by Guarantor. Guarantor further represents that there is no provision
of any other agreement by which Guarantor is bound that in any way conflicts
with or prevents the execution, delivery or performance of this guaranty by
Guarantor.
40
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed, sealed and delivered this
guaranty, all this 16th day of September, 1996.
INDIVIDUAL
**Signed, sealed and delivered in the /s/ Jeffrey T. Arnold (SEAL)
------------------------
presence of:
Name: Jeffrey T. Arnold
----------------------------
/s/ Jeanine M. Magnon
- ----------------------------------------
Unofficial Witness Address: 344 DeClaire Way
-------------------------
Marietta, GA 30067
-----------------------------------
/s/ Vicki Baker
- ----------------------------------------
Notary Public
-----------------------------------
My Commission Expires:
Notary Public, Gwinnett County, Georgia
My Commission Expires March 9, 1999
- ----------------------------------------
(NOTARIAL SEAL)
**SIGNATURE IS TO BE WITNESSED BY AN INDIVIDUAL (AS UNOFFICIAL WITNESS) AND BY A
NOTARY PUBLIC WHO SHOULD AFFIX HIS OR HER NOTARIAL SEAL AND INDICATE THE
EXPIRATION DATE OF HIS OR HER COMMISSION BELOW THE SIGNATURE LINE
41
<PAGE>
EXHIBIT 10.31
SUBLEASE AGREEMENT
------------------
THIS SUBLEASE AGREEMENT (this "Sublease') is made and entered into as
of the 30 day of March, 1998, by and between QUALITY DIAGNOSTIC SERVICES, INC.,
a Georgia corporation, formerly known as Quality Diagnostic Cardiology Services,
Inc., (the "Sublandlord") and CARD GUARD USA, INC., a Georgia corporation (the
"Subtenant"), to be effective as of the "Commencement Date", as hereinafter
defined.
WITNESSETH:
-----------
WHEREAS, Sublandlord, by Lease Agreement dated September 16, 1996,
(the "Master Lease"), leased from Pavilion Partners, L.P. (the "Landlord") Suite
370 comprising 2,093 rentable square feet (the "Premises"), of that certain
building located at 1100 Lake Hearn Drive, Atlanta, Georgia (the "Building"),
such Premises being more particularly described on Exhibit B to the Master Lease
(a copy of which Master Lease is attached hereto as Exhibit "A" and made a part
-----------
hereof); and
WHEREAS, Subtenant desires to sublease the Premises on the terms and
conditions set forth below;
NOW THEREFORE, for and in consideration of the sum of TEN and NO/100
Dollars, the mutual promises set forth below, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1. Premises; Term
--------------
Sublandlord hereby subleases to Subtenant, and Subtenant hereby subleases
from Sublandlord, the Premises for a term (the "Sublease Term") commencing on
the date (the "Commencement Date") which is the earlier of (i) the date of
occupancy agreed to by Sublandlord and Subtenant, or (ii) March ____, 1998, and
ending March 30, 2001 (the "Expiration Date") unless sooner terminated according
to the terms hereof.
2. Subordination
-------------
This Sublease is hereby expressly made subject and subordinate to the
Master Lease and shall be upon the same terms, covenants and conditions provided
in the Master Lease as applicable to the Premises (except such as by their
nature are inapplicable to or inconsistent with this Sublease or as otherwise
provided herein). Subtenant acknowledges that its possession and use of the
Premises shall at all times be subject to the rights of Landlord set forth in
the Master Lease. Sublandlord shall have no liability to Subtenant for any acts
of the Landlord pursuant to the Master Lease. The provisions of the Master Lease
pertaining to the Premises are deemed included herein and made a part hereof
("Sublandlord" being substituted for "Landlord" and "Subtenant" being
substituted for "Tenant"), except that Subtenant's obligations for each subject
addressed in this Sublease, including rental obligations, are limited to the
terms of this Sublease.
3. Obligations Under Master Lease
------------------------------
For the purposes of this Sublease only, from and after the Commencement
Date, and only with respect to matters first accruing thereafter, Subtenant
hereby assumes all of the responsibilities and obligations to be performed on
the part of Sublandlord as tenant under the Master Lease with respect to the
-1-
<PAGE>
Premises for the entire Sublease Term (other than the obligations to pay rent
and additional rent and other amounts which are governed by this Sublease).
Subtenant covenants and agrees not to do, permit or allow, by anyone under
Subtenant's control, any act which would violate or constitute a breach of or a
default under the Master Lease. Upon any breach by Subtenant of any of the
terms, covenants, or agreements to be performed or observed under this Sublease
by Subtenant, which breach is not cured within the applicable notice and cure
period under the Master Lease, Sublandlord may exercise any of the rights given
to the Landlord under the Master Lease, subject to the limitations thereof and
hereof, and the exercise thereof shall not be in derogation of, but shall be in
addition to any other remedies available to Sublandlord, hereunder or under law
or equity.
4. Termination
-----------
In the event the Master Lease is terminated pursuant to its terms prior to
the expiration of the term of this Sublease, this Sublease shall automatically
cease and terminate as of the date upon which the Master Lease is terminated.
Upon any such termination of the Master Lease, all rent due hereunder shall be
prorated from the first day of the month of termination. Neither party, provided
it is not responsible for a default causing such termination, shall have any
further obligation or liability to the other arising out of this Sublease except
for the payment by Subtenant of such amounts of rent as so prorated and any
other amounts accrued as of the date of termination, and except for rights or
obligations that had accrued prior to the effective date of the termination of
this Sublease. To the extent that Sublandlord has over (30) days' notice of such
termination, Sublandlord agrees to give Subtenant reasonable notice at least
thirty (30) days prior to any such termination date, and shall in any event
forward any such notice of termination to Subtenant promptly upon receipt.
5. Rent
----
A. Base Rental
-----------
Subtenant shall pay Sublandlord the Base Rental, as defined in the Master
Lease, for the Premises during the Sublease Term which, as of the date hereof,
is $3,328.00 per month. The Base Rental shall be payable in advance in equal
monthly installments beginning on the Commencement Date and continuing on the
25th day of each and every month thereafter ("Due Date"), during the Sublease
Term, without demand, deduction, set-off or abatement whatsoever. Said payments
of Base Rental shall be made directly to Sublandlord at the address of
Sublandlord set forth herein. Appropriate prorations shall be made in the event
the Commencement Date is not a Due Date or in the event that the Sublease
terminates prior to a Due Date.
B. Additional Rental
-----------------
Subtenant shall also pay Sublandlord, any and all Additional Rental, as
defined in the Master Lease, as and when the same shall become due and payable
under the provisions of the Master Lease. Subtenant shall remit the Additional
Rental for each month to Sublandlord on the Due Date of the successive month
which, as of the date hereof, is $0.00 per month. Any year-end adjustment of
Additional Rental pursuant to Section 7(ii) or (iii) of the Master Lease shall
be prorated between Sublandlord and Subtenant based on Commencement or
Termination Date, as the case may be and at the time of adjustment between
Landlord and Sublandlord for any full calendar year.
-2-
<PAGE>
C. Late Charge
-----------
Any rental amounts not received within five (5) days of when due shall bear
interest at the rate of one and one-half percent (1.5%) per month until paid.
6. Condition of Premises
---------------------
Subtenant represents that it has made a thorough examination and inspection
of the Premises and is familiar with the condition of such property, and
Subtenant agrees to accept the Premises in their "as is" condition, as of the
date of this Sublease. Subtenant agrees that it enters into this Sublease
without any representations or warranties by Sublandlord, its agents,
representatives, servants or employees or any other person, as to the condition
or use by Subtenant of the Premises.
7. Exclusion from Master Lease
---------------------------
The following Articles or Sections of the Master Lease are expressly
excluded from this Sublease and shall not apply to Subtenant: any renewal
options, or options to lease additional space in the Building, or rights of
first refusal with regard to space in the Building. Subtenant acknowledges and
agrees the such rights are personal to Sublandlord and that Subtenant shall have
no rights to exercise such options and renewals, if any, contained in the Master
Lease.
8. Services, Utilities, Maintenance and airs
-----------------------------------------
Subtenant acknowledges and agrees that Sublandlord shall provide, only via
the Landlord, maintenance or repair of the Premises, utilities or services
described as being provided by the Landlord in the Master Lease. Subtenant
agrees that, in cooperation with the Sublandlord, it shall look solely to the
Landlord and not to Sublandlord for the rendition of all such services and the
performance of all obligations required to be furnished and performed in the
Premises. Subtenant shall receive directly from the Landlord all services and
utilities and the performance of all obligations which the Landlord is required
to provide in and for the benefit of the Premises, and Sublandlord shall have no
liability whatsoever in the event that Landlord fails to furnish or perform any
such services or obligations during the Sublease Term. However, Sublandlord
agrees to cooperate with Subtenant in good faith, in dealings with and notices
to Landlord regarding services, utilities, maintenance and repair of the
Premises.
9. Additional Services
-------------------
Subtenant covenants and agrees to pay any fees and expenses assessed by
Landlord pursuant to the Master Lease resulting from Subtenant's use and
occupancy of the Premises. In addition, if other services not provided by
Landlord (the "Other Services") are obtained for the benefit of Subtenant,
Subtenant shall bear all of such costs, and Sublandlord agrees to cooperate with
Subtenant, to the extent reasonably requested, in obtaining such Other Services,
provided same are at no cost to Sublandlord.
10. Use of Premises
---------------
Subtenant shall use the Premises only for the "Permitted Use" as defined in
the Master Lease, and shall not use the Premises for any use or purpose which
would violate the Master Lease. Subtenant shall not change the use of the
Premises without the prior written consent of the Sublandlord, in its reasonable
discretion and Landlord, in the manner provided in the Master Lease. During the
Sublease Term, Subtenant agrees to assume any responsibility previously borne by
Sublandlord in its capacity as tenant under the Master Lease regarding the
Occupational Safety Health Act, the Americans with Disabilities Act,
-3-
<PAGE>
and the legal use or adaptability of the Premises and the compliance thereof to
all applicable laws and regulations enforced during the Sublease Term; provided,
however, that Sublandlord shall be responsible for and shall indemnify and hold
harmless Subtenant with respect to all such compliance of the Premises up to the
Commencement Date.
11. Alterations
-----------
Subtenant shall make no alterations, additions, installations or
improvements of any kind ("Alterations") to the Premises without the prior
written consent of Landlord (in accordance with the Master Lease) and
Sublandlord, in its reasonable discretion. Any Alterations made to the Premises
with consent shall be at the sole cost and expense of Subtenant, and Subtenant
agrees to restore the Premises to their condition as of the Commencement Date at
its sole cost if so requested by Sublandlord or Landlord at the end of the
Sublease Term. Any and all approved Alterations shall be made in conformity with
the applicable terms and conditions of the Master Lease. Subtenant shall submit
its proposed Alterations, simultaneously to Landlord and Sublandlord for
consent, subject to the provisions of the Master Lease.
12. Assignment and Subletting
-------------------------
A. Consent Required
----------------
Subtenant shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet, or otherwise transfer or encumber all or any part of
Subtenant's interest in this Sublease or the Premises without the prior written
consent of the Landlord (in accordance with the apple provisions of the Master
Lease) and Sublandlord, in Sublandlord's reasonable discretion. Any actual or
attempted assignment, transfer, mortgage, encumbrance or subletting without such
consent shall be void, and shall constitute a breach of this Sublease, subject
to the applicable notice and cure provisions of the Master Lease.
B. No Release
----------
Regardless of any consent by Sublandlord, no subletting or assignment shall
release Subtenant of Subtenant's obligation, or alter the primary liability of
Subtenant to pay the Base Rental, Additional Rental, and to perform all other
obligations to be performed by Subtenant hereunder. The acceptance of rent by
Sublandlord from any other person shall not be deemed a waiver by Sublandlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Subtenant or any successor of Subtenant in the
performance of any of the terms hereof, Sublandlord may proceed directly against
Subtenant without the necessity of exhausting remedies against said assignee or
such additional sublessee.
C. Fees
----
In the event Subtenant shall assign or sublet the Premises or request the
consent of Sublandlord to any assignment or subletting, or if Subtenant shall
request the consent of Sublandlord for any act that Subtenant proposes to do,
then Subtenant shall reimburse Sublandlord for any fees Sublandlord is required
to pay as tenant pursuant to the Master Lease, by reason of such act. Should
Sublandlord be required to pay any sums to Landlord to obtain Landlord's
approval of this Sublease, Subtenant shall not be required to reimburse
Sublandlord for any such sums.
-4-
<PAGE>
13. Consents and Approvals
----------------------
Sublandlord shall not be liable for any damages if Sublandlord withholds or
delays any consent or approval requested by Subtenant, and as to any consent or
approval which the Sublandlord has agreed in writing not to unreasonably
withhold or delay, Subtenant shall have only the remedy of specific performance
or injunction.
14. Indemnity
---------
Subtenant shall indemnify and hold harmless Sublandlord and the Landlord
from and against any and all claims arising from Subtenant's use of the
Premises, or from the conduct of Subtenant's business or from any activity, work
or thing done, permitted or allowed by Subtenant in or about the Premises or the
Project (as defined in the Lease), and shall further indemnify and hold harmless
the Sublandlord and the Landlord from and against any all claims arising from
any breach or default in the performance of any obligation on Subtenant's part
to be performed under the terms of this Sublease, or arising from any negligence
of Subtenant or any of Subtenant's agents, contractors, or employees, and from
and against all costs, attorneys' fees, expenses and liabilities incurred in the
defense of any such claim or any action or proceeding brought thereon. Subtenant
agrees that should any action or proceeding be brought against Sublandlord or
the Landlord by reason of any such claim, upon notice from Sublandlord or the
Landlord, Subtenant shall defend the same at Subtenant's expense by counsel
reasonably satisfactory to Sublandlord.
Subtenant, as a material part of the consideration to Sublandlord, hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises arising from Subtenant's use of the Premises, and Subtenant hereby
waives all claims in respect thereof against Sublandlord. Subtenant hereby
agrees that Sublandlord shall not be liable for injury to Subtenant's business
or any loss of income therefrom, or for damage to the goods, wares, merchandise
or other property of Subtenant, Subtenant's shareholders, employees, invitees,
customers or any other person in or about the Premises, nor shall Sublandlord be
liable for injury to any person including Subtenant's shareholders, employees,
agents or contractors, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause whether
the said damage or injury results from conditions arising upon the Premises or
upon portions of the Building, or from other sources or places, and regardless
of whether the cause of such damage or injury or the means of repairing the same
is inaccessible to Subtenant. Sublandlord shall not be liable for any damages
arising from any act, omission or neglect of the Landlord or any tenant of the
Building.
15. Insurance
---------
Sublandlord shall have no obligation to provide insurance or perform any
repair, replacement, or any other requirement imposed upon the Landlord as
landlord pursuant to the Master Lease in the event of damage to all of or any
part of the Building. Subtenant shall obtain and maintain insurance policies
identical to those required to be maintained by Sublandlord as tenant pursuant
to the Master Lease and Sublandlord and Landlord shall be named as additional
insureds. Subtenant acknowledges and agrees that the Landlord and Sublandlord
shall not be responsible or liable to Subtenant for any loss or damage at the
Premises.
-5-
<PAGE>
16. Estoppel Certificate
--------------------
A. Requirements
------------
Subtenant shall, at any time, upon not less than ten (10) days' prior
written notice from Sublandlord, execute, acknowledge and deliver to Sublandlord
a statement in writing (i) certifying that this Sublease is unmodified and in
full force and effect (or, if modified, stating the nature of such modification
and certifying that this Sublease, as so modified, is in full force and effect)
and the extent to which the rent and other charges are paid in advance, if any;
and (ii) acknowledging that there are not, to Subtenant's knowledge, any uncured
defaults on the part of Sublandlord hereunder, or specifying such defaults if
any are claimed. Any such statement may be conclusively relied upon by any
prospective assignee or mortgagees of the Premises.
B. Failure to Comply
-----------------
Subtenant's failure to provide such statement within such times shall be a
default by Subtenant under this Sublease, and shall be conclusive upon Subtenant
(i) that this Sublease is in full force and effect, without modification except
as may be represented by Sublandlord; (ii) that there are no uncured defaults in
the performance by Sublandlord or Landlord; and (iii) that not more than one
month's rent has been paid in advance.
17. Eminent Domain
--------------
In the event of any condemnation of the Premises, all awards and
compensation, or proceeds payable to Sublandlord pursuant to the Master Lease
shall be the property of Sublandlord. No part of any condemnation awards,
compensation or proceeds shall be payable to Subtenant.
18. Rules and Regulations
---------------------
Subtenant shall faithfully observe and comply with all rules and
regulations described in or annexed to the Master Lease, as amended from time to
time.
19. Tax on Tenant's Personal Property
---------------------------------
Subtenant shall pay all taxes levied or assessed upon Subtenant's personal
property and shall deliver satisfactory evidence of such payment to Sublandlord,
if requested.
20. Right to Additional Space
-------------------------
Subtenant acknowledges that it shall have no rights under this Sublease to
lease any other space in the Building.
21. Guaranty
--------
In order to induce Sublandlord to execute this Sublease, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned party identified as "Guarantor" on the signature
page of this Sublease agree to enter into and simultaneously with the execution
of this Sublease has entered into a Guaranty attached hereto as Exhibit "B".
-----------
-6-
<PAGE>
22. Arbitration
-----------
Any dispute arising out of this Sublease shall, at the option of either
party, be settled by arbitration. Within ten (10) days after either party shall
have requested arbitration in writing, the parties shall agree on an impartial
arbitrator, and failing agreement, such arbitrator shall be selected by the
American Arbitration Association at the request of either party. The arbitration
shall be conducted in accordance with the then current rules of commercial
arbitration of the American Arbitration Association, and judgment upon the award
granted by the arbitrator may be entered in any court having jurisdiction
thereof. Fees, costs and expenses of the arbitrator shall be borne by the party
against whom the arbitration shall be determined, or in such proportions as the
arbitrator shall designate.
23. Abatement of Rent
-----------------
Should Sublandlord receive an abatement of rent under the Master Lease,
such abatement shall be passed through and inure to the benefit of Subtenant.
24. Severability
------------
The invalidity of any provision of this Sublease as determined by a court
of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
25. Time of Essence
---------------
Time is of the essence of this Sublease.
26. Captions
--------
Captions of Articles or subdivisions thereof are not a part hereof and are
intended for reference purposes.
27. Notices
-------
All notices or demands given or required to be given hereunder shall be in
writing and shall be sent by hand delivery, overnight courier, or by certified
or registered mail, return receipt requested, addressed to the parties'
addresses set forth below or to each other address as either party may specify
in writing in accordance with this notice provision. Any such notice so given
shall be deemed given and shall be effective on the day of its receipt by the
respective party. Sublandlord shall promptly forward copies of notices from
Landlord to Subtenant upon receipt.
PRIOR TO OCCUPANCY:
- ------------------
Sublandlord: Quality Diagnostic Services, Inc.
-----------
3399 Peachtree Road, N.E., Suite 400
Atlanta, Georgia 30326
Attention: W. Michael Heekin
-7-
<PAGE>
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: James Walker, IV
Subtenant: Card Guard USA, Inc.
---------
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Michael Rosenzweig
With a copy to:
Rogers & Hardin, L.L.P.
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Michael Rosenzweig
AFTER OCCUPANCY:
- ---------------
Sublandlord: Quality Diagnostic Services, Inc.
-----------
3399 Peachtree Road, N.E., Suite 400
Atlanta, Georgia 30326
Attention: W. Michael Heekin
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: James Walker, IV
Subtenant: Card Guard USA, Inc.
---------
1100 Lake Hearn Drive, Suite 370
Atlanta, Georgia 30342
Attention: Michael Elias
With a copy to:
Rogers & Hardin, L.L.P.
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Michael Rosenzweig
-8-
<PAGE>
28. Brokers
-------
Subtenant warrants and represents to Sublandlord that it has dealt with no
broker or real estate agent or made no agreement or created any liability with
respect to this Sublease and/or the Premises or in connection with the payment
of brokerage or other commissions to anyone, and Subtenant hereby agrees to
indemnify, defend and hold Sublandlord harmless from and against all liability,
cost, or expense arising out of the claims of any other broker or real estate
agent claiming by, through or under Subtenant for a commission in connection
with this Sublease and/or the transaction contemplated by this Sublease.
Sublandlord warrants and represents to Subtenant that it has dealt with no
broker or real estate agent or made no agreement or created any liability with
respect to this Sublease and/or the Premises or in connection with the payment
of brokerage or other commissions to anyone, and Sublandlord hereby agrees to
indemnify, defend and hold Subtenant harmless from and against all liability,
cost, or expense rising out of the claims of any other broker or real estate
agent claiming by, through or under Sublandlord for a commission in connection
with this Sublease and/or the transaction contemplated by this Sublease.
29. Consents Required
-----------------
This Sublease is expressly conditioned upon the written consent of the
Landlord. Upon execution of this Sublease, Sublandlord will promptly request
such written consent. If such consent has not been received by Sublandlord
within (30) days from the date of hereof, then, at the option of either party,
upon written notice to the other at anytime after such 30-day period, this
Sublease shall be deemed canceled, null and void and of no further force and
effect, and neither party shall have any claim of any kind or nature against the
other provided such notice is sent before the Landlord's written consent is
delivered to Sublandlord. In no event shall Sublandlord be obligated to deliver
possession of the Premises to Subtenant until the date upon which Sublandlord
notifies Subtenant that it has received the written consent of the Landlord;
however, there shall be an equitable abatement of rent until delivery of
possession of the Premises to Subtenant. Subtenant shall have no liability if
this Sublease is terminated due to such lack of consent.
30. Condition of Premises on Termination
------------------------------------
Upon the expiration or other termination of the Sublease Term, Subtenant
covenants and agrees that it shall quit and surrender the Premises in the
condition existing as of the Commencement Date, shall remove all of Subtenant's
personal property therefrom (except such items, including, without limitation,
such fixtures, equipment, improvements and Alterations, which are required to
remain a part of the Premises pursuant to the Master Lease), and shall make any
repairs or restorations required by reason of each removal to put the Premises
in such condition.
31. Waivers
-------
No waiver by Sublandlord of any provision hereof shall be deemed a waiver
of any provision hereof or of any subsequent breach by Subtenant of the same or
any provision. The consent or approval by Sublandlord of any act shall not be
deemed to render unnecessary obtaining subsequent consent or approval from
Sublandlord or any subsequent act by Subtenant. The acceptance of rent hereunder
by Sublandlord shall not be a waiver of any preceding breach by Subtenant of any
provision hereof, regardless of knowledge by Sublandlord of such preceding
breach at the time of acceptance of such rent.
32. Recording
---------
-9-
<PAGE>
Subtenant shall not record this Sublease, and such recordation shall, at
the option of Sublandlord, constitute a non-curable default of Subtenant
hereunder.
33. Holding Over
------------
Subtenant shall have no right to hold over at the Premises beyond the
Expiration Date or earlier termination of this Sublease. If Subtenant remains in
possession after the expiration or earlier termination of the Sublease Term
without the express written consent of Sublandlord, such occupancy shall, at the
Sublandlord's option, be deemed an act of trespass. In the event of any such
holdover, Subtenant shall pay as liquidated damages (and not as rent) all
amounts payable by Sublandlord to Landlord incurred as a result of such
holdover, including but not limited to all amounts payable by Sublandlord to the
Landlord pursuant to the Master Lease as a result of such continued occupancy by
Subtenant. Nothing herein shall be deemed to limit Sublandlord's rights to
forcibly evict Subtenant, or any other rights or remedies available to
Sublandlord. No receipt of money by Sublandlord form Subtenant after expiration
or termination of this Sublease shall reinstate or extend this Sublease.
34. Cumulative Remedies
-------------------
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
35. Covenants and Conditions
------------------------
Each provision of this Sublease performable by Subtenant shall be deemed
both a covenant and a condition.
36. Choice of Law
-------------
This Sublease shall be governed by the laws of the State of Georgia without
regard to conflicts of laws.
37. Attorneys' Fees
---------------
In the event Sublandlord, without any fault on its part, is a party to any
proceeding, including litigation, commenced by or against Subtenant or by or
against any parties in possession of the Premises or any part thereof claiming
under Subtenant, Subtenant shall pay to Sublandlord all costs, including,
without limitation, reasonable attorneys' fees incurred by or imposed by or upon
Sublandlord in connection with such proceeding, and the costs of enforcement of
this Sublease against Subtenant.
38. Sublandlord's Access
--------------------
Sublandlord and its agents shall have the right to enter the Premises at
reasonable times, upon reasonable notice to Subtenant, for the purpose of
inspecting the Premises and showing the Premises to prospective assignees,
lenders or lessees, all without undue interruption to Subtenant's business. In
addition, Sublandlord shall have the right to enter the Premises to perform such
actions as are required of it as tenant pursuant to the Master Lease. Subject to
the above, and provided Subtenant is not in default hereunder (subject to any
applicable notice and cure period under the Master Lease) or under the Master
Lease, Sublandlord covenants that Subtenant shall have the right to possession
and quiet enjoyment of the Premises during the term of this Sublease.
Sublandlord shall take no action or fail to take a required action
-10-
<PAGE>
which would cause a default under the Master Lease and shall indemnify and hold
harmless Subtenant from all loss, cost, damage, action, liability and expenses
incurred by Subtenant as a result thereof.
39. Security Deposit
----------------
Upon the execution of this Sublease, Subtenant shall pay to Sublandlord the
sum of $0.00 as security for Subtenant's performance of its obligations under
----
this Sublease. Upon termination of this Sublease, provided Subtenant is not then
in default of any of the terms hereof, the security deposit shall be returned to
Subtenant, without interest, less any amounts due Sublandlord upon termination.
40. Corporate Authority
-------------------
Each individual executing this Sublease on behalf of Subtenant or
Sublandlord represents and warrants that he is duly authorized to execute and
deliver this Sublease on behalf of such party.
41. Amendments
----------
This Sublease may be modified only in writing, signed by the parties in
interest at the time of the modification.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
[SIGNATURES CONTINUED ON NEXT PAGE]
-11-
<PAGE>
Signed, sealed and delivered SUBLANDLORD:
this 30 day of March, -----------
1998, in the presence of:
QUALITY DIAGNOSTIC SERVICES, INC.,
/s/ W. Michael Heekin a Georgia corporation
- ----------------------------------
Witness By: /s/ Blake Whitney
-------------------------------
/s/ Michele M. Riddick Title: President
- ---------------------------------- ----------------------------
Notary Public
My Commission Expires [CORPORATE SEAL]
- ----------------------------------
[NOTARIAL SEAL]
SUBTENANT:
---------
Signed, sealed and delivered
this _____ day of March, CARD GUARD, USA, INC.,
1998, in the presence of: a Georgia corporation
- ---------------------------------- By: /s/ Michael Elias
Witness -------------------------------
Title: Executive Vice President
----------------------------
- ----------------------------------
Notary Public
[CORPORATE SEAL]
My Commission Expires
- ----------------------------------
[NOTARIAL SEAL]
GUARANTOR:
Signed, sealed and delivered ---------
this _____ day of March,
1998, in the presence of: CARD GUARD SCIENTIFIC SURVIVAL, LTD
- ---------------------------------- By: /s/ Michael Elias
Witness -------------------------------
Print Name: Michael Elias
-----------------------
- ---------------------------------- Title: Executive Vice President
Notary Public ----------------------------
My Commission Expires
- ----------------------------------
[NOTARIAL SEAL]
-12-
<PAGE>
LANDLORD CONSENT TO SUBLEASE
The undersigned Landlord does hereby consent to the subleasing of the
Premises by Sublandlord to Subtenant pursuant to and in accordance with the
provisions of the within and foregoing Sublease, subject to the following terms
conditions:
1. Landlord's consent shall not in any manner release Sublandlord
from, or relieve Sublandlord of, any of the terms, covenants, conditions,
agreements, requirements, provisions or restrictions set forth in the
Lease, or from the full and complete payment and performance of all duties,
obligations, liabilities and responsibilities of Sublandlord under the
Lease, whenever arising, for which Sublandlord shall remain liable and
responsible in all respects, as principal and not as surety.
2. Sublandlord and Subtenant acknowledge and agree that the Sublease
is, and shall at all times be and remain, in all respects, subject and
subordinate to the Lease and all of the terms, covenants, conditions,
agreements, requirements, provisions or restrictions set forth in the
Lease.
3. Upon a default by Sublandlord in the payment of any base rental,
additional rent or other amounts due under the Lease, or upon any other
default by Sublandlord under the Lease, Landlord shall have, in addition to
its other rights and remedies under the Lease, the right to collect and
receive from Subtenant, upon written demand from Landlord to Sublandlord
and Subtenant at the addresses for notices set forth in the Sublease, any
rental due and payable under the Sublease by Subtenant to Sublandlord. Any
such sums so collected and received shall be applied by Landlord to any
amounts due from Sublandlord under the Lease in such order as Landlord
elects and in furtherance of the foregoing. Sublandlord hereby assigns to
Landlord the rent and other sums due from Subtenant and hereby authorizes
and directs Subtenant to pay such rent directly to Landlord; provided,
--------
however, that, until the occurrence of a default under the Lease,
-------
Sublandlord shall have the license to continue collecting such rent from
Subtenant; and, provided further, however, it is agreed that for all
-------- ------- -------
purposes Landlord is not a party to the Sublease. Landlord shall not have
the right to demand payment from Subtenant of any amounts paid by Subtenant
to Sublandlord prior to receipt of notice from Landlord as provided herein.
4. Upon default by Sublandlord under the Lease and the subsequent
termination of the Lease by Landlord, at the option of Landlord, Subtenant
shall be bound under the terms and conditions of the Sublease with the same
force and effect as if Landlord were the original sublessor, and Subtenant
agrees to execute any attornment agreement requested by Landlord not in
conflict herewith.
5. The consent by Landlord to the Sublease shall not be deemed an
approval of any future assignment of the Lease or the Sublease, or of any
subsequent subletting of the Premises or any portion thereof; and any such
future assignment or subletting shall be made subject to Landlord's prior
written consent, which consent may be withheld in Landlord's sole
discretion, and any such assignment or subletting without the written
consent of Landlord shall be null and void. No assignment of the Lease or
the Sublease, and no subletting of the Premises or any portion thereof,
shall in any manner release Sublandlord from, or relieve Sublandlord of,
any of the terms, covenants, conditions, agreements, requirements,
provisions or restrictions set forth in the Lease, or from the full and
complete payment and performance of all duties, obligations, liabilities
and responsibilities of Sublandlord under the Lease, whenever arising,
13
<PAGE>
for which Sublandlord shall remain liable and responsible in all respects,
as principal and not as surety.
6. By consenting to the Sublease, Landlord in no way agrees to
perform or to be obligated to perform any services for the benefit of
Subtenant under the Sublease, but Landlord shall continue to provide
services to the Premises (as part of the Premises) in accordance with the
terms and conditions of the Lease. Subtenant shall have no rights or claims
against Landlord, but shall instead look solely to Sublandlord for any such
claims, except as may arise after Landlord exercises its rights under
Section 4 hereof.
7. This Consent shall not be deemed to create any contractual or
other relationship between Landlord and Subtenant.
8. Sublandlord and Subtenant agree by their acceptance of this
Consent that the Sublease shall not be amended or modified without the
prior written consent of Landlord, and that the Lease remains in full force
and effect without modification and is binding on Sublandlord, as lessee
thereunder, and Sublandlord hereby ratifies and affirms the same. This
Consent and Agreement does not constitute recognition of any deviations,
alteration or substitutions from the terms and conditions of the Lease.
IN WITNESS WHEREOF, the undersigned Landlord has executed this Consent
under seal this _____ day of April, 1998.
LANDLORD:
PAVILION PARTNERS, L.P., a Georgia limited
partnership
By: Bentley Investments, Inc., a Georgia
corporation, its sole general partner
By: /s/ Lawrence R. Cooper
--------------------------------------
Name: Lawrence R. Cooper
-------------------------------
Title: President
-------------------------------
(CORPORATE SEAL)
14
<PAGE>
EXHIBIT "A"
MASTER LEASE
(See Exhibit 10.30 to Registration Statement)
15
<PAGE>
EXHIBIT "B"
STATE OF GEORGIA
COUNTY OF FULTON
GUARANTY
--------
KNOWN ALL MEN BY THESE PRESENTS:
In consideration of the subletting by Quality Diagnostic Services, Inc.
("Sublandlord") to Card Guard USA, Inc. ("Subtenant") pursuant to Sublease
Agreement dated March ____, 1998 (the "Sublease") of the premises described
therein, the delivery of which Sublease is conditioned upon the execution and
delivery of this guaranty ("Guaranty"), and the payment of One Dollar ($1.00) to
the undersigned by Sublandlord, the receipt and sufficiency of which are hereby
acknowledged by the undersigned, the undersigned (hereinafter collectively
called the "Guarantor") does hereby unconditionally guarantee the full, prompt
and complete performance by Subtenant of all of the terms, covenants, conditions
and agreements contained in the Sublease on the part of Subtenant to be
performed, including specifically, without limitation, the obligation to pay all
rents and any other charges or obligations therein set forth, together with any
and all renewal or renewals, extension or extensions, modification or
modifications thereof, and substitution or substitutions therefor (all such
obligations being hereinafter called the "Obligations").
Guarantor waives presentment, demand, dishonor, notice of dishonor,
protest, and all other notices whatsoever, including, without limitation,
notices of acceptance hereof, of the existence or creation of the Obligations,
and of all defaults, disputes or controversies with Subtenant, and of the
settlement, compromise or adjustments thereof. Guarantor agrees that Sublandlord
shall have full authority, without obtaining the consent of, giving notice to,
or affecting the liability of Guarantor, to make changes of terms, to extend
time to pay, to release the whole or any part of the Obligations, to settle or
compound differences for less than the full amount owing under the Lease, to
accept notes, trade acceptances or any other form of obligation for the
Obligations, to make arrangements or settlements in or out of court in the case
of receivership, liquidation, readjustment, bankruptcy, reorganization,
arrangement or an assignment for the benefit of creditors and to do anything,
whether or not herein specified, which may be done or waived by or between
Sublandlord and Subtenant. The making of such arrangements, settlements,
compromises, adjustments, extensions of time and so forth shall not diminish,
discharge, modify, reduce, extinguish or otherwise affect the liability of
Guarantor hereunder for the full amount owing under the Sublease. Guarantor
further agrees that no act or omission on the part of Sublandlord shall in any
way affect, impede or impair this Guaranty.
This Guaranty shall be enforceable without Sublandlord having (i) to
proceed against Subtenant (any right to require Sublandlord to take action
against Subtenant as required by O.C.G.A. (S) 10-7-24 being hereby expressly
--------
waived) or against any security for any payments due under the Lease, or (ii) to
exercise any of Sublandlord's remedies under the Sublease, and shall be
effective regardless of the solvency or insolvency of Subtenant, any
reorganization, merger or consolidation of Subtenant, any change in the
composition, nature, personnel or location of Subtenant, or any bankruptcy,
receivership, liquidation, reorganization or other proceeding involving
Subtenant.
16
<PAGE>
This Guaranty shall be binding upon and enforceable against each person and
entity executing this Guaranty and upon the respective heirs, legal
representatives, successors and assigns of each such person and entity. The
liability of each person and entity executing this Guaranty and the heirs, legal
representatives, successors and assigns of each such entity and person hereunder
is joint and several, primary and unconditional, and shall not be subject to any
claim of offset, counterclaim or defense of Subtenant.
This Guaranty shall be irrevocable, absolute and unconditional and shall
remain in full force and effect as to Guarantor until such time as all of the
Obligations shall have been paid or satisfied in full. No delay or failure on
the part of Sublandlord in the exercise of any right or remedy shall operate as
a waiver thereof, and no single or partial exercise by Sublandlord of any right
or remedy shall preclude other or further exercise thereof or the exercise of
any other right or remedy. Guarantor agrees that this Guaranty shall not be
affected by reason of assertion by Sublandlord against Subtenant of any rights
or remedies reserved to Sublandlord in the Sublease, or by reason of any summary
or other proceedings against Subtenant, or by the amendment or modification of
the Sublease with or without notice to, or consent of, the Guarantor.
This Guaranty shall remain in full force and effect, and Guarantor shall
continue to be liable for the payment of all amounts owing under the Sublease in
accordance with the original terms of the documents and instruments evidencing
the same, notwithstanding the commencement of any bankruptcy, reorganization or
other debtor relief proceeding by or against Subtenant, and notwithstanding any
modification, discharge or extension of the Obligations, any modification or
amendment of any document or instrument evidencing any of the Obligations, any
stay of the exercise by Sublandlord of any of its rights and remedies against
Subtenant with respect to any of the Obligations, or any cure of any default by
Subtenant under any document or instrument evidencing any of the Obligations,
which may be effected in connection with any such proceeding, whether permanent
or temporary, and notwithstanding any assent thereto by Sublandlord.
Sublandlord may, without notice of any kind, sell, assign or transfer the
Sublease, and in such event each and every immediate and successive assignee,
transferee or holder of the Sublease shall have the right to enforce this
Guaranty, by suit or otherwise, for the benefit of such assignee, transferee or
holder, as fully as if such person were herein by name specifically give such
rights, powers and benefits, but Sublandlord shall have an unimpaired right to
enforce this Guaranty for its benefit as to so much of the Obligations as
Sublandlord has not sold, assigned or transferred.
This Guaranty has been made and delivered in the State of Georgia and shall
be governed by, construed under and interpreted and enforced in accordance with
the laws of the State of Georgia. Wherever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
be invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
Guarantor hereby submits to personal jurisdiction in the State of Georgia
for the enforcement of this Guaranty and waives any and all personal rights
under the laws of the State of Georgia or the United States to object to
jurisdiction within the State of Georgia for the purposes of litigation to
enforce this Guaranty. In the event that such litigation is commenced, Guarantor
agrees that service of process may be made, and personal jurisdiction over
Guarantor obtained, by the serving of a copy of the summons and complaint upon
Subtenant, as agent for Guarantor, at 1100 Lake Hearn Drive, Suite 370, Atlanta,
Georgia, and with a copy to its counsel, Rogers & Hardin, L.L.P. at 2700
17
<PAGE>
International Tower, 229 Peachtree Street, N.E., Atlanta, Georgia 30303,
Attention: Michael Rosenzweig. Nothing contained herein shall prevent
Sublandlord from bringing any action or exercising any rights against any
security given to Sublandlord by Subtenant or Guarantor, or against Guarantor
personally, or against any property of Guarantor, within any other state.
Commencement of any such action or proceeding in any other state shall not
constitute a waiver of the agreement that the laws of the State of Georgia shall
govern the rights and obligations of Guarantor and Sublandlord hereunder or of
the submission made by Guarantor to personal jurisdiction within the State of
Georgia. The aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive but are cumulative and in
addition to all other means of obtaining personal jurisdiction and perfecting
service of process now or hereafter provided by the laws of the State of
Georgia.
Guarantor agrees that Guarantor shall have no right to recover against
Subtenant by way of subrogation to the rights of Sublandlord on account of any
payment by Guarantor to Sublandlord hereunder until all of the Obligations have
been paid and satisfied in full, and Guarantor hereby subordinates any such
rights of subrogation to such extent.
If Guarantor is a corporation or other business entity, Guarantor and the
persons executing this Guaranty as officers or representatives of the Guarantor
represent that Guarantor has full corporate authority to execute this Guaranty
and that the officers executing this Guaranty are duly authorized to execute
this Guaranty on behalf of the Guarantor, and that there is no provision in
Guarantor's charter, bylaws or other governing document that in any way
conflicts with or prevents the execution, delivery or performance of this
Guaranty by Guarantor. Guarantor further represents that there is no provision
of any other agreement by which Guarantor is bound that in any way conflicts
with or prevents the execution, delivery or performance of this Guaranty by
Guarantor.
IN WITNESS WHEREOF, Guarantor has executed, sealed and delivered this
Guaranty, all this ______ day of March, 1998.
Signed, sealed and delivered this _____ day CARD GUARD SCIENTIFIC SURVIVAL, LTD
of March, 1998, in the presence of:
By: /s/ Michael Elias
------------------------------
- -------------------------------------------
Witness Print Name: Michael Elias
-----------------------
- -------------------------------------------
Notary Public Title: Executive Vice President
----------------------------
My Commission Expires
- -------------------------------------------
[NOTARIAL SEAL]
18
<PAGE>
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 30th day
of September, 1998, by and between WebMD, INC., a Georgia corporation ("WebMD")
and JEFFREY T. ARNOLD, an individual (the "Executive"), and is effective as of
the date hereof.
WHEREAS, Executive has made and is expected to continue to make a
significant contribution to the success and development of WebMD in his role as
Chairman and Chief Executive Officer of WebMD; and
WHEREAS, Executive is willing to render services to WebMD on the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and WebMD including,
without limitation, the promises and covenants described herein, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
---------
EMPLOYMENT
----------
SECTION 1.1 Term of Employment. The term of Executive's employment
------------------
hereunder shall continue for a period of two (2) years from the effective date
hereof, unless earlier terminated as provided in this Agreement. At the end of
the second year of the initial two-year term, and at the end of each year-long
extension hereof, this Agreement shall automatically be extended for an
additional one-year term unless either party hereto shall give written notice of
its or his intent to terminate three
<PAGE>
hundred sixty (360) days prior to the end of the initial two-year term or any
year-long extension hereof.
SECTION 1.2 Duties and Responsibilities of Executive. Executive is
----------------------------------------
hereby employed full time as the Chairman and Chief Executive Officer of WebMD,
shall do and perform all services and acts necessary or advisable to fulfill the
duties of such offices, and shall conduct and perform such additional services
and activities as may be determined from time to time by the Board of Directors
of WebMD. During the term of this Agreement, Executive shall devote his full
time, energy and skill to the business of WebMD and to the promotion of WebMD's
interests, and Executive acknowledges that he has a duty of loyalty to WebMD and
shall not engage in, directly or indirectly, any other business or activity that
could materially and adversely affect WebMD's business or the Executive's
ability to perform his duties under this Agreement.
In his capacity as an officer of WebMD, Executive shall report to the
Board of Directors of WebMD. Executive's authority and responsibility in WebMD
shall at all times be subject to the review and discretion of the Board of
Directors, who shall have the final authority to make decisions regarding the
business of WebMD.
SECTION 1.3 Compensation. For all services to be rendered by
------------
Executive under this Agreement, WebMD shall pay Executive as follows:
(a) Base Salary. Executive shall be paid an annual gross salary of
-----------
$180,000 payable bi-weekly. At the sole discretion of the Board of Directors of
WebMD, Executive's annual gross salary may be increased, from time to time,
throughout the term of this Agreement, the amount of any such increase to be
determined by the Board of Directors (or by the Compensation Committee thereof).
2
<PAGE>
(b) Annual Bonus. Executive shall be paid an annual bonus in an
------------
amount approved by the Board of Directors of WebMD (or by the Compensation
Committee thereof).
SECTION 1.4 Benefits.
--------
(a) Vacation. Executive shall be entitled to four weeks paid vacation
--------
annually. Any vacation not used during any calendar year shall be forfeited
except that one week's unused vacation may be carried forward to the year
following the year in which such vacation entitlement accrued.
(b) Life, Disability and Retirement Programs. Executive shall be
----------------------------------------
entitled to participate in any life, disability and retirement programs that are
generally offered to or provided for the senior management personnel of WebMD,
said programs to be approved by the Board of Directors.
(c) Group Insurance. Executive shall be entitled to participate in
---------------
such group health and dental insurance programs (including family coverage) as
may from time to time be offered generally to all of the other members of the
senior management personnel of WebMD and its subsidiaries. Executive's
participation shall be on the same basis (including cost provisions) as such
other members of senior management.
SECTION 1.5 Stock Options. WebMD shall grant Executive options to
-------------
purchase One Million (1,000,000) shares of Common Stock, Series D, of WebMD (the
"Options"), such Options to be subject to the terms and conditions set forth
below. The Options shall be adjusted for any change in the total issued common
shares of WebMD (of any class) due to stock splits, stock dividends and similar
transactions.
(a) Grant, Vesting and Exercise. Options to purchase One
---------------------------
Million (1,000,000) shares of Common Stock, Series D, shall be granted as of the
effective date of this Agreement and at
3
<PAGE>
the exercise price of fifteen dollars ($15.00) per share. Said Options shall
vest and become exercisable in accordance with the following schedule and shall
remain exercisable through the fourth anniversary of the effective date of this
Agreement, at which time such Options shall expire unless earlier terminated in
accordance with the provisions hereof.
<TABLE>
<CAPTION>
--------------------------------------------------------------
OPTIONS FOR NUMBER OF SHARES DATE VESTED AND EXERCISABLE
<S> <C>
--------------------------------------------------------------
333,333 September 30, 1998
--------------------------------------------------------------
166,667 September 30, 1999
--------------------------------------------------------------
166,667 September 30, 2000
--------------------------------------------------------------
333,333 September 30, 2001
--------------------------------------------------------------
</TABLE>
At the effective time and date of a registration statement filed under
the 1933 Act for a public offering of any series of WebMD's shares, one-half (
1/2) of the Options held by Executive which then have not vested and become
exercisable under the above vesting schedule will immediately vest and become
exercisable. All Options shall vest and become exercisable upon a Change of
Control of WebMD. For purposes of this Section 1.5(a), a "Change of Control"
shall mean a change of the possession, direct or indirect, of the power to
direct or cause the direction of management and policies of WebMD, whether
through ownership of voting securities, by contract (other than a commercial
contract for goods or non-management services), or otherwise. Without
limitation, a Change of Control shall be deemed to have occurred if any person
or entity that is not on the date hereof the beneficial owner of any securities
of WebMD becomes the beneficial owner, directly or indirectly, of 20% or more of
the combined voting power of WebMD's outstanding voting securities ordinarily
having the right to vote for the election of directors of WebMD.
4
<PAGE>
(b) Return of Options and Repurchase of Shares.
------------------------------------------
(i) In the event that Executive voluntarily resigns his
employment with WebMD prior to September 30, 2000, other than in a resignation
following a Constructive Termination (as defined in Section 3.2(b) below) all
then outstanding Options that have been issued to Executive shall be canceled as
of the date of Executive's notice of voluntary resignation. In the event that
Executive voluntarily resigns his employment with WebMD after September 30,
2000, or if Executive resigns his employment with WebMD prior to September 30,
2000 in a resignation following a Constructive Termination, all then outstanding
and exercisable options shall remain exercisable in full for a period of 120
days after the date of such notice of voluntary resignation. WebMD shall have
the option at its sole discretion to purchase any unexercised Options from the
Executive at a price per share equal to the difference between the exercise
price of such Options and the per share Fair Market Value of the shares of
Common Stock underlying such Options determined as of or before the thirtieth
(30/th/) day following the date such notice of voluntary resignation was given,
with the Fair Market Value of such shares of Common Stock to be determined in
the manner set forth in clause (iv) of this Subsection 1.5(b) set forth below.
Furthermore, in the event Executive voluntarily resigns his employment with
WebMD and no registration statement filed under the 1933 Act for a public
offering of any series of WebMD's shares has become effective, then WebMD in its
sole discretion may repurchase any shares of Common Stock purchased by Executive
through the exercise of any Options for an amount equal to the Fair Market Value
of such shares of Common Stock. Any such repurchase of shares by WebMD shall be
accomplished within 180 days after such receipt of such notice of resignation.
(ii) In the event that Executive's employment with WebMD shall be
terminated by WebMD for Cause (as defined in Section 3.1) after September 30,
1999 or at any time without Cause, all then outstanding and unexercised Options
shall become exercisable in full as of the date such notice of termination was
given by WebMD and shall remain exercisable in full for a
5
<PAGE>
period of 120 days after the date such notice of termination was given by WebMD.
WebMD shall have the option at its sole discretion to purchase any unexercised
Options from the Executive at a price per share equal to the difference between
the exercise price of such Options and the per share Fair Market Value of the
shares of Common Stock underlying such Option determined as of or before the
thirtieth (30/th/) day following the date such notice of termination was given
by WebMD, with the Fair Market Value of such shares of Common Stock to be
determined in the manner set forth in clause (iv) of Subsection 1.5(b) appearing
below. Furthermore, if no registration statement filed under the 1933 Act for a
public offering of any series of WebMD's Common Stock has become effective, then
WebMD in its sole discretion may repurchase any shares of Common Stock purchased
by Executive through the exercise of any Options for an amount equal to the Fair
Market Value of the shares of Common Stock. Any such repurchase of the shares of
Common Stock shall be accomplished within 180 days after the date such notice of
termination was given by WebMD.
(iii) In the event Executive's employment with WebMD shall be
terminated by WebMD for Cause on or before September 30, 1999, all then
outstanding Options will be canceled.
(iv) The Fair Market Value of a share of Common Stock, Series D,
on the date specified by WebMD shall mean (i) the closing sales price of the
Common Stock of WebMD on such date on the national securities exchange (treating
the Nasdaq National Market System as a national securities exchange) having the
greatest volume of trading in the Common Stock during the thirty (30) day period
preceding the day the value is to be determined or, if such exchange was not
open for trading on such date, the next preceding date on which it was open;
(ii) if the Common Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Common Stock on the
over-the-counter market, in arms-length transactions not involving an affiliate
of WebMD, on the day such value is to be determined, or in the absence of
closing bids on such day, the closing bids on the next preceding day on which
there were bids; (iii) if
6
<PAGE>
the Common Stock also is not traded on the over-the-counter market, the average
net proceeds per share received or the price paid by WebMD with respect to
shares of Common Stock of any series sold or purchased by WebMD in arms length
transactions during the ninety (90) days preceding the day the value is to be
determined; or (iv) if no such purchases or sale transactions by WebMD have
occurred within such ninety (90) day period, the Fair Market Value as determined
in good faith by the Board of Directors of WebMD based on (a) such relevant
facts as may be available to such Board, which may include opinions of
independent experts, the price at which recent purchases or sales have been made
by third parties, the per share book value of the Common Stock, and WebMD's
current and future earnings or (b) an independent appraisal, conducted at
WebMD's expense, by a qualified financial appraiser who is reasonably
satisfactory to both WebMD and Executive, provided that the selection of method
(a) or (b) shall be by mutual agreement of the Board and Executive.
(c) Initial Public Offering. In the event that WebMD shall undertake
-----------------------
an initial public offering ("IPO") of any series of its stock, pursuant to which
it files a registration statement in accordance with the 1933 Act, notice of the
filing of such registration statement shall be provided to Executive, and upon
the effective date of such registration statement (i) pursuant to and in
accordance with the Restated Shareholders Agreement, each one (1) outstanding
share of Common Stock, Series D, will become one (1) share of Common Stock
without series designation, (ii) pursuant to and in accordance with Section
1.5(a) above, one-half ( 1/2) of the Executive's then-unvested Options shall
immediately vest and become exercisable, and (iii) WebMD shall have no right to
repurchase any shares of Common Stock obtained by his exercise of any Options.
SECTION 1.6 Business Expenses. Executive shall be entitled to reimbursement
-----------------
of all ordinary and necessary business expenses reasonably incurred for business
travel, communications (including cell phone and pager), entertainment and meals
in connection with the performance of Executive's duties under this Agreement in
accordance with WebMD's established policies for reimbursement of business
expenses including an automobile allowance of Seven Hundred Dollars
7
<PAGE>
($700.00) per month. WebMD will also pay the initiation fees, membership dues
and assessments for Executive's family membership in a club in the Atlanta area
acceptable to WebMD and Executive which would permit Executive to engage in
business entertainment for the benefit of WebMD. WebMD expects Executive to
attend and participate in continuing education seminars and courses with respect
to the health industry and business management related to his duties, and WebMD
will reimburse all ordinary and necessary expenses of such attendance and
participation.
ARTICLE II
----------
COVENANTS OF EXECUTIVE
----------------------
SECTION 2.1 Confidentiality. Executive recognizes the interest of WebMD
---------------
in maintaining the confidential nature of its proprietary and other business and
commercial information. In connection therewith, Executive covenants that
during the term of his employment with WebMD under this Agreement, and for a
period of one (1) year thereafter, Executive shall not, directly or indirectly,
except as authorized by the Board of Directors, publish, disclose or use for his
own benefit or for the benefit of a business or entity other than WebMD or
otherwise, any secret or confidential matter, or proprietary or other
information not in the public domain that was acquired by Executive during his
employment, relating to WebMD, or any of its subsidiaries' businesses,
operations, customers, suppliers, products, employees, financial affairs or
industrial practices, technology, know-how or intellectual property or other
similar information (the "Proprietary Information").
Executive will abide by WebMD's policies and regulations, as established
from time to time, for the protection of its Proprietary Information. Executive
acknowledges that all records, files, data, documents and the like relating to
suppliers, customers, costs, prices, systems, methods, personnel, technology and
other materials relating to WebMD or its affiliated entities shall be and remain
the sole property of WebMD and/or such affiliated entity and shall, upon the
request of WebMD, turn
8
<PAGE>
over all copies of such Proprietary Information to WebMD (together with a
written statement certifying as to his compliance with the foregoing).
SECTION 2.2 Non-Solicitation of Customers and Non-Competition. During
-------------------------------------------------
the term of his employment with WebMD, and for a period of one (1) year
thereafter, Executive shall not directly or indirectly, through one or more
intermediaries or otherwise, solicit or accept, or attempt to solicit or accept
any business from any customer or client of WebMD, including actively sought
prospective customers, with whom Executive had material contact, for the purpose
of providing services or products to such customer or client which are
competitive with the services or products offered or provided by WebMD.
During the Executive's employment with WebMD, and for the one (1) year
period following the termination of Executive's employment with WebMD for any
reason, Executive shall not, without the prior written consent of the Board of
Directors, which consent may be withheld at the sole discretion of the Board of
Directors, perform the Services (as defined below) in the Territory (as defined
below) on behalf of any entity (other than WebMD) in the Business (as defined
below). For purposes hereof, "Services" means the oversight and management of
sales, marketing, strategic planning and operations. For purposes hereof,
"Territory" means the geographic area within a 50 mile radius of the current
principal executive offices of WebMD. For purposes hereof, "Business" means the
delivery of information and communications services to the healthcare industry.
SECTION 2.3 Non-Solicitation of Employees. During the term of
-----------------------------
Executive's employment with WebMD, and for a period of one (1) year thereafter,
Executive shall not, directly or indirectly, through one or more intermediaries
or otherwise, employ, induce, solicit for employment, or assist others in
employing, inducing or soliciting for employment, any individual who is or was
an employee of WebMD and with whom Executive had material contact in an attempt
to have any such individual work in any other entity in the Business (as defined
above).
9
<PAGE>
SECTION 2.4 Trade Secrets. The Executive shall not, at any time, either
-------------
during the term of his employment or after any termination of employment, use or
disclose any Trade Secrets (as defined under applicable law) of WebMD or its
subsidiaries, except in fulfillment of his duties as the Executive during his
employment, for so long as the pertinent information or data remain Trade
Secrets, whether or not the Trade Secrets are in written or tangible form.
ARTICLE III
-----------
TERMINATION OF EMPLOYMENT
-------------------------
SECTION 3.1 Termination by Company. Executive's employment may be
----------------------
terminated by WebMD by giving notice during the term of this Agreement upon the
occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive incapable
of performing his duties for more than one hundred twenty (120) calendar days in
one calendar year or within consecutive calendar years (termination under this
Section 3.1(a) shall be deemed termination without Cause);
(b) for any reason (other than those set forth in Section 3.1(c))
following a determination by the Board of Directors of WebMD to terminate
Executive's employment (termination under this Section 3.1(b) shall be deemed
termination without Cause); or
(c) "for Cause," which for purposes of this Agreement shall mean that
the Executive shall have committed or engaged in:
10
<PAGE>
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with WebMD;
(ii) any intentional wrongful damage to any material assets of
WebMD;
(iii) any intentional wrongful disclosure of Proprietary Information
or Trade Secrets of WebMD or its affiliates;
(iv) a felony or any similar crime involving dishonesty or moral
turpitude; or
(v) the habitual and debilitating use of alcohol or drugs.
SECTION 3.2 Severance. For purpose of this Agreement, Executive's
---------
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause. Executive shall be entitled to 12
-------------------------
months salary continuation, payable in bi-weekly installments, and continued
participation in WebMD's group health and dental insurance program upon the
timely periodic payment of the amount required by WebMD for employees to
maintain family coverage for such programs, as severance pay in the event that
the Executive's employment is terminated without Cause, commencing as of the
date of Executive's death or disability for purposes of Section 3.1(a), or the
date specified in a notice given under Section 3.1(b), or the date of
Constructive Termination (as defined below). Executive's resignation following
a Constructive Termination shall be deemed a termination without Cause.
11
<PAGE>
(b) Voluntary Termination. Executive shall not receive any severance
---------------------
pay in the event that he voluntarily resigns his employment with WebMD (other
than a resignation following a Constructive Termination) unless such severance
pay is approved by the Board of Directors of WebMD in its sole discretion.
Executive shall provide a minimum of thirty (30) days prior notice to the Board
of Directors of his resignation. In the event Executive shall provide thirty
(30) days prior written notice of his intent to resign, WebMD may accept such
resignation effective as of any date during such thirty (30) day period as WebMD
deems appropriate, provided that Executive shall receive from WebMD his salary
and be entitled to participate at WebMD's expense in any company-sponsored
benefit programs in which he was a participant as of the effective date of his
resignation for the duration of such thirty (30) day period. For purposes of
this Agreement, "Constructive Termination" shall mean:
(i) Such change in duties or position as:
(a) The assignment (other than an occasional temporary
assignment) to Executive of any duties not commensurate with Executive's
position, duties, responsibilities and status with WebMD;
(b) A material change in Executive's reporting
responsibilities, (i.e., reporting to a lower tier) or a diminution in
Executive's titles or offices; or
(c) A material diminution of Executive's authority or
responsibilities.
12
<PAGE>
(ii) A reduction in Executive's base salary specified in Section 1.3(a)
for the calendar year 1998, and a reduction in Executive's base salary in effect
for the prior calendar year for all succeeding years (other than pro rata
reductions in compensation for all senior management of WebMD and its
subsidiaries).
(iii) The requirement that Executive be based anywhere other than
within 50 miles of WebMD's current offices.
(c) For Cause. Executive shall not be entitled to any severance pay
---------
whatsoever in the event that his employment is terminated "for Cause" pursuant
to Section 3.1(c) of this Agreement, unless severance pay is approved by the
Board of Directors of WebMD in its sole discretion.
ARTICLE IV
----------
GENERAL PROVISIONS
------------------
SECTION 4.1 Withholding of Taxes. WebMD may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes and
withholdings as shall be required pursuant to any applicable law, rule or
regulation.
SECTION 4.2 Notice. For purposes of this Agreement, all communications
------
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given (i) when personally delivered, (ii) on the day of transmission when given
by facsimile transmission with confirmation of receipt, (iii) on the following
day if submitted to a nationally recognized courier service, or (iv) five (5)
business days after having been mailed by United States registered mail or
certified mail, return receipt requested,
13
<PAGE>
postage prepaid, addressed to WebMD (to the attention of the Secretary of WebMD)
at its principal executive office or to Executive at his principal residence, or
to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
SECTION 4.3 Governing Law. The validity, interpretation, construction,
-------------
performance and enforcement of this Agreement shall be governed by the laws of
the State of Georgia, without giving effect to the principles of conflict of law
of such State.
SECTION 4.4 Validity. If any provision of this Agreement or the application
--------
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it valid, enforceable and legal; provided, however, if the provision so
held to be invalid, unenforceable or otherwise illegal constituted a material
inducement to a party's execution and delivery of this Agreement, such provision
shall not be reformed unless prior to any reformation that party agrees to be
bound by the reformation.
SECTION 4.5 Entire Agreement. This Agreement supersedes any other
----------------
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of Executive by WebMD. Any waiver or
modification of any term of this Agreement shall be effective only if it is set
forth in a writing signed by all parties hereto.
14
<PAGE>
SECTION 4.6 Successors and Binding Agreement.
--------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
WebMD and any Successor of or to WebMD, but shall not be otherwise be assignable
or delegable by WebMD. "Successor" shall mean any successor in interest,
including, without limitation, any entity, individual or group of persons
acquiring directly or indirectly all or substantially all of the business or
assets of WebMD, whether by sale, merger, consolidation, reorganization or
otherwise.
(b) WebMD shall require any Successor to agree at the time of becoming
a Successor to perform this Agreement to the same extent as the original parties
would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators, heirs,
distributees and legatees.
(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
this Section 4.6.
SECTION 4.7 Captions. The captions in this Agreement are solely for
--------
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
15
<PAGE>
SECTION 4.8 Miscellaneous. No provisions of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by Executive and WebMD. No waiver by a party hereto at any
time of any breach by another party hereto or compliance with any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
SECTION 4.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
WebMD, INC.
By: /s/ W. Michael Heekin
------------------------------
W. Michael Heekin
Chief Operating Officer
EXECUTIVE
/s/ Jeffrey T. Arnold
---------------------------------
Jeffrey T. Arnold
16
<PAGE>
EXHIBIT 10.33
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 11th day of
July, 1997, by and between ENDEAVOR TECHNOLOGIES INC., a Georgia corporation
("ETI"), and W. MICHAEL HEEKIN, an individual (the "Executive"), and is
effective as of the date hereof.
WHEREAS, Executive is expected to make a significant contribution to the
success and development of ETI in his role as a Director and the Chief Operating
Officer of ETI; and
WHEREAS, Executive is willing to render services to ETI on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and ETI including,
without limitation, the promises and covenants described herein, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
---------
EMPLOYMENT
----------
Section 1.1 Term of Employment. The term of Executive's employment
------------------
hereunder shall commence on or before August 18, 1997 and continue for a period
of two (2) years, unless earlier terminated as provided in this Agreement. At
the end of the second year of the initial two-year term, this Agreement shall
automatically be extended for an additional one-year term unless either party
hereto shall give written notice of its or his intent to terminate one hundred
eighty (180) days prior to the end of the second year of the initial two-year
term.
Section 1.2 Duties and Responsibilities of Executive. Executive is hereby
----------------------------------------
employed full time as the Chief Operating Officer of ETI, shall do and perform
all services and acts necessary or advisable to fulfill the duties of such
offices, and shall conduct and perform such additional services and activities
as may be determined from time to time by the Board of Directors or the
President/CEO of ETI, as applicable. During the term of this Agreement,
Executive shall devote his full time, energy and skill to the business of ETI
and to the promotion of ETI's interests, and Executive acknowledges that he has
a duty of loyalty to ETI and shall not engage in, directly and indirectly, any
other business or activity that could materially and adversely affect ETI's
business or the Executive's ability to perform his duties under this Agreement.
<PAGE>
In his capacity as an officer of ETI, Executive shall report to the
President/CEO of ETI. Executive's authority and responsibility in ETI shall at
all times be subject to the review and discretion of the Board of Directors, who
shall have the final authority to make decisions regarding the business of ETI.
Section 1.3 Compensation. For all services to be rendered by Executive
------------
under this Agreement, ETI shall pay Executive as follows:
(a) Base Salary. Executive shall be paid an annual gross salary of One
-----------
Hundred Fifty Thousand Dollars ($150,000) payable bi-weekly. At the sole
discretion of the Board of Directors of ETI, Executive's annual gross salary may
be increased, from time to time, throughout the term of this Agreement, the
amount of any such increase to be determined by the Board of Directors (or by a
compensation committee thereof).
(b) Annual Bonus. Executive shall be paid an annual bonus in an amount
------------
recommended by the President/CEO of ETI and approved by the Board of Directors
of ETI (or a compensation committee thereof).
Section 1.4 Benefits.
--------
(a) Relocation Expenses. The parties acknowledge that Executive will
-------------------
incur substantial expenses in connection with his relocation from Jacksonville,
Florida to the Atlanta area, including but not limited to moving expenses and
temporary housing costs. Executive's household will be moved from Jacksonville,
Florida to Atlanta, Georgia by a moving company engaged by ETI at ETI's expense.
If Executive elects to lease temporary housing in the Atlanta area, ETI shall
also pay Executive's moving expenses from leased housing to his permanent
housing in the Atlanta area, not to exceed Two Thousand Five Hundred Dollars
($2,500). The real estate sales commission to be paid by Executive on the sale
of his Jacksonville home will be reimbursed by ETI on January 1, 1998 (or
earlier upon a recommendation given at the discretion of the President/CEO of
ETI). All such payments and reimbursements will be made in accordance with ETI's
existing policies including receipt of appropriate documentation. A copy of
those policies will be provided to Executive by September 1, 1997. ETI will
reimburse Executive for the reasonable expenses incurred in up to two house-
hunting trips to the Atlanta area and for one school-hunting/registration trip
made by Executive's spouse and son. Subject to the limitation in the following
sentence, ETI will reimburse Executive for the mortgage interest paid by
Executive on his Jacksonville home on or after October 1, 1997 pending the sale
of the home, net of income tax benefits to Executive from the income tax
mortgage interest deduction. ETI shall have no obligation to reimburse any
amount of mortgage interest in excess of an amount equal to the sum of six
scheduled monthly installments of such mortgage interest without ETI's prior
consent. If Executive delivers to ETI prior to April 1,
2
<PAGE>
1998 a written request for reimbursement of one or more additional monthly
installments of mortgage interest, then ETI shall not unreasonably withhold or
delay granting its consent to such request.
(b) Vacation. Executive shall be entitled to three weeks paid vacation
--------
annually during the first three calendar years of his employment by ETI and four
weeks paid vacation during each calendar year thereafter. Any vacation not used
during any calendar year shall be forfeited except that one week's unused
vacation may be carried forward to the year following the year in which such
vacation entitlement accrued.
(c) Life, Disability and Retirement Programs. Executive shall be entitled
----------------------------------------
to participate in any life, disability and retirement programs that are
generally offered to or provided for the senior management personnel of ETI,
said programs to be approved by the Board of Directors. ETI agrees to implement
a 401K plan before December 31, 1997 and recommend same to the Boards of
Directors of ETI and its subsidiaries for adoption.
(d) Group Insurance. Executive shall be entitled to participate in such
---------------
group health and dental insurance programs (including family coverage) as may
from time to time be offered generally to all of the other members of the senior
management personnel of ETI and its subsidiaries. Executive's participation
shall be on the same basis (including cost provisions) as such other members of
senior management.
Section 1.5 Stock Options. ETI shall grant Executive options to purchase
--------------
300,000 shares of Common Stock, Series D of ETI (the "Options"), such Options to
be subject to the terms and conditions set forth below. The Options shall be
adjusted for any change in the total issued common shares of ETI (of any class)
due to stock splits and stock dividends so that after the change, the number of
shares subject to the then-outstanding Options bears the same proportion to the
total number of issued common shares of ETI (of all classes) as borne prior to
the change.
(a) Grant, Vesting and Exercise. Options to purchase 300,000 shares
---------------------------
of Common Stock, Series D shall be granted as of the effective date of this
Agreement and at the exercise price of Two Dollars ($2.00) per each share of
Common Stock, Series D acquired upon exercise (subject to customary
adjustments). It is agreed that Two Dollars ($2.00) is the fair market value of
a share as of the effective date hereof. Said Options shall vest and become
exercisable in accordance with the following schedule and shall remain
exercisable through the fourth anniversary of the effective date of this
Agreement, at which time such Options shall expire unless earlier terminated in
accordance with the provisions hereof. Such Options shall include a provision
requiring Executive to
3
<PAGE>
execute and deliver a copy of the Restated Shareholders Agreement (as it may be
amended from time to time) among ETI and all of its current shareholders (the
"Restated Shareholders Agreement").
<TABLE>
<CAPTION>
Option for
Number of Date Vested
Shares and Exercisable
----------- ---------------
<S> <C>
100,000 August 18, 1997
50,000 August 18, 1998
50,000 August 18, 1999
100,000 August 18, 2000
</TABLE>
At the effective time and date of a registration statement filed under the
1993 Act for a public offering of any series of ETI's shares, one-half (1/2) of
the Options held by Executive which then have not vested and become exercisable
under the above vesting schedule will immediately vest and become exercisable.
All Options shall vest and become exercisable upon a Change of Control of ETI
which occurs subsequent to the effective time and date of a registration
statement filed under the Securities Act of 1933 ("1933 Act") for a public
offering of any series of ETI's shares. For purposes of this Section 1.5(a), a
"Change of Control" shall mean a change of the possession, direct or indirect,
of the power to direct or cause the direction of management and policies of ETI,
whether through ownership of voting securities, by contract (other than a
commercial contract for goods or non-management services), or otherwise.
Without limitation, a Change of Control shall be deemed to have occurred if any
person or entity that is not on the date hereof the beneficial owner of any
securities of ETI becomes the beneficial owner, directly or indirectly, of 20%
or more of the combined voting power of ETI's outstanding voting securities
ordinarily having the right to vote for the election of directors of ETI.
(b) Return of Options and Repurchase of Shares. (i) In the event
------------------------------------------
that Executive voluntarily resigns his employment with ETI prior to August 18,
1999, other than in a resignation following a Constructive Termination (as
defined in Section 3.2(b) below) all then outstanding Options that have been
issued to Executive shall be canceled as of the date of Executive's notice of
voluntary resignation. In the event that Executive voluntarily resigns his
employment with ETI after August 17, 1999, or if Executive resigns his
employment with ETI prior to August 18, 1999 in a resignation following a
Constructive Termination, all then outstanding and exercisable options shall
remain exercisable in full for a period of 120 days after the date of such
notice of voluntary resignation. ETI shall have the option at its sole
discretion to purchase any unexercised Options from the Executive at a price per
share equal to the difference between the exercise price of such Options and the
per share Fair Market Value of the shares of Common Stock underlying such
Options determined as of or before the thirtieth (30th) day
4
<PAGE>
following the date such notice of voluntary resignation was given, with the Fair
Market Value of such shares of Common Stock to be determined in the manner set
forth in clause (iv) of this Subsection 1.5(b) set forth below. Furthermore, in
the event Executive voluntarily resigns his employment with ETI and no
registration statement filed under the 1933 Act for a public offering of any
series of ETI's shares has become effective, then ETI in its sole discretion to
purchase any shares of Common Stock previously obtained by Executive upon his
exercise of any Options for an amount equal to the Fair Market Value of such
shares of Common Stock. Any such repurchase of shares by ETI shall be
accomplished within 180 days after such receipt of such notice of resignation.
(ii) In the event that Executive's employment with ETI shall be
terminated by ETI for Cause after August 17, 1998 or at any time without Cause,
all then outstanding and unexercised Options shall become exercisable in full as
of the date such notice of termination was given by ETI and shall remain
exercisable in full for a period of 120 days after the date such notice to
termination was given by ETI. ETI shall have the option at its sole discretion
to purchase any unexercised Options from the Executive at a price per share
equal to the difference between the exercise price of such Options and the per
share Fair Market Value of the shares of Common Stock underlying such Options
determined as of or before the thirtieth (30th) day following the date such
notice of termination was given by ETI, with the Fair Market Value of such
shares of Common Stock to be determined in the manner set forth in clause (iv)
of Subsection 1.5(b) appearing below. Furthermore, if no registration statement
filed under the 1933 Act for a public offering of any series of ETI's Common
Stock has become effective, then ETI in its sole discretion may repurchase any
shares of Common Stock previously obtained by Executive upon the exercise of any
Options for an amount equal to the Fair Market Value of such shares of the
shares of Common Stock. Any such repurchase of the shares of Common Stock shall
be accomplished within 180 days after the date such notice of termination was
given by ETI.
(iii) In the event Executive's employment with ETI shall be terminated
by ETI for Cause on or before August 17, 1998, all then outstanding Options will
be canceled, and, if no registration statement filed under the 1933 Act for a
public offering of any series of ETI's Common Stock has become effective, then
ETI in its sole discretion may repurchase any shares of Common Stock previously
obtained by Executive upon his exercise of any Options for an amount equal to
the aggregate amount paid by Executive to ETI in connection with the exercise
price of such Options plus interest at eight percent per annum for the period
Executive owned the Common Stock. Any such repurchase of the shares of Common
Stock shall be accomplished within 180 days after such notice of termination.
(iv) The Fair Market Value of a share of Common Stock, Series D on
the date specified by ETI shall mean (i) the closing sales price of the Common
Stock of ETI on such date on the national securities exchange (treating the
Nasdaq
5
<PAGE>
National Market System as a national securities exchange) having the greatest
volume of trading in the Common Stock during the thirty (30) day period
preceding the day the value is to be determined or, if such exchange was not
open for trading on such date, the next preceding date on which it was open;
(ii) if the Common Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Common Stock on the
over-the-counter market, in arms-length transactions not involving an affiliate
of ETI, on the day such value is to be determined, or in the absence of closing
bids on such day, the closing bids on the next preceding day on which there were
bids; (iii) if the Common Stock also is not traded on the over-the-counter
market, the average net proceeds per share received or the price paid by ETI
with respect to shares of Common Stock of any series sold or purchased by ETI in
arms length transactions during the ninety (90) days preceding the day the value
is to be determined; or (iv) if no such purchase or sale transactions by ETI
have occurred within such ninety (90) day period, the fair market value as
determined in good faith by the Board of Directors of ETI based on (a) such
relevant facts as may be available to such Board, which may include opinions of
independent experts, the price at which recent purchases or sales have been made
by third parties, the book value of the per share, and the ETI's current and
future earnings or (b) an independent appraisal, conducted at ETI's expense, by
a qualified financial appraiser who is reasonably satisfactory to both ETI and
Executive, provided that the selection of method (a) or (b) shall be by mutual
agreement of the Board and Executive.
(c) Initial Public Offering. In the event that ETI shall undertake
-----------------------
an initial public offering ("IPO") of any series of its stock, pursuant to which
it files a registration statement in accordance with the 1933 Act, notice of the
filing of such registration statement shall be provided to Executive, and upon
the effective date of such registration statement (i) pursuant to and in
accordance with the Restated Shareholders Agreement, each one (1) outstanding
share of Common Stock, Series D will become one (1) share of Common Stock with
all rights of a share of Common Stock, Series A, (ii) pursuant to and in
accordance with Section 1.5(a) above, one-half (1/2) of the Executive's then
unvested Option shall immediately vest and become exercisable, and (iii) ETI
shall have no right to repurchase any shares of Common Stock obtained by his
exercise of any Options.
Section 1.6 Member of Board. Executive will be elected to the Board of
---------------
Directors of ETI at the first regularly scheduled Board meeting following the
effective date hereof.
Section 1.7 Business Expenses. Executive shall be entitled to
-----------------
reimbursement of all ordinary and necessary business expenses reasonably
incurred for business travel, communications (including cell phone and pager),
entertainment and meals in connection with the performance of Executive's duties
under this Agreement in accordance with ETI's established policies for
reimbursement of business expenses including an automobile allowance of Five
Hundred Dollars ($500) per month. ETI will also pay the initiation fees,
membership dues and
6
<PAGE>
assessments for Executive's family membership in a club in the Atlanta area
acceptable to ETI and Executive which would permit Executive to engage in
business entertainment for the benefit of ETI. ETI expects Executive to attend
and participate in continuing education seminars and courses with respect to the
health industry and business management related to his duties, and ETI will
reimburse all ordinary and necessary expenses of such attendance and
participation. ETI will pay for Executive's continuing membership in the Florida
Bar and the State Bar of Georgia and for the expenses of the continuing legal
education courses that are necessary to maintain those memberships, and for
NHLA/AAHA dues. Such continuing education courses and seminars and continuing
legal education issues will be scheduled in consultation with the President/CEO
of ETI to assure coordination of schedules.
ARTICLE II
----------
COVENANTS OF EXECUTIVE
----------------------
Section 2.1 Confidentiality. Executive recognizes the interest of ETI in
---------------
maintaining the confidential nature of its proprietary and other business and
commercial information. In connection therewith, Executive covenants that
during the term of his employment with Company under this Agreement, and for a
period of one (1) year thereafter, Executive shall not, directly or indirectly,
except as authorized by the Board of Directors, publish, disclose or use for his
own benefit or for the benefit of a business or entity other than ETI or
otherwise, any secret or confidential matter, or proprietary or other
information not in the public domain that was acquired by Executive during his
employment, relating to ETI, or any of its subsidiaries' businesses, operations,
customers, suppliers, products, employees, financial affairs or industrial
practices, technology, know-how or intellectual property or other similar
information (the "Proprietary Information").
Executive will abide by ETI's policies and regulations, as established from
time to time, for the protection of its Proprietary Information. Executive
acknowledges that all records, files, data, documents and the like relating to
suppliers, customers, costs, prices, systems, methods, personnel, technology and
other materials relating to ETI or its affiliated entities shall be and remain
the sole property of ETI and/or such affiliated entity and shall, upon the
request of ETI, turn over all copies of such Proprietary Information to ETI
(together with a written statement certifying as to his compliance with the
foregoing).
Section 2.2 Non-Solicitation of Customers and Non-Competition. During the
-------------------------------------------------
term of his employment with ETI, and for a period of one (1) year thereafter,
Executive shall not directly or indirectly, through one or more intermediaries
or otherwise, solicit, direct or appropriate, or attempt to solicit, direct or
appropriate any individual or entity which was, at the time of termination of
Executive's employment, a customer or client of ETI for the purpose of providing
a service or product to such customer or client which is the same type of
service or product
7
<PAGE>
offered or provided by ETI at the time of termination of Executive's employment,
with ETI. The parties acknowledge that the "same type of service" would include
tracking symptoms or patients by means of telephone transmission.
During the Executive's employment with ETI, and for the one (1) year period
following the termination of Executive's employment with ETI for any reason,
Executive shall not, without the prior written consent of the Board of
Directors, which consent may be withheld at the sole discretion of the Board of
Directors, engage or participate in, as a business executive or equity owner,
the management or conduct of any business or enterprise that directly competes
in any geographical area with any line of business in which ETI was engaged in
at the time of termination of Executive's employment with ETI; provided,
however, that nothing in this Section 2.2 shall prohibit Executive from
acquiring or holding, for investment purposes only, less than five percent (5%)
of the outstanding publicly traded securities of any corporation which may
compete directly or indirectly with ETI.
Section 2.3 Non-Solicitation of Employees. During the term of Executive's
-----------------------------
employment with ETI, and for a period of one (1) year thereafter (the "Non-
solicitation Period"), Executive shall not, directly or indirectly, through one
or more intermediaries or otherwise, employ, induce, solicit for employment, or
assist others in employing, inducing or soliciting for employment any individual
who is at any time during the Non-solicitation Period an employee of ETI for the
purpose of providing services that are the same or similar to the types of
services offered or engaged in by ETI at the time of termination of Executive's
employment with ETI.
Section 2.4 Trade Secrets. The Executive shall not, at any time, either
-------------
during the term of his employment or after any termination of employment, use or
disclose any Trade Secrets (as defined under applicable law) of ETI or its
subsidiaries, except in fulfillment of his duties as the Executive during his
employment, for so long as the pertinent information or data remain Trade
Secrets, whether or not the Trade Secrets are in written or tangible form.
ARTICLE III
-----------
TERMINATION OF EMPLOYMENT
-------------------------
Section 3.1 Termination by Company. Executive's employment may be
----------------------
terminated by ETI by giving notice during the term of this Agreement upon the
occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive incapable
of performing his duties for more than one hundred twenty (120) calendar days in
one calendar year or within consecutive calendar years (termination under this
Section 3.1(a) shall be deemed termination without Cause);
8
<PAGE>
(b) for any reason following a determination by the Board of
Directors of ETI to terminate Executive's employment (termination under this
Section 3.1(b) shall be deemed termination without Cause); or
(c) "for Cause," which for purposes of this Agreement shall mean that
the Executive shall have committed:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with ETI;
(ii) intentional wrongful damage to any material assets of ETI;
(iii) intentional wrongful disclosure of Proprietary Information
or Trade Secrets of ETI or its affiliates;
(iv) conviction of a felony or any similar crime involving
dishonesty or moral turpitude and carrying a prison term of at least one year
(regardless of whether imprisonment is actually imposed);
(v) habitual and debilitating use of alcohol or drugs; or
(vi) the failure of the Executive to meet performance
expectations, as determined and articulated by a majority of the members of
ETI's Board of Directors other than Executive; provided, however, that in the
-------- -------
event of this clause (vi) being the sole reason for a termination for Cause,
Executive shall have the cure provisions and rights provided for in Section
3.1(d) hereof and clause (ii) of Section 3.2(c) hereof.
(d) In the event of a determination by ETI's Board of Directors to
terminate Executive's employment under clause (vi) of Section 3.1(c) based
solely on the failure of Executive to meet performance expectations, then ETI
shall furnish to Executive in writing a notice of proposed termination setting
forth a specific statement of the deficiencies in his performance. Executive
shall then have a period of ninety (90) days after the giving of such written
notice of proposed termination by ETI in which to attempt to effect a cure of
the specified deficiencies. If at the end of such ninety (90) day period no such
cure has been effected to the reasonable satisfaction of the Board of Directors
of ETI, then Executive's employment shall be terminated as of the end of such
ninety (90) day period. ETI shall be obligated to provide to Executive only one
such notice of proposed termination, and if subsequent to effecting a cure of
specified deficiencies the Executive is determined by the Board of Directors to
have again failed to meet performance expectations, then his employment may be
terminated immediately upon ETI's giving of notice of termination to Executive
which specifies his deficiencies in performance.
9
<PAGE>
Section 3.2 Severance. For purposes of this Agreement, Executive's
---------
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause. Executive shall be entitled to 12
-------------------------
months salary continuation, payable in bi-weekly installments, and continued
participation in ETI's group health and dental insurance program upon the timely
periodic payment of the amount required by ETI for employees to maintain family
coverage for such programs, as severance pay in the event that the Executive's
employment is terminated without Cause, commencing as of the date of Executive's
death or disability for purposes of Section 3.1(a), or the date specified in a
notice given under Section 3.1(b), or the date of Constructive Termination (as
defined below). Executive's resignation following a Constructive Termination
shall be deemed a termination without Cause.
(b) Voluntary Termination. Executive shall not receive any
---------------------
severance pay in the event that he voluntarily resigns his employment with ETI
(other than a resignation following a Constructive Termination) unless such
severance pay is approved by the Board of Directors of ETI in its sole
discretion. Executive shall provide a minimum of thirty (30) days prior notice
to the President and CEO of his resignation. In the event Executive shall
provide thirty (30) days prior written notice of his intent to resign, ETI may
accept such resignation effective as of any date during such thirty (30) day
period as ETI deems appropriate, provided that Executive shall receive from ETI
his salary and be entitled to participate at ETI's expense in any Company
sponsored benefit programs in which he was a participant as of the effective
date of his resignation for the duration of such thirty (30) day period. For
purposes of this Agreement, "Constructive Termination" shall mean:
(i) Such change in duties or position as:
(a) The assignment (other than an occasional temporary
assignment) to Executive of any duties not
commensurate with Executive's position, duties,
responsibilities and status with ETI;
(b) A material change in Executive's reporting
responsibilities, (i.e., reporting to a lower tier)
or a diminution in Executive's titles or offices; or
(c) A material diminution of Executive's authority or
responsibilities.
(ii) A reduction in Executive's base salary specified in
Section 1.3(a) for the calendar year 1997, and a reduction
in Executive's base salary in effect for the prior
10
<PAGE>
calendar year for all succeeding years (other than pro
rata reductions in compensation for all senior management
of ETI and its subsidiaries).
(iii) The requirement that Executive be based anywhere other
than within 50 miles of ETI's current offices.
(c) For Cause. Executive shall not be entitled to any severance pay
---------
whatsoever in the event that his employment is terminated "for Cause" pursuant
to Section 3.1(c) of this Agreement, unless (i) severance pay is approved by the
Board of Directors of ETI in its sole discretion, or (ii) Executive's employment
is terminated based solely on non-performance pursuant to clause (vi) of Section
3.1(c), in which event Executive shall be entitled to three (3) months salary
continuation and continued participation in ETI's group health and dental
insurance program upon timely periodic payment of the amount required by ETI for
employees to maintain family coverage for such programs.
ARTICLE IV
----------
GENERAL PROVISIONS
------------------
Section 4.1 Withholding of Taxes. ETI may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes and
withholdings as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Notice. For purposes of this Agreement, all communications
------
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given (i) when personally delivered, (ii) on the day of transmission when given
by facsimile transmission with confirmation of receipt, (iii) on the following
day if submitted to a nationally recognized courier service, or (iv) five (5)
business days after having been mailed by United States registered mail or
certified mail, return receipt requested, postage prepaid, addressed to ETI (to
the attention of the Secretary of ETI) at its principal executive office or to
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
Section 4.3 Governing Law. The validity, interpretation, construction,
-------------
performance and enforcement of this Agreement shall be governed by the laws of
the State of Georgia, without giving effect to the principles of conflict of
laws of such State.
Section 4.4 Validity. If any provision of this Agreement or the
--------
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such
11
<PAGE>
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement to
a party's execution and delivery of this Agreement, such provision shall not be
reformed unless prior to any reformation that party agrees to be bound by the
reformation.
Section 4.5 Entire Agreement. This Agreement supersedes any other
----------------
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of Executive by ETI. Any waiver or
modification of any term of this Agreement shall be effective only if it is set
forth in a writing signed by all parties hereto.
Section 4.6 Successors and Binding Agreement.
--------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
ETI and any Successor of or to ETI, but shall not be otherwise be assignable or
delegable by ETI. "Successor" shall mean any successor in interest, including,
without limitation, any entity, individual or group of persons acquiring
directly or indirectly all or substantially all of the business or assets of
ETI, whether by sale, merger, consolidation, reorganization or otherwise.
(b) ETI shall require any Successor to agree at the time of becoming
a Successor to perform this Agreement to the same extent as the original parties
would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
heirs, distributees and legatees.
(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
this Section 4.6.
Section 4.7 Captions. The captions in this Agreement are solely for
--------
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.8 Miscellaneous. No provisions of this Agreement may be
-------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and ETI. No waiver by a party hereto
at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a
12
<PAGE>
waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
Section 4.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company"
ENDEAVOR TECHNOLOGIES INC.
By: /s/ Jeffrey T. Arnold
--------------------------------------
Jeffrey T. Arnold, President and Chief
Executive Officer
EXECUTIVE
/s/ W. Michael Heekin
-----------------------------------------
W. Michael Heekin
13
<PAGE>
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 1st day of
February, 1998, by and between ENDEAVOR TECHNOLOGIES INC., a Georgia corporation
("ETI"), and K. ROBERT DRAUGHON, an individual (the "Executive"), and is
effective as of the date hereof.
WHEREAS, Executive is expected to make a significant contribution to the
success and development of ETI in his role as Director and Chief Financial
Officer of ETI; and
WHEREAS, Executive is willing to render services to ETI on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and ETI, including,
without limitation, the promises and covenants described herein, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
---------
EMPLOYMENT
----------
Section 1.1 Term of Employment. The term of Executive's employment
------------------
hereunder shall commence on or before February 2, 1998 and continue for a period
of two (2) years, unless earlier terminated as provided in this Agreement. At
the end of the second year of the initial two-year term, this Agreement shall
automatically be extended for an additional one-year term unless either party
hereto shall give written notice of its or his intent to terminate one hundred
eighty (180) days prior to the end of the second year of the initial two-year
term.
Section 1.2 Duties and Responsibilities of Executive. Executive is hereby
----------------------------------------
employed full time as Chief Financial Officer of ETI, shall do and perform all
services and acts necessary or advisable to fulfill the duties of such offices,
and shall conduct and perform such additional services and activities as may be
determined from time to time by the Board of Directors or the CEO of ETI, as
applicable. During the term of this Agreement, Executive shall devote his full
time, energy and skill to the business of ETI and to the promotion of ETI's
interests, and Executive acknowledges that he has a duty of loyalty to ETI and
shall not engage in, directly and indirectly, any other business or activity
that could materially and adversely affect ETI's business or the Executive's
ability to perform his duties under this Agreement.
In his capacity as an officer of ETI, Executive shall report to the CEO of
ETI. Executive's authority and responsibility in ETI shall at all times be
subject to the review and
<PAGE>
discretion of the Board of Directors, who shall have the final authority to make
decisions regarding the business of ETI.
Section 1.3 Compensation. For all services to be rendered by Executive
------------
under this Agreement, ETI shall pay Executive as follows:
(a) Base Salary. Executive shall be paid an annual gross salary of One
-----------
Hundred Seventy Five Thousand Dollars ($175,000) payable bi-weekly. At the sole
discretion of the Board of Directors of ETI, Executive's annual gross salary may
be increased, from time to time, throughout the term of this Agreement, the
amount of any such increase to be determined by the Board of Directors (or by a
compensation committee thereof).
(b) Annual Bonus. Executive may be paid an annual bonus in an amount
------------
recommended by the CEO of ETI and approved by the Board of Directors of ETI (or
a compensation committee thereof).
Section 1.4 Benefits.
--------
(a) Vacation. Executive shall be entitled to three weeks paid vacation
--------
annually during the first three calendar years of his employment by ETI and four
weeks paid vacation during each calendar year thereafter. Any vacation not used
during any calendar year shall be forfeited except that one week's unused
vacation may be carried forward to the year following the year in which such
vacation entitlement accrued.
(b) Life, Disability and Retirement Programs. Executive shall be entitled
----------------------------------------
to participate in any life, disability and retirement programs that are
generally offered to or provided for the senior management personnel of ETI,
said programs to be approved by the Board of Directors.
(c) Group Insurance. Executive shall be entitled to participate in such
---------------
group health and dental insurance programs (including family coverage) as may
from time to time be offered generally to all of the other members of the senior
management personnel of ETI and its subsidiaries. Executive's participation
shall be on the same basis (including cost provisions) as such other members of
senior management.
Section 1.5 Stock Options. ETI shall grant Executive options to purchase
-------------
265,000 shares of Common Stock, Series D of ETI (the "Options"), such Options to
be subject to the terms and conditions set forth below. The Options shall be
adjusted for any change in the total issued common shares of ETI (of any class)
due to stock splits and stock dividends so that after the change, the number of
shares subject to the then-outstanding Options bears the same proportion to the
total number of issued common shares of ETI (of all classes) as borne prior to
the change.
(a) Grant, Vesting and Exercise. Options to purchase 265,000 shares of
---------------------------
Common Stock, Series D shall be granted as of the effective date of this
Agreement and at the exercise
2
<PAGE>
price of Two Dollars ($2.00) per each share of Common Stock, Series D acquired
upon exercise (subject to customary adjustments). It is agreed that Two Dollars
($ 2.00) is the fair market value of a share as of the effective date hereof.
Said Options shall vest and become exercisable in accordance with the following
schedule and shall remain exercisable through the fourth anniversary of the
effective date of this Agreement, at which time such Options shall expire unless
earlier terminated in accordance with the provisions hereof. Such Options shall
include a provision requiring Executive to execute and deliver a copy of the
Restated Shareholders Agreement (as it may be amended from time to time) among
ETI and all of its current shareholders (the "Restated Shareholders Agreement").
Option for
Number of
Shares Date Vested and Exercisable
---------- ---------------------------
88,333 February 2, 1998
44,167 February 2, 1999
44,167 February 2, 2000
88,333 February 2, 2001
At the effective time and date of a registration statement filed under the
1993 Act for a public offering of any series of ETI's shares, one-half (1/2) of
the Options held by Executive which then have not vested and become exercisable
under the above vesting schedule will immediately vest and become exercisable.
All Options shall vest and become exercisable upon a Change of Control of ETI
which occurs subsequent to the effective time and date of a registration
statement filed under the Securities Act of 1933 ("1933 Act") for a public
offering of any series of ETI's shares. For purposes of this Section 1.5(a), a
"Change of Control" shall mean a change of the possession, direct or indirect,
of the power to direct or cause the direction of management and policies of ETI,
whether through ownership of voting securities, by contract (other than a
commercial contract for goods or non-management services), or otherwise.
Without limitation, a Change of Control shall be deemed to have occurred if any
person or entity that is not on the date hereof the beneficial owner of any
securities of ETI becomes the beneficial owner, directly or indirectly, of 20%
or more of the combined voting power of ETI's outstanding voting securities
ordinarily having the right to vote for the election of directors of ETI.
(b) Return of Options and Repurchase of Shares. (i) In the event that
------------------------------------------
Executive voluntarily resigns his employment with ETI prior to February 2, 2000,
all then outstanding Options that have been issued to Executive shall be
canceled as of the date of Executive's notice of voluntary resignation. In the
event that Executive voluntarily resigns his employment with ETI after February
1, 2000, all then outstanding and exercisable, options shall remain exercisable
in full for a period of 120 days after the date of such notice of voluntary
resignation. ETI shall have the option at its sole discretion to purchase any
unexercised
3
<PAGE>
Options from the Executive at a price per share equal to the difference between
the exercise price of such Options and the per share Fair Market Value of the
shares of Common Stock underlying such Options determined as of or before the
thirtieth (30th) day following the date such notice of voluntary resignation was
given, with the Fair Market Value of such shares of Common Stock to be
determined in the manner set forth in clause (iv) of this Subsection 1.5(b) set
forth below. Furthermore, in the event Executive voluntarily resigns his
employment with ETI and no registration statement filed under the 1933 Act for a
public offering of any series of ETI's shares has become effective, then ETI in
its sole discretion may purchase any shares of Common Stock previously obtained
by Executive upon his exercise of any Options for an amount equal to the Fair
Market Value of such shares of Common Stock. Any such repurchase of shares by
ETI shall be accomplished within 180 days after such receipt of such notice of
resignation.
(ii) In the event that Executive's employment with ETI shall be
terminated by ETI for Cause after February 1, 1999 or at any time without Cause,
all then outstanding and unexercised Options shall become exercisable in full as
of the date such notice of termination was given by ETI and shall remain
exercisable in full for a period of 120 days after the date such notice to
termination was given. ETI shall have the option at its sole discretion to
purchase any unexercised Options from the Executive at a price per share equal
to the difference between the exercise price of such Options and the per share
Fair Market Value of the shares of Common Stock underlying such Options
determined as of or before the thirtieth (30th) day following the date such
notice of termination was given by ETI, with the Fair Market Value of such
shares of Common Stock to be determined in the manner set forth in clause (iv)
of Subsection 1.5(b) appearing below. Furthermore, if no registration statement
filed under the 1933 Act for a public offering of any series of ETI's Common
Stock has become effective, then ETI in its sole discretion may repurchase any
shares of Common Stock previously obtained by Executive upon the exercise of any
Options for an amount equal to the Fair Market Value of such shares of the
shares of Common Stock. Any such repurchase of the shares of Common Stock shall
be accomplished within 180 days after the date such notice of termination was
given by ETI.
(iii) In the event Executive's employment with ETI shall be terminated
by ETI for Cause on or before February 1, 1999, all then outstanding Options
will be canceled, and, if no registration statement filed under the 1933 Act for
a public offering of any series of ETI's Common Stock has become effective, then
ETI in its sole discretion may repurchase any shares of Common Stock previously
obtained by Executive upon his exercise of any Options for an amount equal to
the aggregate amount paid by Executive to ETI in connection with the exercise
price of such Options plus interest at eight percent per annum for the period
Executive owned the Common Stock. Any such repurchase of the shares of Common
Stock shall be accomplished within 180 days after such notice of termination.
(iv) The Fair Market Value of a share of Common Stock, Series D on
the date specified by ETI shall mean (i) the closing sales price of the Common
Stock of ETI on such date on the national securities exchange (treating the
NASDAQ National Market System as a national securities exchange) having the
greatest volume of trading in the Common Stock
4
<PAGE>
during the thirty (30) day period preceding the day the value is to be
determined or, if such exchange was not open for trading on such date, the next
preceding date on which it was open; (ii) if the Common Stock is not traded on
any national securities exchange, the average of the closing high bid and low
asked prices of the Common Stock on the over-the-counter market, in arms-length
transactions not involving an affiliate of ETI, on the day such value is to be
determined, or in the absence of closing bids on such day, the closing bids on
the next preceding day on which there were bids; (iii) if the Common Stock also
is not traded on the over-the-counter market, the average net proceeds per share
received or the price paid by ETI with respect to shares of Common Stock of any
series sold or purchased by ETI in arms length transactions during the ninety
(90) days preceding the day the value is to be determined; or (iv) if no such
purchase or sale transactions by ETI have occurred within such ninety (90) day
period, the fair market value as determined in good faith by the Board of
Directors of ETI based on (a) such relevant facts as may be available to such
Board, which may include opinions of independent experts, the price at which
recent purchases or sales have been made by third parties, the book value per
share of the Common Stock, and the ETI's current and future earnings or (b) an
independent appraisal, conducted at ETI's expense, by a qualified financial
appraiser who is reasonably satisfactory to both ETI and Executive, provided
that the selection of method (a) or (b) shall be by mutual agreement of the
Board and Executive.
(c) Initial Public Offering. In the event that ETI shall undertake an
-----------------------
initial public offering ("IPO") of any series of its stock, pursuant to which it
files a registration statement in accordance with the 1933 Act, notice of the
filing of such registration statement shall be provided to Executive, and upon
the effective date of such registration statement (i) pursuant to and in
accordance with the Restated Shareholders Agreement, each one (1) outstanding
share of Common Stock, Series D, will become one (1) share of Common Stock with
all rights of a share of Common Stock, Series A, (ii) pursuant to and in
accordance with Section 1.5(a above, one-half (1 /2) of the Executive's then-
unvested Options shall immediately vest and become exercisable, and (iii) ETI
shall have no right to repurchase any shares of Common Stock obtained by
Executive's exercise of any Options.
Section 1.6 Business Expenses. Executive shall be entitled to
-----------------
reimbursement of all ordinary and necessary business expenses reasonably
incurred for business travel, communications (including cell phone and pager),
entertainment and meals in connection with the performance of Executive's duties
under this Agreement in accordance with ETI's established policies for
reimbursement of business expenses including an automobile allowance of Five
Hundred Dollars ($500) per month. ETI will also pay the initiation fees,
membership dues and assessments for Executive's family membership in a club in
the Atlanta area acceptable to ETI and Executive which would permit Executive to
engage in business entertainment for the benefit of ETI. ETI expects Executive
to attend and participate in continuing education seminars and courses with
respect to the health industry and business management related to his duties,
and ETI will reimburse all ordinary and necessary expenses of such attendance
and participation. Such continuing education courses and seminars will be
scheduled in consultation with the CEO of ETI to ensure coordination of
schedules.
5
<PAGE>
ARTICLE II
----------
COVENANTS OF EXECUTIVE
----------------------
Section 2.1 Confidentiality. Executive recognizes the interest of ETI in
---------------
maintaining the confidential nature of its proprietary and other business and
commercial information. In connection therewith, Executive covenants that
during the term of his employment with Company under this Agreement, and for a
period of one (1) year thereafter, Executive shall not, directly or indirectly,
except as authorized by the Board of Directors, publish, disclose or use for his
own benefit or for the benefit of a business or entity other than ETI or
otherwise, any secret or confidential matter, or proprietary or other
information not in the public domain that was acquired by Executive during his
employment, relating to ETI, or any of its subsidiaries' businesses, operations,
customers, suppliers, products, employees, financial affairs or industrial
practices, technology, know-how or intellectual property or other similar
information (the "Proprietary Information").
Executive will abide by ETI's policies and regulations, as established from
time to time, for the protection of its Proprietary Information. Executive
acknowledges that all records, files, data, documents and the like relating to
suppliers, customers, costs, prices, systems, methods, personnel, technology and
other materials relating to ETI or its affiliated entities shall be and remain
the sole property of ETI and/or such affiliated entity and shall, upon the
request of ETI, turn over all copies of such Proprietary Information to ETI
(together with a written statement certifying as to his compliance with the
foregoing).
Section 2.2 Non-Solicitation of Customers and Non-Competition.
-------------------------------------------------
During the term of his employment with ETI, and for a period of one
(1) year thereafter, Executive shall not directly or indirectly, through one or
more intermediaries or otherwise, solicit, direct or appropriate, or attempt to
solicit, direct or appropriate any individual or entity which was, at the time
of termination of Executive's employment, a customer or client of ETI for the
purpose of providing a service or product to such customer or client which is
the same type of service or product offered or provided by ETI at the time of
termination of Executive's employment, with ETI.
During the Executive's employment with ETI, and for the one (1) year
period following the termination of Executive's employment with ETI for any
reason, Executive shall not, without the prior written consent of the Board of
Directors, which consent may be withheld at the sole discretion of the Board of
Directors, engage or participate in, as a business executive or equity owner,
the management or conduct of any business or enterprise that directly competes
in any geographical area with any line of business in which ETI was engaged in
at the time of termination of Executive's employment with ETI; provided,
however, that nothing in this Subsection 2.2 shall prohibit Executive from
acquiring or holding, for investment purposes only, less than five percent (5%)
of the outstanding publicly traded securities of any corporation which may
compete directly or indirectly with ETI.
6
<PAGE>
Section 2.3 Non-Solicitation of Employees. During the term of Executive's
-----------------------------
employment with ETI, and for a period of one (1) year thereafter (the "Non-
solicitation Period"), Executive shall not, directly or indirectly, through one
or more intermediaries or otherwise, employ, induce, solicit for employment, or
assist others in employing, inducing or soliciting for employment any individual
who is at any time during the Non-solicitation Period an employee of ETI for the
purpose of providing services that are the same or similar to the types of
services offered or engaged in by ETI at the time of termination of Executive's
employment with ETI.
Section 2.4 Trade Secrets. The Executive shall not, at any time, either
-------------
during the term of his employment or after any termination of employment, use or
disclose any Trade Secrets (as defined under applicable law) of ETI or its
subsidiaries, except in fulfillment of his duties as the Executive during his
employment, for so long as the pertinent information or data remain Trade
Secrets, whether or not the Trade Secrets are in written or tangible form.
ARTICLE III
-----------
TERMINATION OF EMPLOYMENT
-------------------------
Section 3.1 Termination by Company. Executive's employment may be
----------------------
terminated by ETI by giving notice during the term of this Agreement upon the
occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive incapable of
performing his duties for more than one hundred twenty (120) calendar days in
one calendar year or within consecutive calendar years (termination under this
Section 3.1(a) shall be deemed termination without Cause);
(b) for any reason following a determination by the Board of Directors of
ETI to terminate Executive's employment (termination under this Section 3.1(b)
shall be deemed termination without Cause); or
(c) "for Cause," which for purposes of this Agreement shall mean that the
Executive shall have committed or engaged in:
(i) an intentional act of fraud, embezzlement or theft in connection
with his duties or in the course of his employment with ETI;
(ii) intentional wrongful damage to any material assets of ETI;
(iii) intentional wrongful disclosure of Proprietary Information or
Trade Secrets of ETI or its affiliates;
(iv) a felony or any similar crime involving dishonesty or moral
turpitude;
7
<PAGE>
(v) the habitual and debilitating use of alcohol or drugs; or
(vi) the failure of the Executive to meet performance expectations, as
determined and articulated by a majority of the members of ETI's Board of
Directors other than Executive; provided, however, that in the event of this
-------- -------
clause (vi) being the sole reason for a termination for Cause, Executive shall
have the cure provisions and rights provided for in Section 3.1(d) hereof and
clause (ii) of Section 3.2(c) hereof.
(d) In the event of a determination by ETI's Board of Directors to
terminate Executive's employment under clause (vi) of Section 3.1(c) based
solely on the failure of Executive to meet performance expectations, then ETI
shall furnish to Executive in writing a notice of proposed termination setting
forth a specific statement of the deficiencies in his performance. Executive
shall then have a period of ninety (90) days after the giving of such written
notice of proposed termination by ETI in which to attempt to effect a cure of
the specified deficiencies. If at the end of such ninety (90) day period no such
cure has been effected to the reasonable satisfaction of the Board of Directors
of ETI, then Executive's employment shall be terminated as of the end of such
ninety (90) day period. ETI shall be obligated to provide to Executive only one
such notice of proposed termination, and if subsequent to effecting a cure of
specified deficiencies the Executive is determined by the Board of Directors to
have again failed to meet performance expectations, then his employment may be
terminated immediately upon ETI's giving of notice of termination to Executive
which specifies his deficiencies in performance.
Section 3.2 Severance. For purposes of this Agreement, Executive's
---------
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause. Executive shall be entitled to 12 months
-------------------------
salary continuation, payable in bi-weekly installments, and continued
participation in ETI's group health and dental insurance program upon the timely
periodic payment of the amount required by ETI for employees to maintain family
coverage for such programs, as severance pay in the event that the Executive's
employment is terminated without Cause, commencing as of the date of Executive's
death or disability for purposes of Section 3.1(a), or the date specified in a
notice given under Section 3.1(b).
(b) Voluntary Termination. Executive shall not receive any severance pay
---------------------
in the event that he voluntarily resigns his employment with ETI unless such
severance pay is approved by the Board of Directors of ETI in its sole
discretion. Executive shall provide a minimum of thirty (30) days prior notice
to the CEO of his resignation. In the event Executive shall provide thirty (30)
days prior written notice of his intent to resign, ETI may accept such
resignation effective as of any date during such thirty (30) day period as ETI
deems appropriate, provided that Executive shall receive from ETI his salary and
be entitled to participate at ETI's expense in any Company sponsored benefit
programs in which he was a participant as of the effective date of his
resignation for the duration of such thirty (30) day period.
8
<PAGE>
(c) For Cause. Executive shall not be entitled to any severance pay
---------
whatsoever in the event that his employment is terminated "for Cause" pursuant
to Section 3.1(c) of this Agreement, unless (i) severance pay is approved by the
Board of Directors of ETI in its sole discretion, or (ii) Executive's employment
is terminated based solely on non-performance pursuant to clause (vi) of Section
3.1 (c), in which event Executive shall be entitled to three (3) months salary
continuation and continued participation in ETI's group health and dental
insurance program upon timely periodic payment of the amount required by ETI for
employees to maintain family coverage for such programs.
ARTICLE IV
----------
GENERAL PROVISIONS
------------------
Section 4.1 Withholding of Taxes. ETI may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes and
withholdings as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Notice. For purposes of this Agreement, all communications
------
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given (i) when personally delivered, (ii) on the day of transmission when given
by facsimile transmission with confirmation of receipt, (iii) on the following
day if submitted to a nationally recognized courier service, or (iv) five (5)
business days after having been mailed by United States registered mail or
certified mail, return receipt requested, postage prepaid, addressed to ETI (to
the attention of the Secretary of ETI) at its principal executive office or to
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
Section 4.3 Governing Law. The validity, interpretation, construction,
-------------
performance and enforcement of this Agreement shall be governed by the laws of
the State of Georgia, without giving effect to the principles of conflict of
laws of such State.
Section 4.4 Validity. If any provision of this Agreement or the
--------
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances shall not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it valid, enforceable and legal; provided, however, if the provision so
held to be invalid, unenforceable or otherwise illegal constituted a material
inducement to a party's execution and delivery of this Agreement, such provision
shall not be reformed unless prior to any reformation that party agrees to be
bound by the reformation.
Section 4.5 Entire Agreement. This Agreement supersedes any other
----------------
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between the
parties with respect to the employment of
9
<PAGE>
Executive by ETI. Any waiver or modification of any term of this Agreement shall
be effective only if it is set forth in a writing signed by all parties hereto.
Section 4.6 Successors and Binding Agreement.
--------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of ETI
and any Successor of or to ETI, but shall not be otherwise be assignable or
delegable by ETI. "Successor" shall mean any successor in interest, including,
without limitation, any entity, individual or group of persons acquiring
directly or indirectly all or substantially all of the business or assets of
ETI, whether by sale, merger, consolidation, reorganization or otherwise.
(b) ETI shall require any Successor to agree at the time of becoming a
Successor to perform this Agreement to the same extent as the original parties
would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators, heirs,
distributes and legatees.
(d) This Agreement is personal in nature and neither of the parties shall,
without the consent of the other, assign, transfer or delegate this Agreement or
any rights or obligations hereunder except as expressly provided in this Section
4.6.
Section 4.7 Captions. The captions in this Agreement are solely for
--------
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.8 Miscellaneous. No provisions of this Agreement may be
-------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and ETI. No waiver by a party hereto
at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at the
same or at any prior or subsequent time.
Section 4.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
ENDEAVOR TECHNOLOGIES INC.
By: /s/ Jeffrey T. Arnold
---------------------
Jeffrey T. Arnold
Chief Executive Officer
EXECUTIVE
/s/ K. Robert Draughon
----------------------
K. Robert Draughon
11
<PAGE>
EXHIBIT 10.35
MEMORANDUM OF UNDERSTANDING
---------------------------
This Memorandum of Understanding ("MOU") is entered into effective as of
the 6/th/ day of July, 1998, by and among William Porter Payne, a resident of
the State of Georgia ("Payne"), Premiere Technologies, Inc., a Georgia
corporation ("Premiere"), and Endeavor Technologies, Inc., a Georgia corporation
("Endeavor").
WHEREAS, effective May 22, 1998, Premiere and Payne agreed that Payne would
be employed by Premiere's wholly-owned subsidiary, Orchestrate.com, Inc.
("Orchestrate"), and, in respect of such service, would enter into a two-year
employment agreement with Premiere providing for (i) a salary of $750,000 per
year, (ii) a minimum bonus of $250,000 per year, (iii) a car allowance of $1,000
per month and (iv) options to purchase 500,000 shares of Common Stock of
Premiere, in addition to certain other benefits and remuneration agreed upon by
the parties at such time, which agreement was reflected in and subsumed by an
Executive Employment and Incentive Option Agreement dated July 6, 1998 between
Premiere and Payne (the "Payne Employment Agreement");
WHEREAS, as Chairman of Orchestrate, one of Payne's principal duties is to
assist Endeavor in the development of its business for the purpose of increasing
revenue opportunities for Premiere and enhancing the value of Premiere's
interest in Endeavor, recognizing that (i) Premiere is a substantial shareholder
of Endeavor and (ii) Endeavor represents an important channel for the
distribution of Premiere's "Orchestrate" family of products;
WHEREAS, in entering into the Payne Employment Agreement, the parties
contemplated that Payne, acting in his capacity as Chairman of Orchestrate,
would play a significant role in the development of Endeavor's "WebMD" product,
and that Endeavor would also compensate Payne for such assistance through the
grant to Payne of an option to purchase 200,000 shares of Common Stock of
Endeavor at an exercise price of $2.00 per share;
WHEREAS, Premiere and Endeavor have determined that Payne's services to
Endeavor are so valuable to Endeavor that it is both useful and appropriate for
Endeavor to reimburse Premiere for a portion of his services as an employee of
Premiere;
WHEREAS, Premiere and Endeavor are prepared to share Payne's services on
the basis described herein; and
WHEREAS, to avoid future disputes, ambiguities and conflicts of interest,
each of Payne, Premiere and Endeavor desire to set forth in writing the nature
of the sharing arrangement they are prepared to enter into with respect to
Payne's services.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this MOU, the parties hereto agree as follows:
1. SHARING ARRANGEMENT. Each of Payne, Premiere and Endeavor agrees that,
notwithstanding that Payne is a full-time employee of Premiere or the contrary
provisions of the Payne Employment Agreement, Payne may devote up to 60% of his
time (or roughly three days a week) directly to the business of Endeavor. As an
employee of Premiere, Payne shall have the title of Chairman of Orchestrate. In
his service to Endeavor, Payne may serve as a member of its Board of Directors
and have the title of Vice Chairman, but shall not otherwise serve as an officer
or employee of Endeavor. Without Premiere's prior written consent, in his
service to Endeavor, Payne shall not carry any title that implies that he serves
as an employee of Endeavor. The Board of Directors of Endeavor shall act
expeditiously to create a vacancy on the Board and to appoint Payne to fill that
vacancy as soon as possible. Payne's appointment to the Board of Directors of
Endeavor shall not fulfill Endeavor's obligation to appoint a Premiere
designated director to the Board of Endeavor pursuant to Section 2 of the First
Amendment to Restated Shareholders Agreement of Endeavor Technologies, Inc.
dated December 15, 1997.
<PAGE>
2. COMPENSATION. Effective as of August 6, 1998, for the balance of the
two-year term of Payne's agreed-upon employment with Premiere, Endeavor agrees
to reimburse Premiere for one-half of (i) Payne's salary of $750,000 per year,
(ii) minimum bonus of $250,000 per year and (iii) automobile allowance of $1,000
per month provided under the Payne Employment Agreement.
Endeavor shall be obligated to indemnify Payne for his service to Endeavor
pursuant to a standard form of Indemnification Agreement between Endeavor and
its directors. Endeavor has previously agreed to provide Payne options to
purchase 200,000 shares of Common Stock of Endeavor at an exercise price of
$2.00 per share in connection with its efforts to recruit Payne to Endeavor's
Board of Directors, and it will honor this agreement.
Except as set forth in this Section 2, Endeavor shall have no further
compensation obligations to Payne or Premiere relating to Payne's employment,
but shall reimburse Payne in accordance with its corporate policies for expenses
incurred by Payne in discharging the business of Endeavor.
3. OFFICE AND STAFF RESOURCES. As Payne's employer, Premiere shall
provide Payne (i) an office at Premiere's headquarters in Atlanta, Georgia and
(ii) a secretary. All of the expenses associated with such arrangements shall
be borne by Premiere.
4. RESPONSIBILITIES. Premiere and Endeavor agree that the principal
services offered by Payne to them involve the establishment and/or continuation
of sales and marketing efforts and the creation of strategic relationships
principally with large corporations. In order to reduce the potential that
Payne's sales and marketing efforts on behalf of one company may conflict with
his efforts on behalf of the other company, each of Payne, Premiere and Endeavor
agrees that:
(a) On behalf of Endeavor, Payne's responsibilities will be
directed toward the establishment of Endeavor as a leading
provider of healthcare-related Internet services, including
healthcare content and turnkey solutions, delivered (at
least in part) through Premiere's Orchestrate(R) service and
network. In this capacity, Payne will seek to create
strategic relationships and/or sales relationships with
healthcare organizations, providers and insurers and the
providers of healthcare information and other healthcare-
related "content" delivered via the Internet. Payne and
Endeavor agree with Premiere that business opportunities and
potential strategic relationships that involve the
marketing, sale or provision of communications services or
solutions via the Internet, private data networks or the
public switched telephone network, including without
limitation long distance calling cards, voice messaging
services, enhanced document distribution services,
conferencing services, unified messaging services, or other
services commonly understood by Premiere and Endeavor as
elements of Premiere's Orchestrate(R) service (whether
involving the provision of communications services through
the Internet, private data networks or via the public
switched telephone network) (collectively, "Enhanced
Communications Services") shall be directed to Premiere; and
(b) On behalf of Premiere, Payne's marketing and sales efforts
will be directed to the continuation of Premiere as a
leading provider of Enhanced Communications Services,
including without limitation, the establishment of
Orchestrate(R) as the leading Web-enabled enhanced
communications solution. In this capacity, Payne will
provide marketing and sales services, as directed by the
Chairman or President of Premiere, on behalf of Premiere and
each of its subsidiaries, and will seek to create strategic
relationships and/or sales relationships with entities or
organizations who may themselves, or whose customers may,
seek Enhanced Communications Services, including without
limitation, Orchestrate(R) services. Payne and Premiere
agree with Endeavor that business opportunities and
potential strategic relationships that involve the
marketing, sale or provision of healthcare-related Internet
services such as content and turnkey solutions shall be
directed to Endeavor.
2
<PAGE>
Any facts raising conflicts or potential conflicts in terms of Payne's
allegiances shall be reported to the Chief Executive Officers of the Company and
Endeavor for an appropriate, mutually acceptable resolution. Such conflicts or
potential conflicts shall include, without limitation, any such conflicts or
potential conflicts arising from the expansion of either party's business beyond
the scope of such business as presently conducted.
5. EXCULPATORY PROVISION. Premiere shall not be liable for, and Payne
and Endeavor hereby agree to hold Premiere harmless against, any loss, cost,
liability or expense (including attorneys' fees and costs and expenses of
investigation) directly or indirectly occurring or arising from actions taken by
Payne (or omissions or failures to act on his part) occurring in the course of
Payne's service to Endeavor or any subsidiary or affiliate thereof.
Endeavor shall not be liable for, and Payne and Premiere hereby agree to
hold Endeavor harmless against, any loss, cost, liability or expense (including
attorneys' fees and costs and expenses of investigation) directly or indirectly
occurring or arising from actions taken by Payne (or omissions or failures to
act on his part) occurring in the course of Payne's employment to Premiere or
any subsidiary or affiliate thereof.
6. BINDING INTENT; GOVERNING LAW. This MOU shall constitute a binding and
enforceable agreement among the parties hereto with respect to the subject
matter hereof. This MOU shall be governed by and construed in accordance with
the laws of the State of Georgia, and may be executed in counterparts, all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this MOU effective as of the
6th day of July, 1998.
WILLIAM PORTER PAYNE
/s/ William Porter Payne
-------------------------------
ENDEAVOR TECHNOLOGIES, INC.
By: /s/ W. Michael Heekin
--------------------------
Its: Chief Operating Officer
-------------------------
PREMIERE TECHNOLOGIES, INC.
By: /s/ Boland T. Jones
--------------------------
Its: Chief Executive Officer
-------------------------
3
<PAGE>
EXHIBIT 10.36
WEBMD, INC.
AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN
<PAGE>
WEBMD, INC.
AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I - DEFINITIONS................................... 1
1.1 "Award"................................... 1
1.2 "Board"................................... 1
1.3 "Change in Control"....................... 1
1.4 "Code".................................... 1
1.5 "Committee"............................... 2
1.6 "Company"................................. 2
1.7 "Covered Employees"....................... 2
1.8 "Director"................................ 2
1.9 "Disinterested Person".................... 2
1.10 "Employee"................................ 2
1.11 "Employer"................................ 2
1.12 "Exchange Act"............................ 2
1.13 "Exercise Price".......................... 2
1.14 "Fair Market Value"....................... 2
1.15 "Grantee"................................. 3
1.16 "Incentive Stock Option".................. 3
1.17 "Non-Employee Director"................... 3
1.18 "Officer"................................. 3
1.19 "Option".................................. 3
1.20 "Optionee"................................ 3
1.21 "Outside Director"........................ 3
1.22 "Parent".................................. 3
1.23 "Permitted Transferee".................... 3
1.24 "Plan".................................... 3
1.25 "Purchasable"............................. 4
1.26 "Qualified Domestic Relations Order"...... 4
1.27 "Reload Option"........................... 4
1.28 "Restricted Stock"........................ 4
1.29 "Restriction Agreement"................... 4
1.30 "Section 16 Insider"...................... 4
1.31 "Stock"................................... 4
1.32 "Stock Option Agreement".................. 4
1.33 "Subsidiary".............................. 4
ARTICLE II - THE PLAN..................................... 4
2.1 Name...................................... 4
-i-
<PAGE>
2.2 Purpose................................... 4
2.3 Effective Date............................ 5
ARTICLE III - PARTICIPANTS................................ 5
ARTICLE IV - ADMINISTRATION.............................. 5
4.1 Duties and Powers of the Committee........ 5
4.2 Interpretation; Rules..................... 6
4.3 No Liability.............................. 6
4.4 Majority Rule............................. 6
4.5 Company Assistance........................ 6
ARTICLE V - SHARES OF STOCK SUBJECT TO PLAN............... 6
5.1 Limitations............................... 6
5.2 Antidilution.............................. 7
ARTICLE VI - OPTIONS...................................... 8
6.1 Types of Options Granted.................. 8
6.2 Option Grant and Agreement................ 9
6.3 Optionee Limitations...................... 9
6.4 $100,000 Limitation....................... 9
6.5 Exercise Price............................ 10
6.6 Exercise Period........................... 10
6.7 Option Exercise........................... 10
6.8 Reload Options............................ 11
6.9 Nontransferability of Option.............. 12
6.10 Termination of Employment or Service...... 12
6.11 Employment Rights......................... 12
6.12 Certain Successor Options................. 12
6.13 Effect of Change in Control............... 12
ARTICLE VII - RESTRICTED STOCK............................ 13
7.1 Awards of Restricted Stock................ 13
7.2 Non-Transferability....................... 13
7.3 Lapse of Restrictions..................... 13
7.4 Termination of Employment................. 13
7.5 Treatment of Dividends.................... 14
7.6 Delivery of Shares........................ 14
ARTICLE VIII - STOCK CERTIFICATES........................ 14
ARTICLE IX - TERMINATION AND AMENDMENT OF PLAN......... 15
ARTICLE X - RELATIONSHIP TO OTHER COMPENSATION PLANS.. 15
ARTICLE XI - MISCELLANEOUS............................. 15
11.1 Performance Goals......................... 15
-ii-
<PAGE>
11.2 Replacement or Amended Grants............. 16
11.3 Forfeiture Provisions..................... 16
11.4 Plan Binding on Successors................ 16
11.5 Singular, Plural; Gender.................. 16
11.6 Headings, etc............................. 16
11.7 Interpretation............................ 16
-iii-
<PAGE>
WEBMD, INC.
AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
1.1 "Award" shall mean a grant of Restricted Stock.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Change in Control" shall mean the occurrence of either of the
following events:
(a) A change in the composition of the Board of Directors as a result
of which fewer than one-half of the incumbent directors are directors who
either:
(i) Had been directors of the Company 24 months prior to such
change; or
(ii) Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the
directors who had been directors of the Company 24 months prior to such
change and who were still in office at the time of the election or
nomination; or
(b) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act), other than any person who is a shareholder of the Company on
or before the effective date of the Plan, by the acquisition or aggregation of
securities is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 50 percent or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart from
rights accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that any change in the
relative beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of outstanding shares
of Base Capital Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
the Company.
1.4 "Code" shall mean the United States Internal Revenue Code of 1986,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
<PAGE>
1.5 "Committee" shall mean a committee of at least two Directors
appointed from time to time by the Board, having the duties and authority set
forth herein in addition to any other authority granted by the Board. In
selecting the Committee, the Board shall consider (i) the benefits under Section
162(m) of the Code of having a Committee composed of Outside Directors for
Options granted to Covered Employees, if and when and to the extent such Section
applies to the Company, and (ii) the benefits under Rule 16b-3 of having a
Committee composed of either the entire Board or a Committee of at least two
Directors who are Non-Employee Directors for Options granted to or held by any
Section 16 Insider, if and when such rule applies with respect to officers and
directors of the Company. At any time that the Board shall not have appointed a
committee as described above, any reference herein to the Committee shall mean
the Board.
1.6 "Company" shall mean WebMD, Inc., a Georgia corporation.
1.7 "Covered Employees" shall have the meaning set forth in Code Section
162(m)(3) and the regulations promulgated thereunder.
1.8 "Director" shall mean a member of the Board and any person who is an
advisory, honorary or emeritus director of the Company if such person is
considered a director for the purposes of Section 16 of the Exchange Act, as
determined by reference to such Section 16 and to the rules, regulations,
judicial decisions, and interpretative or "no-action" positions with respect
thereto of the Securities and Exchange Commission, as the same may be in effect
or set forth from time to time.
1.9 "Disinterested Person" shall have the meaning set forth in Rule 16b-3
under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
1.10 "Employee" shall mean an employee of the Employer.
1.11 "Employer" shall mean the corporation that employs a Grantee.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934. Any
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
1.13 "Exercise Price" shall mean the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
1.14 "Fair Market Value" on any date shall mean (i) the closing sales
price of the Stock, regular way, on such date on the national securities
exchange having the greatest volume of trading in the Stock during the thirty-
day period preceding the day the value is to be determined or, if such exchange
was not open for trading on such date, the next preceding date on which it was
open; (ii) if the Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Stock on the over-
the-counter
2
<PAGE>
market on the day such value is to be determined, or in the absence of closing
bids on such day, the closing bids on the next preceding day on which there were
bids; or (iii) if the Stock also is not traded on the over-the-counter market,
the fair market value as determined in good faith by the Board or the Committee
based on such relevant facts as may be available to the Board, which may include
opinions of independent experts, the price at which recent sales have been made,
the book value of the Stock, and the Company's current and future earnings.
1.15 "Grantee" shall mean a person who is an Optionee or a person who has
received an Award of Restricted Stock.
1.16 "Incentive Stock Option" shall mean an option to purchase any stock
of the Company which complies with and is subject to the terms, limitations, and
conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
1.17 "Non-Employee Director" shall have the meaning set forth in Rule
16b-3 under the Exchange Act, as the same may be in effect from time to time, or
in any successor rule thereto, and shall be determined for all purposes under
the Plan according to interpretative or "no-action" positions with respect
thereto issued by the Securities and Exchange Commission.
1.18 "Officer" shall mean a person who constitutes an officer of the
Company for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
1.19 "Option" shall mean an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
1.20 "Optionee" shall mean a person to whom an Option has been granted
hereunder.
1.21 "Outside Director" shall have the meaning set forth in Code Section
162 and the regulators promulgated thereunder.
1.22 "Parent" shall mean any corporation (other than the Employer) in an
unbroken chain of corporations ending with the Employer if, at the time of the
grant (or modification) of the Option, each of the corporations other than the
Employer owns stock possessing 50 percent or more of the total combined voting
power of the classes of stock in one of the other corporations in such chain.
1.23 "Permitted Transferee" shall mean, with respect to an Optionee, any
member of such Optionee's immediate family and any charitable, religious,
scientific, or educational organization, contributions to which are deductible
for federal or state income tax purposes, and any trust or other vehicle for the
benefit of such a family member or organization.
1.24 "Plan" shall mean the WebMD, Inc. Amended and Restated 1997 Stock
Incentive Plan, the terms of which are set forth herein.
3
<PAGE>
1.25 "Purchasable" shall refer to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
1.26 "Qualified Domestic Relations Order" shall have the meaning set
forth in the Code or in the Employee Retirement Income Security Act of 1974, or
the rules and regulations promulgated under the Code or such Act.
1.27 "Reload Option" shall have the meaning set forth in Section 6.8
hereof.
1.28 "Restricted Stock" shall mean Stock issued, subject to restrictions,
to a Grantee pursuant to Article VII hereof.
1.29 "Restriction Agreement" shall mean the agreement setting forth the
terms of an Award and executed by a Grantee as provided in Section 7.1 hereof.
1.30 "Section 16 Insider" shall mean any person who is subject to the
provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2
promulgated pursuant to the Exchange Act.
1.31 "Stock" shall mean the Common Stock, no par value, of the Company, as
adjusted pursuant to Section 5.2 hereof.
1.32 "Stock Option Agreement" shall mean an agreement between the Company
and an Optionee under which the Optionee may purchase Stock hereunder, a sample
form of which is attached hereto as Exhibit A (which form may be varied by the
---------
Committee in granting an Option).
1.33 "Subsidiary" shall mean any corporation (other than the Employer) in
an unbroken chain of corporations beginning with the Employer if, at the time of
the grant (or modification) of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "WebMD, Inc. Amended and Restated
----
1997 Stock Incentive Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
-------
Company, its Subsidiaries and its shareholders by affording certain employees,
Officers and Directors of the Company and its Subsidiaries as well as key
consultants and advisors to the Company or any Subsidiaries and employees of the
Company's suppliers and contractors an opportunity to acquire or increase their
proprietary interests in the Company. The objective of the issuance of
4
<PAGE>
the Options and Awards is to promote the growth and profitability of the Company
and its Subsidiaries because the Grantees will be provided with an additional
incentive to achieve the Company's objectives through participation in its
success and growth and by encouraging their continued association with or
service to the Company. In particular, with respect to the issuance of Options
to employees, the purpose of the Plan also includes to attract, retain and
reward employees, to increase identification with the Company's interests, and
to provide incentive for remaining with and enhancing the value of the Company
over the long term.
2.3 Effective Date. The Plan shall become effective on January 1, 1997,
--------------
provided, however, that the Plan shall terminate, and all Options or Awards
- -------- -------
theretofore granted or awarded shall become void and may not be exercised, on
January 1, 1998, if the shareholders of the Company shall not by that date have
approved the Plan's adoption.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company, which shall include, but not be limited to,
employees, Officers and Directors, including but not limited to executive
personnel, of the Company or any Subsidiary, as well as key consultants and
advisors to the Company or any Subsidiary and employees of the Company's
suppliers and contractors.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered by
----------------------------------
the Committee. The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it may determine. The
Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written consent in lieu of a
meeting and to meet telephonically. In administering the Plan, the Committee's
actions and determinations shall be binding on all interested parties. The
Committee shall have the power to grant Options or Awards in accordance with the
provisions of the Plan and may grant Options and Awards singly, in combination,
or in tandem. Subject to the provisions of the Plan, the Committee shall have
the discretion and authority to determine those individuals to whom Options or
Awards will be granted and whether such Options shall be accompanied by the
right to receive Reload Options, the number of shares of Stock subject to each
Option or Award, such other matters as are specified herein, and any other terms
and conditions of a Stock Option Agreement or Restriction Agreement. The
Committee shall also have the discretion and authority to delegate to any
Officer its powers to grant Options or Awards under the Plan to any person who
is an employee of the Company but not an Officer or Director. To the extent not
inconsistent with the provisions of the Plan, the Committee may give a Grantee
5
<PAGE>
an election to surrender an Option or Award in exchange for the grant of a new
Option or Award, and shall have the authority to amend or modify an outstanding
Option Agreement or Restriction Agreement, or to waive any provision thereof,
provided that the Grantee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of the Plan,
---------------------
the Committee also shall have complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable for the administration of the Plan,
including, without limitation, the amending or altering of the Plan and any
Options or Awards granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of the
------------
Committee shall be liable to any person for any act or determination made in
good faith with respect to the Plan or any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
-------------
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and timely
------------------
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary in
the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant to the
-----------
provisions of Section 5.2 hereof, the maximum number of shares of Stock that may
be issued hereunder shall be five million (5,000,000). The maximum number of
shares of Stock with respect to one or more Options and/or SARs that may be
granted during any one calendar year under the Plan to any one Covered Employee
shall be 500,000, and the maximum fair market value of any Awards (other than
Options and SARs) that may be received by a Covered Employee (less any
consideration paid for such Award) during any one calendar year under the Plan
shall be $2,000,000. Notwithstanding anything to the contrary herein, in the
event of the applicability of Section 162(m) of the Code to any grant hereunder,
such grant shall comply with the requirements of the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.
Any or all shares of Stock subject to the Plan may be issued in any combination
of Incentive Stock Options, non-Incentive Stock Options, or Restricted Stock,
and the amount of Stock subject to the Plan may be increased from time to time
in accordance
6
<PAGE>
with Article IX, provided that the total number of shares of Stock issuable
pursuant to Incentive Stock Options may not be increased to more than five
million (5,000,000) (other than pursuant to antidilution adjustments) without
shareholder approval. Shares subject to an Option or issued as an Award may be
either authorized and unissued shares or shares issued and later acquired by the
Company. The shares covered by any unexercised portion of an Option that has
terminated for any reason (except as set forth in the following paragraph), or
any forfeited portion of an Award, may again be optioned or awarded under the
Plan, and such shares shall not be considered as having been optioned or issued
in computing the number of shares of Stock remaining available for option or
award hereunder.
In the event of the issuance of Options in respect of options to acquire
stock of any entity acquired, by merger or otherwise, by the Company (or any
Subsidiary of the Company), to the extent that such issuance shall not be
inconsistent with the terms, limitations and conditions of Code section 422 or
Rule 16b-3 under the Exchange Act, the aggregate number of shares of Stock for
which Options may be granted hereunder shall automatically be increased by the
number of shares subject to the Options so issued; provided, however, that the
-------- -------
aggregate number of shares of Stock for which Options may be granted hereunder
shall automatically be decreased by the number of shares covered by any
unexercised portion of an Option so issued that has terminated for any reason,
and the shares subject to any such unexercised portion may not be optioned to
any other person.
5.2 Antidilution.
------------
(a) If at any time following October 15, 1997, the outstanding shares
of Stock are changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of merger, consolidation,
reorganization, recapitalization, reclassification, combination or exchange of
shares, stock split or stock dividend, in the event that any spin-off, spin-out
or other distribution of assets materially affects the price of the Company's
stock, or in the event of any assumption and conversion to the Plan by the
Company of an acquired company's outstanding option grants:
(i) The aggregate number and kind of shares of Stock for which
Options or Awards may be granted hereunder shall be adjusted
proportionately by the Committee; and
(ii) The rights of Optionees (concerning the number of shares
subject to Options and the Exercise Price) under outstanding Options
and the rights of the holders of Awards (concerning the terms and
conditions of the lapse of any then-remaining restrictions), shall be
adjusted proportionately by the Committee.
(b) If the Company shall be a party to any reorganization in which it
does not survive, involving merger, consolidation, or acquisition of the stock
or substantially all the assets of the Company, the Committee, in its
discretion, may:
7
<PAGE>
(i) notwithstanding other provisions hereof, declare that all
Options granted under the Plan shall become exercisable immediately
notwithstanding the provisions of the respective Option Agreements
regarding exercisability, that all such Options shall terminate 30
days after the Committee gives written notice of the immediate right
to exercise all such Options and of the decision to terminate all
Options not exercised within such 30-day period, and that all then-
remaining restrictions pertaining to Awards under the Plan shall
immediately lapse; and/or
(ii) notify all Grantees that all Options or Awards granted under
the Plan shall be assumed by the successor corporation or substituted
on an equitable basis with options or restricted stock issued by such
successor corporation.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in Section 5.2(b), the provisions of such
section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause all then-remaining restrictions pertaining to Awards
under the Plan to lapse, and shall cause every Option outstanding under the Plan
to terminate to the extent not exercised prior to the adoption of the plan of
dissolution or liquidation by the shareholders, provided that, notwithstanding
--------
other provisions hereof, the Committee may declare all Options granted under the
Plan to be exercisable at any time on or before the fifth business day following
such adoption notwithstanding the provisions of the respective Option Agreements
regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of this
section, and the manner of their application, shall be determined solely by the
Committee, and any such adjustment may provide for the elimination of fractional
share interests; provided, however, that any adjustment made by the Board or the
-------- -------
Committee shall be made in a manner that will not cause an Incentive Stock
Option to be other than an incentive stock option under applicable statutory and
regulatory provisions. The adjustments required under this Article shall apply
to any successors of the Company and shall be made regardless of the number or
type of successive events requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan, grant
------------------------
either Incentive Stock Options or Options which do not qualify as Incentive
Stock Options. Within the limitations provided in this Plan, both types of
Options may be granted to the same person at the same time, or at different
times, under different terms and conditions, as long as the terms and conditions
of each Option are consistent with the provisions of the Plan. Without
limitation of the foregoing, Options may be granted subject to conditions based
on the financial performance of the Company or any other factor the Committee
deems relevant.
8
<PAGE>
6.2 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------
evidenced by minutes of a meeting or the written consent of the Committee and by
a written Stock Option Agreement executed by the Company and the Optionee. The
terms of the Option, including the Option's duration, time or times of exercise,
exercise price, whether the Option is intended to be an Incentive Stock Option,
and whether the Option is to be accompanied by the right to receive a Reload
Option, shall be stated in the Option Agreement. No Incentive Stock Option may
be granted more than ten years after the earlier to occur of the effective date
of the Plan or the date the Plan is approved by the Company's shareholders.
Separate Option Agreements may be used for Options intended to be Incentive
Stock Options and those not so intended, but any failure to use such separate
agreements shall not invalidate, or otherwise adversely affect the Optionee's
interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an Incentive Stock
--------------------
Option to any person who, at the time the Incentive Stock Option is granted:
(a) is not an employee of the Company or any of its Subsidiaries; or
(b) owns or is considered to own stock possessing at least 10% of the
total combined voting power of all classes of stock of the Company or any of its
Parent or Subsidiary corporations; provided, however, that this limitation shall
-------- -------
not apply if at the time an Incentive Stock Option is granted the Exercise Price
is at least 110% of the Fair Market Value of the Stock subject to such Option
and such Option by its terms would not be exercisable after five years from the
date on which the Option is granted. For the purpose of this subsection (b), a
person shall be considered to own (i) the stock owned, directly or indirectly,
by or for his or her brothers and sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; (ii) the stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust in proportion
to such person's stock interest, partnership interest or beneficial interest
therein; and (iii) the stock which such person may purchase under any
outstanding options of the Employer or of any Parent or Subsidiary of the
Employer.
6.4 $100,000 Limitation. Except as provided below, the Committee shall not
--------------------
grant an Incentive Stock Option to, or modify the exercise provisions of
outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Employer and any Parent or Subsidiary of the
Employer such that the aggregate Fair Market Value (determined as of the
respective dates of grant or modification of each option) of the stock with
respect to which such Incentive Stock Options are exercisable for the first time
during any calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time); provided that the foregoing
--------
restriction on modification of outstanding Incentive Stock Options shall not
preclude the Committee from modifying an outstanding Incentive Stock Option if,
as a result of such modification and with the consent of the Optionee, such
Option no longer constitutes an Incentive Stock Option; and provided that, if
--------
the $100,000 limitation (or such other limitation prescribed by the Code)
described in this Section is exceeded, the
9
<PAGE>
Incentive Stock Option the granting or modification of which resulted in the
exceeding of such limit shall be treated as an Incentive Stock Option up to the
limitation and the excess shall be treated as an Option not qualifying as an
Incentive Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to each Option
--------------
shall be determined by the Committee. Subject to the provisions of Section
6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall not be less
than the Fair Market Value of the Stock as of the date the Option is granted (or
in the case of an Incentive Stock Option that is subsequently modified, on the
date of such modification). The Exercise Price of a non-Incentive Stock Option
shall not be less than the Fair Market Value of the Stock on the date that the
Option is granted.
6.6 Exercise Period. The period for the exercise of each Option granted
---------------
hereunder shall be determined by the Committee, but the Option Agreement with
respect to each Option intended to be an Incentive Stock Option shall provide
that such Option shall not be exercisable after the expiration of ten years from
the date of grant (or modification) of the Option. In addition, no Option
granted to a Section 16 Insider shall be exercisable prior to the expiration of
six months from the date such Option is granted, other than in the case of the
death or disability of the Optionee, and no Option shall be exercisable prior to
shareholder approval of the Plan.
6.7 Option Exercise.
---------------
(a) Unless otherwise provided in the Stock Option Agreement or Section
6.6 hereof, an Option may be exercised at any time or from time to time during
the term of the Option as to any or all full shares which have become
Purchasable under the provisions of the Option, but not at any time as to less
than 100 shares unless the remaining shares that have become so Purchasable are
less than 100 shares. The Committee shall have the authority to prescribe in any
Stock Option Agreement that the Option may be exercised only in accordance with
a vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at its
principal office a written notice of exercise with respect to a specified number
of shares of Stock and (ii) payment to the Company at that office of the full
amount of the Exercise Price for such number of shares in accordance with
Section 6.7(c). If requested by an Optionee, an Option may be exercised with the
involvement of a stockbroker in accordance with the federal margin rules set
forth in Regulation T (in which case the certificates representing the
underlying shares will be delivered by the Company directly to the stockbroker).
(c) The Exercise Price is to be paid in full in cash upon the exercise
of the Option and the Company shall not be required to deliver certificates for
the shares purchased until such payment has been made; provided, however, that
-------- -------
in lieu of cash, all or any portion of the Exercise Price may be paid by
tendering to the Company shares of Stock duly endorsed for transfer and owned by
the Optionee, or by authorization to the Company to withhold shares of Stock
otherwise issuable upon exercise of the Option, in each case to be credited
against the Exercise Price at the Fair Market Value of such shares on the date
of exercise (however, no
10
<PAGE>
fractional shares may be so transferred, and the Company shall not be obligated
to make any cash payments in consideration of any excess of the aggregate Fair
Market Value of shares transferred over the aggregate option price); provided
further, that the Board may provide in a Stock Option Agreement or may otherwise
determine in its sole discretion at the time of exercise that, in lieu of cash
or shares, all or a portion of the Exercise Price may be paid by the Optionee's
execution of a recourse note equal to the Exercise Price or relevant portion
thereof, subject to compliance with applicable state and federal laws, rules and
regulations.
(d) In addition to and at the time of payment of the Exercise Price,
the Optionee shall pay to the Company in cash the full amount of any federal,
state, and local income, employment, or other withholding taxes applicable to
the taxable income of such Optionee resulting from such exercise; provided,
--------
however, that in the discretion of the Committee any Option Agreement may
- -------
provide that all or any portion of such tax obligations, together with
additional taxes not exceeding the actual additional taxes to be owed by the
Optionee as a result of such exercise, may, upon the irrevocable election of the
Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid, and
subject to such restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary or appropriate
to satisfy the conditions of the exemption set forth in Rule 16b-3 under the
Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until such
shares have been issued and transferred to the Optionee upon the exercise of the
Option.
6.8 Reload Options.
--------------
(a) The Committee may specify in a Stock Option Agreement (or may
otherwise determine in its sole discretion) that a Reload Option shall be
granted, without further action of the Committee, (i) to an Optionee who
exercises an Option (including a Reload Option) by surrendering shares of Stock
in payment of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for
the same number of shares as are surrendered to pay such amounts, (iii) as of
the date of such payment and at an Exercise Price equal to the Fair Market Value
of the Stock on such date, and (iv) otherwise on the same terms and conditions
as the Option whose exercise has occasioned such payment, except as provided
below and subject to such other contingencies, conditions, or other terms as the
Committee shall specify at the time such exercised Option is granted; provided
that the shares surrendered by a Section 16 Insider in payment as provided above
--------
must have been held by the Optionee for at least six months prior to such
surrender.
(b) Unless provided otherwise in the Stock Option Agreement, a Reload
Option may not be exercised by an Optionee (i) prior to the end of a one-year
period from the date that the Reload Option is granted, and (ii) unless the
Optionee retains beneficial ownership
11
<PAGE>
of the shares of Stock issued to such Optionee upon exercise of the Option
referred to above in Section 6.8(a) for a period of one year from the date of
such exercise.
6.9 Nontransferability of Option.
----------------------------
(a) No Incentive Stock Option shall be transferable by an Optionee
other than by will or the laws of descent and distribution, and no Option shall
be transferable by an Optionee who is a Section 16 Insider prior to shareholder
approval of the Plan or, after such approval, other than by will or the laws of
descent and distribution or pursuant to a Qualified Domestic Relations Order.
During the lifetime of an Optionee, Incentive Stock Options shall be exercisable
only by such Optionee (or by such Optionee's guardian or legal representative,
should one be appointed).
(b) Except as provided above and unless provided otherwise in the
Stock Option Agreement, Optionees and Permitted Transferees of Optionees may
transfer Options to any person, including a broker-dealer, but the Option shall
not be transferable by any person other than an Optionee or Permitted Transferee
except by will or the laws of descent and distribution or pursuant to a
Qualified Domestic Relations Order. Except as provided above and unless provided
otherwise in the Stock Option Agreement, Options shall be exercisable by any
person to whom such Option has been validly transferred.
6.10 Termination of Employment or Service. The Committee shall have the
------------------------------------
power to specify, with respect to the Options granted to a particular Optionee,
the effect upon such Optionee's right to exercise an Option of termination of
such Optionee's employment or service under various circumstances, which effect
may include immediate or deferred termination of such Optionee's rights under an
Option, or acceleration of the date at which an Option may be exercised in full;
provided, however, that in no event may an Incentive Stock Option be exercised
- -------- -------
after the expiration of ten years from the date of grant thereof.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option
-----------------
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the right
of the Company or any of its Subsidiaries to terminate such person's employment
at any time.
6.12 Certain Successor Options. To the extent not inconsistent with the
-------------------------
terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company) may contain terms that differ
from those stated in this Article, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code section 424(a).
6.13 Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting an Option or thereafter, that such Option shall become exercisable
on an accelerated basis in the event that a Change in Control occurs with
respect to the Company. If the Committee finds that there is a reasonable
possibility that, within the succeeding six months, a
12
<PAGE>
Change in Control will occur with respect to the Company, then the Committee may
determine that all outstanding Options shall be exercisable on an accelerated
basis.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of
--------------------------
Restricted Stock, which shall be governed by a Restriction Agreement between the
Company and the Grantee. Each Restriction Agreement shall contain such
restrictions, terms, and conditions as the Committee may, in its discretion,
determine, and may require that an appropriate legend be placed on the
certificates evidencing the subject Restricted Stock.
Shares of Restricted Stock granted pursuant to an Award hereunder shall be
issued in the name of the Grantee as soon as reasonably practicable after the
Award is granted, provided that the Grantee has executed the Restriction
Agreement governing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the foregoing documents within any time period
prescribed by the Committee, the Award shall be void. At the discretion of the
Committee, Shares issued in connection with an Award shall be deposited together
with the stock powers with an escrow agent designated by the Committee. Unless
the Committee determines otherwise and as set forth in the Restriction
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have all of the rights of a shareholder with respect to such Shares, including
the right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
7.2 Non-Transferability. Until any restrictions upon Restricted Stock
-------------------
awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3,
such shares of Restricted Stock shall not be transferable other than by will or
the laws of descent and distribution, or pursuant to a Qualified Domestic
Relations Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
---------------------
hereunder shall lapse at such time or times (but, with respect to any award to a
Grantee who is also a Section 16 Insider, not less than six months after the
date of the Award) and on such terms and conditions as the Committee may, in its
discretion, determine at the time the Award is granted or thereafter.
7.4 Termination of Employment. The Committee shall have the power to
-------------------------
specify, with respect to each Award granted to any particular Grantee, the
effect upon such Grantee's rights with respect to such Restricted Stock of the
termination of such Grantee's employment under various circumstances, which
effect may include immediate or deferred forfeiture of such Restricted Stock or
acceleration of the date at which any then-remaining restrictions shall lapse.
13
<PAGE>
7.5 Treatment of Dividends. At the time an Award of Restricted Stock is
----------------------
made the Committee may, in its discretion, determine that the payment to the
Grantee of any dividends, or a specified portion thereof, declared or paid on
such Restricted Stock shall be (i) deferred until the lapsing of the relevant
restrictions and (ii) held by the Company for the account of the Grantee until
such lapsing. In the event of such deferral, there shall be credited at the end
of each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum determined by the Committee. Payment
of deferred dividends, together with interest thereon, shall be made upon the
lapsing of restrictions imposed on such Restricted Stock, and any dividends
deferred (together with any interest thereon) in respect of Restricted Stock
shall be forfeited upon any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Except as provided otherwise in Article VIII below,
------------------
within a reasonable period of time following the lapse of the restrictions on
shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such shares and such shares shall be
free of all restrictions hereunder.
ARTICLE VIII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, or deliver any certificate for shares of Restricted Stock
granted hereunder, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares which the Committee shall deem necessary or advisable under any federal
or state law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any federal or
state governmental agency or body which the Committee shall determine to be
necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant to
applicable federal and state securities laws.
14
<PAGE>
ARTICLE IX
TERMINATION AND AMENDMENT OF PLAN
The Board may at any time terminate the Plan, and may at any time and from
time to time and in any respect amend the Plan; provided, however, that the
-------- -------
Board (unless its actions are approved or ratified by the shareholders of the
Company within twelve months of the date that the Board amends the Plan) may not
amend the Plan to:
(a) Increase the total number of shares of Stock issuable pursuant to
Incentive Stock Options under the Plan or materially increase the number of
shares of Stock subject to the Plan, in each case except as contemplated in
Section 5.2 hereof;
(b) Change the class of employees eligible to receive Incentive Stock
Options that may participate in the Plan or materially change the class of
persons that may participate in the Plan; or
(c) Otherwise materially increase the benefits accruing to participants
under the Plan.
No termination or amendment modification of the Plan shall affect adversely
a Grantee's rights under an Option Agreement or Restriction Agreement without
the consent of the Grantee or his legal representative.
ARTICLE X
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
Subsidiaries.
ARTICLE XI
MISCELLANEOUS
11.1 Performance Goals. The Committee may (but need not) determine that any
-----------------
Award granted pursuant to this Plan to an Optionee (including, but not limited
to, Optionees who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Company or a Subsidiary of a specified target
return, or target growth in return, on equity or assets, (b) the Company's or
Subsidiary's stock price, (c) the achievement by a business unit of the Company
or Subsidiary of a specified target, or target growth in, net income or earnings
per share, or (d) any combination of the goals set forth in (a) through (c)
above. If an Award is made on such basis, the Committee has the right for any
reason to reduce (but not increase) the Award, notwithstanding the achievement
of a specified goal. If an Award is made on such
15
<PAGE>
basis, the Committee shall establish goals prior to the beginning of the period
for which such performance goal relates (or such later date as may be permitted
under Code Section 162(m) or the regulations thereunder). Any payment of an
Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
11.2 Replacement or Amended Grants. At the sole discretion of the
-----------------------------
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or Awards or accept the surrender of outstanding Options or
Awards and grant new Options or Awards in substitution for them. However no
modification of an Option or Award shall adversely affect a Grantee's rights
under an Option Agreement or Restriction Agreement without the consent of the
Grantee or his legal representative.
11.3 Forfeiture Provisions.
---------------------
(a) Restricted Stock. If the holder of any shares of Restricted Stock
----------------
provides services to a competitor of the Company or any of its Subsidiaries,
whether as an employee, officer, director, independent contractor, consultant,
agent, or otherwise, such services being of a nature that can reasonably be
expected to involve the skills and experience used or developed by such holder
while an Employee, then any shares of Restricted Stock held by such holder
subject to remaining restrictions shall be forfeited, subject in each case to a
determination to the contrary by the Committee.
(b) Options. The sample Stock Option Agreement attached hereto as
-------
Exhibit A contains provisions with respect to forfeiture of option gain,
- ---------
forfeiture of unexercised Options and set-off provisions, in each case
applicable to Options granted to Employees.
11.4 Plan Binding on Successors. The Plan shall be binding upon the
--------------------------
successors and assigns of the Company.
11.5 Singular, Plural; Gender. Whenever used herein, nouns in the singular
------------------------
shall include the plural, and the masculine pronoun shall include the feminine
gender.
11.6 Headings, etc. Headings of Articles and Sections hereof are inserted
-------------
for convenience and reference; they do not constitute part of the Plan.
11.7 Interpretation. With respect to Section 16 Insiders, transactions
--------------
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Plan administrators fails to so comply, it shall be
deemed void to the extent permitted by law and deemed advisable by the Plan
administrators. The deduction limits of Code Section 162(m) and the regulations
thereunder do not apply to the Company until such time, if any, as any class of
the Company's common equity securities is registered under Section 12 of the
1934 Act or the Company otherwise meets the definition of a "publicly held
corporation" under Treasury Regulation 1.162-27(c) or any successor provision.
Upon becoming a publicly held corporation, the
16
<PAGE>
deduction limits of Code Section 162(m) and the regulations thereunder shall not
apply to compensation payable under this Plan until the expiration of the
reliance period described in Treasury Regulation 1.162-27(f) or any successor
regulation.
* * * * *
17
<PAGE>
Exhibit A to WebMD, Inc.
Amended and Restated
1997 Stock Incentive Plan
Form of Stock Option
Agreement
WEBMD, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
_____ day of ______________________, by and between WebMD, Inc., a Georgia
corporation (the "Company"), and __________________ (the "Optionee").
WHEREAS, on ___________________, the Board of Directors and shareholders of
the Company adopted a stock option plan known as the "WebMD, Inc. Amended and
Restated 1997 Stock Incentive Plan" (the "Plan"); and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the provisions
---------------------
of the Plan and the terms and definitions of the Plan are incorporated herein by
reference and made a part hereof. A copy of the Plan has been delivered to, and
receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock, no par value (the "Stock"), set forth on Schedule A
attached hereto and incorporated herein by reference. The Option shall be
exercisable in the amounts and at the time specified on Schedule A. The Option
shall expire and shall not be exercisable on the date specified on Schedule A or
on such earlier date as determined pursuant to Section 8, 9, or 10 hereof.
Schedule A states whether the Option is intended to be an Incentive Stock
Option.
3. Purchase Price. The price per share to be paid by the Optionee for the
--------------
shares subject to this Option (the "Exercise Price") shall be as specified on
Schedule A, which price
A-1
<PAGE>
shall be an amount not less than the Fair Market Value of a share of Stock as of
the Date of Grant (as defined in Section 11 below) if the Option is an Incentive
Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at least the
--------------
lesser of 100 shares or the number of shares of Purchasable Stock as to which
the Option remains unexercised. In the event this Option is not exercised with
respect to all or any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not exercised shall
no longer be subject to this Option.
5. Restrictions on Transferability.
-------------------------------
(a) No Incentive Stock Option shall be transferable by an Optionee
other than by will or the laws of descent and distribution, and no Option shall
be transferable by an Optionee who is a Section 16 Insider prior to shareholder
approval of the Plan or, after such approval, other than by will or the laws of
descent and distribution or pursuant to a Qualified Domestic Relations Order.
During the lifetime of an Optionee, Incentive Stock Options shall be exercisable
only by such Optionee (or by such Optionee's guardian or legal representative,
should one be appointed).
(b) Except as provided above [and except list any other restrictions on
------------------------------
transfer], Optionees and Permitted Transferees of Optionees may transfer Options
- --------
to any person, including a broker-dealer, but the Option shall not be
transferable by any person other than an Optionee or Permitted Transferee except
by will or the laws of descent and distribution or pursuant to a Qualified
Domestic Relations Order. Except as provided above [and list any other specific
-----------------------
exceptions], Options shall be exercisable by any person to whom such Option has
- ----------
been validly transferred.
6. Notice of Exercise of Option. This Option may be exercised by the
----------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice of
Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of Stock owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise Price
applicable to such shares purchased hereunder, or (iii) a certified or cashier's
check accompanied by the number of shares of Stock whose Fair Market Value when
added to the amount of the check equals the total Exercise Price applicable to
such shares purchased hereunder. Upon receipt of any such notice and
accompanying payment, and subject to the terms hereof, the Company agrees to
issue to the Optionee or the Optionee's administrators, executors or personal
representatives, as the case may be, stock certificates for
A-2
<PAGE>
the number of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of Shares subject to this Option, the
--------------------
Exercise Price and other matters are subject to adjustment during the term of
this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
-------------------------
(a) Except as otherwise specified in Schedule A hereto, in the event
of the termination of the Optionee's employment with the Company or any of its
Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the Optionee
may exercise this Option at any time within 30 days after such termination to
the extent of the number of shares which were Purchasable hereunder at the date
of such termination.
(b) Except as specified in Schedule A attached hereto, in the event of
a termination of the Optionee's employment that is either (i) for cause or (ii)
voluntary on the part of the Optionee and without the written consent of the
Company, this Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto,
in the event of the retirement of the Optionee at the normal retirement date as
prescribed from time to time by the Company or any Subsidiary, the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee's retirement. This Option does not
confer upon the Optionee any right with respect to continuance of employment by
the Company or by any of its Subsidiaries. This Option shall not be affected by
any change of employment so long as the Optionee continues to be an employee of
the Company or one of its Subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
-----------------
of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her
personal representative) may exercise this Option at any time within three
months after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A with
-----------------
with respect to the rights of the Optionee upon termination of employment under
Section 8(a) above, hereof, in the event of the Optionee's death while employed
by the Company or any of its Subsidiaries or within three months after a
termination of such employment (if such termination was neither (i) for cause
nor (ii) voluntary on the part of the Optionee and without the written consent
of the Company), the appropriate persons described in Section 6 hereof or
persons to whom all or a portion of this Option is transferred in accordance
with Section 5 hereof may exercise this Option at any time within a period
ending on the earlier of (a) the last day of the three month period following
the Optionee's death or (b) the expiration date of this Option. If the Optionee
A-3
<PAGE>
was an employee of the Company at the time of death, this Option may be so
exercised to the extent of the number of shares that were Purchasable hereunder
at the date of death. If the Optionee's employment terminated prior to his or
her death, this Option may be exercised only to the extent of the number of
shares covered by this Option which were Purchasable hereunder at the date of
such termination.
11. Date of Grant. This Option was granted by the Board of Directors
-------------
of the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
----------------------------------
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate law or any rule, regulation, order or consent
decree of any regulatory authority (including without limitation the Securities
and Exchange Commission) having jurisdiction over the affairs of the Company.
The Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section.
13. Restriction on Disposition of Shares. The shares purchased
------------------------------------
pursuant to the exercise of an Incentive Stock Option shall not be transferred
by the Optionee except pursuant to the Optionee's will or the laws of descent
and distribution until such date which is the later of two years after the grant
of such Incentive Stock Option or one year after the transfer of the shares to
the Optionee pursuant to the exercise of such Incentive Stock Option.
14. Stock Option Forfeiture Provisions. The purpose of the Company's
----------------------------------
issuance of Options to Employees is to attract, retain and reward Employees, to
increase their stock ownership and identification with the Company's interests,
and to provide incentive for remaining with and enhancing the value of the
Company over the long term. In return for granting this Option to Employee,
please acknowledge by signing below that Employee has read and agrees to the
following:
(a) Forfeiture Of Option gain and unexercised Options if Employee
engages in certain activities. If, at any time within (a) the term of this
Option or (b) within one year after termination of employment or (c) within one
year after the exercise any portion of this Option, whichever is the latest,
Optionee engages in any activity in competition with any activity of the
Company, or inimical, contrary or harmful to the interests of the Company,
including, but not limited to: (i) conduct related to Optionee's employment for
which either criminal or civil penalties against Optionee may be sought, (ii)
violation of Company policies, including, without limitation, the Company's
insider trading policy, (iii) accepting employment with or serving as a
consultant, advisor or in any other capacity to an employer that is in
competition with or acting against the interests of the Company, including
employing or recruiting any present, former or future employee of the Company,
(iv) disclosing or misusing any confidential information or material concerning
the Company, or (v) participating in a hostile takeover attempt, then (1) this
Option shall terminate effective the date on which
A-4
<PAGE>
Optionee enters into such activity, unless terminating sooner by operation of
another term or condition of this Option or the Plan, and (2) any option gain
realized by Optionee from exercising all or a portion of this Option shall be
paid by Optionee to the Company.
(b) Right of Set-off. By accepting this Agreement, Optionee consents
to a deduction from any amounts the Company owes Optionee from time to time
(including amounts owed to Optionee as wages or other compensation, fringe
benefits, or vacation pay, as well as any other amounts owed to Optionee by the
Company), to the extent of the amounts Optionee owes the Company under
paragraphs (a) and (b) of this Section 14 above. Whether or not the Company
elects to make any set-off in whole or in part, if the Company does not recover
by means of set-off the full amount Optionee owes it, calculated as set forth
above, Optionee agrees to pay immediately the unpaid balance to the Company.
(c) Committee Discretion. Optionee may be released from Optionee's
obligations under paragraphs (a), (b) and (c) of this Section 14 only if the
Committee (or its duly appointed agent) determines in its sole discretion that
such action is in the best interests of the Company.
15. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be governed
by the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished shall be deemed
made or accomplished, upon actual delivery thereof to the designated recipient,
or three days after deposit thereof in the United States mail, registered,
return receipt requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the executive offices of
the Company at 400 The Lenox Building, 3399 Peachtree Road, N.E., Atlanta,
Georgia 30326.
(d) This Agreement may not be modified except in writing executed by
each of the parties hereto.
(e) THE OPTIONEE ACKNOWLEDGES THAT THIS OPTION AND ALL SHARES OF STOCK
ACQUIRED PURSUANT TO THE EXERCISE OF THIS OPTION ARE DEEMED TO BE "RESTRICTED
SECURITIES" AS DEFINED IN RULE 144 PROMULGATED PURSUANT TO THE SECURITIES ACT OF
1933 AND, THEREFORE, RESALE OF SUCH SHARES MUST BE MADE PURSUANT TO THE
REGISTRATION PROVISIONS OF SUCH ACT OR AN EXEMPTION THEREFROM.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the Company's
seal to
A-5
<PAGE>
be affixed hereto and attested by the Secretary or an Assistant Secretary of the
Company, and the Optionee has executed this Stock Option Agreement under seal,
all as of the day and year first above written.
COMPANY:
Attest: WEBMD, INC.
_________________________________ By: _______________________
Secretary
Name: _____________________
[SEAL]
Title: ____________________
OPTIONEE:
__________________________
Name: ____________________
Address: _________________
_________________
_________________
A-6
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
WEBMD, INC.
AND
[NAME OF OPTIONEE]
----------------
Dated ________________
1. Number of Shares Subject to Option: ___________________ Shares.
----------------------------------
2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option.
----------- -- --------------------------------
3. Option Exercise Price: $________ per Share.
---------------------
4. Date of Grant:
-------------
5. Option Vesting Schedule:
-----------------------
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof
( ) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number
of shares:
No. of Shares Vesting Date
------------- ------------
6. Option Exercise Period:
-----------------------
Check One:
( ) All options expire and are void unless exercised on or before
____________________.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
------------- ---------------
<PAGE>
7. Effect of Termination of Employment of Optionee (if different from that set
-----------------------------------------------
forth in Sections 8 and 10 of the Stock Option Agreement):
<PAGE>
SCHEDULE B
TO
STOCK OPTION AGREEMENT
BETWEEN
WEBMD, INC.
AND
[NAME OF OPTIONEE]
------------------
Dated ________________
NOTICE OF EXERCISE
The undersigned hereby notifies WebMD, Inc. (the "Company") of this
election to exercise the undersigned's stock option to purchase ______________
shares of the Company's common stock, no par value (the "Common Stock"),
pursuant to the Stock Option Agreement (the "Agreement") between the undersigned
and the Company dated _________________. Accompanying this Notice is (1) a
certified or a cashier's check in the amount of $___________ payable to the
Company, and/or (2) _____________ shares of the Company's Common Stock presently
owned by the undersigned and duly endorsed or accompanied by stock transfer
powers, having an aggregate Fair Market Value (as defined in the WebMD, Inc.
Amended and Restated 1997 Stock Incentive Plan) as of the date hereof of
$__________, such amounts being equal, in the aggregate, to the purchase price
per share set forth in Section 3 of the Agreement multiplied by the number of
shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 7 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _______
day of ______________, ______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
___________________________________________
Name:
Position (if other than Optionee):
<PAGE>
EXHIBIT 10.38
DIRECTOR STOCK OPTION PLAN
OF
WEBMD, INC.
ADOPTED: NOVEMBER 13, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purpose................................................................ 1
2. Definitions............................................................ 1
3. Total Aggregate Shares................................................. 2
4. Rule 16b-3 Plan and Shareholder Approval............................... 3
5. Type of Options........................................................ 3
6. Grants of Options...................................................... 3
7. Exercise Price, Vesting Schedule and Term of Option.................... 4
8. Exercise of Option..................................................... 4
9. Termination of Option Period........................................... 5
10. Assignability of Options............................................... 5
11. Adjustments............................................................ 5
12. Purchase for Investment................................................ 6
13. Amendments, Modifications, Suspension or Discontinuance of this Plan... 6
14. Governmental Regulation................................................ 7
15. Miscellaneous.......................................................... 7
16. Effective Date and Termination Date.................................... 8
i
<PAGE>
DIRECTOR STOCK OPTION PLAN
OF
WEBMD, INC.
1. Purpose. The Director Stock Option Plan of WEBMD, INC. (the "Company")
is intended as an incentive to retain, as directors of the Company, persons of
training, experience and ability, to encourage the sense of proprietorship of
such persons and to stimulate the active interest of such persons in the
development and financial success of the Company.
2. Definitions. As used herein, the following terms shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock Series D of the Company,
without par value per share, for so long as such Series of Common Stock remains
outstanding or, if all Common Stock Series D of the Company has been converted
into or exchanged for another class or series of securities, "Common Stock"
shall mean such class or series of securities.
(d) "Date of Grant" shall mean the date on which an Option is granted to
an Eligible Person pursuant to Section 6(c) hereof.
(e) "Director" shall mean a member of the Board.
(f) "Eligible Person(s)" shall mean those persons who are, as of a
specified date, non-employee Directors of the Company.
(g) "ERISA" shall mean the Employee Retirement Income Security Act, as
amended.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" of a Share on any date of reference shall be the
Closing Price on the business day preceding such date. For this purpose, the
"Closing Price" of the Shares on any business day shall be: (i) if the Shares
are listed or admitted for trading on any United States national securities
exchange, the last reported sale price of Shares on such exchange, as reported
in any newspaper of general circulation; (ii) if Shares are quoted on NASDAQ, or
any similar system of automated dissemination of quotations of securities prices
in common use, the average of the closing high bid and low asked quotations for
such day of Shares on such system; (iii) if neither clause (i) nor (ii) is
applicable, the average of the high bid and low
1
<PAGE>
asked quotations for Shares as reported by the National Quotation Bureau,
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for Shares on at least five of the ten preceding days; (iv) in lieu
of the above, if actual transactions in the Shares are reported on a
consolidated transaction reporting system, the last sale price of the Shares for
such day and on such system; or (v) prior to an Initial Public Offering, the
fair market value of such Shares as determined by the Board which, in making
such determination, shall consider and rely upon the prices at which securities
of the Company have previously been sold in transactions between: (x) the
Company and parties who were not, at the time of such sale, affiliated with the
Company; and (y) parties who are were not, at the time of such sale, affiliated
with the Company.
(j) "Initial Grant Date" shall mean the date upon which this Plan is
approved by the Board.
(k) "Initial Public Offering" shall mean the offer and sale by the Company
of its equity securities in a transaction underwritten by an investment banking
firm following the completion of which (i) such equity securities are listed for
trading on any national securities exchange or (ii) there are at least two
market makers who are making a market in such equity securities through the
NASDAQ National Market System.
(l) "Nonqualified Stock Option" shall mean a stock option that is not an
incentive stock option, as defined in Section 422 of the Code.
(m) "Option" shall mean any option granted under this Plan.
(n) "Option Agreement" shall mean an option agreement between the Company
and an Optionee.
(o) "Optionee" shall mean a person to whom an Option is granted under this
Plan or any person who succeeds to the rights of such person under this Plan by
reason of the death or disability of such person.
(p) "Plan" shall mean this Director Stock Option Plan of WebMD, Inc.
(r) "Share(s)" shall mean a share or shares of the Common Stock.
(q) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chains.
3. TOTAL AGGREGATE SHARES. Subject to the adjustments set forth in
Section 11 hereof, a total of 1,000,000 Shares shall be subject to the Plan.
The Shares subject to the Plan shall consist of unissued Shares or previously
issued Shares reacquired and held by the Company, or any Subsidiary, and such
number of Shares shall be and hereby is reserved for sale for such
2
<PAGE>
purpose. Any of such Shares that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan, the Company
shall at all times reserve a sufficient number of Shares to meet the
requirements of the Plan. Should any Option expire or be canceled prior to its
exercise in full, the Shares theretofore subject to such Option may again be the
subject of any Option under the Plan.
4. Rule 16b-3 Plan and Shareholder Approval. The Company intends for this
Plan to comply with the requirements of Rule 16b-3 promulgated by the Securities
and Exchange Commission pursuant to the Exchange Act. Accordingly, this Plan
will be subject to approval by shareholders of the Company owning a majority of
the issued and outstanding shares of Common Stock present or represented and
entitled to vote at a meeting duly held in accordance with applicable law.
5. Type of Options. An Option granted hereunder shall be a Nonqualified
Stock Option.
6. Grants of Options.
(a) Options shall be granted only to Eligible Persons. Each Option shall
be evidenced by an Option Agreement, which shall contain terms that are not
inconsistent with this Plan or applicable laws.
(b) The Options granted to Directors under this Plan shall be in addition
to regular director's fees, if any, or other benefits, if any, with respect to
the Director's position with the Company or its Subsidiaries. Neither the Plan
nor any Options granted under the Plan shall confer upon any person any right to
continue to serve as a Director.
(c) Options shall automatically be granted as follows:
(i) on the Initial Grant Date, each Eligible Person shall
automatically be granted an Option to acquire 20,000 shares of
Common Stock for his service as a Director;
(ii) each Eligible Person who becomes an Eligible Person by reason of
being elected as a Director after the Initial Grant Date of the
adoption of this Plan shall automatically be granted on the date
of his initial election an Option to acquire 20,000 shares of
Common Stock for his service as a Director; and
(iii) on January 1 of each calendar year, each Eligible Person shall
automatically be granted an Option to acquire 5,000 shares of
Common Stock for his service as a Director.
3
<PAGE>
(d) Except for the automatic grants of Options under Section 6(c), no
Options shall otherwise be granted hereunder, and the Board shall not have any
discretion with respect to the grant of Options within the meaning of Rule 16b-3
promulgated under the Exchange Act, or any successor rule.
7. EXERCISE PRICE, VESTING SCHEDULE AND TERM OF OPTION.
(a) The exercise price of each Share placed under an Option pursuant to
this Plan shall be the Fair Market Value of such Share on the Date of Grant.
(b) Each grant shall vest immediately on the Date of Grant.
(c) Each Option granted under this Plan shall have a term of ten years
from the Date of Grant of such Option.
8. Exercise of Option.
(a) After the six-month anniversary of the Date of Grant of an Option,
such Option may be exercised at any time and from time to time during the term
of such Option, in whole or in part.
(b) Options may be exercised: (i) during the Optionee's lifetime, solely
by the Optionee; (ii) if an Option has been assigned pursuant to Section 10
hereof, by the successor Optionee; or (iii) after Optionee's death, by the
personal representative of the Optionee's estate or the person or persons
entitled thereto under his will or under the laws of descent and distribution.
(c) An Option shall be deemed exercised when: (i) the Company has received
written notice of such exercise delivered to the Company in accordance with the
notice provisions of the applicable Option Agreement; (ii) full payment of the
aggregate exercise price of the Shares as to which the Option is exercised has
been tendered to the Company; and (iii) arrangements that are satisfactory to
the Board in its sole discretion have been made for the Optionee's payment to
the Company of the amount, if any, that the Company determines to be necessary
for the Company to withhold in accordance with the applicable federal or state
income tax withholding requirements.
(d) The exercise price of any Shares purchased shall be paid, at the
option of the Optionee (i) solely in cash by certified check, cashier's check,
money order or personal check (if approved by the Board); (ii) in Common Stock
of any series theretofore owned by such Optionee; or (iii) without the exchange
of any funds, by the Optionee electing to receive the full number of Shares
purchasable under the Option then being exercised less that number of Shares
----
that have a value (i.e., the Fair Market Value of the Shares less the Exercise
----
Price with respect to such Shares) being equal to the Exercise Price (or by a
combination of the above); provided, however, that, in the case of the
-------- -------
preceding clause (ii), if the Optionee acquired such stock to be surrendered
directly or indirectly from the Company, he shall have owned such stock for six
months prior to using such stock to exercise an Option; provided, further,
-------- -------
however, that such
- -------
4
<PAGE>
exercise transaction shall not result in a violation of Section 16 of the
Exchange Act. For purposes of determining the amount, if any, of the exercise
price satisfied by payment in Common Stock, such Common Stock shall be valued at
its Fair Market Value on the date of exercise. Any Common Stock delivered in
satisfaction of all or a portion of the exercise price shall be appropriately
endorsed for transfer and assignment to the Company.
(e) The Optionee shall not be, nor have any of the rights or privileges
of, a shareholder of the Company with respect to any Shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such Shares shall have been issued by the Company to the Optionee.
9. Termination of Option Period. The unexercised portion of an Option
shall automatically and without notice terminate and become null and void and be
forfeited upon the earliest to occur of the following:
(i) if the Optionee's position as a Director of the Company
terminates, other than by reason of such Optionee's death or disability,
180 days after the date that the Optionee's position as a Director of the
Company terminates;
(ii) one year after the death of Optionee;
(iii) one year after the date on which the Optionee's position as
Director is terminated by reason of a mental or physical disability
determined by a medical doctor satisfactory to the Company; or
(iv) five years after the Date of Grant of such Option.
10. Assignability of Options. No Option shall be assignable or otherwise
transferable, except to members of the Optionee's immediate family or by will,
or the laws of descent and distribution, and no Option shall be transferrable by
an Optionee in violation of Section 16 of the Exchange Act.
11. Adjustments.
(a) If at any time there shall be an increase or decrease in the number of
issued and outstanding Shares, through the declaration of a stock dividend or
through any recapitalization resulting in a stock split, combination or exchange
of Shares, then appropriate proportional adjustment shall be made in the number
of Shares (and, with respect to Options, the exercise price per Share): (i)
subject to outstanding Options; (ii) reserved under the Plan; and (iii) granted
as subsequent Options.
(b) In the event of a merger, consolidation or other reorganization of the
Company under the terms of which the Company is not the surviving corporation,
but the surviving corporation elects to assume an Option, each Optionee shall be
entitled to receive, upon
5
<PAGE>
the exercise of such Option, with respect to each Share: (i) the number of
shares of stock of the surviving corporation (or equity interest in any other
entity); and (ii) any other notes, evidences of indebtedness or other property,
that the Optionee would have received in connection with such merger,
consolidation or other reorganization had he exercised the Option with respect
to such Shares immediately prior to such merger, consolidation or other
reorganization.
(c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect and no adjustment by reason thereof shall
be made with respect to, the number of or exercise price of Shares then subject
to outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate: (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issuance by the Company of debt securities or preferred
stock that would rank above the Shares subject to outstanding Options; (iv) the
dissolution or liquidation of the Company; (v) any sale, transfer or assignment
of all or any part of the assets or business of the Company; or (vi) any other
corporate act or proceeding, whether of a similar character or otherwise.
12. Purchase for Investment. As a condition of any issuance of a stock
certificate for Shares, the Board may obtain such agreements or undertakings, if
any, as it may deem necessary or advisable to assure compliance with any
provision of this Plan or any law or regulation, including, but not limited to,
the following:
(a) a representation and warranty by the Optionee to the Company, at the
time his Option is exercised, that he is acquiring the Shares to be issued to
him for investment and not with a view to, or for sale in connection with, the
distribution of any such Shares; and
(b) a representation, warranty or agreement to be bound by any legends
that are, in the opinion of the Board, necessary or appropriate to comply with
the provisions of any securities law deemed by the Board to be applicable to the
issuance of the Shares and are endorsed upon the certificates representing the
Shares.
13. Amendments, Modifications, Suspension or Discontinuance of this Plan.
For the purpose of complying with changes in the Code or ERISA, the Board may
amend, modify, suspend or terminate the Plan at any time. For the purpose of
meeting or addressing any other changes in legal requirements or any other
purpose, the Board may amend, modify, suspend or terminate the Plan only once
every six months.
6
<PAGE>
14. Governmental Regulation. This Plan and the granting of Options and the
exercise of Options hereunder, and the obligation of the Company to sell and
deliver shares under such Options, shall be subject to all applicable laws,
rules, and regulations and to such approvals by any governmental agencies or
national securities exchanges as may be required.
15. Miscellaneous.
(a) If any provision of this Plan is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead this Plan
shall be construed and enforced as if such provision had never been included in
this Plan.
(b) This Plan shall be governed by the laws of the State of Georgia.
(c) Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine or neuter gender shall be a
reference to such other gender as is appropriate.
7
<PAGE>
16. Effective Date and Termination Date. The effective date of this Plan
is November 13, 1998, the date on which the Board adopted this Plan, but is
subject to the approval of the holders of a majority of the common stock,
without series designation, present either in person or by proxy and entitled to
vote at a duly held meeting of the shareholders of the Company at which a quorum
is present representing a majority of all outstanding voting common stock,
without series designation. In the event that such shareholder approval is not
obtained, all options granted pursuant to the Plan shall be null and void. This
Plan shall terminate on the tenth anniversary of the effective date.
WEBMD, INC.
By:
---------------------------------------
Name (Print):
--------------------------
Title:
---------------------------------
8
<PAGE>
EXHIBIT 10.39
WEBMD, INC.
FORM OF DIRECTOR'S AND OFFICER'S
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of __________ ___, 1998, between WebMD, Inc.
f/k/a Endeavor Technologies Inc., a Georgia corporation (the "Corporation"), and
the member of the Board of Directors and/or the officer of the Corporation named
on the signature page hereof (the "Executive").
WHEREAS, the Executive is a member of the Board of Directors and/or an
officer of the Corporation and in such capacity is performing a valuable service
to the Corporation; and
WHEREAS, the Corporation's Bylaws (the "Bylaws") and Sections 14-2-850
through 14-2-859 of the Georgia Business Corporation Code, as amended to date
(the "State Statute") provide for the indemnification of the directors and
officers of the Corporation; and
WHEREAS, the Bylaws and State Statute specifically contemplate that
contracts may be entered into between the Corporation and the members of its
Board of Directors and officers with respect to indemnification of such
directors and officers; and
WHEREAS, in order to provide to the Executive assurances with respect
to the protection provided against liabilities that he may incur in the
performance of his duties to the Corporation, and to thereby induce the
Executive to serve as a member of its Board of Directors and/or as an officer of
the Corporation, the Corporation has determined and agreed to enter into this
contract with the Executive.
NOW, THEREFORE, in consideration of the premises and the Executive's
continued service as a director and/or an officer after the date hereof, the
parties agree as follows:
1. INDEMNIFICATION. Subject only to the exclusions set forth in
Section 2 hereof, and in addition to any other indemnity to which the Executive
may be entitled under the State Statute or any bylaw, resolution or agreement
(but without duplication of payments with respect to indemnified amounts), the
Corporation hereby further agrees to hold harmless and indemnify the Executive,
to the fullest extent permitted by law, including, but not limited to, holding
harmless and indemnifying the Executive against any and all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the Executive in connection with any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (including an action by or in the right of the
Corporation), to which the Executive is, was, or at any time becomes a party, or
is threatened to be made a party, by reason of the fact that the Executive is,
was, or at any time becomes a director, officer, employee or agent of the
Corporation, or a predecessor corporation, or is or was serving or at any time
serves at the request of the Corporation as a director, officer, partner,
trustee, employee, or agent of another corporation, partnership, employee
benefit plan, joint venture, trust, or other enterprise.
<PAGE>
2. LIMITATIONS ON INDEMNITY. No indemnity pursuant to Section 1
hereof shall be paid by the Corporation:
(a) with respect to any proceeding in which the Executive is
adjudged, by final judgment not subject to further appeal, liable to
the Corporation or is subjected to injunctive relief in favor of the
Corporation:
(i) for any appropriation, in violation of his duties, of
any business opportunity of the Corporation;
(ii) for acts or omissions which involve intentional
misconduct or a knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-
832 of the Georgia Business Corporation Code; or
(iv) for any transaction from which the Executive received
an improper personal benefit;
(b) with respect to any suit in which final judgment is rendered
against the Executive for an accounting of profits, made from the
purchase or sale by the Executive of securities of the Corporation,
pursuant to the provisions of Section 16(b) of the Securities Exchange
Act of 1934 or similar provisions of any federal, state, or local
statutory law, or on account of any payment by the Executive to the
Corporation in respect of any claim for such an accounting; or
(c) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
3. CONTRIBUTION. If the indemnification provided in Section 1 is
unavailable, then in respect of any threatened, pending, or completed action,
suit, or proceeding in which the Corporation is jointly liable with the
Executive (or would be if joined in such action, suit or proceeding), the
Corporation shall contribute, to the extent it is not lawfully prevented from
doing so, to the amount of expenses, judgments, fines, and settlements paid or
payable by the Executive in such proportion as is appropriate to reflect (i) the
relative benefits received by the Corporation on the one hand and the Executive
on the other hand from the transaction from which such action, suit, or
proceeding arose, and (ii) the relative fault of the Corporation on the one hand
and of the Executive on the other in connection with the events which resulted
in such expenses, judgments, fines, or settlement amounts, as well as any other
relevant equitable considerations. The relative fault of the Corporation on the
one hand and of the Executive on the other shall be determined by reference to,
among other things, the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent the circumstances resulting
in such expenses, judgments, fines, or settlement amounts. The Corporation
agrees that it would not be just and equitable if contribution pursuant to this
Section 3 were determined by pro rata allocation or any other method of
allocation that does not take account of the foregoing equitable considerations.
2
<PAGE>
4. CONTINUATION OF OBLIGATIONS. All agreements and obligations of the
Corporation contained herein shall continue during the period the Executive is a
director, officer, employee, or agent of the Corporation (or is serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise) and shall
continue thereafter for so long as the Executive shall be subject to any
possible claim or threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, or investigative, by reason of the fact that the
Executive was a director and/or officer of the Corporation or serving in any
other capacity referred to herein.
5. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the
Executive of notice of the commencement of any action, suit, or proceeding, the
Executive will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation in writing of the
commencement thereof, but the omission to so notify the Corporation will not
relieve the Corporation from any liability which it may have to the Executive
otherwise than under this Agreement. With respect to any such action, suit, or
proceeding as to which the Executive so notifies the Corporation.
(a) the Corporation will be entitled to participate therein at its own
expense; and
(b) subject to Section 6 hereof, and if the Executive shall have
provided his written affirmation of his good faith belief that his conduct
did not constitute behavior of the kind described in paragraph 2(a) hereof
and that he is entitled to indemnification hereunder, the Corporation may
assume the defense thereof.
After notice from the Corporation to the Executive of its election so to
assume such defense, the Corporation will not be liable to the Executive under
this Agreement for any legal or other expenses subsequently incurred by the
Executive in connection with the defense thereof, other than reasonable costs of
investigation or as otherwise provided below. The Executive shall have the
right to employ his separate counsel in such action, suit, or proceeding, but
the fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of the
Executive unless (i) the employment of counsel by the Executive has been
authorized by the Corporation, (ii) counsel designated by the Corporation to
conduct such defense shall not be reasonably satisfactory to the Executive, or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of such
counsel shall be at the expense of the Corporation. For the purposes of clause
(ii) above, the Executive shall be entitled to determine that counsel designated
by the Corporation is not reasonably satisfactory if, among other reasons, the
Executive shall have been advised by qualified counsel that, because of actual
or potential conflicts of interest in the matter between the Executive, other
officers or directors similarly indemnified by the Corporation, and/or the
Corporation, representation of the Executive by counsel designated by the
Corporation is likely to materially and adversely affect the Executive's
interest or would not be permissible under applicable canons of legal ethics.
3
<PAGE>
The Corporation shall not be liable to indemnify the Executive under this
Agreement for any amounts paid in settlement of any action or claim effected
without the Corporation's written consent. The Corporation shall not settle any
action or claim in any manner which would impose any penalty or limitation on
the Executive without the Executive's written consent. Neither the Corporation
nor the Executive will unreasonably withhold consent to any proposed settlement.
6. ADVANCEMENT AND REPAYMENT OF EXPENSES. Upon request therefor
accompanied by reasonably itemized evidence of expenses incurred, and by the
Executive's written affirmation of his good faith belief that his conduct met
the standard applicable to indemnification pursuant to Section 1 hereof and did
not constitute behavior of the kind described in Section 2(a) hereof and that he
is entitled to indemnification hereunder, the Corporation shall advance to the
Executive the reasonable expenses (including attorneys' fees and costs of
investigation and defense (including the fees of expert witnesses, other
professional advisors, and private investigators)) incurred by him in defending
any civil or criminal suit, action, or proceeding for which the Executive is
entitled (assuming an applicable standard of conduct is met) to indemnification
pursuant to this Agreement. The Executive agrees to reimburse the Corporation
for all reasonable expenses paid by the Corporation, whether pursuant to this
Section or Section 5 hereof, in defending any action, suit, or proceeding
against the Executive in the event and to the extent that it shall ultimately be
determined that the Executive is not entitled to be indemnified by the
Corporation for such expenses under this Agreement. Any advances and the
Executive's agreement to repay shall be unsecured and interest-free.
7. ENFORCEMENT.
(a) The Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in
order to induce the Executive to serve as a director and/or officer of the
Corporation and acknowledges that the Executive will in the future be
relying upon this Agreement in continuing to serve in such capacity.
(b) In the event the Executive is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse the Executive
for all of the Executive's reasonable fees and expenses in bringing and
pursuing such action.
8. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable in whole
or in part for any reason, such invalidity or unenforceability shall
not affect the validity or enforceability of the other provisions
hereof.
9. GOVERNING LAW; SUCCESSORS; AMENDMENT AND TERMINATION.
(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Georgia.
4
<PAGE>
(b) This Agreement shall be binding upon the Executive and the
Corporation and its successors and assigns (including any transferee of all
or substantially all of its assets and any successor by merger or otherwise
by operation of law), and shall inure to the benefit of the Executive, his
heirs, personal representatives, and assigns and to the benefit of the
Corporation and its successors and assigns.
(c) No amendment, modification, termination, or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
(d) References to the male gender shall include the female gender, and
vice versa.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EXECUTIVE WEBMD, INC.
By:
- ----------------------------- -------------------------------------
Name (Print):________________ Name (Print)_________________________
Title:_______________________________
5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.40
CO-MARKETING AGREEMENT
----------------------
This Co-Marketing Agreement ("Agreement") is made and entered into
October 20, 1998 ("Effective Date"), by and between WebMD, Inc., a Georgia
corporation located at 400 The Lenox Building, 3399 Peachtree Road, NE, Atlanta
GA 30326 ("Co-Marketer") and E*TRADE Group, Inc., a Delaware corporation located
at Four Embarcadero Place, 2400 Geng Road, Palo Alto, CA 94303 ("E*TRADE").
1. Definitions.
-----------
a. "Co-Branded Site" means the co-branded consumer web site known
as "Destination E*TRADE" (or any other name) as described in Exhibit A attached
hereto.
b. "E*TRADE Services" means E*TRADE's electronic brokerage
services and related products available at the E*TRADE Site.
c. "E*TRADE Site" means E*TRADE's web site located at
[http://www.etrade.com] (or any replacement or successor address).
d. "Co-Marketer Services" means Co-Marketer's internet-based
communications and information services and related products targeting
healthcare professionals and other participants in the healthcare industry and
consumers of healthcare related information available through the Co-Marketer
Sites.
e. "Co-Marketer Sites" means Co-Marketer's professional web sites
located at [http://www.webmd.com] and [http://www.webmd.etrade.com] (or any
replacement or successor addresses) and all third party co-branded or mirrored
addresses or sites thereof.
f. "Partners" means content partners, technology partners and
distribution partners of Co-Marketer.
2. Co-Marketing Obligations.
------------------------
a. Scope. The parties shall undertake and perform the obligations
-----
for the marketing and promotion of the Co-Marketer Services along with the
E*TRADE Services on the Co-Branded Site, the Co-Marketer Sites and/or E*TRADE
Site, to the extent specified in Exhibit A, attached hereto. All such
promotional activity shall be subject to the prior approval of both parties,
such approval not to be unreasonably withheld.
b. Restrictions. Other than by engaging in the activities
------------
described in Section 2.a above and Exhibit A, Co-Marketer, its Partners,
affiliates, and their employees will not (i) describe E*TRADE's brokerage
services (other than disseminating or posting promotional or advertising
materials approved in each case, in advance and before first use, by
<PAGE>
E*TRADE pursuant to Section 3 below); (ii) recommend or endorse specific
securities; (iii) become involved in any manner in the business of providing the
financial services offered by E*TRADE, including, without limitation, by: (A)
opening, approving, maintaining, administering, or closing customer brokerage
accounts with E*TRADE; (B) soliciting, processing, or facilitating securities
transactions relating to customer brokerage accounts with E*TRADE; (C) extending
credit to any customer for the purpose of purchasing securities through, or
carrying securities with, E*TRADE; (D) answering E*TRADE customer inquiries
involving E*TRADE customer accounts or related transactions or engaging in
negotiations involving brokerage accounts or securities transactions; (E)
accepting customer securities orders, selecting among broker-dealers or routing
orders to markets for execution; (F) handling funds or securities of E*TRADE
customers, or effecting clearance or settlement of customer securities trades;
or (G) resolving or attempting to resolve any problems, discrepancies, or
disputes involving E*TRADE customer accounts or related transactions. Co-
Marketer acknowledges that engaging in any of the above activities may subject
Co-Marketer to broker-dealer registration requirements under the Securities
Exchange Act of 1934, as amended, and applicable state securities law.
3. Licensed Marks.
--------------
a. License to E*TRADE Marks. Subject to all the terms and
------------------------
conditions of this Agreement, E*TRADE hereby grants Co-Marketer a nonexclusive,
non-transferable, non-sublicensable license to use the E*TRADE Marks solely on
the Co-Marketer Sites and the Co-Branded Site and solely in connection with the
marketing and promotion of the Co-Marketer Services and the E*TRADE Services.
"E*TRADE Marks" shall mean solely the E*TRADE name and logo specified in Exhibit
B hereto; provided, however, that E*TRADE, in its sole discretion from time to
time, may change the appearance and/or style of the E*TRADE Marks or add or
subtract from the list in Exhibit B, provided that, unless required earlier by a
court order or to avoid potential infringement liability, Co-Marketer shall have
fourteen (14) days' notice to implement any such changes. Co-Marketer hereby
acknowledges and agrees that (i) the E*TRADE Marks are owned solely and
exclusively by E*TRADE, (ii) except as set forth herein, Co-Marketer has no
rights, title or interest in or to the E*TRADE Marks and (iii) all use of the
E*TRADE Marks by Co-Marketer shall inure to the benefit of E*TRADE. Co-Marketer
agrees not to apply for registration of the E*TRADE Marks (or any mark
confusingly similar thereto) anywhere in the world. Co-Marketer agrees that it
shall not engage, participate or otherwise become involved in any activity or
course of action that diminishes and/or tarnishes the image and/or reputation of
any E*TRADE Mark.
b. Use and Display of E*TRADE Marks. Co-Marketer acknowledges and
--------------------------------
agrees that the presentation and image of the E*TRADE Marks should be uniform
and consistent with respect to all services, activities and products associated
with the E*TRADE Marks. Accordingly, Co-Marketer agrees to use the E*TRADE Marks
solely in the manner which E*TRADE shall specify from time to time in E*TRADE's
sole discretion. All usage by Co-Marketer of the E*TRADE Marks shall include the
registered trademark symbol and shall be in the following form, as appropriate:
[E*TRADE Mark](R). All literature and materials
2
<PAGE>
printed, distributed or electronically transmitted by Co-Marketer and containing
the E*TRADE Marks shall include the following notice:
[E*TRADE Mark] is a registered trademark of
E*TRADE Group, Inc.
c. License to Co-Marketer Marks. Subject to all the terms and
----------------------------
conditions of this Agreement, Co-Marketer hereby grants E*TRADE a nonexclusive,
non-transferable, non-sublicensable license to use the Co-Marketer Marks solely
on the E*TRADE Site and in connection with the marketing and distribution of the
E*TRADE Services to its customers. "Co-Marketer Marks" shall mean solely the Co-
Marketer trade names, marks and logos specified in Exhibit C hereto; provided,
however, that Co-Marketer, in its sole discretion from time to time, may change
the appearance and/or style of the Co-Marketer Marks or add or subtract from the
list in Exhibit C, provided that, unless required earlier by a court order or to
avoid potential infringement liability, E*TRADE shall have fourteen (14) days'
notice to implement any such changes. E*TRADE hereby acknowledges and agrees
that, (i) the Co-Marketer Marks are owned solely and exclusively by Co-Marketer,
(ii) except as set forth herein, E*TRADE has no rights, title or interest in or
to the Co-Marketer Marks and (iii) all use of the Co-Marketer Marks by E*TRADE
shall inure to the benefit of Co-Marketer. E*TRADE agrees not to apply for
registration of the Co-Marketer Marks (or any mark confusingly similar thereto)
anywhere in the world. E*TRADE agrees that it shall not engage, participate or
otherwise become involved in any activity or course of action that diminishes
and/or tarnishes the image and/or reputation of any Co-Marketer Mark.
d. Use and Display of Co-Marketer Marks. E*TRADE acknowledges and
------------------------------------
agrees that the presentation and image of the Co-Marketer Marks should be
uniform and consistent with respect to all services, activities and products
associated with the Co-Marketer Marks. Accordingly, E*TRADE agrees to use the
Co-Marketer Marks solely in the manner which Co-Marketer shall specify from time
to time in Co-Marketer's sole discretion. All usage by E*TRADE of the Co-
Marketer Marks shall include the appropriate trademark symbol and shall be in
the following form, as appropriate: [Co-Marketer Mark](R) or [Co-Marketer
Mark](TM). All literature and materials printed, distributed or electronically
transmitted by E*TRADE and containing the Co-Marketer Marks shall include the
following notice:
[Co-Marketer Mark] is a [registered] trademark of
Co-Marketer Corporation
4. Payment; Reports; Audit Rights.
------------------------------
a. Payment and Reports. Subject to the terms and conditions of
this Agreement, all payments made under this agreement shall be made in
accordance with terms specified in Exhibit D attached hereto.
3
<PAGE>
b. Audit Rights. All records relating to payment obligations
------------
hereunder, and inspection and audits thereof, shall be kept and made available
in accordance with terms specified in Exhibit D.
5. Ownership. Each party or their respective licensors and third
---------
party information and content providers retain all rights, title and interest in
and to all of the information, content, data, designs, materials and all
copyrights, patent rights trademark rights and other proprietary rights thereto
provided by it pursuant to this Agreement. Except as expressly provided herein,
no other right or license with respect to any copyrights, patent rights,
trademark rights or other proprietary rights is granted under this Agreement.
All rights not expressly granted hereunder by a party are expressly reserved to
such party and its licensors and information and content providers.
6. Term and Termination.
--------------------
a. This Agreement shall commence on the Effective Date and shall
remain in full force and effect (unless terminated earlier as provided below)
for an initial term of one (1) year which shall be renewed automatically for
additional one (1) year periods unless either party provides written notice
ninety (90) days before the end of the then current term (collectively, the
"Term"). Either party may terminate this Agreement at any time without cause by
providing ninety (90) days' written notice to the other party.
b. This Agreement may be terminated by a party for cause
immediately by written notice upon the occurrence of any of the following
events:
i) If the other ceases to do business, or otherwise
terminates its business operations, except as a result of an assignment
permitted under Section 13.a below; or
ii) If the other shall fail to promptly secure or renew any
license, registration, permit, authorization or approval or exemption therefrom
for the conduct of its business in the manner contemplated by this Agreement or
if any such license, registration, permit, authorization or approval is revoked
or suspended and not reinstated within sixty (60) days; or
iii) If the other materially breaches any material provision
of this Agreement and fails to cure substantially such breach within thirty (30)
days of written notice describing the breach; or
iv) Effective immediately and without notice if the other
becomes insolvent or seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding, or if any
such proceeding is instituted against the other (and not dismissed within ninety
(90) days).
c. Survival. Sections 4.b and 5 through and including 12, any
--------
accrued payment obligations and, except as otherwise expressly provided herein,
any right of action for breach of this Agreement prior to termination shall
survive any termination of this Agreement.
4
<PAGE>
Furthermore, upon termination or expiration of this Agreement, the licenses and
obligations in Sections 2 and 3 shall cease.
d. Obligations After Termination or Expiration. Upon the expiration
-------------------------------------------
or termination of this Agreement for any reason:
i) Except as otherwise specified in clause (ii) below, each
party will promptly cease using and destroy or return to the other party all
promotional and advertising materials that bear the Marks of the other party and
all Confidential Information of such other party; and
ii) Co-Marketer and E*TRADE will continue to deliver the Co-
Marketer and E*TRADE Services, respectively, to their customers until the
expirations or terminations of their respective subscription agreements with Co-
Marketer and E*TRADE.
7. Warranty Disclaimer. NEITHER PARTY MAKES ANY WARRANTIES TO ANY PERSON
-------------------
OR ENTITY WITH RESPECT TO ANY INFORMATION, CONTENT OR OTHER MATERIALS PROVIDED
OR MADE AVAILABLE BY IT HEREUNDER AND DISCLAIMS ALL EXPRESS OR IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OR MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
8. Indemnification. Each party (the "Indemnitor") shall defend or settle
---------------
at its expense a claim or suit against the other party (the "Indemnitee"), its
sublicensees, distributors, and end users arising out of or in connection with
an assertion that the information, content or other materials or services
provided or made available by the Indemnitor or the use thereof as specifically
authorized by the Indemnitor, infringe any copyright or trademark rights of any
third party, or are a misappropriation of any third party's trade secret, or
contain any libelous, defamatory, disparaging, pornographic or obscene
materials. The Indemnitor shall indemnify and hold harmless the Indemnitee
against and from damages, costs, and reasonable attorneys' fees, if any,
incurred in defending and/or resolving such suit; provided that (a) the
Indemnitor is promptly notified in writing of such claim or suit, (b) the
Indemnitor shall have the sole control of the defense and/or settlement thereof,
(c) the Indemnitee furnishes to the Indemnitor, on request, information
available to the Indemnitee for such defense, and (d) the Indemnitee cooperates
in any defense and/or settlement thereof as long as the Indemnitor pays all of
the Indemnitee's reasonable out of pocket expenses and attorneys' fees. The
Indemnitee shall not admit any such claim without prior consent of the
Indemnitor.
Co-Marketer agrees to indemnify E*TRADE for any third party claim,
(including without limitation any Self-Regulatory Organization, state, or
federal regulatory or securities claims) arising out of the Co-Marketer Services
or out of a breach of any provision of this Agreement by Co-Marketer, its
Partners, affiliates and their employees, including but not limited to any
distribution of promotional or advertising materials not approved in advance by
E*TRADE under Section 2.b. of this Agreement.
5
<PAGE>
E*TRADE agrees to indemnify Co-Marketer for any third party claim,
(including without limitation any Self-Regulatory Organization, state, or
federal regulatory or securities claims) arising out of the use or distribution
by Co-Marketer, its Partners, affiliates and employees of any promotional or
advertising materials approved by E*TRADE only to the extent that these
materials relate directly to the E*TRADE Services.
9. Limited Liability. EXCEPT AS OTHERWISE PROVIDED BELOW, AND
-----------------
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY
SHALL BE LIABLE OR OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT OR UNDER
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR COST OF PROCUREMENT
OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS IN THIS SECTION 9 SHALL NOT
APPLY TO ANY BREACH OF SECTION 10.
10. Confidential Information.
------------------------
a. Each party ("Receiving Party") agrees to keep confidential
and not disclose or use except in performance of its obligations under this
Agreement, confidential or proprietary information related to the other party's
("Disclosing Party") technology or business that the Receiving Party learns in
connection with this Agreement and any other information received from the
other, including without limitation, to the extent previously, currently or
subsequently disclosed to the Receiving Party hereunder or otherwise:
information relating to products or technology of the Disclosing Party or the
properties, composition, structure, use or processing thereof, or systems
therefor, or to the Disclosing Party's business (including, without limitation,
computer programs, code, algorithms, schematics, data, know-how, processes,
ideas, inventions (whether patentable or not), names and expertise of employees
and consultants, all information relating to customers and customer transactions
and other technical, business, financial, customer and product development
plans, forecasts, strategies and information), all of the foregoing,
"Confidential Information"). Neither party shall disclose the terms of this
Agreement to any third party without the prior written consent of the other
party. Each party shall use reasonable precautions to protect the other's
Confidential Information and employ at least those precautions that such party
employs to protect its own confidential or proprietary information.
"Confidential Information" shall not include information the Receiving Party can
document (a) is in or (through no improper action or inaction by the Receiving
Party or any affiliate, agent or employee) enters the public domain (and is
readily available without substantial effort), or (b) was rightfully in the
Receiving Party's possession or known by it prior to receipt from the Disclosing
Party, or (c) was rightfully disclosed to the Receiving Party by another person
without restriction, or (d) was independently developed by the Receiving Party
by persons without access to such information and without use of any
Confidential Information of the Disclosing Party. Each party, with prior written
notice to the Disclosing Party, may disclose such Confidential Information to
the minimum extent possible that is required to be disclosed to a governmental
entity or agency in connection with seeking any governmental or regulatory
approval, or pursuant to the lawful requirement or request of a governmental
entity or agency, provided that reasonable measures
6
<PAGE>
are taken to guard against further disclosure, including without limitation,
seeking appropriate confidential treatment or a protective order, or assisting
the other party to do so.
b. The Receiving Party acknowledges and agrees that due to the
unique nature of the Disclosing Party's Confidential Information, there can be
no adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties to unfairly compete
with the Disclosing Party resulting in irreparable harm to the Disclosing Party,
and therefore, that upon any such breach or any threat thereof, the Disclosing
Party shall be entitled to appropriate equitable relief in addition to whatever
remedies it might have at law and to be indemnified by the Receiving Party from
any loss or harm, including, without limitation, lost profits and attorney's
fees, in connection with any breach or enforcement of the Receiving Party's
obligations hereunder or the unauthorized use or release of any such
Confidential Information. The Receiving Party will notify the Disclosing Party
in writing immediately upon the occurrence of any such unauthorized release or
other breach. Any breach of this Section 10 will constitute a material breach of
this Agreement.
11. Relationship of Parties. The parties hereto expressly understand
-----------------------
and agree that each party is an independent contractor in the performance of
each and every part of this Agreement, is solely responsible for all of its
employees and agents and its labor costs and expenses arising in connection
therewith. Neither party nor its agents or employees are the representatives of
the other party for any purpose and neither party has the power or authority as
agent, employee or any other capacity to represent, act for, bind or otherwise
create or assume any obligation on behalf of the other party for any purpose
whatsoever.
12. Notices. Notices under this Agreement shall be sufficient only if
-------
personally delivered, delivered by a major commercial rapid delivery courier
service or mailed, postage or charges prepaid, by certified or registered mail,
return receipt requested to a party at its addresses set forth on the first page
above or as amended by notice pursuant to this Section. If not received sooner,
notice by mail shall be deemed received five (5) days after deposit in the U.S.
mails.
13. Related Services.
----------------
a. ***
b. ***
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
7
<PAGE>
c. Co-Marketer Employee E*TRADE Accounts. Co-Marketer will
-------------------------------------
promote E*TRADE as the exclusive on-line financial services provider to its
employees. E*TRADE will design a special promotion for Co-Marketer employees to
encourage them to open E*TRADE accounts.
14. Miscellaneous.
-------------
a. Prohibition Against Assignment. Neither this Agreement nor
------------------------------
any rights, licenses or obligations hereunder, may be assigned by either party
without the prior written approval of the non-assigning party. Notwithstanding
the foregoing, either party may assign this Agreement to any acquiror of all or
of substantially all of such party's equity securities, assets or business
relating to the subject matter of this Agreement. Any attempted assignment in
violation of this Section will be void and without effect. Subject to the
foregoing, this Agreement will benefit and bind the parties' successors and
assigns.
b. Applicable Law; Attorneys' Fees. This Agreement shall be
-------------------------------
governed by and construed in accordance with the laws of the State of California
without reference to conflict of law principles thereof. In any action to
enforce this Agreement the prevailing party will be entitled to costs and
attorneys' fees.
c. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matter hereof and
supersedes all prior discussions, documents, agreements and prior course of
dealing, and shall not be effective until signed by both parties.
d. Amendment and Waiver. Except as otherwise expressly provided
--------------------
herein, any provision of this Agreement may be amended or modified and the
observance of any provision of this Agreement may be waived (either generally or
any particular instance and either retroactively or prospectively) only with the
written consent of the parties. The failure of either party to enforce its
rights under this Agreement at any time for any period shall not be construed as
a waiver of such rights.
e. Severability. In the event that any of the provisions of this
------------
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, such provisions shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
8
<PAGE>
f. Publicity. Any press releases in connection with this
---------
Agreement shall be subject to the prior written mutual approval of the parties.
g. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
h. Third Party Beneficiaries. E*TRADE's and Co-Marketer's third
-------------------------
party licensors and information providers are intended beneficiaries of this
Agreement. All such third parties shall be bound by the terms of this Agreement
including without limitation Paragraph 2(b) hereto to the maximum extent
possible.
i. Headings. Headings and captions are for convenience only and
--------
are not to be used in the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date. All signed copies of this Agreement shall be deemed originals.
CO-MARKETER: WebMD, Inc.
By: /s/ K. Robert Draughon
Name: K. Robert Draughon
--------------------------------
Title: Chief Financial Officer
-------------------------------
E*TRADE GROUP, INC.
By: /s/ Stephen C. Richards
Name: Stephen C. Richards
--------------------------------
Title: SVP, Corporate Development and
------------------------------
New Ventures
------------------------------
9
<PAGE>
EXHIBIT A
Co-Marketer's Promotional and Advertising Obligations
- -----------------------------------------------------
Pursuant to Section 2.a of the Agreement, Co-Marketer agrees to
advertise and promote the E*TRADE Services on the Co-Marketer Sites as specified
in this Exhibit. Co-Marketer shall use materials and content (including,
without limitation, active hyperlinking URLs) provided by and/or approved in
advance and before first use, by E*TRADE for advertisement and promotion of the
E*TRADE Services on the Co-Marketer Sites. E*TRADE shall be the exclusive
provider of brokerage services and investment related products (specifically
excluding banking and insurance products and services), electronic or otherwise,
promoted on the Co-Marketer Sites.
1) Co-Marketer - E*TRADE Offer: E*TRADE will purchase subscriptions
---------------------------
to the Co-Marketer Services from Co-Marketer in Subscription Blocks (as provided
in Exhibit D, hereto) which subscriptions Co-Marketer will promote and advertise
in accordance with all provisions of this Agreement on behalf of E*TRADE free of
charge to any person approved by E*TRADE for a new account pursuant to E*TRADE's
standard terms.
Each such subscription to the Co-Marketer service shall include:
Unlimited local dialup Internet access (ISP account) which the
Subscriber may decline at the Subscriber's sole discretion
Customized Physician web-site, including links to patient education
information
Payor referrals, eligibility, and verification via electronic data
interchange (EDI)
Certified E-mail account (***/mo.)
Universal in-box (telephonic and web-based e-mail, voice-mail, and
faxing)
Continued Medical Education credits (CME)
Access to a comprehensive source of dynamic medical/healthcare content
Tools to manage the user's practice and improve the user's lifestyle
OTHER CO-MARKETER WEB SITES. Upon completion of this Agreement, and for forty-
five (45) days thereafter, Co-Marketer shall not engage in any conversations,
negotiations, or discussions of any kind with any third party securities broker
or dealer, other than E*TRADE, for purposes of promoting or otherwise including
such third party broker on Co-Marketer's consumer site (i.e. "Health and
Wellness Center") or any other web site owned or controlled by Co-Marketer. In
the event that E*TRADE and Co-Marketer fail to reach an agreement regarding such
site during this forty-five (45) day period, E*TRADE shall have a right of first
refusal for one (1) years for inclusion as securities broker-dealer service
provider on such site.
E*TRADE shall further have a right of first refusal for inclusion as securities
broker-dealer service provider on any site created, sponsored, or developed by
Co-Marketer, wherever located, intended for use by individuals and/or
organizations located outside of the United States.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
10
<PAGE>
PROMOTION AND ADVERTISING. Co-Marketer shall use the payment described in
Paragraph 1 of Exhibit D hereto to fund a national media campaign, consisting of
print, radio, on-line and/or television advertising to promote the E*TRADE
Offer. Co-Marketer shall further use commercially reasonable efforts to promote
the E*TRADE Offer. Any such print, radio, on-line and/or televisions
advertising must be approved, in advance and before first use, by E*TRADE.
CO-MARKETER SERVICE LEVEL AGREEMENT: In performance of its obligations under
this Agreement Co-Marketer shall meet the requirements for service level
performance as set forth in Exhibit E attached hereto.
CO-BRANDED WEB PAGE:
Co-Marketer's promotional efforts and obligations regarding the Co-
Branded Site hereunder consist of the following:
1. Co-Marketer agrees to provide *** to E*TRADE all of the
medical/healthcare content for the "Destination E*TRADE" Site ("Co-
Branded Site"). The Co-Branded Site shall be a co-branded area
consisting of a co-branded first page, with the second through last
pages containing Co-Marketer content but always including a "Back to
E*TRADE" navigation button. *** All content on the second through last
page of the Co-Branded Site page and all advertising and sponsorship
and revenues thereof shall be owned exclusively by Co-Marketer.
2. Co-Marketer agrees to advertise and promote the E*TRADE Services
in the "Financial center" area of the Co-Marketer Sites as specified
in this Exhibit. Co-Marketer shall sponsor and promote E*TRADE as an
exclusive securities broker-dealer featured on the Co-Marketer Sites.
Co-Marketer shall use materials and content provided by and/or
approved, in advance and before first use, by E*TRADE for
advertisement and promotion of the Co-Branded Site, such advertising
to include (i) on-line banner ads on the Co-Marketer Sites with direct
links to the E*TRADE Site, (ii) prominent display of E*TRADE's name
and logos in the portal page and other pages and (iii) other
activities as specified in this Exhibit A. Co-Marketer shall not sell
advertising to, or otherwise promote, any other securities broker or
dealer on the Co-Branded Site.
3. The Co-Branded Site shall be located on a Co-Marketer server with
direct http "hot" links from the "Financial Center" area of the Co-
Marketer Sites. The parties shall mutually agree upon links, as
appropriate, from the Co-Branded Site to additional information or
applications located on the Co-Marketer Sites.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
11
<PAGE>
4. Co-Marketer shall not sell any advertising to any third party on
the Co-Branded Site on terms more favorable to such third party than
those offered to or being paid by E*TRADE without first offering such
terms to E*TRADE. In all advertisements and other references in the
"Financial Center" or similar area of the Co-Marketer Sites, E*TRADE
will be featured with no less prominence than that provided to any
other third party.
5. Co-Marketer agrees to use only such materials and content
(including, without limitation, active hyperlinking URLs) provided by
and/or approved, in advance and before first use, by E*TRADE for
advertisements and promotion of the E*TRADE Services on the Co-
Marketer Sites. E*TRADE shall be the exclusive provider of broker-
dealer services and investment related products (specifically
excluding banking and insurance products and services), electronic or
otherwise, promoted on the Co-Marketer Sites.
6. Co-Marketer and the Co-Branded Site shall meet the requirements
for service level performance as set forth in Exhibit E attached
hereto.
7. E*TRADE may, in its sole discretion, grant to its international
affiliates the right to hyperlink to the Co-Branded Site.
YEAR 2000 COMPLIANCE. Co-Marketer represents and warrants that the Co-Marketer
Sites, the Co-Branded Site, and Co-Marketer Services (including, without
limitation, with respect to the specific promotions below) are Year 2000
Compliant. For purposes of this Agreement, "Year 2000 Compliant" shall mean
that the Co-Marketer Sites and Co-Marketer Services will not be materially
affected by any inability to (i) completely and accurately address, present,
produce, store and calculate data involving dates beginning with January 1,
2000, and will not produce abnormally ending or incorrect results involving such
dates as used in any forward or regression date based function; or (ii) function
in a such a way that all "date" related functionalities and data fields include
the indication of century and millennium, and will perform calculations which
involve a four-digit year field. Notwithstanding the foregoing, this Year 2000
warranty shall not apply to the extent that any services or software are used or
interfaced with other software, data or operating systems, which are not Year
2000 compliant.
E*TRADE'S OBLIGATIONS
- ---------------------
Pursuant to Section 2.a of the Agreement, E*TRADE agrees to advertise and
promote the E*TRADE and Co-Marketer Services as specified in this Exhibit.
PROMOTION AND ADVERTISING. E*TRADE shall promote Co-Marketer membership to
E*TRADE's subscriber base, via the following promotion: any E*TRADE customer
that signs up for one (1) year of Co-Marketer membership at the best commercial
rate available at the time of enrollment (specifically excluding special and
promotional offers not available generally to all Co-Marketer subscribers) shall
receive *** from E*TRADE during that year.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
12
<PAGE>
E*TRADE further agrees to advertise the E*TRADE/Co-Marketer relationship by
including Co-Marketer in a portion of E*TRADE's future planned media buys and
through on-line banner advertisement, using materials and content provided by
and/or approved in advance by Co-Marketer.
E*TRADE will design and prepare *** (***) Fulfillment Kits for use solely in
connection with this Agreement as soon as is commercially reasonable after the
Effective Date. The parties shall use good faith efforts to reach agreement
regarding the provision of additional Fulfillment Kits.
YEAR 2000 COMPLIANCE. E*TRADE represents and warrants that the E*TRADE Site and
E*TRADE Services (including, without limitation, with respect to the specific
promotions above) are Year 2000 Compliant. For purposes of this Agreement,
"Year 2000 Compliant" shall mean that the E*TRADE Site and E*TRADE Services will
not be materially affected by any inability to (i) completely and accurately
address, present, produce, store and calculate data involving dates beginning
with January 1, 2000, and will not produce abnormally ending or incorrect
results involving such dates as used in any forward or regression date based
function; or (ii) function in a such a way that all "date" related
functionalities and date fields include the indication of century and
millennium, and will perform calculations which involve a four-digit year field.
Notwithstanding the foregoing, this Year 2000 warranty shall not apply to the
extent that any services or software are used or interfaced with other software,
data or operating systems, which are not Year 2000 compliant.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
13
<PAGE>
EXHIBIT B
---------
E*TRADE Marks
- -------------
E*TRADE(R)
[E*TRADE logo]
14
<PAGE>
EXHIBIT C
---------
Co-Marketer Marks
- -----------------
WebMD(TM)
WebMD OnCall(TM)
[WebMD logo]
15
<PAGE>
EXHIBIT D
---------
Payment Terms
-------------
By E*TRADE.
1. Initial Guaranteed Purchase. Subject to the terms and conditions
---------------------------
of this Agreement, on the Effective Date of this Agreement E*TRADE shall
purchase *** (***) subscriptions to the Co-Marketer service from Co-Marketer.
E*TRADE will pay Co-Marketer *** (***) for these subscriptions within thirty
(30) days of the Effective Date.
2. Subscription Blocks. Subject to the terms and conditions of this
-------------------
Agreement, Co-Marketer will offer to E*TRADE, for purchase at E*TRADE's sole
discretion, additional blocks of *** (***) subscriptions to the Co-Marketer
service ("Subscription Blocks") at the rate of *** (***) per Subscription Block.
E*TRADE may purchase additional Subscription Blocks from Co-Marketer singly or
in any combination at any time at E*TRADE's sole discretion by providing written
notice, including but not limited to notice by postal mail, or facsimile, to Co-
Marketer.
3. Payment Schedule. Payment for each successive purchase of
----------------
additional Subscription Blocks by E*TRADE shall be made within thirty (30) days
of E*TRADE's written notice to Co-Marketer of its intent to purchase any such
additional Subscription Blocks.
4. Renegotiation for ISP Usage. In the event that more than ***
---------------------------
(***) of all subscribers to the Co-Marketer service from the E*TRADE Offer
decline the internet access services as provided in Exhibit A hereto, the
parties agree to renegotiate in good faith the price of Subscription Blocks to
be paid by E*TRADE.
BY CO-MARKETER
For every E*TRADE account holder who opens a Co-Marketer subscription through
the efforts of E*TRADE, other than an account holder who opened a new account
with E*TRADE pursuant to this Agreement, Co-Marketer shall pay *** (***) to
E*TRADE within thirty (30) days of the receipt of the first payment from such
account holder by Co-Marketer.
Co-Marketer will reimburse E*TRADE's cost of *** (***) for the Fulfillment Kits
prepared by E*TRADE pursuant to Exhibit A hereto. E*TRADE may, in its sole
discretion, withhold this sum from the Initial Guaranteed Purchase described
herein as satisfaction of Co-Marketer's obligation hereunder. The parties shall
use good faith efforts to reach agreement regarding the provision of additional
Fulfillment Kits.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
16
<PAGE>
RECORDS AND AUDIT TERMS
- -----------------------
Each party shall keep, maintain and preserve for at least three (3)
years following termination or expiration of the term of this Agreement or any
renewal(s) thereof, accurate records relating to such party's payment
obligations hereunder. Such records shall be maintained as confidential, but
shall be available for inspection and audit as provided herein. Each party
shall have the right at least once per calendar year to have an independent
public accountant, reasonably acceptable to the other party, examine such other
party's relevant books, records and accounts for the purpose of verifying the
accuracy of payments made to the other party as required under this Agreement.
Each party acknowledges and agrees that such accountant shall not have access to
the books, records, and accounts relating to other products or services except
as such books, records and accounts also directly relate to the payments due
hereunder. Each audit will be conducted at the audited party's place of
business, or other place agreed to by Co-Marketer and E*TRADE, during the
audited party's normal business hours and with at least five (5) business days
prior written notice to the audited party. The auditing party shall pay the
fees and expenses of the auditor for the examination; provided that should any
examination disclose a shortfall in the excess of the greater of twenty-five
thousand dollars ($25,000) or five percent (5%) of the payments due the auditing
party for the period being audited, the audited party shall pay the reasonable
fees and expenses of the auditor for that examination. At least every two weeks
during the term of this Agreement, each party shall provide the other party with
such reports as reasonably requested in order to facilitate each party's
obligations under this agreement.
17
<PAGE>
EXHIBIT E
---------
1. PERFORMANCE
a) Average less than *** response time for *** of requests. Measures server
response time only, not network transmission time.
b) Average *** up time. This would be exclusive of regularly scheduled
maintenance. Scheduled maintenance is defined as maintenance for which 48
hours advance notice has been given for the required down time.
c) Post an approved message in the event of a system outage.
2. MONITORING/REPORTING
a) Provide details on the method used to monitor performance times.
b) Provide weekly and monthly reporting which details server up time with the
following details per period:
. average response time
. actual daily response time detail
. average server up time
. actual daily server up time
This information will be emailed to the appropriate contact within the E*TRADE
Information Systems Division on Monday of each week for the previous week's
reports and the first working day of each month for the previous month's
reports.
3. ESCALATION PROCEDURES
a) Notify E*TRADE via the following email addresses in case of a service
outage:
. [email protected]
. [email protected]
b) Notify E*TRADE within *** of Co-Marketer's awareness of a service outage.
Status information to include:
. reason for the outage.
. ETA for service restored.
c) If E*TRADE experiences a service outage and has not been notified by email
by Co-Marketer, E*TRADE will contact the Senior System Administrator at Co-
Marketer by pager at (800) 329-4358 and will be given the information listed
in 3.b).
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
18
<PAGE>
d) Continue to notify E*TRADE with updated status for the duration of the
outage.
e) Provide a post incident summary. This summary should include:
. the cause of the problem.
. method used to correct the problem.
. measures Co-marketer will take to prevent further occurrences.
4. BUSINESS RESUMPTION
a) Co-Marketer must prove the ability to switch processing from the primary
server to a hot backup server within ***. Testing of this procedure will be
conducted as requested by E*TRADE on a designated weekend by both Co-
Marketer and E*TRADE personnel.
b) Perform an analysis that documents all of the single points of failure in
the Co-Marketer - E*TRADE system. Include network components such as
routers, hardware and software components.
c) Eliminate all of the single points of failure within the Co-marketer domain
within *** months from the date of this document.
5. REVENUE IMPACT RECOUPMENT
a) In the event that Co-Marketer fails to meet the performance objectives
defined in Section 1.a), a penalty of *** will be due E*TRADE.
b) In the event that Co-Marketer fails to meet the performance objectives
defined in Section 1.b), Co-Marketer will credit E*TRADE a prorated amount
of the monthly service fee as compensation for the service outage. The
calculation for this credit will be as follows: The monthly fee as specified
in Exhibit D of this Agreement divided by 720 hours (30 days per month times
24 hours per day) times the total time of the outage.
c) In the event that Co-Marketer fails to meet the performance objectives
defined in Section 1.c), a penalty of *** will be due E*TRADE.
d) These penalties will be credited to the month's billing in which the
performance failure occurred.
e) Failure by Co-Marketer to meet these performance objectives for ***
consecutive months or *** out of *** months shall constitute a breach of
this Agreement and E*TRADE will have the right to terminate immediately
after providing written notice to Co-Marketer of such intent.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
19
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.41
DELMAR PUBLISHERS
LICENSE AND SERVICE AGREEMENT
This AGREEMENT is made as of the date of signing of the Agreement, December 22,
1998 by and between ("Delmar Publishers") as Licensor and ("WebMD, Inc.") as
Licensee.
Licensor: Delmar Publishers
3 Columbia Circle
Albany, NY 12203
Licensee: WebMD, Inc.
400 The Lenox Building
3399 Peachtree Road, NE
Atlanta, GA 30326
WITNESSETH
WHEREAS, Delmar Publishers has developed and copyrighted certain proprietary
healthcare and other content ("Content"), as more fully described in Appendix A
("Delmar Publishers Content"), and in conjunction with delivery of this Content,
Delmar Publishers shall provide Content Subscription and Promotional Support
("Subscription and Promotional Support"), as more fully described in Appendix B.
WHEREAS, the parties acknowledge that the Internet is neither owned nor
controlled by any one entity; therefore, Delmar Publishers can make no guarantee
that any given End-User shall be able to access the Content Service at any given
time. Delmar Publishers represents that it shall make every good faith effort
to ensure that its Content Service is available as widely as possible and with
as little service interruption as possible.
WHEREAS, WebMD intends to engage in the marketing, sale and provision of
healthcare and other content to Subscribers and End-Users of their service, and
wishes to license the Content and make use of Subscriptions and Promotional
Support Services to make the Content available through WebMD's World Wide Web
site located at www.webrn.com which will act as an Internet aggregator of
--------------
content and services for the nursing profession and possibly other healthcare
professionals (the "WebMD Service") and possibly through its World Wide Web site
located at www.webmd.com, and known in this Agreement as the "Service".
DEFINITIONS
For purposes of this Agreement, the following definition of terms shall be used:
ADVERTISING. Payment by a third party for placement of an advertisement in
- -----------
conjunction with Content.
Page 1 of 13
<PAGE>
SUBSCRIPTION. Payment by a third party healthcare related entity or an
- ------------
individual healthcare professional for access to Content through WebRN.
SPONSORSHIP. Payment by a third party for subscriptions for Subscriber access
- -----------
to Content involving placement of a company trademark or notification of a
company identity in conjunction with Content.
REVENUE. Payment by third parties for products and/or services before any
- -------
subtractions for expenses or costs. Revenue includes payments of transaction
fees, advertising, sponsorships and other sources that are unnamed, but may
occur.
END-USERS. A subscriber or consumer of any of WebMD's world website services,
- ---------
including without limitation, those services offered through webmd.com and
webrn.com.
SUBSCRIBERS. A paying subscriber to the WebRN website services.
- -----------
NOW, THEREFORE, in consideration of the premises, mutual covenants, and promises
set forth herein, the parties hereto agree as follows:
ARTICLE - DUTIES OF LICENSOR
1.1 GRANT. Delmar Publishers hereby grants to WebMD for the term of this
-----
Agreement the nontransferable and nonexclusive right and license to the list of
content items available in the Delmar Catalog of products in accordance with
Appendix A. The list includes the rights to any Delmar-owned graphic,
illustration, photograph, video, audiotape, animation, testbank, cd-rom,
textbook or other article of content. WebMD will obtain the right to market
this content as is, or in a repurposed format agreeable to Delmar Publishers to
the "End-Users" of their service.
1.2 NONEXCLUSIVITY. This Agreement does not impose any obligation of
--------------
exclusivity upon either party.
1.3 MARKETS. End-Users of Content are Nurses, Nursing Students, Consumers,
-------
Physicians, Corporations, Hospitals, Organizations who subscribe to and continue
to have access to the service via WebMD's World Wide Web sites, including
without limitation, WebRN or WebMD.
1.4 ADVERTISING AND SPONSORSHIP. Advertising and sponsorship may from time to
---------------------------
time occur in conjunction with the Content. WebMD may sell sponsorship of an
entire electronic publication as listed in Appendix A. Advertising and
sponsorship occurring in conjunction with the Content (see APPENDIX A) may be
subject to regulatory limitation as interpreted and enacted by Delmar
Publishers.
1.5 DISTRIBUTION TERRITORY. Use of Content by WebMD is limited to "End-Users"
----------------------
of their Web Site Service.
1.6 ACCESS TO CONTENT. Delmar Publishers grants authorized End-Users of the
-----------------
Service (see Section 2.1 below) access to the Content through use of an industry
standard Web browser.
1.7 CONTENT AND SUBSCRIPTION & PROMOTIONAL SUPPORT. Delmar Publishers agrees
----------------------------------------------
to provide
Page 2 of 13
<PAGE>
WebMD with technical support for integration of "Web-Ready" content to be used
on WebMD's website. In addition, Delmar Publishers agrees to deliver a "Web-
Ready" version of Delmar's PDR for Nurses, and develop and deliver Delmar's
Electronic Care Plan Maker, and Accu-Calc to WebMd in accordance with Appendix
B.
1.8 ACTIVITY REPORTING. WebMd shall maintain and provide Delmar Publishers with
------------------
quarterly active Subscriber statistics for WebRN website service.
1.9 NOTICE OF CONTENT CESSATION. Delmar Publishers shall have the right to
---------------------------
cease normal production or updating of any of the Web-Enabled Content outlined
in this Agreement, provided that such cessation by Delmar Publishers is not with
respect to WebMD alone but is part of a program by Delmar Publishers to cease
production or updating of such Content on or through other electronically
accessed networks, including but not limited to the same or similar On-line
Distributors on which the Service is available. Delmar Publishers shall give
WebMD three (3) months' written notice prior to Delmar Publishers requesting
WebMD to cease use of any Content set, as described above. Upon receipt of such
notice and subsequent removal of the subject Delmar Publishers Content from the
Service, WebMD shall have the right in its discretion: (a) to obtain from Delmar
Publishers substitute Content acceptable to WebMD and Delmar Publishers as a
replacement; or (b) to reduce the payments. In the event that Delmar Publishers
resumes production and/or updating of Content that Delmar Publishers previously
ceased producing or updating, WebMD shall have the right but not the obligation
to again use such formerly discontinued or non-updated Content in the Service in
accordance with this Agreement. If WebMD does so, it shall be under the same
terms and conditions as such Content was formerly used hereunder.
ARTICLE II - DUTIES OF LICENSEE
2.1 AVAILABILITY OF THE CONTENT TO END-USERS. WebMD shall take all reasonable
----------------------------------------
steps to protect the content from malicious users, and unauthorized, copying,
distributing, publishing, transmitting, or displaying.
2.2 CONTENT INTEGRITY. WebMD shall not edit or otherwise effect an editorial
-----------------
change in the Content without Delmar Publishers' consent which shall not be
unreasonably withheld. It is agreed that graphical user interfaces (GUIs)
created by WebMD shall not violate the rights of Delmar Publishers hereunder.
The foregoing shall in no way prohibit WebMD from interlinking and cross-
referencing the Content with material from other Content providers.
2.3 PROPRIETARY INTEREST. WebMD acknowledges that Delmar Publishers has
--------------------
proprietary rights in and to the Content. WebMD shall not, by virtue of this
Agreement or by virtue of its access to the Content, obtain any proprietary
rights in or to the Content except the rights specifically granted to WebMD
herein. WebMD shall not use or transmit the Content except as specifically
authorized by this Agreement.
2.4 AUDIT AND REVIEW. As long as this Agreement is in effect, and for a one-
----------------
year period thereafter, WebMd shall maintain and supply to Delmar Publishers
every calendar quarter records that are used to calculate payments to Delmar
Publishers. This includes records on use and distribution of the Content, and
logs maintained by web servers that record end user activity. Delmar Publishers
understands and agrees that all of WebMD's financial records and statements are
confidential and subject to the Confidentiality Agreement between the parties
effective upon signing of this Agreement.
Page 3 of 13
<PAGE>
(a) Upon a minimum of twenty (20) business days' notice to WebMD, and
during business hours, Delmar Publishers may itself or through an agent at
its expense, audit relevant books and records of WebMD for the sole purpose
of determining that WebMD is in compliance with all of the terms of this
Agreement and that the proper payment, as described in Section 3 below, has
been paid to Delmar Publishers. Such an audit may not be made more
frequently than once every twelve (12) months and once within the twelve
(12) month period following conclusion or termination of this Agreement.
(b) In the event Delmar Publishers determines that payments are due from
WebMD, it shall so notify WebMD and provide WebMD with a calculation and
supporting explanation. WebMD shall thereupon have fifteen (15) business
days within which to pay the claim. In the event WebMD does not pay the
claim; the parties shall resolve their dispute by arbitration in the City
of New York in accordance with the Rules of the American Arbitration
Association. WebMD shall promptly pay any payment thus determined to be
due and unpaid.
2.5 COPYRIGHT NOTICE. When making the Content available to End-Users as
----------------
permitted by this Agreement, WebMD shall cause a notice comprised of the
following elements to be conspicuously displayed during every End-User session
as appropriate to protect Delmar Publishers' intellectual property rights: (a)
the word "Copyright" or the symbol (C) (the letter c in a circle), (b) the year
of first publication of such document as specified by Delmar Publishers, (c) the
name of the copyright holder or, if space constraints require, an abbreviation
by which the name can be recognized or a generally known alternative
designation, and (d) the words "All Rights Reserved" (or, if space constraints
require, an abbreviation by which such phrase can be recognized that is
reasonably acceptable to Delmar Publishers).
2.6 END-USER AGREEMENT. When making the Content available to End-Users as
------------------
permitted by this Agreement, WebMD shall cause to have included in the terms and
conditions of the applicable End-User agreement: (a) a provision prohibiting
use of materials retrieved through the Service in any fashion that may infringe
upon any copyright or proprietary interest therein; (b) a provision prohibiting
storage of materials retrieved through the Service in a searchable, machine-
readable database; (c) a provision limiting the liability of Delmar Publishers
in a manner similar to that contained in its electronic products, especially as
it applies to the use of healthcare information by professionals; (d) a
provision prohibiting use of all the Content from any commercial use, resale, or
mailing list database development, utilization or application.
Furthermore, WebMD shall place a notice relating to all the provisions described
above on one of the first introductory screens that Subscribers must view upon
entering or using the Service in all available media. Such notice shall require
Subscriber acknowledgment and acceptance to become an authorized, registered
Subscriber.
ARTICLE III - PRICING AND PAYMENT TERMS
3.1 PRICING/APPENDIX A
------------------
(a) In consideration of Delmar Publishers' grant to WebMD of the right and
license to access the Content and Services outlined in Appendix A in
accordance with Article I above, throughout the term of this
Agreement, WebMD shall pay Delmar Publishers a minimum fee each year
of:
Page 4 of 13
<PAGE>
*** for year one
*** for year two
*** for year three
(b) Plus, *** per month per WebRN Subscriber.
(c) Plus, *** (***) of all Net Revenue from advertising and sponsorship
occurring in conjunction with the Content. "Net Revenue" shall be
defined as gross receipts less any End-User credits or commissions
paid by WebMD to third parties.
3.2 PAYMENT TERMS/APPENDIX A
--------------------------
(a) Pro-rata minimum payments shall be made in installments of the
guaranteed totals as indicated below.
DUE DATE AMOUNT DUE
---------------------------
Dec. 23, 1998 ***
Jun. 15, 1999 ***
Jan. 15, 2000 ***
Jan. 15, 2001 ***
(b) Incremental payments for subscribers (at the rate of *** per WebRN
Subscriber per month) shall be paid each quarter starting on April 15,
1999 with a final payment during the term of this Agreement occurring
on January 15, 2002.
(c) Payments for advertising sponsorship shall be paid each quarter
starting on April 15, 1999 with a final payment during the term of
this Agreement occurring on January 15, 2002.
3.3 PRICING/APPENDIX B
------------------
(a) In consideration of Delmar Publishers' grant to WebMD of the right and
license to access the Content and Services outlined in Appendix B,
Section 2 in accordance with Article I above, throughout the term of
this Agreement, WebMD shall pay Delmar Publishers the following for
each of the web-ready products mentioned below:
PRODUCT DOLLAR AMOUNT
------- -------------
Accu-Calc; ***
Electronic Care Plan Maker ***
Medical Terminology ***
---
Total: ***
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
Page 5 of 13
<PAGE>
3.4 PAYMENT TERMS/APPENDIX B
------------------------
(a) Delmar Publishers agrees to provide all additional "web-enabled"
services (Accu-Calc, Electronic Care Plan Maker, and Medical
Terminology) in a "WebMD-Approved" format according to the schedule
outlined in Appendix B, Section 2.
WebMD will have until September 15, 1999 to use and test each product.
Unless Delmar Publishers is notified otherwise in writing by this
time, the products will be considered "WebMD-Accepted", and Delmar
Publishers will invoice WebMD the above mentioned product pricing,
{see Section 3.3 (a)j} which will be payable within 90 days.
BILL SEND DATE DUE DATE
-------------- --------
9/15/99 12/15/99
ARTICLE IV - TERM AND TERMINATION
4.1 TERM. This Agreement shall be effective for an initial term beginning upon
----
the Effective Date and ending December 31, 2001 unless sooner terminated
pursuant to this Article IV.
4.2 FAILURE TO PERFORM. If either party to this Agreement shall fail to
------------------
perform or observe any material term, covenant, agreement or warranty, or if any
material representation contained herein is untrue, the other party may
immediately terminate this Agreement if such failure is not corrected (if
reasonably correctable) within thirty (30) days of delivery of written notice
thereof to the other party.
4.3 BANKRUPTCY AND BUSINESS TERMINATION. If either party shall cease doing
-----------------------------------
business, become insolvent, or if a petition in bankruptcy shall be filed with
respect to a party, or upon an attempted assignment not permitted under Section
6.6 below, the other party shall have the right to immediately terminate this
Agreement upon written notice to the other party. The right and license granted
by Delmar Publishers to WebMD herein with respect to the Content is deemed a
software license for purposes of Section 605(n) of the Federal Bankruptcy Act,
and WebMD shall have the full rights of a protected licensee thereunder.
4.4 TERMINATION WITHOUT CAUSE. WebMD shall have the right to terminate the
-------------------------
agreement upon ninety (90) days written notice. Upon such cessation of the
Service, this Agreement shall terminate, and neither party shall have any
obligation to the other under this Agreement except WebMD shall remit all
Payments that accrued prior to such cessation.
4.5 CONDUCT UPON TERMINATION. Upon termination of this Agreement for any
------------------------
reason, WebMD shall cease solicitation for and use of the Content.
ARTICLE V - LIABILITY LIMITATION AND INDEMNIFICATION
5.1 LIMITATION OF LIABILITY. NEITHER PARTY MAKES ANY WARRANTY, EXPRESS OR
-----------------------
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE MARKETING AND SALE OF THE
CONTENT. NEITHER PARTY SHALL HAVE ANY LIABILITY TO ANY
Page 6 of 13
<PAGE>
THIRD PARTY RESULTING FROM ITS PERFORMANCE UNDER THIS AGREEMENT OR FOR ANY
FAILURE TO PERFORM HEREUNDER. NEITHER PARTY HERETO, NOR THEIR RESPECTIVE
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES AND SUBCONTRACTORS, SHALL BE LIABLE TO
THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS) INCURRED IN CONNECTION WITH SERVICES PERFORMED OR PRODUCTS
PROVIDED UNDER THIS AGREEMENT. NEITHER PARTY SHALL BE LIABLE FOR DAMAGES CAUSED
OR ALLEGEDLY CAUSED BY FAILURE OF PERFORMANCE, ERROR, OMISSION, INTERRUPTION,
DELETION, DEFECT, DELAY IN OPERATION OR TRANSMISSION, OR COMMUNICATIONS LINE
FAILURE INVOLVING THE CONTENT SERVICE, AND NEITHER PARTY SHALL BE LIABLE FOR ANY
ACT OR INACTION OF END-USERS REGARDING THE CONTENT, AND CONTENT SERVICE
INCLUDING BUT NOT LIMITED TO MISUSE, ABUSE, INFRINGEMENT, THEFT OR DESTRUCTION
OR UNAUTHORIZED ACCESS TO, ALTERATION OF DELMAR PUBLISHERS' RECORDS, PROGRAMS,
OR USE OF THE CONTENT, WHETHER FOR BREACH OF CONTRACT (INCLUDING BREACH OF
WARRANTY, LOST PROFITS OR OTHER ECONOMIC LOSS), TORTIOUS BEHAVIOR (INCLUDING
STRICT LIABILITY) NEGLIGENCE OR UNDER ANY OTHER CAUSE OF ACTION.
Delmar Publishers expressly limits its damages to WebMD and End-Users of the
Content Service for any non-accessibility time or other down time to a pro-rata
credit of Delmar Publishers' charges during system unavailability. Delmar
Publishers specifically denies any responsibilities for any damages arising as a
consequence of such unavailability.
5.2 FORCE MAJEURE. Neither party shall be liable in damages for any delay or
-------------
default in performing its obligations hereunder if such delay or default is
caused by matters beyond the reasonable control of the non-performing party,
such as but not limited to power failures, wars or insurrections, acts of God,
acts of government, strikes, fires, floods, earthquakes, work stoppages,
embargoes and/or inability to obtain material; provided, however, that the party
experiencing such occurrence shall notify the other party at the earliest
possible date and take reasonable steps to mitigate and/or cure the cause of
such delay.
5.3 INDEMNIFICATION.
---------------
(a) Delmar Publishers shall indemnify and hold harmless WebMD its affiliates,
and its and their directors, officers, employees, agents, successors and assigns
against any and all judgments, settlements, penalties, costs and expenses
(including reasonable attorneys' fees) paid or incurred in connection with
claims by any party which are attributable to: Delmar Publishers' negligence or
misconduct in collecting, collating and compiling the Content from Delmar
Publishers' original data sources (including but not limited to drug
manufacturers); a material breach of any warranty or representation made or
obligation undertaken by Delmar Publishers under this Agreement or infringement
or misappropriation by the Content of any copyright or other proprietary right
of any third party.
(b) WebMD shall indemnify and hold harmless Delmar Publishers, its affiliates
and its and their directors, officers, employees, agents, successors and assigns
against any and all judgments, settlements, penalties, costs and expenses
(including reasonable attorneys' fees) paid or incurred in connection with
claims by any party which arise from WebMD's distribution of the Content under
this
Page 7 of 13
<PAGE>
Agreement and are attributable to a failure of the hardware or software of
WebMD's computer system (other than the Content) or to a material breach of any
warranty or representation made or obligation undertaken by WebMD under this
Agreement.
(c) If any claim or action is instituted or threatened by a third party against
a party to this Agreement for which it believes it is entitled to be indemnified
pursuant to this Agreement, it shall promptly give notice thereof to the other
party, and cooperate fully with the indemnifying party. The indemnifying party
shall solely control the defense and settlement of such claims. The indemnified
party shall be permitted to participate in such defense and represent itself at
its own expense and to use counsel of its own choosing.
5.5 REPRESENTATIONS AND WARRANTIES. Delmar Publishers represents and warrants
------------------------------
that it is authorized to grant the license herein to WebMD, and covenants that
WebMD's exercise of the license herein shall infringe no copyright or other
right of any person or entity. If any portion of the Content furnished to WebMD
under this Agreement becomes (or, in the good faith judgment of Delmar
Publishers, is likely to become) the subject of a claim for infringement or
misappropriation, Delmar Publishers may, upon notice to WebMD, request that
WebMD remove such portion of the Content from the Service, and WebMD shall
comply with such request promptly; provided however, that Delmar Publishers
shall not have the right to request such removal unless such materials are
required to be removed from the services of all other similarly situated on-line
vendors (if any) to whom they are made available by Delmar Publishers; and
provided that in the event of such removal, WebMD shall have the same rights
described in Section 1.11 above. Delmar Publishers represents and warrants that
it is not aware of any pending, threatened or possible claim or action by any
third party with respect to a possible violation of that third party's rights.
Delmar Publishers makes no warranties or representations of any kind, whether
expressed or implied for the Content and Content Service it is providing
regarding the merchant-ability or fitness for a particular use or purpose.
Connection speed to the service represents the speed of a connection and does
not represent guarantees of available end to end bandwidth.
The parties agree that WebMD makes no warranty or representation regarding, nor
is WebMD responsible for, the Content, which WebMD is obtaining from Delmar
Publishers under this Agreement, and as to which WebMD has a duty not to edit or
change (Section 2.3 above).
ARTICLE VI - MISCELLANEOUS
6.1 ENTIRE AGREEMENT AND AMENDMENT. Together with all written amendments,
------------------------------
exhibits and appendices, this Agreement constitutes the entire agreement between
Delmar Publishers and WebMD with respect to the subject matter addressed herein.
This Agreement can only be modified or supplemented by writing signed by duly
authorized representatives of both parties. This Agreement shall be binding
upon the parties, their successors, legal representatives and permitted assigns.
WebMD and Delmar Publishers intend this Agreement to be a valid legal instrument
and no provision of this Agreement which shall be deemed unenforceable shall in
any way invalidate any other provision of this Agreement all of which shall
remain in full force and effect.
During the term of this Agreement the parties may under mutual consent reach a
new agreement on
Page 8 of 13
<PAGE>
license of Content and provision of Content Services to WebMD. At such time,
this Agreement shall be amended to reflect any new understanding between the
parties.
6.2 ADVERTISING, TRADE NAMES, TRADEMARKS AND COPYRIGHTED MATERIALS.
--------------------------------------------------------------
(a) WebMD hereby grants Delmar Publishers a revocable license to use any
WebMD service mark, trademark, trade name and logo associated with WebMD (the
"WebMD Marks") solely in the advertisement and promotion of WebMD during the
term of this Agreement. Delmar Publishers shall not use any mark, name or logo
to identify WebMD other than the WebMD Marks without WebMD's prior written
consent. Delmar Publishers acknowledges that the WebMD Marks are valid service
marks, trademarks, trade names and logos and the sole property of WebMD, and
Delmar Publishers shall not disparage or challenge the validity of the WebMD
Marks during the term of this Agreement. Delmar Publishers shall promptly notify
WebMD of any actual or alleged infringements of WebMD Marks of which Delmar
Publishers becomes aware during the term. Nothing contained herein shall be
construed to authorize Delmar Publishers: (i) to use any WebMD Marks as a mark,
name or logo or as part of the mark, name or logo of any firm, partnership or
corporation; (ii) to apply any WebMD Mark to any goods or to use any WebMD Mark
in connection with any services except as set forth in this Agreement; or (iii)
at any time after the termination of this Agreement, to apply any WebMD Mark to
goods or to otherwise use any WebMD Mark in any manner whatsoever. WebMD shall
be attributed as the source of the Service in all material produced by or for
Delmar Publishers where reference is made to the use of the Content as part of
the Service hereunder.
(b) Delmar Publishers hereby grants WebMD a revocable license to use any
of Delmar Publishers' service marks, trademarks, trade names and logos (the
"Delmar Publishers Marks") in the advertisement and promotion of WebMD during
the term of this Agreement. WebMD may use Delmar Publishers Marks, mention
Delmar Publishers' name and mention and/or describe the strategic relationship
between Delmar Publishers and WebMD in print and online advertisements,
marketing materials, registration statements and other reports that are filed
with the Securities and Exchange Commission (pursuant to which WebMD may also
file this Agreement as an exhibit) and other information; provided, however,
-------- -------
that Delmar Publishers shall be given five days prior written notice of WebMD's
intention to use Delmar Publishers Marks, and Delmar Publishers shall not have
reasonably objected to WebMD's use of Delmar Publishers Marks prior to the
expiration of such five-day period. WebMD acknowledges that Delmar Publishers
Marks are valid service marks, trademarks, trade names and logos of Delmar
Publishers and the sole property of Delmar Publishers, and WebMD shall not
disparage or challenge the validity of Delmar Publishers Marks during the term
of this Agreement. WebMD shall promptly notify Delmar Publishers of any actual
or alleged infringements of Delmar Publishers Marks of which WebMD becomes aware
during the term of this Agreement. Delmar Publishers shall be attributed as the
source of the Content in sales literature and in End-User documentation (if
any), and Delmar Publishers.
6.3 CONFIDENTIALITY. Each party shall preserve the confidential information of
---------------
or pertaining to the other party and shall not, without first obtaining the
other's written consent, disclose to any person or organization, or use for its
own benefit, any confidential information of or pertaining to the other party
during and after the term of this Agreement, unless such confidential
information is required to be disclosed by a court of competent jurisdiction or
by any governmental or self-regulatory organization or authority.
6.4 NOTICES. All notices, requests, demands and other communications or
-------
payments under this
Page 9 of 13
<PAGE>
Agreement shall be in writing, and shall be deemed to have been duly delivered
if delivered by hand or sent by traceable carrier or prepaid registered or
certified mail addressed as follows (or to such other address as may be
designated by a party, in writing, pursuant hereto):
Licensee:
--------
WebMD, Inc. cc: Corporate Counsel
400 The Lenox Building 400 The Lenox Building
3399 Peachtree Road, NE 3399 Peachtree Road, NE
Atlanta, Georgia 30326 Atlanta, Georgia 30326
Attn: Jeff Arnold, Chief Executive
Officer
Licensor:
--------
Delmar Publishers
3 Columbia Circle
Albany, New York 12203
Attn: Greg Burnell, Chief Executive
Officer
6.5 GOVERNING LAW. This Agreement is made and entered into in the State of New
------------- ------------
York and shall be construed according to internal laws, and not the laws
- -----
pertaining to choice or conflict of laws, of that State.
6.6 RELATIONSHIP AND ASSIGNMENT. Nothing in this Agreement shall be deemed to
---------------------------
create an agency, joint venture, or partnership relationship between Delmar
Publishers and WebMD. Except as expressly set forth in this Agreement, neither
patty shall have authority to act on behalf of or bind the other party in any
way. Neither WebMD nor Delmar Publishers may assign this Agreement or delegate
any rights or obligations hereunder without the prior written consent of the
other party except to an affiliated entity controlled by or under common control
of a party hereto. In the event of a third party acquiring the assets of WebMD,
this Agreement is not transferable. Any attempted assignment by either party
without such consent shall be of no effect.
6.7 DUE AUTHORIZATION. Each of WebMD and Delmar Publishers represents and
-----------------
warrants that it is authorized to enter into this Agreement and that there are
no outstanding commitments, agreements, or understandings, express or implied,
which may or can in any way defeat or modify the rights conveyed or obligations
undertaken by it under this Agreement.
6.8 HEADINGS. The heading of each Article, Section, and Appendix of this
--------
Agreement is for the purpose of convenience only and shall not affect the
interpretation of any provision hereof.
6.9 SURVIVAL OF OBLIGATIONS. Articles III, IV, V and VI shall survive the
-----------------------
termination or expiration of this Agreement.
Page 10 of 13
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officer as of the day and year first above
written.
Delmar Publishers WebMD, Inc.
By: /s/ Greg Burnell By: /s/ W. Michael Heekin
------------------------- ------------------------------
Printed Name: Greg Burnell Printed Name: W. Michael Heekin
Title: President/CEO Title: Executive Vice President
Date: 12/22/98 Date: 12/22/98
----------------------- ----------------------------
Page 11 of 13
<PAGE>
APPENDIX A
Delmar Publishers Content
Content to be made available to WebMD throughout the term of this Agreement for
use on WebMD's website consists of:
1. DELMAR'S NURSES DRUG DATABASE. This service is already "web-ready". It is
revised and up to date as of October 1, 1998. The content is almost equally
divided between pharmacological information and Nursing Considerations. Delmar
Publishers will provide to WebMD monthly updates to include newly approved
drugs, and new drugs uses, cautions, side effects, interactions, and warnings.
Any technical support required from Delmar to integrate this content into
WebMD's web-site will be provided ***.
2. DELMAR'S CATALOG OF PRODUCTS as listed up to December 31, 1998. (see
attached catolog) Only Delmar-owned, copyrighted text, graphic, illustration,
photograph, video, audiotape, animation, testbank, cd-rom content.
3. WEB HOSTING SERVICES: Delmar Publishes agrees to provide web-hosting
services for all web-enabled products for WebMD (Delmar's Nurses Drug Database,
Accu-Calc, Electronic Care Plan Maker, and Medical Terminology) for a period of
up to 18 months, until such time that WebMD is ready to integrate the above-
mentioned Delmar content onto the existing WebMD/RN website. While Delmar
Publishers will assist in the development and hosting of a portion of the WebRN
website, it is understood that WebMD will retain their license to the content
outlined in Appendix A and B, regardless of whether it is hosted by Delmar,
WebMD or another third party.
The web-site will be operated and maintained by Delmar Publishers and selected
partners to provide a design that is consistent with the current WebMD/RN web
site. Delmar Publishers and their partners agree to uphold a professional
diligence and skill in maintaining the web-site and in a manner consistent with
high industry standards.
4. ADVERTISING SERVICES. Delmar Publisher's agrees to provide WebMD with
prominent advertising space on Delmar's website, Nursing.com, for the term of
the agreement ***. Delmar Publishers will commit to including WebMD/RN's name,
logo and description of service on the Nursing.com. website. In addition, Delmar
Publishers will set up a hyperlink to the WebMD/RN website and maintain the link
for the life of the contract.
Delmar Publishers will also include advertisement for WebMD/RN in all Nursing
and Allied Health catalogs for the term of the Agreement. In addition, Delmar
Publishers will mention the same WebMD information listed above in all relevant
Nursing Marketing material ***.
5. CONSULTATION SERVICES. Delmar Publishers agrees to provide at least 4 hours
of in-person consultation services to WebMD/WebRN personnel every month for the
life of the contract.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission
Page 12 of 13
<PAGE>
APPENDIX B
DELMAR PUBLISHERS
SUBSCRIPTION AND PROMOTIONAL SUPPORT
1. DELMAR'S NURSES DRUG GUIDE. Delmar Publishers agrees to supply one copy
annually of the English language text version of the Drug database for Nurses
for each active Subscriber to the WebRN services. Delmar Publishers agrees to
bundle this product with a WebRN welcome letter and flyer and ship them to
Subscribers, upon mutually agreeable terms and conditions. This WebRN
Subscriber benefit will be in effect for the term of this agreement and in
accordance with all rights, privileges, and responsibilities outlined in Article
I, II, and III in this contract. WebMD will make the content available to
authorized Subscribers.
2. WEB-ENABLED PRODUCTS. Delmar Publishers agrees to provide to WebMD an
Internet compatible version of AccuCalc and Electronic Care Plan Maker and
-------- --------------------------
Delmar's Medical Terminology CD-ROM for use by WebMD for the term of this
- -----------------------------------
agreement and in accordance with all rights, privileges and responsibilities
outlined in Article I, II, and III ***. At its sole discretion, WebMD will make
the content available to all End Users.
Web-Enabled Product Delivery Schedule
PRODUCT ESTIMATED DELIVERY DATE
- ------- -----------------------
Nurses Drug Database 15 days from contract signature date
Electronic Care Plan Maker 45 days from contract signature date
Medical Terminology 95 days from contract signature date
Accu-Calc 100 days from contract signature date
3. TECHNICAL SUPPORT. Delmar Publishers will provide ***, technical and
editorial support services for integration of Internet compatible content
outlined in section 1.2 of Appendix B for deployment and use on WebMD.
4. DELMAR / WEBMD/RN CO-BRANDED WEBSITE. Upon mutually agreeable terms and
conditions, Delmar Publishers agrees to develop and host a co-branded website
marketing Delmar text, video, and cd-rom products to WebRN and WebMD customers.
Delmar Publishers will fulfill all on-line sales orders for books off the co-
branded web-site and ship product to the customer. WebMD will be entitled to
*** of the net revenue collected from sales of Delmar /ITP content off the co-
branded website.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission
Page 13 of 13
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.42
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU"), dated December 16, 1998,
entered into by and on behalf of WebMD, Inc., with its principal offices located
at 40180 The Lenox Building, 3399 Peachtree Road, N.E., Atlanta, Georgia 30326
("WebMD"), and CNN Interactive, a division of Cable News Network, Inc., with its
principal offices located at One CNN Center, Box 105366, Atlanta, Georgia 30348-
5366 ("CNN"), is intended to set forth the basic understanding of the parties
regarding each party's efforts to enhance and/or promote the other party's web
site in certain respects, and the further agreement of the parties to negotiate
in good faith the terms of a definitive agreement based on this understanding
(the "Agreement").
Accordingly, the parties hereby agree as follows:
1. WebMD Content. WebMD agrees to deliver and/or make accessible to CNN
-------------
certain health and wellness related information ("WebMD Content") for use,
publication and distribution by CNN on its web site and related services,
CNN.com (the "CNN Site"). WebMD agrees that the WebMD Content provided or
made accessible to CNN hereunder will include, at a minimum: (i) *** (***)
new articles per week; (ii) *** (***) of the total content available to
consumers on WebMD's web site (the "WebMD Site") at any given time; and
(iii) specific types of content to be agreed upon by the parties and set
forth in an exhibit to the Agreement including without limitation the types
of content listed on Exhibit A to this MOU. Furthermore, WebMD agrees to
provide and/or make accessible all content owned or controlled by WebMD to
CNN for use on the CNN Site and further agrees to use commercially
reasonable efforts to secure sufficient rights in any third party content
to enable WebMD to provide said licensed content to CNN. The WebMD Content
will include editorial news stories that are timely, generally consistent
with the quality and editorial standards of CNN and of general interest to
health consumers.
2. Use of WebMD Content by CNN. Although CNN may use content from third party
---------------------------
sources as it deems editorially appropriate, CNN hereby agrees to position
WebMD as its premier provider of content for the "Health" section of the
CNN Site ("Health Section"). As editorially appropriate, CNN will display
portions of the WebMD Content selected by CNN and related links and
branding throughout the Health Section and provide users with opportunities
to link to specific sections within the WebMD Site for greater depth,
related stories and other WebMD Site features. In connection with each
party's respective performance hereunder, each party agrees to specify and
designate an editorial contact for the other party. As more specifically
described in Paragraph 4 below, CNN will:
a. position WebMD branding prominently on every page of the Health
Section;
b. incorporate WebMD Content within the Health Section, introduce
WebMD editorially based services to CNN users through existing
CNN content areas within the Health Section and possibly create
new features for the Health
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
<PAGE>
Section (by way of example only, a WebMD Health Almanac) (all of
which will provide further links and easy navigation to the WebMD
sites);
c. provide prominent links, as editorially appropriate, on the CNN
Site homepage to the WebMD Content in the Health Section;
d. promote the Health Section and the CNN/WebMD relationship via
CNN's various e-mail products, as appropriate;
e. promote the Health Section and the CNN/WebMD relationship via
promotional banners that will run throughout the CNN family of
web sites;
f. promote the Health Section and the CNN/WebMD relationship to
health-related chats and message boards within the CNN Site
discussion section; and
g. issue a joint press release with WebMD announcing the CNN/WebMD
relationship and follow-up press releases (as and when
appropriate as agreed by the parties) announcing further
developments (e.g., traffic milestones and new content
---
additions).
3. Licenses. The parties hereto agree to grant each other the appropriate
--------
licenses to use their respective content (as applicable), marks, logos and
brand identifiers for purposes consistent with the relationship established
by the Agreement.
4. Promotion of WebMD by CNN. During the Term, CNN agrees to provide the
-------------------------
following promotion to WebMD:
a. WebMD Branding. WebMD branding will appear on each page of
--------------
the Health Section (see IDG branding on
http://cnn.com/TECH/computing/ for an example of the integration
on the main page of the Health Section; the remaining Health
Section pages will include WebMD branding in a space above the
fold as mutually agreed by the parties). Additional WebMD
branding (and a link for "more" to the WebMD Site) will be
included on individual WebMD Content in a manner similar to the
current Salon Magazine branding and link on
http://cnn.com/books/rviews/9811/30/dismay.salon/index.html.
b. WebMD Promotional Banners. CNN will create promotional banners
-------------------------
out of unsold advertising inventory promoting the Health Section
that will include the WebMD logo and affiliation that will rotate
through the CNN family of web sites and receive a minimum of ***
page impressions per month. In the event ad inventory is
unavailable, CNN will provide WebMD with promotional space in top
left corner of the CNN Site.
c. Message to E-Mail Subscribers. At least once a month, CNN will
-----------------------------
include in its "QuickNews" e-mail subscriber service a
promotional mention (and a link to the Health Section in the html
versions of such e-mails) with language similar to "visit
CNN.com/HEALTH with WebMD for the latest in health-related news."
d. CNN Link of the Day Mention. CNN will include a WebMD Content
---------------------------
mention and/or WebMD branding as part of the CNN.com/Health
content
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
2
<PAGE>
offering in the Link of the Day space on the CNN Site homepage a
minimum of *** (***) times per month.
e. Homepage Editorial Promotion. CNN agrees that the Health
----------------------------
Section will be eligible (in the same manner as other sections on
CNN.com) for promotion in the upper right hand box located on the
CNN.com homepage based on editorial decision. WebMD understands
that such promotion will be provided to the Health Section as CNN
deems editorially appropriate.
f. Promotion in Health-Related Specials. As health-related special
------------------------------------
sections are created by CNN for the general CNN Specials area
(see http://cnn.com/SPECIALS/) , and as editorially appropriate,
CNN will include WedMD Content and branding (and/or links to the
WebMD Site) within those specials. While CNN has no absolute
obligation to create such specials, CNN anticipates that a
minimum of *** health-related special (e.g., Breast Cancer
Awareness month) per----year will be created, subject to
editorial considerations.
g. Chat/Message Boards. CNN agrees to promote the Health Section
-------------------
and the WedMD relationship established hereunder in health-
related chats and message boards within the CNN discussion
section. Specifically, CNN agrees: (i) to provide WedMD with
branding "above the fold" on all pages containing medical- and
health-related message boards; (ii) that CNN will work with WedMD
to develop co-branded medical-and health-related chats on the CNN
Site; (iii) if WebMD provides webcasting capabilities, CNN will
work with WedMD to explore the possibility of promoting WedMD's
webcasting efforts as editorially appropriate; and (iv) CNN will
not develop co-branded medical- or health-related chats on the
CNN Site with Intellihealth, On Health, or Village's Better
Health ("WebMD Competitors"); additionally, CNN agrees not to
develop such chats with any other third party reasonably
considered to be a WedMD competitor without discussing the
opportunity with WedMD; provided, however, this latter commitment
specifically excludes arrangements with AccentHealth and Mayo
Clinic. Notwithstanding clause (iv), nothing herein will prevent
CNN from engaging individuals (e.g., medical experts) aligned
----
with any WedMD Competitor to participate in CNN Site health-
related chats; however, CNN will not, in such event, provide
branding to the WebMD Competitor.
It is understood that CNN may be temporarily excused from performance
of certain of the above-commitments during periods of high traffic if
it is reasonably necessary for CNN to temporarily remove certain items
from the CNN Site to enhance performance during such high-traffic
periods. Also, each party shall have the right to temporarily disable
links to the other party's site during any time such other Site is
experiencing technical difficulties.
5. Branding/Promotion Fee. During the Term, for WedMD promotion, linking and
----------------------
branding hereunder, WebMD hereby agrees to pay CNN an annual fee as
follows: (i) Year 1 - ***
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
3
<PAGE>
(ii) Year 2 - ***; and (iii) Year 3 - ***. The annual fee shall be payable
on a quarterly basis in advance, with the initial payment payable upon the
earlier of execution of the Agreement or any approved public uses of
references to this MOU by WebMD (including the filing of the WedMD S-1).
6. Delivery Benchmarks. CNN, with commercially reasonable cooperation from
-------------------
WebMD, will achieve minimum impressions for the Health Section over the
first two (2) years of the term as follows: (i) *** during Year 1; and
(ii) *** during Year 2 (each a "Delivery Benchmark"). Should it appear,
based on monthly impressions, that CNN is not on track to achieve the
applicable Delivery Benchmark, WebMD agrees to work with CNN and modify the
mix of WebMD Content as mutually agreed to improve traffic. It is
understood and agreed, however, that the foregoing Delivery Benchmarks are
established solely to measure performance of the branding and linking
relationship established hereunder. The parties agree to schedule
quarterly meetings by phone or in person to discuss traffic, the WebMD
Content and other matters related to the parties' mutual desire to increase
traffic to meet the Delivery Benchmarks. Any failure to achieve one or
more Delivery Benchmarks will not be deemed to be a breach of CNN's
obligations hereunder, but shall give rise to the following specific
remedies:
(i) if traffic in year 1 does not reach the applicable Delivery
Benchmark but is *** or more, WebMD's year 2 fee will be
reduced by the same percentage as such year 1 under-
delivery. For example, if traffic for year 1 equals ***
(i.e., *** of the *** target), then in year 2 WebMD will pay
only *** of the year 2 fee;
(ii) if traffic in year 1 does not reach *** page impressions,
then WebMD and CNN will each have the right to terminate the
Agreement by written notice to the other provided at any
time during the ten (10) day period following CNN's written
delivery of the final traffic numbers. Said termination
will take effect two (2) months after the end of year 1.
During that two (2) month period (if one of the parties has
elected to terminate), WebMD will pay a prorate portion of
the year 1 fee;
(iii) if traffic in year 2 does not reach the applicable Delivery
Benchmark but is *** or more, WebMD's year 3 fee will be
reduced by the same percentage as such year 2 under-
delivery; and
(iv) if traffic in year 2 does not reach *** page impressions,
then WebMD and CNN will each have the right to terminate the
Agreement by written notice to the other provided at any
time during the ten (10) day period following CNN's written
delivery of the final traffic numbers. Such termination
will take effect two (2) months after the end of year 2.
During that two (2) month period (if one of the parties has
elected to terminate), WebMD will pay a prorated portion of
the Year 2 fee.
7. Development and Posting of WebMD Sponsored Page by CNN. CNN will, in
------------------------------------------------------
consultation with WebMD, design and create and publish on the CNN Site a
page containing the
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
4
<PAGE>
WebMD logo along with the CNN logo and certain CNN content ("CNN Content"),
namely, the latest headlines, from national, international, sports, weather and
entertainment news stories selected and provided by CNN (the "WebMD Sponsored
Page"). It is understood and agreed that such CNN Content is made available for
the WebMD Sponsored page on a non-exclusive basis and CNN retains all rights to
use such content in any other manner it deems appropriate, including without
limitation, use in other areas of the CNN Site. The WebMD Sponsored Page will
serve as an access point to the CNN site for users of the "Physicians Lounge"
area of the professional/subscriber overall intent to present a look and fee
consistent with that of the WebMD Site; however, it is understood and agreed
that the WebMD Sponsored Page will have CNN's "QuickNews" branding and text
links to the CNN Site homepage and/or stories on the CNN Site. The WebMD
Sponsored Page will display both the CNN logo and the WebMD logo, each with an
active link to the CNN Site and the WebMD Site. CNN will retain sole and
exclusive editorial control of the regularly updated CNN Content for the WebMD
Sponsored Page. CNN agrees that it will use or post material in connection with
the WebMD Sponsored Page which is of the nature and quality that is consistent
with web site products and services provided by CNN generally. WebMD expressly
agrees that CNN will be the exclusive provider of general news (i.e., hard
----
general news as opposed to health-related news, financial news or sports news,
even though the CNN Content may include health, sports and financial news) on
the WebMD Site during the Term.
8. Ownership. Each party retains all rights, title and interest in and to any
---------
content, logos, marks and brand identifiers provided by it to the other
hereunder.
9. Exclusivity. Except as specifically provided herein to the contrary, this
-----------
Agreement and all rights and licenses granted hereunder are non-exclusive
and, among other things, each party reserves the absolute right to enter
into agreements with third parties related to content for their respective
sites (except news content for the WebMD Site) or for the distribution of
their respective content through other sites even if competitive with this
Agreement. Specifically, the sole exceptions to such non-exclusivity
relate to WebMD's commitment not to include any other general news on the
WebMD Site directly or indirectly by branding and extensive linking, and
CNN's agreement not to develop a co-branded medical or health-related chat
on the CNN Site with any WebMD Competitor.
10. Term. The Agreement will commence as of the date of this MOU and will
----
continue for period of three (3) years from the date the WedMD Content is
launched and publicly available on the CNN Site, unless earlier terminated
in accordance with this Agreement. It is the parties mutual desire to
launch such WebMD Content on the CNN site no later than February 1, 1999.
11. Termination. Either party may terminate the Agreement at any time during
-----------
the Term in the event of a material breach by the other party that remained
uncured for a period of thirty (30) days after written notice of such
breach. Additionally, either party may terminate the Agreement based on
CNN's failure to deliver the specified minimum annual impressions for the
Health Section as specifically outlined in Paragraph 6(ii) and Paragraph
6(iv) of this MOU. Each party will have the right to terminate in the
event of the other party's bankruptcy or substantially similar adverse
financial position. CNN will have the right to terminate this MOU (or the
Agreement) if: (i) WebMD fails to consummate either of its planned
acquisitions of content providers, Direct Medical Knowledge or Sapient
Health
5
<PAGE>
Network, within forty-five (45) days of this MOU; or (ii) the quality of
the WebMD Content fails, at any time, to meet CNN's editorial standards or
otherwise adversely affects CNN's reputation, journalistic integrity or
goodwill.
12. Good Faith Negotiations. WebMD and CNN will endeavor in good faith to
-----------------------
negotiate and enter into definitive written Agreement relating to the
matters addressed hereunder within the next sixty (60) days from the date
hereof ("Negotiation Period"), setting forth the terms outlined in this MOU
as well as customary representations, warranties, covenants, indemnities,
limitations and other undertakings appropriate for a transaction of the
type contemplated hereunder.
13. Press Release. The parties shall cooperate with one another to develop a
-------------
mutually agreeable press release related to this MOU and the Agreement
contemplated hereunder as soon as possible after the execution of the
Agreement. Any and all future releases and public announcements shall be
subject to the mutual written agreement of the parties as to timing,
content and the necessity therefor.
14. Confidentiality. Except as and to the extent required by law, neither
---------------
party will disclose or use, and will direct it representatives not to
disclose or use to the detriment of the other party, any Confidential
Information (as defined below) with respect to the business of the other
party furnished, or to be furnished, by such party, or their respective
representatives to the other party or its representatives at any time or in
any manner other than disclosures to employees on a need-to-know basis.
For purposes of this Paragraph, "Confidential Information" means any
information about the ongoing negotiations related to this MOU or the
business or activities of either party stamped "confidential" or identified
in writing as such by a party to the other party promptly following its
disclosure. Disclosure of the Confidential Information to employees and
agents of the parties hereto will be limited to a need to know basis under
circumstances where the employee or agent is advised of the confidential
nature of the disclosure and is bound to keep said information
confidential. Notwithstanding the foregoing, the following information
shall not be deemed Confidential Information: (i) information that is
already known to the recipient party or its representatives or to others
not bound by a duty of confidentiality prior to disclosure; (ii)
information that becomes public available through no fault of the recipient
party or its representatives; (iii) information that is independently
developed by a party without the use of or reference to the Confidential
Information of the other party; or (iv) information that properly comes
into the recipient's possession from a third party who is not under an
obligation to maintain the confidentiality of such information.
Notwithstanding anything contained herein, it shall not be a breach of this
provision for either party to disclose Confidential Information pursuant to
any applicable subpoena or other legal or regulatory process or to its
shareholders pursuant to regulatory requirement so long as the recipient
notifies the disclosing party prior to making such disclosure. Upon the
written request of the disclosing party, the recipient party will promptly
return to the disclosing party or destroy any Confidential Information in
its possession and certify in writing to the disclosing party that it has
done so. Notwithstanding any other provision of this Paragraph, WebMD may,
for purposes of filing legally required documents in connection with any
public offerings of stock in WebMD, disclose the existence but not the
financial terms of the MOU or the Agreement.
6
<PAGE>
15. Standard Terms and Conditions. Each party will provide standard
-----------------------------
representations and warranties to the other party regarding its ability to
enter into the Agreement and carry out the transaction contemplated
hereunder. Additionally, each party will be solely responsible for the
content, logos, brand identifiers and other materials provided by it to the
other party hereunder for use in accordance with the terms of the Agreement
and will indemnify and hold the other party harmless from any claims
related to such materials. Finally, the Agreement will contain other
customary provisions appropriate for a transaction of this nature.
The signature of each party's duly authorized representative below shall
evidence the agreement of such party that this MOU accurately summarizes its
understanding with respect to the subject matter hereof.
CNN INTERACTIVE, A DIVISION OF CABLE NEWS
NETWORK, INC. WEBMD, INC.
/s/ Louis Lettes /s/ Jeff Arnold
- ---------------------------- ---------------------------
Signature Signature
Louis Lettes Jeffrey T. Arnold
- ---------------------------- ---------------------------
Print Name Print Name
VP Business Development Chairman/CEO
- ---------------------------- ---------------------------
Title Title
7
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.43
STRATEGIC DISTRIBUTION ALLIANCE AGREEMENT
-----------------------------------------
THIS STRATEGIC DISTRIBUTION ALLIANCE AGREEMENT (the "Agreement") is
entered into this 23/rd/ day of October, 1998, by and between WebMD, Inc., a
Georgia corporation ("WebMD"), and HBO & Company of Georgia, a Delaware
corporation ("HBOC").
BACKGROUND
----------
1. WebMD is engaged in, among other things, the business of promoting,
selling and providing under its "WebMD/SM/" brand name certain Internet-based
communications and information services (the "WebMD Services");
2. HBOC is engaged, directly and through its affiliates, in the business
of providing integrated patient care, clinical, financial, managed care and
strategic management software solutions and other healthcare-related products
and services (the "HBOC Services");
3. Section 10 of that certain Investment Agreement dated as of August 24,
1998 (the "Investment Agreement") by and between WebMD and HBOC contemplates
that if WebMD and HBOC enter into a strategic alliance agreement within ninety
(90) days of the closing of the investment by HBOC, WebMD will grant a
Performance-Based Warrant (as such capitalized term is defined in the Investment
Agreement) to HBOC based upon certain annual gross revenues of WebMD derived
from the strategic alliance; and
4. The parties agree that this Agreement constitutes the strategic
alliance as contemplated in the Investment Agreement and desire to enter into
such a strategic alliance pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
TERMS OF AGREEMENT
------------------
1. DEFINITIONS. The following capitalized terms used in this Agreement
shall have the following meanings:
(a) "Affiliates" means any entity controlling, controlled by, or
under common control with, either party to this Agreement.
(b) "Correction(s)" means a modification, revision or supplement to
the WebMD Services which makes the WebMD Services perform functions it was
designed to perform or corrects defects or "bugs."
<PAGE>
(c) "Distributor(s)" means HBOC, its Affiliates and those entities
which (at the time in question) are authorized by HBOC either as distributor or
agent to distribute HBOC Services. Additional Distributors may be added by HBOC
during the term of this Agreement so long as HBOC requires any such entity to
execute a written agreement with HBOC containing terms and conditions
substantially similar to those contained in this Agreement for the protection of
Proprietary Information.
(d) "Documentation" means the full and complete documentation in any
media and form (CD, hard copy, electronic, etc.) for WebMD Services, including
all programmer, user, training, operating, support and other manuals, technical
specifications and documents and manuals relating to the installation,
implementation, use, maintenance, testing and operation of WebMD Services,
together with all revisions, updates and other modifications thereto as WebMD
may make from time to time.
(e) "Enhancement(s)" means modifications, revisions, additions or
supplements to the WebMD Services which enables the WebMD Services to provide or
perform services or functions it could not previously perform or materially
improves the manner in which the WebMD Services performs existing functions.
(f) "HBOC Customer(s)" means the (i) current customers of HBOC which
have licensed HBOC software or purchased from HBOC services or hardware; and
(ii) prospective customers to whom HBOC or any of its Affiliates is marketing or
with whom HBOC or any of its Affiliates is negotiating for the license of HBOC
Software or the sale of hardware or HBOC Services. The term "HBOC Customer"
shall include Affiliates of any HBOC Customer.
(g) "New Release(s)" means all modifications, revisions, Enhancements,
Corrections or replacements for WebMD Services and related Documentation which
WebMD has agreed to provide pursuant to this Agreement or which WebMD makes
available to its customers in general from time to time at no additional license
fee.
(h) "Proprietary Information" means any data or information regarding
(i) the business operations of a party which is not generally known to the
public and affords such party a competitive advantage, including but not limited
to, information regarding its products and product development, suppliers,
marketing strategies, finance, operations, customers, sales, and internal
performance results; (ii) proprietary software, including but not limited to:
concepts, designs, documentation, reports, data, specifications, source code,
object code, flow charts, file record layouts, databases, inventions and trade
secrets, whether or not patentable or copyrightable; and (iii) the terms and
conditions of this Agreement.
(i) "Subscription Agreement" means the agreement which sets forth the
terms and conditions pursuant to which HBOC Customer will be licensed to use the
WebMD Services.
2
<PAGE>
(j) "Territory" means the geographical area and territories listed in
Exhibit A attached hereto. The Territory may be extended pursuant to the mutual
- ---------
written agreement of the parties.
2. LICENSE.
(a) License Grant. Subject to the terms and conditions set forth in
-------------
this Agreement, WebMD grants HBOC, its Affiliates and Distributors a non-
exclusive, non-transferable license to market the WebMD Services to HBOC
Customers.
(b) Trademarks.
----------
(i) WebMD grants HBOC a non-exclusive, non-transferable license
to use WebMD's trademarks, service marks, logos, or slogans (the "WebMD Marks")
solely to advertise and promote the WebMD Services during the term of this
Agreement. HBOC shall submit all of such materials to WebMD for prior review and
approval. HBOC shall not receive any ownership in or to the WebMD Marks as a
result of such use. HBOC shall not use any of the WebMD Marks in any manner
likely to confuse, mislead or deceive the public, or to be adverse to the best
interests of WebMD.
(ii) HBOC grants to WebMD limited permission to use the HBOC's
trademarks, service marks, logos, or slogans (the "HBOC Marks") solely to
identify itself as a partner of HBOC during the term of this Agreement. WebMD
shall use the HBOC Marks in accordance with the guidelines established by HBOC
from time to time, a current copy of which is attached hereto as Exhibit B.
---------
WebMD shall submit all such materials to HBOC for prior review and approval.
WebMD shall not use any of the HBOC Marks in any manner likely to confuse,
mislead or deceive the public, or to be adverse to the best interests of HBOC.
(c) Fulfillment. WebMD agrees to allow HBOC Customers who wish to
-----------
subscribe to the WebMD Services (the "Subscribers") through HBOC's marketing
efforts to subscribe to WebMD Services at the prices set forth on Exhibit C
---------
attached hereto, subject to adjustment as set forth in Section 13(o) of this
Agreement. Upon a potential Subscriber's execution of a Subscription Agreement,
HBOC shall forward the executed Subscription Agreement to WebMD for
consideration, acceptance and fulfillment. WebMD shall act on all such
Subscription Agreements it receives within a reasonable time after its receipt
thereof, not to exceed three (3) business days. WebMD shall maintain appropriate
bandwidth, storage space and access speed to permit timely access to the WebMD
Services by all Subscribers.
(d) HBOC Internet Commerce Content. HBOC may offer to WebMD from time
------------------------------
to time a non-exclusive, non-transferable, non-assignable license to incorporate
certain HBOC Services (the "HBOC Internet Commerce Content") into the WebMD
Services. HBOC represents and warrants to WebMD that such HBOC Internet
Commerce Content (A) will be licensed to or the property of HBOC or a third
party from whom HBOC has received the right to offer such HBOC Internet Commerce
Content to WebMD and that HBOC or such third party will have the full right to
allow WebMD to use such HBOC Internet Commerce Content,
3
<PAGE>
and to display and incorporate such HBOC Internet Commerce Content into WebMD
Services, without infringement upon the rights of any party; and (B) will have
been prepared and/or compiled with care. If such HBOC Internet Commerce Content
is incorporated into the WebMD Services: (x) WebMD shall have the right and
license to use such HBOC Internet Commerce Content in order to display and
incorporate such HBOC Internet Commerce Content into WebMD Services; and (y)
other than the right and license granted pursuant the foregoing clause (x),
WebMD shall obtain no rights in or to such HBOC Internet Commerce Content. The
parties will negotiate in good faith the terms and conditions under which the
HBOC Internet Commerce Content will be incorporated into the WebMD Services.
(e) Joint Services. The parties contemplate that they may, from time
--------------
to time, develop new products and services for incorporation into the WebMD
Services. Concurrently with the development of such new products and services,
the parties agree to negotiate in good faith the terms and conditions under
which those products and services will be incorporated into the WebMD Services.
Such terms and conditions shall include, without limitation, the terms and
conditions set forth on Exhibit D attached hereto.
---------
(f) Goals; Performance-Based Warrant. The parties acknowledge that the
--------------------------------
Investment Agreement contemplates that if HBOC enters into this Agreement within
ninety (90) days of the closing of the investment in WebMD by HBOC and meets the
WebMD gross revenue targets generated by the joint marketing efforts of HBOC and
WebMD, including but not limited to HBOC's commercially reasonable efforts to
enroll Subscribers to the WebMD Services, as set forth on Exhibit E attached
---------
hereto, within the respective time periods set forth therein, WebMD shall issue
to HBOC, within five (5) days following the execution of this Agreement by the
parties, a Performance-Based Warrant to purchase an aggregate of *** (***)
shares of Preferred Stock or, in the event that the Initial Public Offering has
been closed by such date, Common Stock, (as such capitalized terms are defined
in the Investment Agreement). The Performance-Based Warrant would be granted
with respect to *** (***); *** (***); and *** (***) shares on March 31 of each
of the calendar years 1999, 2000 and 2001, respectively, with the exercise price
per share equal to the Fair Market Value (as defined below) of the underlying
capital stock on the respective dates of grant (as adjusted for stock splits,
stock dividends, combinations and the like occurring after the date thereof).
For purposes of this Section 2(f), "Fair Market Value" means: (i) prior to an
Initial Public Offering (as such capitalized term is defined in the Investment
Agreement), the fair market value of the underlying capital stock on the
respective dates of grant as determined by the Board of Directors of WebMD, in
its sole discretion; provided, however, that Fair Market Value shall not be
-------- --------
greater than the price at which securities of WebMD were last sold in a
transaction between WebMD and parties who were not, at the time of such sale,
affiliated with WebMD; or (ii) subsequent to an Initial Public Offering, the
Market Price (as such capitalized term is defined in the Warrant to Purchase
Shares of Series A Preferred Stock or Common Stock of WebMD issued to HBOC and
dated August 24, 1998) on the respective dates of grant. The parties agree that
all fees received by WebMD from WebMD Subscribers enrolled through the marketing
efforts of HBOC Call Center Group or any other HBOC sales group in calendar year
1998 (either prior to or after the execution of this Agreement) shall be
included in the calculation of the gross revenues for the twelve (12)-month
period ended March 31,
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
4
<PAGE>
1999 for purposes of the possible grant of the Performance-Based Warrant. The
parties further agree that such targets merely constitute a good faith estimate
by HBOC during the specified time periods and that the failure to meet such
targets shall not constitute a breach of this Agreement by HBOC.
3. MARKETING.
(a) Generally. HBOC will use commercially reasonable efforts to market
---------
the WebMD Services.
(b) Marketing Activities. HBOC and WebMD, as appropriate, may perform
--------------------
some or all of the following marketing activities:
(i) Press Releases. Subject to each party's prior written
--------------
approval, issue a press release announcing the creation of the strategic
alliance and additional press releases from time to time to publicize other
significant events regarding joint business developments and joint services.
(ii) Marketing Materials. Work together to develop articles or
-------------------
entries regarding WebMD Services for the HBOC marketing materials, including:
Fact Sheets, WebMD Solutions Directory, HBOC Sales Manual and For Your Arsenal
-------------------------- ----------------- ----------------
and other marketing materials released by HBOC from time to time during the term
of this Agreement. HBOC shall include references to the WebMD Services in
marketing presentations, as appropriate, and both parties, in consultation with
each other, shall be responsible for the design and development of marketing
materials for the WebMD Services.
(iii) RFP Responses. Recommend WebMD Services as a solution in
-------------
responses to requests for proposals ("RFP's") from HBOC Customers, provided
WebMD cooperates with HBOC in the preparation of such responses, such
cooperation to include, without limitation, ensuring the accuracy of HBOC's
responses to routine questions regarding WebMD Services contained in RFP's, the
development and update of standard information required to support HBOC
responses to routine questions in such RFP's, the formulation of responses to
non-routine questions in such RFP's, and other support to HBOC's RFP Specialists
as reasonably required in connection with clarifications to RFP responses.
(iv) Demonstrations. WebMD shall provide HBOC a reasonable amount
--------------
of sales support which may include demonstrations of the WebMD Services, either
at an HBOC or HBOC Cus tomer site, and attendance at sales presentations by
HBOC.
(v) Representatives. Each party shall assign a representative who
---------------
shall serve as that party's point-of-contact or facilitator between the parties
on all matters arising under this Agreement. The representatives shall meet on a
mutually agreed upon basis to review and coordinate all activities under this
Agreement, including development, support, marketing and sales, and to amicably
resolve any disputes which may arise under this Agreement.
5
<PAGE>
(vi) Sales Training and Assistance. From time to time and at no
-----------------------------
charge to HBOC, upon mutually agreeable terms and conditions, HBOC and WebMD may
organize and hold sales training workshops for the WebMD Services. WebMD agrees
to respond timely and effectively to reasonable requests for assistance from
HBOC in order to promote the license of the WebMD Services by HBOC.
(c) Business Partner Database. HBOC will include information about
-------------------------
WebMD and WebMD Services in HBOC's Business Partner directory and other
materials, as appropriate, for use by HBOC sales representatives, Affiliates,
Distributors and others.
(i) Trade Show Attendance. Upon HBOC's reasonable request, WebMD
---------------------
shall participate with HBOC at vendor fairs and healthcare information industry
trade shows, seminars and selected user group events.
(ii) Web Page Links. As deemed appropriate, each party may
--------------
establish a link on its respective Web site to the Web site of the other party.
4. WebMD RESPONSIBILITIES.
(a) Technical Support for HBOC. WebMD shall provide to HBOC, at no
--------------------------
additional charge, reasonable technical support and consultation from WebMD's
designated offices by way of telephone, bulletin boards or other electronic
means, to assist HBOC in the resolution of problems encountered by HBOC in the
operation, configuration, implementation and support of WebMD Services. Such
support shall include commercially reasonable efforts by WebMD to verify,
diagnose and correct errors and defects in the WebMD Services. WebMD shall serve
as the sole contact point and provide all technical support for the WebMD
Services for HBOC Customers.
(b) Pre-releases. Upon HBOC's reasonable request, WebMD shall provide
------------
newly developed or beta versions ("Pre-releases") of WebMD Services for review,
evaluation, training and planning purposes. WebMD shall make Pre-releases
available to HBOC no later than when WebMD makes the same available to other
third party distributors of the WebMD Services. ANY PRE-RELEASE IS PROVIDED TO
HBOC "AS IS" AND WebMD MAKES NO WARRANTIES AND SPECIFICALLY DISCLAIMS ALL
IMPLIED WARRANTIES REGARDING THE PRE-RELEASE.
(c) Participation in Development. WebMD shall provide HBOC with
----------------------------
frequent communication regarding contemplated New Releases, Enhancements, and
other product directions, including providing HBOC with access to WebMD Services
under development in order that HBOC may fully utilize all the features of the
WebMD Services as early as is technically feasible, all of which shall be
provided to HBOC no later than provided to any other third party distributor of
the WebMD Services. WebMD agrees not to add incremental provider content
solutions without first previewing comparable HBOC solutions.
(d) HBOC Training. WebMD shall provide to HBOC, at no additional
-------------
charge, adequate initial training and re-training from time to time as
reasonably necessary and
6
<PAGE>
reasonably requested by HBOC on the use, operation and installation of WebMD
Services. All training shall be conducted by qualified personnel at such
facilities and at such times mutually agreed to by the parties, it being
contemplated that initially WebMD's personnel shall provide such training in one
or more sessions at HBOC's offices. Unless otherwise expressly agreed, travel
and living expenses incurred by each party in connection with the training shall
be the responsibility of the party incurring the expenses.
(e) Professional Services. WebMD shall make certain other professional
---------------------
services available to HBOC beyond the scope of those provided in this Section 4
on mutually acceptable terms and conditions.
(f) Access to Technical Assistance. WebMD shall provide HBOC with any
------------------------------
technical assistance as may be reasonably necessary for any application or
database interfaces or integration between HBOC Services and WebMD Services on
mutually acceptable terms and conditions; however the rates payable by HBOC for
such services shall not exceed WebMD's actual costs incurred in any event.
(g) Continued Development of WebMD Services. Recognizing that a
---------------------------------------
significant portion of a customer's perceived value in Internet-based services
such as the WebMD Services is the developer's continued investment in improved
and enhanced versions thereof, WebMD shall devote appropriate resources to
developing improved and enhanced versions of the WebMD Services (including
versions designed to be compatible with new hardware, database,
presentation/windowing and operating system features and versions with improved
and additional features).
(h) Sale of Line of Business. In the event that HBOC should transfer
------------------------
any line of business whose products or services are dependent on the WebMD
Services, WebMD shall not unreasonably refuse to enter into a distribution
agreement with the buyer of such product or service line on terms comparable to
WebMD's then current terms for such a strategic relationship.
(i) Marketing Literature; Sales Support. WebMD shall provide and
-----------------------------------
distribute a reasonable number of copies of its WebMD Services marketing
materials to appropriate HBOC sales and marketing personnel. WebMD shall
respond timely and effectively to HBOC's reasonable requests for information and
sales assistance.
(j) Advertising and Sponsorship Placement. WebMD shall be responsible
-------------------------------------
for all advertising and sponsorship placements on its Web site.
(k) Customer Support. WebMD shall serve as the sole contact point and
----------------
provide all customer support for the WebMD Services for HBOC Customers.
5. PRICES AND PAYMENT.
(a) Customer Fees. WebMD shall determine the fees to be charged for
-------------
the WebMD Services (subject to adjustment as set forth in Section 13(o) of this
Agreement), and
7
<PAGE>
HBOC shall determine the fees to be charged for the HBOC Internet Commerce
Content. The parties shall jointly determine the fees to be charged for services
which they jointly develop. WebMD shall be responsible for billing and
collection of the amounts owed for the WebMD Services. Concurrently with the
incorporation of any HBOC Internet Commerce Content as more fully described in
Section 2(d) of this Agreement, the parties agree to negotiate in good faith an
arrangement for WebMD to bill, collect and remit to HBOC fees, if any, relating
to any such HBOC Internet Commerce Content.
(b) Payment Terms. WebMD shall remit to HBOC incentive commissions per
-------------
paid Subscriber enrolled by HBOC or its Affiliates as set forth on Exhibit F
---------
within thirty (30) days of WebMD's receipt of the monthly fees from such
Subscriber. Subscriber fees pursuant to this Section 5(b) shall be payable by
the Subscriber within thirty (30) days following the end of each calendar month
in which such fees accrue.
(c) WebMD Commissions and Discounts. In the event WebMD provides
-------------------------------
commissions or discounts to any similarly situated third party distributor of
the WebMD Services, HBOC shall be entitled to receive the benefit of such
commission and/or discount offering for as long as that offering is in effect.
WebMD shall notify HBOC of all such transactions for which HBOC either qualifies
or for which it might qualify if it agrees to the conditions of such other
commission and/or discount offering.
(d) Expenses. Except as otherwise specified in this Agreement or
--------
mutually agreed to by the parties, each party shall be solely responsible for
its own travel and out-of-pocket expenses incurred in the performance of its
obligations under this Agreement.
6. PROPRIETARY RIGHTS AND CONFIDENTIALITY.
(a) Ownership and Protection. Each party agrees that it has no
------------------------
interest in or right to use the Proprietary Information of the other except in
accordance with the terms of this Agreement. Each party acknowledges that it may
disclose Proprietary Information to the other in the performance of this
Agreement. The party receiving the Proprietary Information shall (i) maintain it
in strict confidence and take all reasonable steps to prevent its disclosure to
third parties, except to the extent necessary to carry out the purposes of this
Agreement, in which case these confidentiality restrictions shall be imposed
upon the third parties to whom the disclosures are made; (ii) use at least the
same degree of care as it uses in maintaining the secrecy of its own Proprietary
Information (but no less than a reasonable degree of care); and (iii) prevent
the removal of any proprietary, confidential or copyright notices placed on the
Proprietary Information.
(b) Limitation. Neither party shall have any obligation concerning any
----------
portion of the Proprietary Information of the other which (i) is publicly known
prior to or after disclosure hereunder other than through acts or omissions
attributable to the recipient or its employees or representatives; (ii) as
demonstrated by prior written records, is already known to the recipient at the
time of disclosure hereunder, (iii) is disclosed in good faith to the recipient
by a third party having a lawful right to do so; or (iv) is the subject of
written consent
8
<PAGE>
of the party which supplied such information authorizing disclosure; or (v) is
required to be disclosed by the receiving party by applicable law or legal
process, provided that the receiving party shall immediately notify the other
party so that it can take steps to prevent its disclosure.
(c) Remedies for Breach. In the event of a breach of this Section 6,
-------------------
the parties agree that the non-breaching party may suffer irreparable harm and
the total amount of monetary damages for any injury to the non-breaching party
may be impossible to calculate and would therefore be an inadequate remedy.
Accordingly, the parties agree that the non-breaching party may be entitled to
temporary, preliminary and permanent injunctive relief against the breaching
party, its officers or employees, in addition to such other rights and remedies
to which it may be entitled at law or in equity.
7. WebMD WARRANTIES.
(a) Warranties of Authority and Title. WebMD hereby warrants and
---------------------------------
represents that (i) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia and has full power and
authority to enter into and consummate the transactions contemplated in this
Agreement; (ii) the execution, delivery and performance of this Agreement does
not violate the terms of any security agreement, license or any other contract
or written instrument to which WebMD is bound; (iii) the WebMD Services do not
infringe any patent, trademark, copyright or trade secret of a third party, and
(iv) it is not aware of any third party infringing on the rights of WebMD with
respect to the WebMD Services.
(b) Product Warranties. WebMD hereby warrants and represents that
------------------
WebMD Services, including all modifications, Corrections, Enhancements and New
Releases will have the functions and features and perform as described in the
Documentation provided to HBOC or to HBOC Customers by WebMD during the term of
this Agreement. WebMD further warrants that prior to delivery, the WebMD
Services have been audited and tested in accordance with WebMD's internal
quality control processes and that the WebMD Services contains no third party
software which would require HBOC, as a distributor of the WebMD Services, to
agree to any terms and conditions in addition to those set forth in this
Agreement. In the event that the WebMD Services fails to conform to such
warranties, WebMD shall promptly and continuously provide such support as
reasonably necessary to cause the WebMD Services to perform as warranted.
(c) WebMD Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 7
----------------
OR OTHERWISE UNDER THIS AGREEMENT (OR ANY OTHER AGREEMENT BETWEEN THE PARTIES)
OR IN ANY OTHER WebMD MATERIALS OR DOCUMENTATION PROVIDED TO SUBSCRIBERS, WebMD
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARISING BY LAW OR CUSTOM,
INCLUDING BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
9
<PAGE>
(d) Year 2000 Warranty. WebMD warrants that the occurrence in or use
------------------
by the WebMD Services of dates on or after January 1, 2000 (the "Millennial
Dates") will not have a material adverse effect on the performance of the WebMD
Services with respect to date-dependent data, computations, output or other
functions (including, without limitation, calculating, computing or sequencing),
and the WebMD Services will create, store and generate output data related to or
including the Millennial Dates without errors or omissions.
8. HBOC WARRANTIES.
(a) Warranties of Authority. HBOC hereby warrants and represents that
-----------------------
(i) it is a corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware and has full power and authority to
enter into and consummate the transactions contemplated in this Agreement; and
(ii) the execution and performance of this Agreement does not violate the terms
of any security agreement, license or any other contract or written instrument.
(b) HBOC Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 8(b)
---------------
OR OTHERWISE UNDER THIS AGREEMENT (OR ANY OTHER AGREEMENT BETWEEN THE PARTIES)
HBOC DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARISING BY LAW OR
CUSTOM, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
9. INTELLECTUAL PROPERTY INDEMNIFICATION. WebMD shall indemnify, defend
and hold harmless HBOC, its Affiliates and Distributors and their officers,
directors, employees agents and affiliates (collectively, for purposes of this
Section 9, "HBOC Persons") from all damages, liabilities and expenses (and all
legal costs including reasonable attorneys fees, court costs, expenses and
settlements resulting from any action or claim) arising out of, connected with
or resulting in any way from (i) any allegation that the authorized possession,
distribution or use (by HBOC, its Affiliates or Distributors) in a manner that
is in compliance with this Agreement and the terms and conditions for the use of
the WebMD Services of WebMD Services infringes a patent, trademark, copyright,
trade secret or other intellectual property right of a third party; and (ii) the
use of WebMD Services (by HBOC, its Affiliates or Distributors) in a manner that
is in compliance with the terms and conditions for the use of the WebMD
Services. If any such claim or proceeding arises, HBOC Persons seeking
indemnification hereunder shall give timely notice of the claim to WebMD after
they it receive actual notice of the existence of the claim. WebMD shall have
the option, at its expense, to employ counsel reasonably acceptable to HBOC
Persons to defend again such claim and to compromise, settle or otherwise
dispose of the claim; provided, however, that no compromise or settlement of any
claim admitting liability of or imposing any obligations upon HBOC Persons may
be effected without the prior written consent of HBOC Persons. In addition, and
at the option and expense of WebMD, WebMD may, at any time after any such claim
has been asserted, and shall, in the event any WebMD Services are held to
constitute an infringement, either procure for HBOC Persons the right to
continue using the WebMD Services, or replace or modify the WebMD Services so
that they become non-infringing,
10
<PAGE>
provided that such replacement or modified WebMD Services have the same
functional characteristics as the infringing WebMD Services, or, if the prior
two (2) remedies are commercially impractical, refund to HBOC all fees, costs
and charges paid by HBOC to WebMD for the WebMD Services and any other WebMD
Services reasonably rendered ineffective as the result of said infringement.
HBOC shall cooperate fully in such actions, making available books or records
reasonably necessary for the defense of such claim. If WebMD refuses to defend
or does not make known to HBOC Persons its willingness to defend against such
claim within ten (10) days after it receives notice thereof, then HBOC Persons
shall be free to investigate, defend, compromise, settle or otherwise dispose of
such claim in its best interest and incur other costs in connection therewith,
all at the expense of WebMD.
10. LIMITATION OF LIABILITY.
(a) Exclusion of Consequential Damages. NEITHER PARTY WILL BE LIABLE
----------------------------------
TO THE OTHER FOR ANY CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES, WHETHER
FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF THE OTHER PARTY OR ITS CLIENTS,
CUSTOMERS OR SUBSCRIBERS (INCLUDING WITHOUT LIMITATION CLAIMS FOR GOODWILL, LOST
PROFITS OR USE OF MONEY) ARISING OUT OF BREACH OF EXPRESS OR IMPLIED WARRANTIES,
BREACH OF CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY, IN TORT OR
OTHERWISE, IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, EXCEPT ONLY IN
THE CASE OF PERSONAL INJURY WHERE AND TO THE EXTENT THAT APPLICABLE LAW REQUIRES
SUCH LIABILITY; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL IMPAIR OR
LIMIT WebMD'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 9 OF THIS AGREEMENT.
(b) Limitation of HBOC's Obligations. HBOC reserves the right to
--------------------------------
withhold service or otherwise cease performance of its obligations hereunder
with respect to any HBOC Customer which is found by HBOC to be in default or
breach of any agreement with HBOC. Upon such cessation of services, HBOC shall
be relieved of its performance obligations contained in this Agreement with
respect to such HBOC Customer, and shall not be found to be in breach of this
Agreement by WebMD. HBOC's aggregate liability to WebMD for damages concerning
performance or non-performance by HBOC or in any way related to the subject
matter of this Agreement, regardless of whether the claim for such damages is
based on contract or tort, shall not exceed the amount received by WebMD from
HBOC Customers during the previous twelve (12) months for the WebMD Services
giving rise to such claim.
11. TERMINATION; DISPUTE RESOLUTION.
(a) Term. This Agreement shall commence on the Effective Date and
----
shall continue in full force and effect for a period of three (3) years
("Initial Term"), unless earlier terminated as provided for below. Thereafter,
this Agreement will automatically renew for successive terms of one (1) year
each (each, a "Renewal Term"). Either party may terminate
11
<PAGE>
this Agreement without cause at the end of the Initial Term or any Renewal Term
by providing at least nine (9) months prior written notice to the other party.
(b) Early Termination. Either party may terminate this Agreement
-----------------
immediately by notice to the other party upon the occurrence of any of the
following events of default by the other party:
(i) The other party fails to observe, perform or fulfill any of
its obligations or warranties (other than confidentiality obligations) under the
Agreement and fails to cure such default within thirty (30) days after the non-
defaulting party gives written notice of such failure;
(ii) The other party fails to observe, perform or fulfill any
confidentiality obligation imposed hereunder and fails to cure such default
within ten (10) days after the non-defaulting party gives notice of such
failure;
(iii) The other party's business is liquidated, dissolved or
suspended;
(iv) The other party is prevented from performing any of its
material obligations hereunder for more than ninety (90) days due to an event
beyond its reasonable control as described in Section 13(k); or
(v) Any representation or warranty made herein by the other party
is false or misleading in any material respect as of the date on which it was
made or becomes false or misleading in any material respect at any time
thereafter.
(c) Termination by HBOC. HBOC may, in its reasonable discretion,
-------------------
terminate this Agreement upon ninety (90) days written notice by providing
notice to WebMD upon the occurrence of a change in the direct or indirect
ownership or control of WebMD which in HBOC's reasonable opinion may adversely
affect HBOC's rights, goodwill, HBOC Customer relationships or competitive
position.
(d) Obligations After Expiration or Termination. Upon the expiration
-------------------------------------------
or termination of this Agreement for any reason:
(i) Except as otherwise specified below in clause (ii), each
party will promptly cease using and destroy or return to the other party all
advertisements and promotional materials that bear a trademark of the other
party and all Proprietary Information of such other party.
(ii) WebMD will continue to deliver the WebMD Services to HBOC
Customers, subject to their obligation to make timely payment therefor, until
the expirations or terminations of their respective Subscription Agreements, and
will continue to pay HBOC all incentive commissions set forth on Exhibit F
---------
attached hereto earned with respect to such HBOC Customers.
12
<PAGE>
(iii) WebMD shall continue to perform all applicable warranty and
technical support and other obligations regarding the WebMD Services in
accordance with the provisions of this Agreement until such time as the last
HBOC Customer Subscription Agreement expires or terminates.
(e) Survival. The provisions of the Agreement which by their nature
--------
are intended to survive termination or expiration of this Agreement shall
survive expiration or termination of this Agreement.
(f) Dispute Resolution. In the event of a dispute between the parties
------------------
and for which dispute the parties are unable to reach a mutually agreeable
resolution, the dispute shall be submitted to arbitration under the commercial
arbitration rules of the American Arbitration Association then in effect. There
shall be one arbitrator mutually agreed to by both parties; such arbitrator
shall have experience in the area of controversy. After the hearing, the
arbitrator shall decide the controversy and render a written decision setting
forth the issues adjudicated, the resolution thereof and the reasons for the
award. The award of the arbitrator shall be conclusive. Payment of the expenses
of arbitration, including the fee of the arbitrator, shall be assessed by the
arbitrator based on the extent to which each party prevails.
12. EXCLUSIVITY.
(a) During the term of this Agreement, WebMD agrees that it shall not
grant a license to market the WebMD Services in the Territory to any of the
entities listed on Exhibit G attached hereto, or to any entity or person that
---------
controls or is controlled by, directly or indirectly, an entity listed on
Exhibit G, except upon HBOC's prior written approval. The exclusivity rights
- ---------
granted pursuant to this Section 12(a) shall be subject to attainment of the
WebMD gross revenue targets as set forth on Exhibit H attached hereto within the
---------
respective time periods set forth therein. If HBOC fails to meet either of such
targets, WebMD shall provide written notice to HBOC within thirty (30) days
after each such failure. HBOC shall then have a cure period of one hundred
eighty (180) days following (i) March 31, 2000 to meet the first target as set
forth in Section 1 of Exhibit H and to bring current the pro rata portion of the
---------
second target as set forth in Section 2 of Exhibit H; and (ii) March 31, 2001 to
---------
meet the second target as set forth in Section 2 of Exhibit H.
---------
(b) During the term of this Agreement, HBOC agrees that it shall not
enter into an agreement to market Internet-based communications and information
services in the Territory which are provided or distributed by any of the
entities listed on Exhibit I attached hereto, or to any entity or person that
---------
controls or is controlled by an entity listed on Exhibit I, except upon WebMD's
---------
prior written approval. The exclusivity rights granted pursuant to this Section
12(b) shall be subject to attainment of the WebMD gross revenue targets as set
forth on Exhibit J attached hereto within the respective time periods set forth
---------
therein. If WebMD fails to meet either of such targets, WebMD shall provide
written notice to HBOC within thirty (30) days after each such failure. WebMD
shall then have a cure period of one hundred eighty (180) days following (i)
March 31, 2000 to meet the first target as set forth in Section 1 of Exhibit J
---------
and to bring current the pro rata portion of the second target as set forth in
Section 2
13
<PAGE>
of Exhibit J; and (ii) March 31, 2001 to meet the second target as set forth in
---------
Section 2 of Exhibit J.
---------
(c) If either party fails to meet its respective targets as set forth
on Exhibit H and Exhibit J attached hereto within the respective time periods
--------- ---------
set forth therein, including the cure periods specified in this Section 12,
neither party will be bound by the exclusivity provisions set forth in this
Section 12.
(d) For purposes of this Section 12, "Control" means the ownership of
at least a majority of the voting interests of an entity listed on Exhibit G and
---------
Exhibit I attached hereto.
- ---------
13. MISCELLANEOUS PROVISIONS.
(a) Independent Contractor. It is expressly agreed that WebMD and HBOC
----------------------
are acting under this Agreement as independent contractors, and the relationship
established under this Agreement shall not be construed as a partnership, joint
venture or other form of joint enterprise. Neither party is authorized to make
any representations or create any obligation or liability, expressed or implied,
on behalf of the other party, except as may be expressly provided for in this
Agreement.
(b) Comparable Terms. The fees charged HBOC Customers by WebMD for
----------------
WebMD Services and any non-price terms imposed shall not at any time be less
favorable than any price or non-price terms offered by WebMD to customers of any
third party which markets the WebMD Services in comparable volumes. In the event
that WebMD offers any third party distributor of the WebMD Services more
favorable price or non-price terms than those offered hereunder to HBOC, the
WebMD shall so notify HBOC, and the more favorable terms shall be immediately
extended to HBOC.
(c) Access to Books and Records. The parties shall keep complete,
---------------------------
accurate and up-to-date books and records in accordance with generally accepted
accounting principles and sound business practices covering all transactions
relating to this Agreement. Either party and/or its authorized representatives
shall upon reasonable notice have the right (not more than once annually) to
inspect, audit, and/or copy such records in order to determine whether all
provisions of this Agreement have been met. The parties agree that all
information and records obtained in such audit shall be considered Proprietary
Information. This right to audit shall be available to either party for up to
two (2) years following the termination of this Agreement.
(d) Omnibus Reconciliation Act of 1980. If the provisions of Section
----------------------------------
952 of the Omnibus Reconciliation Act of 1980, as amended (currently codified at
42 U.S.C. l395x(v)1(I)), are or become applicable to this Agreement, then, until
the expiration of four (4) years after the furnishing of services pursuant to
this Agreement, WebMD shall, upon written request, make available to the
Secretary of Health and Human Services, the U.S. Comptroller General, or any
other duly authorized representative of the federal government, the contracts
and books, documents and records of WebMD that are necessary to certify the
nature and extent of costs related to this Agreement.
14
<PAGE>
(e) Compliance with Laws. WebMD, its employees and agents shall comply
--------------------
with applicable federal, state and local laws, ordinances, regulations and
codes, including the identification and procurement of required permits
certificates, approvals and inspections, in the performance of this Agreement.
(f) Export Assurance. HBOC hereby acknowledges and agrees that it will
----------------
first obtain any export license or approval required by the United States
Department of Commerce pursuant to Section 370 of the Export Administrative
Regulation prior to exporting the WebMD Services.
(g) Headings. The headings of the paragraphs of this Agreement are for
--------
convenience only and shall not be a part of or affect the meaning or
interpretation of this Agreement.
(h) Exhibits. This Agreement incorporates the attached Exhibits and
--------
any subsequent Exhibits or schedules referencing this Agreement.
(i) Non-Solicitation of Employees. During the term of this Agreement
-----------------------------
and for a period of one (1) year thereafter, each party agrees that without the
other party's prior written consent neither it nor its Affiliates shall solicit,
hire or otherwise retain as an employee or independent contractor any person who
during the previous twelve (12) months was an employee of the other party.
Notwithstanding the foregoing, nothing in this Section 13(i) shall be construed
to prohibit one party from hiring any employee of the other party who, without
solicitation or recruitment by the hiring party, responds to any general
advertisement for employment in a newspaper or otherwise.
(j) Assignment. This Agreement and any interest hereunder shall inure
----------
to the benefit of and be binding upon the parties and their respective
successors, legal representatives and permitted assigns. Upon prior notice to
the other party, either party may assign this Agreement (i) to any legal entity
in connection with the merger or consolidation of the assigning Party into such
entity or the sale of all or substantially all of the assets of the assigning
Party to such entity; or (ii) to any direct or indirect subsidiary of the
assigning party in connection with any corporate reorganization. Except as
stated in the previous sentence, neither party may assign or delegate this
Agreement without the other party's prior written consent, which consent shall
not be unreasonably withheld. Any attempt to assign, delegate or otherwise
transfer the Agreement in violation of this Section 13(j) is voidable by the
other party.
(k) Force Majeure. Neither party shall be responsible or considered in
-------------
breach of this Agreement for any delay or failure in the performance of any
obligation of this Agreement to the extent that such failure or delay is caused
by acts of God, fires, explosions, labor disputes, accidents, civil
disturbances, material shortages or other similar causes beyond its reasonable
control, even if such delay or failure is foreseeable; provided, however, that
the non-performing party provides notice of such cause preventing or delaying
performance and resumes its performance as soon as practicable and provided
further that the other party may
15
<PAGE>
terminate this Agreement upon notice if such non-performance continues for a
period of ninety (90) days.
(l) Governing Law; Statute of Limitations. The validity and
-------------------------------------
construction of this Agreement shall be governed by, subject to and construed in
accordance with the laws of the State of Georgia, excluding its conflicts of law
rules. In the event either party employs attorneys to enforce any right arising
out of or relating to this Agreement, the prevailing party shall be entitled to
recover its reasonable attorneys fees and costs. Any claim arising out of or
relating to this Agreement shall be commenced within one (1) year of the date
upon which the cause of action accrued (or, if one (1) year is shorter than the
minimum allowed by law, then the minimum period allowed by law).
(m) Notices. All notices, requests, demands and other communications
-------
(collectively, "Notices") required or permitted by this Agreement shall be in
writing and shall be delivered by hand, telex, telegraph, facsimile or like
method of transmission or mailed by registered or certified mail, return receipt
requested, first class postage prepaid, addressed as follows:
If to HBOC:
HBO & Company
301 Perimeter Center North
Atlanta, Georgia 30346
Attn: Vice President, Business Development
FAX: (404) 393-6092
with a copy to: General Counsel
If to WebMD:
WebMD, Inc.
400 The Lenox Building
3399 Peachtree Road, NE
Atlanta, Georgia 30326
Attn: Chief Operating Officer
FAX: (404) 479-7651
with a copy to: Corporate Counsel
If delivered by hand, telex, telegraph, facsimile or like method of
transmission, the date on which a Notice is actually delivered shall be deemed
the date of receipt and if delivered by mail, the date on which a Notice is
actually received shall be deemed the date of receipt. Either party may change
the address or designated person for receiving Notices by providing notice in
accordance with this Section 13(m).
16
<PAGE>
(n) Severability. If any term of this Agreement is held as invalid or
------------
unenforceable, the remainder of this Agreement shall not be affected, and each
term and provision shall be valid and enforced to the fullest extent permitted
by law.
(o) Entire Agreement/Amendments. This Agreement, including all
---------------------------
exhibits attached hereto, contains the entire agreement between the parties and
supersedes all prior and contemporaneous proposals, discussions and writings by
and between the parties and relating to the subject matter hereof.
Notwithstanding the generality of the foregoing sentence, the parties
acknowledge that the License Agreement dated as of December 30, 1997 between
National Health Enhancement Systems, Inc. (currently known as HBOC Call Center
Group) and Endeavor Technologies, Inc. (currently known as WebMD, Inc.) shall
remain in full force and effect and is not superseded by this Agreement. None of
the terms of this Agreement shall be deemed to be waived by either party or
amended or supplemented unless such waiver, amendment or supplement is written
and signed by both parties; provided, however, that WebMD may, in its sole
discretion, amend Exhibit C attached hereto upon one hundred eighty (180) days
---------
prior notice to HBOC; provided further that (i) WebMD may not increase the
prices specified in Exhibit C during the initial term of the Subscription
---------
Agreements which are in effect on the effective date of the price increase; and
(ii) if WebMD amends Exhibit C, (A) HBOC may terminate this Agreement within
---------
thirty (30) days after receiving written notice of such amendment; (B) if such
amendment increases or decreases the monthly base Subscriber fees for the WebMD
and WebMD OnCall Packages as set forth in Sections 1 and 2 of Exhibit C by an
---------
aggregate amount greater than or equal to twenty-five percent (25%), then the
targets as set forth in Exhibit E with respect to the possible grant of the
---------
Performance-Based Warrant will be increased or decreased, as the case may be, on
a pro rata basis; and (C) the parties shall negotiate in good faith to update
Exhibit F in the event any additional packages are added to Exhibit C. The
- --------- ---------
invalidity or unenforceability of any particular provision of this Agreement, as
determined by any court of competent jurisdiction or any appropriate
legislature, shall not affect the other provisions hereof and this Agreement
shall be construed in all respects as if such invalid or unenforceable provision
had been omitted. No usage of trade or industry course of dealing shall be
relevant to explain or supplement any term expressed in this Agreement.
(p) Except as expressly provided herein, each party shall bear its own
costs incurred in performing under this Agreement.
17
<PAGE>
IN WITNESS WHEREOF, WebMD and HBOC, intending to be legally bound by
the terms of this Agreement, have caused this Agreement to be executed by their
duly authorized representatives.
WebMD, INC.
By: /s/ W. Michael Heekin
--------------------------------
Name: W. Michael Heekin
------------------------------
Title: Chief Operating Officer
-----------------------------
HBO & COMPANY OF GEORGIA
By: /s/ Michael L. Kappel
--------------------------------
Name: Michael L. Kappel
------------------------------
Title: Sr. VP - Corporate Planning
& Business Development
--------------------------
18
<PAGE>
EXHIBIT A
---------
Territory
Worldwide
19
<PAGE>
EXHIBIT B
---------
Trademark/Logo Requirements
20
<PAGE>
EXHIBIT C
---------
WebMD Services Pricing Schedule
1. WebMD Package: $29.95/month - WebMD Membership, includes Electronic Data
Interchange;/1/ Virtual Receptionist Universal Inbox;/2/ Physician Web Site;
Healthcare References and Patient Education Materials; Continuing Medical
Education; Interactive Dissectible Anatomy;/3/ Secure Electronic Messaging;/4/
Online Patient Advice Lines; and Consumer Financial Network (collectively,
"WebMD Suite")
2. WebMD OnCall Package: $99.95/month - WebMD Suite and WebMD OnCall
Medical Messaging Center./5/
3. Upgrades:/6/
(a) Internet Service Provider;/7/ $19.95/month
(b) Network Computer Hardware Package, including printer, monitor with
speakers and keyboard - $25.00/month/8/
(c) PC Hardware Package, including printer, monitor with speakers and
keyboard - $50.00/month/9/
(d) Patient Test Results: $50.00/month/10/
(e) Pager: MobileComm(R) Monthly Pricing/11/
<TABLE>
<CAPTION>
Base Rate Page Allowance Page Overcall Price
--------- -------------- -------------------
<S> <C> <C> <C>
Local Alpha $19.95 250 S0.40/page
Regional Alpha $39.95 140 $0.65/page
National Alpha $49.95 140 $0.65/page
</TABLE>
Note: WebMD and WebMD OnCall packages are sold as a one-year subscription. Each
hardware system is sold as a three-year subscription.
________________________
1 Subscriber is responsible for fees, if any, charged by EDI providers.
2 Base service includes unlimited Internet-based access; Additional charges
for domestic 800-based access at $0.25/minute; Additional international
rates and taxes may also apply.
21
<PAGE>
3 Available soon on CD-ROM.
4 Base service includes 5 secure electronic messages/month; Additional secure
electronic messages at $2.00 each.
5 Charges include 50 live message transactions/month; Additional live message
transactions at $0.75 each. Charges also include 100 integrated voice
response ("IVR") transactions/month; Additional IVR transactions at $0.25
each.
6 All upgrades are subject to charges in addition to the base Subscriber fees
for WebMD and WebMD OnCall Packages as set forth on this Exhibit C.
---------
7 Base service includes unlimited local dial-up Internet access; Additional
charges for long distance dial-up Internet access at $5.95/hour.
8 Additional one-time charge of $100.00 for activation, setup and
installation of each hardware package. Installation provided with each
hardware package; If not required, additional one-time charge of $25.00 for
activation and setup. Subject to one-time early termination charge of
$20.00/month for each full mouth remaining in three-year subscription to
cover hardware costs. Subscription to Network Computer Hardware Package
upgrade requires a subscription to Internet Service Provider upgrade.
9 Additional one-time charge of $100.00 for activation, setup and
installation of each hardware package. Installation provided with each
hardware package; If not required, additional one-time charge of $25.00 for
activation and setup. Subject to one-time early termination charge of
$35.00/month for each full month remaining in three-year subscription to
cover hardware costs.
10 Base service includes unlimited e-mail-based results/month and 50
telephony-based results/month; Additional telephony-based results at $0.50
each.
11 Subscription to Pager upgrade requires a subscription to WebMD OnCall
Package.
22
<PAGE>
EXHIBIT D
---------
Joint Services
WebMD and HBOC agree that they may develop in the future from time to time
joint products and services as contemplated by this Agreement. The terms and
conditions relating to the offering of those products and services, when
developed, shall include, among other things and without limitation, the
following terms and conditions:
1. Patient Test Results offering: *** of Net Revenues, if any, derived
from a proposed patient test results offering.
2. Electronic commerce sales of HBOC Services through WebMD: HBOC retains
*** of such revenues, if any.
For purposes of this Exhibit D, "Net Revenues" mean gross revenues, less
---------
cost of goods sold and direct operating costs.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
23
<PAGE>
EXHIBIT E
---------
Performance-Based Warrant Targets
1. WebMD gross revenues of *** (***) generated by the joint marketing efforts
of WebMD and HBOC during the twelve (12)-month period ended March 31, 1999.
2. WebMD gross revenues of *** (***) generated by the joint marketing efforts
of WebMD and HBOC during the twelve (12)-month period ended March 31, 2000.
3. WebMD gross revenues of *** (***) generated by the joint marketing efforts
of WebMD and HBOC during the twelve (12)-month period ended March 31, 2001.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
24
<PAGE>
EXHIBIT F
---------
Incentive Commissions
(Monthly payments per paid Subscriber)
1. WebMD Package: Greater of *** or *** of base Subscriber
fees as set forth on Exhibit C of this
---------
Agreement
2. WebMD OnCall Package: Greater of *** or *** of base Subscriber
fees as set forth on Exhibit C of this
---------
Agreement
3. Upgrades
(a) Internet Service Provider: *** of base Subscriber fees as set forth
on Exhibit C of this Agreement
---------
(b) Network Computer Hardware *** of base Subscriber fees as set forth
Package: on Exhibit C of this Agreement
---------
(c) IBM Hardware Package: *** of base Subscriber fees as set forth
on Exhibit C of this Agreement
---------
(d) Patient Test Results: See Section 3 of Exhibit D of this
Agreement
(e) Pager: *** of base rate Subscriber fees as set
forth on Exhibit C of this Agreement
4. Additional Charges
(a) Virtual Receptionist Universal *** of usage fees for domestic 800-based
Inbox: access
(b) WebMD OnCall: *** of overcall live message and IVR
transaction fees
WebMD shall remit to HBOC as an up-front payment an amount equal to the
incentive commissions as set forth above for months one (1) to three (3)
following enrollment by HBOC or its Affiliates of new paid Subscribers pursuant
to the terms and conditions of this Agreement. Thereafter, WebMD shall remit to
HBOC on a monthly basis amounts equal to the incentive commissions set forth
above for each of months four (4) and all remaining months until the expiration
or termination of the Subscription Agreements of such paid Subscribers following
enrollment by HBOC or its Affiliates. Thereafter, WebMD shall not owe any
further incentive commission to HBOC with respect to such Subscribers.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
25
<PAGE>
EXHIBIT G
---------
HBOC Competitors
1. Cerner Corporation
2. Shared Medical Systems Corporation
3. IDX Systems Corporation
26
<PAGE>
EXHIBIT H
---------
HBOC Exclusivity Targets
1. WebMD gross revenues of *** (***) generated by the joint marketing
efforts of WebMD and HBOC on or before March 31, 2000.
2. WebMD gross revenues of *** (***) generated by the joint marketing
efforts of WebMD and HBOC during the twelve (12)-month period ended March 31,
2001.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
27
<PAGE>
EXHIBIT I
---------
WebMD Competitors
1. Physicians' Online, Inc.
2. Healtheon Corporation
3. InteliHealth, Inc.
4. HealthGate Data Corp.
5. Medcast, Inc.
28
<PAGE>
EXHIBIT J
---------
WebMD Exclusivity Targets
1. WebMD gross revenues of *** (***) generated on or before March 31, 2000.
2. WebMD gross revenues of *** (***) generated during the twelve (12)-month
period ended March 31, 2001.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
29
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.44
ADDENDUM TO STRATEGIC DISTRIBUTION ALLIANCE AGREEMENT
-----------------------------------------------------
THIS ADDENDUM TO STRATEGIC DISTRIBUTION ALLIANCE AGREEMENT (this
"Addendum"), entered into as of the 3rd day of November, 1998, effective as of
the 27th of October, 1998, is made by and between WebMD, INC., a Georgia
corporation ("WebMD"), and HBO & COMPANY OF GEORGIA, a Delaware corporation
("HBOC").
W I T N E S S E T H:
-------------------
WHEREAS, WebMD and HBOC are parties to that certain Strategic
Distribution Alliance Agreement dated as of October 23, 1998 (the "Agreement");
WHEREAS, under the Agreement, HBOC will market the WebMD Services (as
defined in the Agreement) to HBOC Customers (as defined in the Agreement);
WHEREAS, the parties have agreed upon certain additional terms with
regard to a certain marketing program to be undertaken by HBOC under the
Agreement; and
WHEREAS, WebMD and HBOC desire to enter into this Addendum to provide
for such additional terms.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, WebMD and HBOC hereby
agree as follows:
1. Applicability of Agreement. To the extent consistent with the
--------------------------
terms of this Addendum, all terms of the Agreement are applicable to the
transaction contemplated by this Addendum.
2. Defined Terms. All capitalized terms used herein and not defined
-------------
herein shall have the meaning set forth in the Agreement. As used herein, the
following term shall have the meaning associated therewith:
"WebMD Subscription" means the entry by a Subscriber into a
Subscription Agreement with WebMD for use of the WebMD Services as a
direct result of the marketing efforts of HBOC, provided that the term
of such agreement shall be no less than three (3) years, subject to
applicable provisions of WebMD's Terms and Conditions of Use and
Service Agreement.
3. Marketing Program. Subject to the terms set forth herein, in the
-----------------
event that (a) parties affiliated with a particular healthcare organization,
integrated delivery system or physician practice ("Entity") enter into *** (***)
or more WebMD Subscriptions as set forth in the Agreement, and (b)
simultaneously in connection therewith, HBOC enters into a license
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE>
agreement ("License Agreement") with such Entity for use of HBOC's Connect 2000
software product ("Connect 2000"), then WebMD will pay to HBOC up to *** ($***)
of the Initial License Fee (as defined below) applicable to an individual seat
license under the License Agreement. Notwithstanding the foregoing, WebMD will
only make such payment for the lesser of the number of (i) Connect 2000
users/seat licenses or (ii) WebMD Subscriptions entered into by an Entity in
connection with this marketing program.
4. Initial License Fee. As used above, "Initial License Fee" means the
-------------------
initial software license fee charged by HBOC under an applicable License
Agreement to an Entity solely for use of Connect 2000 divided by the total
number of users/seat licenses under the applicable License Agreement. HBOC
agrees that the Initial License Fee to be charged to Entities in connection with
this marketing program shall be determined in a manner that is consistent with
the price terms allocable to a single seat license for Connect 2000 offered by
HBOC to any third party.
5. Calculation by HBOC of Initial License Fee. The parties acknowledge
------------------------------------------
and agree that in providing Connect 2000 to HBOC Customers, HBOC typically
charges a single amount for hardware, an initial software license fee,
implementation and other products and services. Thus, in order to determine the
Initial License Fee, HBOC will be required to identify that portion of the
above-referenced total charges to an Entity which is allocable only to the
initial license of Connect 2000 as calculated above. HBOC agrees to make such
calculation in good faith and in accordance with its customary, historical
pricing of Connect 2000.
6. Payment. After calculation of the Initial License Fee with regard to
-------
any Entity as set forth above, HBOC will provide to WebMD an invoice therefor.
WebMD will make payment on such invoice within thirty (30) days after receipt
thereof.
7. No Further Obligations. After payment of the Initial License Fee to
----------------------
HBOC as set forth above, WebMD will have no further obligations with regard to
the applicable License Agreement. The parties acknowledge and agree that the
License Agreement is solely between HBOC and the applicable Entity. Therefore,
HBOC shall bear all obligations to the Entity with regard thereto, including,
but not limited to, technical and customer support, software warranties and
intellectual property infringement indemnification. In addition, any additional
fees to be paid to HBOC under the License Agreement beyond the Initial License
Fee (and any other obligations of the Entity under the License Agreement) shall
be the sole responsibility of the Entity.
8. Termination; Continuation. The foregoing marketing program shall
-------------------------
terminate upon the entry by WebMD into *** (***) WebMD Subscriptions generated
hereunder. Thereafter, if the parties desire to continue this marketing
program, the parties will negotiate in good faith the terms of any such
continuation.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
2
<PAGE>
IN WITNESS WHEREOF, WebMD and HBOC have executed this Addendum effective as
of the day and year first above written.
WebMD, INC.
By: /s/ W. Michael Heekin
------------------------------------
Name: W. Michael Heekin
------------------------------------
Title: Chief Operating Officer
------------------------------------
HBO & COMPANY OF GEORGIA
By: /s/ Michael L. Kappel
------------------------------------
Name: Michael L. Kappel
------------------------------------
Title: Sr. VP - Corporate Planning/Business
------------------------------------
Development
------------------------------------
3
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.45
INTERNET CUSTOMIZATION AND ACCESS SERVICES AGREEMENT
This Internet Customization and Access Service Agreement (the "Agreement")
is entered into this 18th day of December, 1998 (the "Effective Date") between
CompuServe Interactive Services, Inc., a Delaware corporation, whose address is
5000 Arlington Center Boulevard, Columbus, Ohio 43220 ("Company") and WebMD,
Inc., a Georgia corporation, whose address is 3399 Peachtree Road, Suite 400,
Atlanta, Georgia 30326 ("WebMD").
The parties hereto agree and bind themselves as follows:
(1) DEFINITIONS.
(a) "Company Services" shall mean the Internet Access Service and any other
services to be provided by Company under this Agreement.
(b) "End User" shall mean any person or entity to whom the End User
Software is distributed pursuant to this Agreement.
(c) "Fulfillment Date" shall mean the earlier of (i) the date that the
fulfillment materials are first available for delivery to End Users or (ii)
sixty (60) days after the Effective Date.
(d) "Internet Access Service" shall mean the standard personal computer-
based, narrow-band U.S. versions or the CompuServe(R) brand online service that
provides access to the Internet, either via dial-up connections locally or via a
local or toll-free telephone number provided by Company hereunder.
(e) "Interactive Service" shall mean an entity offering on or more of the
following: (i) online or Internet connectivity services (e.g., an Internet
service provider); (ii) a broad selection of aggregated third party interactive
content (or navigation thereto) (e.g., an online service or search and directory
service); (iii) communications software capable of serving as the principal
means through which a user creates, sends and receives electronic mail or real
time online messages.
(f) "Joint Marketing Plan" shall mean a plan for the marketing of the
services contemplated herein to be developed and mutually agreed upon by the
Parties within thirty (30) days of the Effective Date. Such Plan shall
thereafter be reviewed at least once every six (6) months and amended by the
Parties from time to time as necessary to advance the Parties' mutual planning
objectives and take account of changes contemplated by this Agreement.
(g) "Subscriber" shall mean any End User who is registered with Company as
an authorized current user of the Internet Access Service.
(h) "End User Software" shall mean the object code version of the Company's
standard software for End Users to utilize the Internet Access Service.
1
<PAGE>
(i) "Host Software" shall mean the object code version of the software
located on Company's computer hardware that delivers content to Subscribers as
such software shall be modified for WebMD pursuant to Section 2(a) hereof.
(j) "Support and Service Agreement" shall mean an agreement for the
provision of technical support to Subscribers and all other WebMD subscribers
with regard to the Company Services and the WebMD Site, which agreement shall be
developed and mutually agreed upon by the Parties within *** days of the
Effective Date. Such agreement shall thereafter be reviewed at least once every
*** months and amended by the Parties from time to time as necessary to
advance the Parties' mutual planning objectives and take account of changes
contemplated by this Agreement.
(k) "Technical Integration Plan" shall mean a plan for technical
integration of the services contemplated hereunder to be developed and mutually
agreed upon by the Parties within thirty (30) days of the Effective Date. Such
Plan shall thereafter be reviewed at least once every six (6) months and amended
by the Parties from time to time as necessary to advance the Parties' mutual
planning objectives and take account of changes contemplated by this Agreement.
(l) "WebMD Site" shall mean the WebMD homepage on the World Wide Web
located at the location specified on Exhibit 2, as such Site may be changed,
modified or further developed during the term of this Agreement.
(2) COMPANY OBLIGATIONS.
(a) CUSTOMIZATION. Company, at *** cost and expense, will customize
the Host Software as specified on Exhibit 2 as is reasonably necessary and
technically feasible to redirect Subscribers to an automated WebMD start page.
(b) Company will provide WebMD with the then current End User Software in
object code form for distribution by WebMD pursuant to this Agreement, Company
hereby grants WebMD a non-exclusive license to distribute and promote the End
User Software and related documentation during the Term, solely to the limited
extent and for the express purposes contemplated hereunder.
(c) INTERNET ACCESS. Company shall provide Internet Access to each End User
who requests such service during the term of this Agreement on the standard
terms and conditions for the provisions of Internet Access Services set forth on
Exhibit I and at the rate listed on Exhibit 2 hereto. In no event shall WebMD
modify or add any surcharges to the fees charged by Company for the Internet
Access Service.
(d) E-MAIL ADDRESSES. As a part of the Company Services, Company shall
provide each End User with either (i) *** personal e-mail address with its
Internet Access Service known as "CompuServe Classic" (versions 4x and below) or
(ii) a primary e-mail address plus *** additional addresses as sub-accounts
to Subscribers with Company's new service currently known as "CompuServe 2000"
for use in connection with the other Company Services provided hereunder. The
Parties hereby acknowledge that WebMD provides
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
2
<PAGE>
professional e-mail addresses and messaging services through its virtual
receptionist product to End Users as a standard feature of a WebMD subscription.
All WebMD links, toolbars and other directional indications will point to the
virtual receptionist and other electronic communication features included with
the applicable WebMD subscription. The e-mail toolbar in the Company browser
used as a part of the End User Software will point to the Company e-mail
services provided as part of this Agreement. The above listed features will be
mutually agreed to by the Parties and set forth in the Technical Integration
Plan.
(e) COMPANY USER SUPPORT SERVICE. As more specifically set forth in the
Support and Service Agreement, Company will provide its standard End User
service to WebMD, including a unique toll number, available 24 hours a day,
7 days a week to handle questions relating to the Internet Access Service,
including registration, installation and billing questions, and the Software
provided hereunder.
(f) REPORTING; BILLING. WebMD shall be responsible for billing all
Subscribers under the rate(s) set forth in Exhibit I on a monthly basis
("Subscribers' Fees") and remitting such Subscriber Fees to Company as provided
below. Company shall provide its standard reports on the Company Services,
including without limitation, information on the number of Subscribers and total
billed revenue. Company shall invoice WebMD for all active Subscribers no later
than the last Saturday of each month. WebMD shall pay all undisputed invoices no
later than *** days from the date CompuServe sends such invoices.
WebMD shall use commercially reasonable efforts to resolve all disputed invoices
within thirty (30) days. Company shall make such standard reports available
electronically to WebMD in a mutually agreeable file format suitable to permit
WebMD to incorporate such reported data into its bills to Subscribers. Company
and WebMD shall make customized reports, including reports in electronic format,
available to WebMD at WebMD's reasonable request. WebMD bears sole risk of
collection for delinquent accounts, except to the extent the delinquency results
from service problems caused by Company, and provided that WebMD can terminate
service for delinquent accounts immediately. Each Party shall maintain complete,
clear and accurate records of all expenses, revenues, fees, transactions and
related documentation (including agreements) in connection with the performance
of financial obligations under this Agreement ("Records"). All such Records
shall be maintained for a minimum of *** years following termination of
this Agreement. For the sole purpose of ensuring compliance with this Agreement,
each Party shall have the right, at its expense, to direct an independent
certified public accounting firm subject to strict confidentiality restrictions
to conduct a reasonable and necessary copying and inspection of portions of the
Records of the other Party which are directly related to amounts payable to the
Party requesting the audit pursuant to this Agreement. Any such audit may be
conducted after *** business days prior written notice, subject to the
following. Such audits shall not be made more frequently than once every twelve
months. No such audit of Company shall occur during the period beginning on
*** and ending ***. No such audit of WebMD shall be conducted during the
period beginning on December 1 and ending January 1. In lieu of providing access
to its Records as described above, a Party shall be entitled to provide the
other Party with a report from an independent certified public accounting firm
confirming the information to be derived from such Records.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
3
<PAGE>
(g) INSTANT MESSENGER SERVICE. Company shall provide as part of the End
User Software or make available through electronic access on the Internet the
"CompuServe Instant Messenger" software to Subscribers and to all other WebMD
subscribers, regardless of their Internet service provider, all as more
specifically set forth in the Technical Integration Plan. The distribution of
the Instant Messenger software shall be subject to Company's then-current terms
and conditions.
(h) USER SUPPORT AND SUPPORT OF ADDITIONAL SOFTWARE. Company shall provide
a toll-free telephone number to receive End User trouble calls regarding the
WebMD Site and other issues as more fully set forth in the Support and Service
Agreement. Based on a mutually agreeable script, Company may encourage WebMD
subscribers who use the Company dial-up support to change their Internet service
provider to a full or "bring your own access" Company account, all as more
specifically set forth in the separate Support and Service Agreement.
(i) COMPANY FULFILLMENT RESPONSIBILITIES. Company, at its sole cost, shall
be responsible for the creation and reproduction of the fulfillment materials
set forth on Exhibit 2 attached hereto ("Company Fulfillment Materials"), all as
more specifically set forth in the Joint Marketing Plan.
(j) USE OF COMPANY FORUMS. As one of the Company Services, each Subscriber
shall have access to Company public forums. All such forums will maintain the
Company branding and links to Company membership information. Company also
agrees to explore and negotiate in good faith toward the development of creating
private forums for all other WebMD subscribers. In addition, Company will
explore and negotiate in good faith to create a method of providing access to
Company public forums by non-subscribing consumers accessing the WebMD Site who
are also non-Company subscribers. Notwithstanding the above, Company shall not
be required to provide non-Company subscribers with access to such forums if it
will have a material adverse impact on the Company.
(3) WEBMD OBLIGATIONS.
(a) MINIMUM SUBSCRIPTION COMMITMENTS. WebMD will generate a minimum of ***
Subscribers within eight (8) months and *** Subscribers within twelve (12)
months of the Fulfillment Date. If the eight (8) month hurdle described above is
not met, WebMD will perform a direct mail campaign (or a mutually agreeable
campaign of similar size) to *** physicians or similar target, which will
primarily market the Company Services. If the twelve (12) month hurdle described
above is not met, WebMD will perform at its own expense a second direct mail
campaign (or a mutually agreeable campaign of similar size) to ***, then
currently licensed physicians or similar target which will primarily market the
Company Services. In addition, if the twelve (12) month hurdle is not met,
Company may no longer use WebMD as the exclusive distribution channel to the
medical community and Company may choose to terminate this Agreement, either
upon thirty (30) days prior written notice to WebMD. If Company fails to provide
such notice within thirty (30) days of the date of the twelve (12) month hurdle,
this Agreement shall continue in full force in accordance with the terms hereof.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
4
<PAGE>
(b) WEBMD FULFILLMENT RESPONSIBILITIES. WebMD, at its sole cost, will be
responsible for the distribution to End Users of the fulfillment materials
listed on Exhibit 2 ("Fulfillment Materials"). WebMD will conduct an initial
general distribution of the Fulfillment Materials to *** potential End Users,
all as more specifically set forth in the Joint Marketing Plan. Company shall be
the exclusive Internet Access Service provided on the Fulfillment Materials for
End Users with personal computers.
(c) PROMOTIONAL OFFERS. Once per calendar quarter, WebMD will undertake a
promotional offer to WebMD subscribers to encourage End Users using other
Internet service providers through individual, personal computers to switch to
the Company Services, all as more specifically set forth in the Joint Marketing
Plan.
(d) MANAGEMENT OF WEBMD SITES. WebMD will manage, review, delete, edit,
create, update and otherwise manage the WebMD Site and the Anchor Tenant Site
(described below) (collectively, the "Sites). WebMD will ensure that the Sites
are current, accurate and well-organized at all times.
(e) SOLICITATION OF COMPUSERVE USERS. During the term of this Agreement
neither WebMD nor its agents will (i) solicit, or participate in the
solicitation of Subscribers when that solicitation is for the benefit of an
Interactive Service (including WebMD, if the solicitation is intended to cause
Subscribers to use another provider for online access) that is in competition
with Company, its parent or affiliates or (ii) use the Company Services to
promote any product or service (excluding the products and services offered by
WebMD that are competitive with those Company exclusive advertising and commerce
relationships set forth on Exhibit 3 hereto. Neither WebMD nor its agents may
use the Company Services to promote products or services of third parties. For a
period of one year after the expiration or termination of this Agreement, WebMD
will not directly market, including without limitation direct contact by mail,
e-mail or telemarketing, an online access provider that is in competition with
Company to WebMD subscribers who are also Subscribers.
(f) COLLECTION OF SUBSCRIBER INFORMATION. WebMD is prohibited from
collecting Subscribers' screen names e-mail addresses or other individually
identifying information ("User Information") from public or private areas within
the Company Service unless WebMD has a separate, business relationship with such
Subscribers. For purposes of this section, a "prior, business relationship"
shall mean that Subscribers either engaged in a transaction with WebMD or
voluntarily provided information to WebMD.
(4) JOINT OBLIGATION.
(a) CONTENT. WebMD shall at its own expense design, create, edit, manage,
update, and maintain a custom "consumer" version of its health community for
Company ("Anchor Tenant Site"). Company agrees to feature WebMD as the anchor
tenant in Company's Health Channel. The top three (3) pages of the Anchor Tenant
Site shall be co-branded to include the CompuServe and WebMD brand names ("Co-
Branded Pages"). The Parties shall, in good faith, use reasonable commercial
efforts to develop and implement a Technical Integration Plan relative to the
design, development and management of the Anchor Tenant Site. Such
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
5
<PAGE>
Technical Integration Plan shall include reasonable commercial standards for
WebMD's responsibilities in managing and hosting the Anchor Tenant Site. Company
owns all right, title and interest in and to the advertising and promotional
spaces (i) within the Internet Access Service (including, without limitation,
advertising and promotional spaces on any Company forms or pages which are
included within, preceding, framing or otherwise associated with the Anchor
Tenant Site and (ii) on the Co-Branded Pages. WebMD will own all right, title
and interest in and to the advertising and promotional spaces within the WebMD
Site but excluding the Co-Branded Pages. WebMD will not serve on the Co-Branded
Pages advertising or commerce that is competitive with those Company exclusive
advertising and commerce relationships set forth on Exhibit 3 hereto or with
Interactive Services that are in competition with the Company. The provisions of
this Subsection will be more specifically set forth in the Technical Integration
Plan.
(b) BRANDING. Company and WebMD will mutually agree to an appropriate level
of Company branding in the WebMD Site all as more fully set forth in the
Technical Integration Plan. This branding will be used for both branding and
navigation to the Company main menu. WebMD will place a Company link on the
bottom frame of the WebMD portal as long as a customer is not a member of
another affinity WebMD program, and Company will have preferred placement in the
WebMD "lounge" area, all as more specifically set forth in the Technical
Integration Plan.
(c) COMMERCIAL RELATIONSHIPS. WebMD is free to create commercial
relationships and promote those relationships on the WebMD portal and Web Site.
Company is free to create commerce relationships and promote those relationships
on the Company Services.
(d) OPERATION STANDARDS. Company shall be responsible for all
communications, hosting costs and expenses associated with the Internet Access
Service and will provide all computer hardware and software necessary for End
Users and Subscribers to access the Internet Access Service. WebMD shall be
responsible for all communications, hosting costs and expenses associated with
the WebMD Site and will provide all computer hardware and software necessary for
End Users and Subscribers to access the WebMD Site and Anchor Tenant Site. Each
Party will ensure that the performance and availability of their respective
services and sites are monitored on a continuous, 24/7 basis and remain
competitive in all material respects with the performance and availability of
other similar services based on similar form technology.
(5) TERM AND TERMINATION.
(a) TERM. This Agreement shall commence on the Effective Date, and shall
continue in effect for two (2) years after the Fulfillment Date (the "Initial
Term"), unless earlier terminated as provided herein. Upon prior, mutual written
consent, the parties may extend the term of this Agreement for additional one
(1) year terms.
(b) Termination. Either Party may terminate this Agreement immediately upon
the occurrence of any of the following events: (i) if the other Party breaches a
material term of this
6
<PAGE>
Agreement and fails to cure such breach within thirty (30) days following the
nonbreaching Party's written notice of such breach which shall specify the
conditions to be cured in reasonable detail; (ii) if the other Party dissolves,
discontinues or terminates its business, or if any bankruptcy, reorganization,
insolvency, dissolution or similar proceeding is instituted by or against it and
is not dismissed within sixty (60) days, or if it makes any assignment for the
benefit of creditors or takes any corporate action in furtherance of the
foregoing; or (iii) if the Parties fail to develop and execute either the Joint
Marketing Plan, the Technical Integration Plan or the Support and Service
Agreement. Upon termination of the Agreement pursuant to either Section 5(a) or
5(b) of this Agreement, Company may engage in separate billing arrangements with
Subscribers.
(6) INTELLECTUAL PROPERTY RIGHTS.
(a) SOFTWARE. Except as expressly provided in Section 6(b), all components
of the End User Software, Host Software and all intellectual property rights
therein are and shall be owned by Company. In the event that the Software should
become, or in Company's opinion is likely to become, the subject of a claim of
infringement of any patent, copyright, trademark or trade secret, then Company
may, at its option: (i) procure the right to continue using the Software; or
(ii) replace or modify the Software to make it noninfringing with functionally
equivalent software.
(b) TRADEMARKS AND OTHER PROPRIETARY MARKS. The parties acknowledge and
agree that the other Party may specify certain trade names, trademarks, service
marks, logos and other proprietary marks ("Marks") of the other Party that will
be required to appear packaging, advertising and promotional materials and that
all usage of any such Marks shall be in accordance with the guidelines that the
parties will communicate to each other on their accepted usage. All promotional
materials that use the other Party's Mark, including the use of such Marks on
packaging, disks, documentation and advertising shall be mutually agreed to by
the Parties. Each Party acknowledges the other Party's intellectual property
rights in and to each of their respective Marks, and, except as provided in this
paragraph, nothing in this Agreement shall be construed to grant either Party
any rights in or to the other Party's Marks. Except as expressly authorized in
advance in writing, each Party shall not use any mark of the other Party in any
advertising, marketing, technical, packaging or other materials. Neither Party
shall challenge or contest the ownership of the Marks or validity of the Marks.
Neither Party shall do anything that is inconsistent with such ownership and
agrees that all use of the Marks shall inure to the benefit of and be on behalf
of the owner of the Marks. Neither Party shall set up any adverse claim against
the Party owning the Marks based on its use of the Marks as may be authorized
hereunder. Each Party shall employ best efforts to use the Marks in a manner
that does not denigrate from the owner's rights in the Marks and will take no
action that will interfere with or diminish its rights in the Marks. Neither
Party shall adopt, use or register any Mark, corporate name, or certification
mark or other designation similar to, or containing in whole or in part, the
Marks not owned by it.
All rights not expressly granted herein related to the Marks are
reserved by the owner. Neither Party may use the Marks in a manner other than as
expressly described herein. All rights that either Party has acquired or may
acquire in Marks owned by the other Party in
7
<PAGE>
conjunction with this Agreement, including all associated goodwill, shall be the
property of the owner of the Marks solely and hereby are assigned to such owner.
Except as otherwise expressly provided herein, neither Party shall assign,
transfer or sublicense its rights under this Section in any manner without the
prior written consent of the other Party. Any attempted assignment or transfer
in violation of the provisions hereof, by operation of law or otherwise, shall
be void. Neither Party shall use a Mark in any manner which, in Mark owner's
reasonable judgment, will diminish or otherwise damage such owner's goodwill in
the Mark, including, but not limited to uses which could be deemed to be
obscene, pornographic, excessively violent or otherwise in poor taste or
unlawful, or which purpose or objective is to encourage unlawful activities.
Each Party acknowledges and agrees that a breach by it of this Section may cause
the other Party or its licensor(s) irreparable damage that cannot be remedied in
monetary damages in an action at law, and may also constitute infringement of
the Marks. In the event of any breach that could cause irreparable harm to the
owner of the Marks, or cause some impairment or dilution of its reputation or
Marks, such owner shall be entitled to an immediate injunction, in addition to
any other available legal or equitable remedies.
(7) CONFIDENTIALITY.
(a) For purposes of this Section 7, the following terms shall have the
meanings as specified below:
(i) "Trade Secrets" means information which: (A) derives economic
value, actual or potential, from not being generally known to, and not being
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and, (B) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(ii) "Confidential Information" means information, other than Trade
Secrets, that is of value to its owner and is treated as confidential.
(iii) "Proprietary Information" means Trade Secrets and Confidential
Information.
(b) Each party ("Receiving Party") agrees to hold the Proprietary
Information of the other party ("Disclosing Party") in strictest confidence and
not to, directly or indirectly, copy, reproduce, distribute, duplicate, reveal,
report, publish, disclose, cause to be disclosed, or otherwise transfer the
Proprietary Information of the Disclosing Party to any third party, or utilize
the Proprietary Information of the Disclosing Party for any purpose whatsoever
other than as specifically authorized by this Agreement. With regard to the
Trade Secrets, this obligation shall continue for so long as such information
constitutes a trade secret under applicable law. With regard to the Confidential
Information, this obligation shall continue for the term of this Agreement and
for a period of five years thereafter. The Receiving Party acknowledges and
agrees that the Proprietary Information of the Disclosing Party is and shall at
all times remain the sole and exclusive property of the Disclosing Party and in
the event of termination or expiration of this Agreement for any reason, the
Receiving Party shall return immediately to the Disclosing Party all Proprietary
Information of the Disclosing Party and any copies thereof in its possession or
under its control. Upon the return of such Proprietary
8
<PAGE>
Information, the Receiving Party shall provide the Disclosing Party with a
signed written statement certifying that it has returned all Proprietary
Information of the Disclosing Party and any copies thereof to the Disclosing
Party.
(c) Without limiting the general obligations specified in subparagraph (b)
above, the Receiving Party agrees to implement the following security steps in
order to protect the confidentiality and security of the Proprietary Information
of the Disclosing Party:
(i) Implement internal procedures to limit, control and supervise
the use of the Proprietary Information of the Disclosing Party.
(ii) Make the Proprietary Information of the Disclosing Party
available only to full-time employees of the Receiving Party who have executed
written agreements requiring them to recognize the proprietary and confidential
nature of the Proprietary Information of the Disclosing Party and to comply with
the nondisclosure obligations set forth herein.
(iii) Notify the Disclosing Party in writing of any suspected or
known breach of the obligations and/or restrictions set forth in this Section 7.
(iv) Use those security procedures it uses for its own proprietary
information that it protects against unauthorized disclosure, appropriation or
use.
(8) LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE LIABILITY TO ANY OTHER
FOR ANY INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE PERFORMANCE THEREOF (EVEN IF THAT
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM BREACH
OF THE AGREEMENT, THE SALE OF PRODUCTS, THE USE OR INABILITY TO USE THE COMPANY
SERVICES, THE WEBMD SITE, THE ANCHOR TENANT SITE, OR ARISING FROM ANY OTHER
PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR
ANTICIPATED PROFITS OR LOST BUSINESS (COLLECTIVELY, "DISCLAIMED DAMAGES");
PROVIDED THAT EACH PARTY WILL REMAIN LIABLE TO THE OTHER PARTY TO THE EXTENT ANY
DISCLAIMED DAMAGES ARE CLAIMED BY A THIRD PARTY AND ARE SUBJECT TO
INDEMNIFICATION PURSUANT TO SECTION 9 BELOW. LIABILITY ARISING UNDER THIS
AGREEMENT WILL BE LIMITED TO DIRECT, OBJECTIVELY MEASURABLE DAMAGES.
(9) INDEMNITY.
(a) COMPANY. Company agrees to defend, indemnify and hold WebMD and the
officers, directors, agents, affiliates, distributors, franchisees and employees
of WebMD harmless from and against any and all claims, losses, damages, actions,
liabilities, expenses, or costs, including reasonable attorneys fees, arising
out of any claim, demand, action, suit, investigation, arbitration or other
proceeding by a third party based on (a) any assertion that any of the Company
Services or the Software, alone or in combination, infringes the patent,
copyright, trademark, intellectual property or similar rights or trade secret
rights of such third
9
<PAGE>
party, (b) violation by Company of any administrative order, applicable law,
governmental regulations, (c) Company's violation of its terms of service with
respect to Subscribers.
(b) WEBMD. WebMD agrees to defend, indemnify and hold Company and the
officers, directors, agents, affiliates, distributors, franchisees and employees
of Company harmless from and against any and all claims, losses, damages,
actions, liabilities, expenses, or costs, including reasonable attorneys fees,
arising out of any claim, demand, action, suit, investigation, arbitration or
other proceeding by a third party based on (a) any assertion that the WebMD Site
infringes the patent, copyright, trademark, intellectual property or similar
rights or trade secret rights of such third party, or (b) violation by WebMD of
any administrative order, applicable law or governmental regulation.
(10) DISCLAIMERS.
(a) COMPANY'S DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, COMPANY DOES
NOT MAKE ANY AND IT HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE COMPANY SERVICES, OR ANY PORTION
THEREOF, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR
COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, COMPANY
SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING ANY ECONOMIC OR OTHER BENEFIT THAT
WEBMD MIGHT OBTAIN THROUGH ITS PARTICIPATION IN THIS AGREEMENT.
(b) WEBMD DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, WEBMD DOES NOT
MAKE ANY AND WEBMD HEREBY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES REGARDING
THE WEBMD SITE, WEBMD'S SERVICES OR ANY PORTION THEREOF, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED
WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, WEBMD SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING ANY ECONOMIC OR OTHER BENEFIT THAT COMPANY
MIGHT OBTAIN THROUGH ITS PARTICIPATION IN THIS AGREEMENT.
(10) FORCE MAJEURE. No party shall be liable for a delay in the performance of
its obligations and responsibilities under this Agreement due to causes beyond
its reasonable control, including, but not limited to, prohibitions or
requirements of applicable laws, failures or delays in transportation or
communication, failure or substitutions of equipment, labor disputes, accidents,
shortages of labor, fuel, raw materials or equipment or technical failures,
provided that the delayed party has taken reasonable measures to notify the
other, in writing, of the delay. The time for completion of any obligation to
which this provision applies shall be extended for a period equivalent to the
delay.
10
<PAGE>
(11) EXCLUSIVITY. During the term of this Agreement and subject to the Minimum
Subscription Commitments of WebMD set forth in Section 3(a) hereof, Company
shall not market, sell or distribute Company-branded Internet services with any
other medical service Internet aggregator, including without limitation,
*** and ***; provided, however, Company may bundle a non-
branded Internet access service with any such medical service Internet
aggregator. During the term of this Agreement, WebMD shall not enter into
agreements with third parties for Internet service provider services (excluding
America Online, Inc.), supplied through a personal computer, and otherwise
substantially similar to those contemplated hereunder. For purposes of this
Section, "substantially similar shall mean the combination of dial-up Internet
access, customized web browser software and end-user support services provided
by such third Party.
(12) NOTICES. All notices, requests, demands, or communications required or
permitted shall be in writing, delivered personally or by overnight courier
service, or by facsimile or First Class U.S. Mail to the respective addresses
set forth at the beginning of the Agreement (or at such other addresses as shall
be given in writing by either Party to the other), and, in the case of WebMD,
with a copy to: Corporate Counsel, WebMD, Inc., 3399 Peachtree Road, Suite 400,
Atlanta, Georgia 30326; in the case of Company, with a copy to: Vice President
of Business Affairs, with a copy to the Assistant General Counsel, CompuServe
Interactive Services, Inc., 5000 Arlington Centre, Columbus, Ohio 43220. All
notices, requests, demands or communications shall be deemed effective upon
receipt.
(13) GOVERNING LAW. The substantive law of the State of Ohio, excluding its
conflicts principles shall govern this Agreement.
(14) RELATIONSHIP OF THE PARTIES. Nothing in this Agreement shall be construed
to make either Party an agent, joint venturer or partner of or with the other,
and neither Party shall have the right or authority to legally bind the other in
any manner.
(15) ASSIGNMENT. Neither Party may assign its rights nor obligations under this
Agreement to any third Party without the written consent of the other Party,
such consent not to be unreasonably withheld.
(16) WAIVER; REMEDIES CUMULATIVE. No failure or delay (in whole or in part) on
the part of any party to exercise any right or remedy shall operate as a waiver
thereof, nor affect any other right or remedy. All rights and remedies hereunder
are cumulative and are not exclusive of any other rights or remedies provided
hereunder or by law.
(17) SEVERABILITY. If any provision contained in this Agreement is or becomes
invalid, illegal, or unenforceable in whole or in part, such invalidity,
legality, or unenforceability shall not affect the remaining provisions and
portions of this Agreement.
(18) COUNTERPARTS. This Agreement may be signed in counterparts, and each
counterpart shall be a part of the same whole. Both parties shall comply with
all laws, regulations and other legal requirements that apply to this Agreement.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
11
<PAGE>
(19) ENTIRE AGREEMENT. This agreement contains the entire agreement of the
Parties with respect to the subject matter herein, and supersedes all prior and
contemporaneous proposals, discussions, agreements, understandings and
communications, whether written or oral and may be amended only in writing
executed by both parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WEBMD, INC. COMPUSERVE INTERACTIVE SERVICES, INC.
By: /s/ W. Michael Heekin By: /s/ Mayo S. Stunz
-------------------------- --------------------------
Name: W. Michael Heekin Name: Mayo S. Stunz
-------------------------- --------------------------
Title: Exec V P Title: President
-------------------------- --------------------------
12
<PAGE>
EXHIBIT I
TERMS AND CONDITIONS OF SOFTWARE USE
[TO BE ATTACHED]
13
<PAGE>
EXHIBIT 2
DESCRIPTION OF END USER SOFTWARE
--------------------------------
Company will provide pursuant to the terms of the Agreement to WebMD and
its End Users the standard Internet Company software package, including an
Internet browser, dial-up registration capability.
DESCRIPTION OF HOST SOFTWARE
Such specifications are to be more fully set forth in the Technical Integration
Plan, but in any event shall include without limitation, the following: Subject
to the terms of the Agreement, Company shall customize the Host Software as is
reasonably necessary and technically feasible to create an automated process to
lead users to the on-line start page will be the WebMD portal front page;
Company agrees to redirect appropriate toolbar icons and pulldowns to WebMD
news, sports, stock quote and travel areas.
FULFILLMENT MATERIALS
Company, at *** cost and expense, shall include the following
fulfillment materials in the End User fulfillment packages:
(1) Diskettes or CD's containing the Software;
(2) Package labels;
(3) Container and/or mailer; and
(4) Promotional code, which must be prominently displayed.
INTERNET ACCESS RATES
*** per month for unlimited hours of local access each month. Company's
current fee structure generally available to its customer base is attached
hereto.
OTHER COMPANY INFORMATION
The URL of the WebMD Site is http:www.webmd.com.
***Omitted pursuant to a request for confidential treatment and filed separately
with the Commission.
14
<PAGE>
EXHIBIT 3
COMPANY EXCLUSIVE ADVERTISING AND COMMERCE RELATIONSHIPS
15
<PAGE>
EXHIBIT 10.47
RESTATED SHAREHOLDERS AGREEMENT
OF
ENDEAVOR TECHNOLOGIES INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
1.1 "Affiliate"....................................................... 2
1.2 "Agreement"....................................................... 2
1.3 "Appraised Value"................................................. 2
1.4 "Board of Directors".............................................. 2
1.5 "Articles of Amendment"........................................... 2
1.6 "Business"........................................................ 2
1.7 "Business Plan"................................................... 3
1.8 "Bylaws".......................................................... 3
1.9 "CEO"............................................................. 3
1.10 "COO"............................................................. 3
1.11 "Confidential Information"........................................ 3
1.12 "Consultant"...................................................... 4
1.13 "Corporation"..................................................... 4
1.14 "Corporation Notice".............................................. 4
1.15 "Directors"....................................................... 4
1.16 "Distributor"..................................................... 4
1.17 "Equity Securities"............................................... 4
1.18 "Exchange Act".................................................... 4
1.19 "First Refusal Offer Fraction".................................... 4
1.20 "Fully Diluted Basis"............................................. 4
1.21 "Fundamental Issues".............................................. 5
1.22 "Individual Shareholders"......................................... 5
1.23 "Initial Public Offering"......................................... 5
1.24 "Non-competition Period".......................................... 5
1.25 "Non-Selling Shareholders"........................................ 5
1.26 "Offer Notice".................................................... 5
1.27 "Offer Percentage"................................................ 5
1.28 "Offer Period".................................................... 5
1.29 "Participating Securities"........................................ 5
1.30 "Participating Shareholders"...................................... 6
1.31 "Person".......................................................... 6
1.32 "Personnel"....................................................... 6
1.33 "Repurchase Note"................................................. 6
1.34 "Sale of the Corporation"......................................... 6
1.35 "SEC"............................................................. 6
1.36 "Securities Act".................................................. 6
1.37 "Selling Shareholder"............................................. 6
1.38 "Series A Common Stock"........................................... 7
1.39 "Series B Common Stock"........................................... 7
1.40 "Series C Common Stock"........................................... 7
1.41 "Series D Common Stock"........................................... 7
1.42 "Shareholders".................................................... 7
1.43 "Stock Dividend".................................................. 7
1.44 "Transfer"........................................................ 7
1.45 "Transfer Date"................................................... 7
1.46 "Voting Securities"............................................... 7
</TABLE>
2
<PAGE>
ARTICLE II
CAPITALIZATION
ARTICLE III
CORPORATE GOVERNANCE
<TABLE>
<S> <C>
3.1 Board of Directors................................................ 8
3.2 Voting............................................................ 9
3.3 Vacancies......................................................... 9
3.4 Fundamental Corporate Transactions................................ 10
3.5 Management of the Corporation..................................... 11
</TABLE>
ARTICLE IV
CERTAIN COVENANTS
<TABLE>
<S> <C>
4.1 Community Property Matters........................................ 12
4.2 Competition....................................................... 13
4.3 Confidential Information.......................................... 14
4.4 Accounts and Reports.............................................. 16
</TABLE>
ARTICLE V
CERTAIN RIGHTS
<TABLE>
<S> <C>
5.1 Transfers Generally............................................... 17
5.2 Legend............................................................ 19
5.3 Right of First Refusal............................................ 20
5.4 Involuntary Transfers............................................. 23
5.5 Repurchase Rights................................................. 24
</TABLE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
6.1 Representations and Warranties.................................... 27
(a) Investment Matters........................................... 27
(b) Authority.................................................... 28
(c) Consents and Approvals....................................... 28
(d) No Violations................................................ 29
(e) Corporate Opportunity........................................ 30
</TABLE>
ARTICLE VII
MISCELLANEOUS
<TABLE>
<S> <C>
7.1 Termination....................................................... 31
7.2 Waivers........................................................... 32
7.3 Assignability..................................................... 32
7.4 Notices........................................................... 32
7.5 Third Party Rights................................................ 33
7.6 Choice of Law..................................................... 33
7.7 Interpretation.................................................... 34
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
7.8 Severability...................................................... 34
7.9 Enforcement of Agreement.......................................... 34
7.10 References to Money............................................... 35
7.11 References to Agreement........................................... 35
7.12 Entire Agreement.................................................. 36
7.13 Headings, etc..................................................... 36
7.14 Counterparts...................................................... 36
7.15 Survival.......................................................... 36
7.16 Amendments........................................................ 36
</TABLE>
4
<PAGE>
RESTATED SHAREHOLDERS AGREEMENT
OF
ENDEAVOR TECHNOLOGIES INC.
THIS RESTATED SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of the
18th day of October, 1996, made and entered into by and among Endeavor
Technologies Inc., a Georgia corporation (the "Corporation"), Jeffrey T. Arnold
("Arnold"), Jouko J. Rissanen ("Rissanen"), Lucius E. Burch, III ("Burch"),
Robert A. Frist ("Frist") and the parties named or to be named on the signature
pages hereto (collectively with Arnold, Rissanen, Burch and Frist, the
"Shareholders").
W I T N E S S E T H :
--------------------
WHEREAS, the Shareholders believe that it would be in the best
interests of the Shareholders and the Corporation that provision be made for the
continuity and stability of the ownership of the Corporation, and the
Shareholders desire to enter into this Agreement to set forth the terms and
conditions pursuant to which the Corporation will be organized and the business
of the Corporation will be operated.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto, subject to the terms and conditions set forth
below, hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, as used in this Agreement, the
following terms shall have the following meanings:
1.1 "AFFILIATE" shall mean any Person that, directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified. As used in this definition,
"control" shall mean the power through the ownership of voting securities,
contract, or otherwise to direct the affairs of another Person.
1.2 "AGREEMENT" shall mean this Agreement as originally executed or, as
the context or subject matter otherwise requires, as amended, modified,
supplemented or restated from time to time.
1.3 "APPRAISED VALUE" shall mean, with respect to any class or series of
Equity Securities, the value per share of such class or series most recently
determined by a recognized independent valuation firm retained by the
Corporation for the purpose of preparing an annual valuation of the Corporation.
1.4 "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
1.5 "ARTICLES OF AMENDMENT" shall have the meaning ascribed to such term
in Section 2.1.
1.6 "BUSINESS" shall mean (a) cardiac care services, including without
limitation, cardiac event monitoring, transtelephonic pacemaker follow up and
holter monitoring; (b) mobile and fixed site ultrasound and nuclear diagnostic
testing services; and (c) the distribution of products and systems related
6
<PAGE>
to arrhythmia management and ultrasound.
1.7 "BUSINESS PLAN" shall mean the strategic plan for the Corporation,
including the annual operating and capital budgets of the Corporation prepared
annually by the Corporation.
1.8 "BYLAWS" shall have the meaning ascribed to such term in Section 3.1.
1.9 "CEO" shall mean the Chief Executive Officer of the Corporation, who
shall also be the Chairman of the Board of Directors of the Corporation, as
elected by the Board of Directors of the Corporation from time to time.
1.10 "COO" shall mean the Chief Operating Officer of the Corporation, as
elected by the Board of Directors of the Corporation from time to time.
1.11 "CONFIDENTIAL INFORMATION" shall mean (a) information in written form
that the Corporation clearly labels as confidential and (b) information which is
orally disclosed by representatives of the Corporation where such disclosure is
preceded by written notification that such information is confidential.
Confidential Information shall not include any information that: (a) is or
subsequently becomes publicly available without the receiving party's breach of
any obligation owed to the Corporation; (b) became known to the receiving party
from a third party prior to the Corporation's disclosure of such information to
the receiving party other than as a result of the breach of an obligation of
confidentiality owed to the Corporation by such third party; (c) becomes known
to the receiving party from a third party other than as a result of the breach
of an obligation of confidentiality owed
7
<PAGE>
to the Corporation by such third party; or (d) is independently developed by the
receiving party.
1.12 "CONSULTANT" shall mean any person who shall have entered into a
consulting agreement with the Corporation pursuant to which such person provides
consulting services to the Corporation.
1.13 "CORPORATION" shall have the meaning ascribed to such term in the
recitals to this Agreement.
1.14 "CORPORATION NOTICE" shall have the meaning ascribed to such term in
Section 5.3.
1.15 "DIRECTORS" shall mean the persons elected to the Board of Directors
in accordance with this Agreement.
1.16 "DISTRIBUTOR" shall mean any person who shall have entered into a
representative principal agreement with the Corporation pursuant to which such
person distributes the products or services of the Corporation.
1.17 "EQUITY SECURITIES" shall mean any capital stock of the Corporation or
any securities convertible into, or exercisable or exchangeable for, capital
stock of the Corporation, including, without limitation, the Series A, Series B,
Series C and Series D Common Stock of the Corporation.
1.18 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1.19 "FIRST REFUSAL OFFER FRACTION" shall have the meaning ascribed to such
term in Section 5.3.
1.20 "FULLY DILUTED BASIS" shall mean, for purposes of any calculation
pursuant to this Agreement that is to be done on a "Fully Diluted Basis," the
sum of all of the issued and outstanding
8
<PAGE>
shares of Voting Securities of the Corporation plus all shares of Voting
Securities that may be issuable upon the conversion, exchange or exercise of any
then outstanding Equity Securities (other than Voting Securities).
1.21 "FUNDAMENTAL ISSUES" shall have the meaning ascribed to such term in
Section 3.4.
1.22 "INDIVIDUAL SHAREHOLDERS" shall mean any Shareholder which is a
natural person.
1.23 "INITIAL PUBLIC OFFERING" shall mean the offer and sale by the
Corporation of any of its Equity Securities in a transaction underwritten by an
investment banking firm, following the completion of which (i) such Equity
Securities are listed for trading on any national securities exchange or (ii)
there are at least two market makers who are making a market in such Equity
Securities through the Nasdaq National Market.
1.24 "NON-COMPETITION PERIOD" shall have the meaning ascribed to such term
in Section 4.2.
1.25 "NON-SELLING SHAREHOLDERS" shall have the meaning ascribed to such
term in Section 5.3.
1.26 "OFFER NOTICE" shall have the meaning ascribed to such term in Section
5.3.
1.27 "OFFER PERCENTAGE" shall have the meaning ascribed to such term in
Section 5.3.
1.28 "OFFER PERIOD" shall have the meaning ascribed to such term in Section
5.3.
1.29 "PARTICIPATING SECURITIES" shall mean Equity Securities other than
Series D Common Stock, including without limitation,
9
<PAGE>
Series A, B and C Common Stock.
1.30 "PARTICIPATING SHAREHOLDERS" shall mean the holders of Participating
Securities.
1.31 "PERSON" shall mean an individual, firm, trust, association,
corporation, partnership, government (whether federal, state, local or other
political subdivision, or any agency or bureau of any of them) or other entity.
1.32 "PERSONNEL" shall have the meaning ascribed to such term in Section
4.3.
1.33 "REPURCHASE NOTE" shall have the meaning ascribed to such term in
Section 5.5.
1.34 "SALE OF THE CORPORATION" shall mean either (a) a sale of all or
substantially all of the assets of the Corporation, or the sale of all of the
capital stock of the Corporation followed by a liquidation of the Corporation or
(b) a merger, consolidation or other business combination involving the
Corporation with or into another corporation or a partnership in which (i) the
Shareholders receive cash, securities or other consideration in exchange for a
majority of their capital stock of the Corporation or (ii) the Corporation is
not the surviving entity.
1.35 "SEC" shall mean the United States Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act.
1.36 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
1.37 "SELLING SHAREHOLDER" shall have the meaning ascribed to such term in
Section 5.3.
10
<PAGE>
1.38 "SERIES A COMMON STOCK" shall mean the Common Stock, Series A of the
Corporation.
1.39 "SERIES B COMMON STOCK" shall mean he Common Stock, Series B of the
Corporation.
1.40 "SERIES C COMMON STOCK" shall mean the Common Stock, Series C of the
Corporation.
1.41 "SERIES D COMMON STOCK" shall mean the Common Stock, Series D of the
Corporation.
1.42 "SHAREHOLDERS" shall have the meaning ascribed to such term in the
recitals to this Agreement.
1.43 "STOCK DIVIDEND" shall have the meaning ascribed to such term in
Section 2.1.
1.44 "TRANSFER" shall mean any offer, transfer, sale, exchange, assignment,
mortgage, pledge, grant of lien or security interest in, gift or other
disposition or encumbrance of any nature, whether voluntary, involuntary or by
operation of law; provided, however, that any sale of Equity Securities to the
Corporation shall not be deemed to involve any Transfer.
1.45 "TRANSFER DATE" shall have the meaning ascribed to such term in
Section 5.4.
1.46 "VOTING SECURITIES" shall mean all of the issued and outstanding
shares of Series A Common Stock of the Corporation taken as a whole.
ARTICLE II
CAPITALIZATION
The relative equity interests of the Shareholders in the Corporation prior
to and after the contemplated one share for two
11
<PAGE>
shares reverse split of the Corporation's shares shall be as set forth on
EXHIBIT A hereto.
- ------- -
ARTICLE III
CORPORATE GOVERNANCE
3.1 BOARD OF DIRECTORS. Subject to the terms of this Agreement and the
------------------
Articles of Incorporation ("Articles"), and Bylaws ("Bylaws") of the Corporation
attached hereto as EXHIBITS B and C, respectively, the business and affairs of
-------- - -
the Corporation shall be managed by the Board of Directors, which will consist
of seven Directors certain of whom shall be designated as follows:
(a) For so long as Arnold holds (directly or indirectly) at least 5%
of the Corporation's Equity Securities on a Fully Diluted Basis, Arnold shall be
entitled to designate three Directors;
(b) For so long as Rissanen owns at least 5% of the Corporation's
Equity Securities on a Fully Diluted Basis, Rissanen shall be entitled to
designate one Director;
(c) For so long as Burch owns at least 3% of the Corporation's Voting
Securities on a Fully Diluted Basis, Burch shall be entitled to designate one
Director; and
(d) For so long as Frist owns at least 3% of the Corporation's Equity
Securities on a Fully Diluted Basis, Frist shall be entitled to designate one
Director.
The right to designate Directors is non-transferrable and any attempted
sale, assignment or transfer of such right shall be void, regardless of whether
any such sale, assignment or transfer is attempted in connection with or
separate and apart from a Transfer
12
<PAGE>
of any Equity Securities.
3.2 VOTING. During the term of this Agreement, each of the Shareholders
------
shall cause the Voting Securities beneficially owned by such Shareholder, if
any, to be voted at all meetings of Shareholders of the Corporation at which
Directors are to be elected in favor of (or shall consent in writing to) the
election of the representatives of Arnold, Rissanen, Burch and Frist as may,
from time to time, be designated by each such party in accordance with Section
3.1 above and shall otherwise take such action as may be necessary to give
effect to the purposes of this Agreement with regard to ensuring that Arnold,
Rissanen, Burch and Frist shall be afforded such representation on the Board of
Directors as is contemplated by this Agreement. During the term of this
Agreement, each of the Shareholders shall cause the Equity Securities entitled
to vote on any matter submitted for Shareholder approval beneficially owned by
such Shareholder to be voted at all meetings of Shareholders of the Corporation
(or shall consent in writing) in accordance with the recommendation of the Board
of Directors with respect to such matter. The voting obligations created hereby
shall survive and continue with respect to such Shareholder notwithstanding the
fact any such Shareholder may not be entitled to designate a member of the Board
of Directors or may subsequently forfeit such right.
3.3 VACANCIES. In the event there should be a vacancy in the Board of
---------
Directors, each of the Shareholders shall cause all Voting Securities
beneficially owned by such Shareholder, if any, to be voted (or shall cause
their respective Director designees to vote)
13
<PAGE>
so as to fill any such vacancy with the new designee of the Shareholder whose
previous designee is no longer serving and is the subject of such vacancy. In
the event the person no longer serving as a Director and who is the subject of
the vacancy (a) was designated by a Shareholder who is no longer entitled to
designate an additional Director, or (b) was not designated by a Shareholder,
each Shareholder shall cause all Voting Securities beneficially owned by such
Shareholder to be voted so as to fill any such vacancy with a nominee
recommended by a majority of the remaining Directors; provided, however, that in
the event of a tie vote, the nominee chosen by Arnold shall prevail.
3.4 FUNDAMENTAL CORPORATE TRANSACTIONS. Each of the following actions or
----------------------------------
transactions (the "Fundamental Issues") shall require, and shall not be taken or
consummated without, the consent of at least five Directors:
(a) the approval of the Business Plan;
(b) the filing of a registration statement with respect to an Initial
Public Offering;
(c) the amendment of the Articles or Bylaws;
(d) the redemption or repurchase of any Equity Securities;
(e) Capital expenditures not contemplated in the Business Plan in
excess of 20% of the capital expenditures contemplated in the Business Plan
(f) the incurrence of indebtedness not contemplated in the Business
Plan, in excess of 20% of the incurrence of indebtedness contemplated in the
Business Plan;
14
<PAGE>
(g) removal of any Director; or
(h) the sale of the Corporation.
3.5 MANAGEMENT OF THE CORPORATION. (a) The management of the day-to-day
-----------------------------
operations of the Corporation shall be under the direction of the CEO, who shall
have such power, authority and duties as are set forth in the Bylaws. The CEO
shall report directly to the Board of Directors. The CEO will be responsible
for providing appropriate reports regarding the Corporation's progress with
respect to the implementation of the Business Plan and the operations and
condition of the Corporation. The Corporation shall also have such other
officers as may be required by law or as the Board of Directors may deem
appropriate. The Directors designated by Arnold will nominate individuals to
serve in such positions and the approval of such nominees shall not be
unreasonably withheld by the Directors designated by Rissanen, Burch and Frist.
(b) At least 60 days prior to the end of each fiscal year, the CEO and
COO shall cause to be prepared and submitted to the Board of Directors for
approval the Business Plan for the ensuing fiscal year. The Business Plan, as
approved by the Board of Directors, shall provide the basis for the operation of
the Corporation during the fiscal year covered thereby, and the CEO and/ or COO
shall report to the Board of Directors on a quarterly basis as to the
Corporation's achievement of the objectives set forth in such Business Plan, as
well as any material deviations from, or trends affecting, such objectives.
(c) The parties hereto expressly acknowledge and agree
15
<PAGE>
that an important component of the compensation of the officers, directors,
certain key employees and certain Distributors of the Corporation will consist
of the opportunity to acquire over time an equity interest in the Corporation
and, in connection therewith, each Shareholder shall cause their respective
Director designees to approve and, if deemed necessary, shall cause all Equity
Securities beneficially owned by such Shareholder to be voted in favor of the
implementation of an appropriate stock option plan(s) pursuant to which
officers, Directors, certain key employees and certain Distributors of the
Corporation may receive options to purchase Equity Securities on such terms and
conditions as the Board of Directors may deem appropriate; provided, however,
-------- -------
that in no event shall the total number of shares of Equity Securities that may
be issuable pursuant to such stock option plan(s) exceed in the aggregate 20.6%
of the total number of shares of Equity Securities that are issued and
outstanding on the date hereof.
ARTICLE IV
CERTAIN COVENANTS
4.1 COMMUNITY PROPERTY MATTERS. Each Individual Shareholder to become a
--------------------------
party hereto whose Equity Securities are now or become community property, shall
at the later of the date of this Agreement or the time when his or her spouse
first has a community property interest in any of such Equity Securities, cause
such spouse to execute a counterpart of this Agreement and any amendment hereto
executed by such Shareholder, or another writing in form and substance
satisfactory to the Corporation, subjecting such spouse and the spouse's
community property interest in such Equity
16
<PAGE>
Securities to the applicable provisions of this Agreement. No spouse executing
this Agreement or any such writing solely by reason of his or her community
property interest in Equity Securities and the immediately preceding sentence,
shall be considered to be a Shareholder under this Agreement.
4.2 COMPETITION. None of the Shareholders shall, while they are
-----------
Shareholders and for 2 years thereafter (the "Non-competition Period") invest or
otherwise acquire a financial interest in, or in any way participate in the
management of, or direct the business or policies of, directly or indirectly,
whether alone or in conjunction with any Person, any Person which is involved in
providing the Business, and each Shareholder will take such action as may be
appropriate to ensure that each Affiliate of such Shareholder will not violate
the provisions of this Section 4.2. Notwithstanding the foregoing sentence, (a)
J. Rex Fuqua's direct or beneficial ownership of any or all of the shares of
Fuqua Enterprises, Inc. or any of its successors (including any entity which may
acquire Fuqua Enterprises or into which Fuqua Enterprises may merge) and his
service as a director and executive officer of Fuqua Enterprises, Inc., (b) Ken
Melkus' direct or beneficial ownership of any or all of the shares of Cardiology
Partners of America, LLC ("CPA") or any of its successors (including any entity
which may acquire CPA or into which CPA may merge) and his service as a director
and executive officer of CPA, (c) Joel Gordon or The Joel Company's direct or
beneficial ownership of any or all of the shares of CPA (as defined above) or
any of its successors (including any entity which may acquire CPA or into which
CPA may merge) and Joel Gordon's service as a director and executive
17
<PAGE>
officer of CPA, (d) any Shareholder's ownership of five percent or less (on a
fully diluted basis) of any class of the equity securities of a Person, or (e)
any Shareholder's serving as a director of any public company whose shares are
traded on a national stock exchange or quoted on the Nasdaq national market
system shall not be a violation of the provisions of this Section 4.2.
4.3 CONFIDENTIAL INFORMATION. (a) The Shareholders acknowledge that the
------------------------
Corporation derives and will continue to derive significant economic and
competitive value from the Confidential Information that it has developed and
that the Confidential Information is not generally known to and is not readily
available to or ascertainable by others. The Shareholders shall maintain secret
and confidential the Confidential Information and shall take all reasonable
precautions against the disclosure of the Confidential Information to third
parties. The Shareholders shall not circulate or otherwise disclose the
Confidential Information within their own organizations except to personnel
(including, without limitation, such Shareholder's employees, officers,
directors, representatives, agents or Affiliates) directly involved in the
Business ("Personnel") on a need-to-know basis and, prior to any such
circulation or disclosure of the Confidential Information, shall require such
Personnel to have executed a non-disclosure agreement which covers the
Confidential Information (e.g., a Shareholder's standard form of non-disclosure
agreement which by its terms covers third party confidential information) or be
otherwise bound to hold the Confidential Information in confidence (e.g.,
pursuant to professional rules of
18
<PAGE>
conduct). The Shareholders acknowledge that a breach of the confidentiality
provisions of this Agreement would cause irreparable injury to the Corporation
for which no remedy at law would be adequate. It is the understanding of the
Shareholders that the obligations relating to Confidential Information may be
enforced to the fullest extent permissible under the laws and public policies of
the State of Georgia. If there is a breach or threatened breach of the
confidentiality provisions of this Agreement, the Corporation shall be entitled
to injunctive relief or the equivalent mandatory relief under the laws of the
State of Georgia restraining any Shareholder from such breach or threatened
breach. The Shareholders acknowledge and agree that the prohibition against
disclosure of Confidential Information is in addition to, and not in lieu of,
any other or additional rights or remedies which may be available to the
Corporation pursuant to the laws of the State of Georgia and that the
enforcement by the Corporation of its rights and remedies pursuant to this
Agreement shall not be construed as a waiver of any rights or remedies which it
may possess in law or at equity absent this Agreement.
(b) Upon the written request of the Corporation, the Shareholders
shall return to the Corporation or destroy (subject to the right to retain, for
archival purposes only, a single copy, which single copy may be used solely by
attorneys representing such Shareholder for reference purposes only and may not
be used for any commercial or competitive purposes whatsoever) all copies of
Confidential Information held by the Shareholders or any Personnel within each
Shareholder's organization, regardless of the form in which such Confidential
Information is held including, without
19
<PAGE>
limitation, Confidential Information held in written, graphic, pictorial or
recorded form (including any working papers prepared by each Shareholder or such
Shareholder's Personnel that contain or are derived from any Confidential
Information), or stored on computer discs, hard drives, magnetic tape or any
other electronic medium, together with a certificate of each Shareholder (if
requested by the Corporation) certifying to the same. The foregoing provision
shall not apply to Confidential Information which is rightfully held by a
Shareholder in connection with its performance under an agreement or agreements
between such Shareholder and the Corporation which has not expired or been
properly terminated.
(c) No Shareholder shall be subject to the provisions contained in
Section 4.3(a) hereof to the extent that the Shareholder or any of its
Affiliates is, based on the advice of its counsel, required by law to make
disclosure of any Confidential Information relating to the Corporation.
4.4 ACCOUNTS AND REPORTS. The Corporation will maintain a proper system
--------------------
of accounts in accordance with generally accepted accounting principles
consistently applied, will keep full and complete financial records in which
complete entries will be made in accordance with generally accepted accounting
principles, reflecting all financial transactions of the Corporation and in
which, for each fiscal year, all proper reserves for depreciation, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made, and will, except as hereinafter set forth, furnish to
each Shareholder, so long as such Shareholder shall own at least 2% of the
Corporation's Voting
20
<PAGE>
Securities, the following reports:
(a) within 90 days after the end of each fiscal year a copy of the
balance sheet of the Corporation as at the end of such year, together with
statements of operations, stockholders' equity and changes in financial position
of the Corporation for such year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles and practices
consistently applied and certified by independent public accountants;
(b) within 45 days after the end of each fiscal quarter (except for
the fiscal quarter which is also the end of a fiscal year) a copy of the balance
sheet of the Corporation as of the end of such quarter and statements of
operations, stockholders' equity and changes in financial position of the
Corporation for such fiscal quarters and for the portion of the fiscal year
ending on the last day of such quarter, each of the foregoing financial
statements to set forth in comparative form the corresponding figures for the
corresponding fiscal period in the prior fiscal year, to be in reasonable detail
and to be certified, subject to year-end audit adjustments, by the Corporation's
chief financial officer or the CEO; and
(c) within 30 days after the end of each month (except for those
months which are the end of the first three fiscal quarters of the fiscal year
and of the fiscal year) a copy of the statements of operations of the
Corporation for such month.
ARTICLE V
CERTAIN RIGHTS
5.1 TRANSFERS GENERALLY. (a) No Shareholder shall make or
-------------------
21
<PAGE>
permit to be made any Transfer of Equity Securities except in compliance with
the terms and conditions of this Agreement and with then applicable laws, rules
and regulations. Any purported Transfer of Equity Securities other than in
compliance with the terms and conditions of this Agreement shall be void and of
no force and effect and the Corporation shall be entitled to recognize the last
Shareholder of record who acquired such Equity Securities in a manner not
contrary to this Agreement as the holder of such Equity Securities for all
purposes.
(b) The effectiveness of any Transfer of Equity Securities by any
Shareholder to any Person, and any issuance by the Corporation of any Equity
Securities, shall be conditioned upon the receipt by the Corporation of an
instrument in form and substance satisfactory to the Corporation and the
Shareholders by which the transferee of such Equity Securities accepts and
agrees to be bound as a Shareholder by the terms and conditions of this
Agreement. The Corporation shall not issue any certificates representing Equity
Securities without receipt of such an instrument in accordance with the
preceding sentence. If the Corporation so requests, each request for Transfer of
Equity Securities shall be accompanied by an opinion of counsel obtained by the
transferor reasonably satisfactory to the Corporation to the effect that the
Transfer complies with the applicable provisions of the Securities Act and the
rules and regulations thereunder.
(c) No Shareholder shall be permitted to Transfer any Equity
Securities to a person engaged in the Business in competition with the
Corporation unless such Transfer has received
22
<PAGE>
the prior approval of all of the members of the Board of Directors as
constituted at the time of such Transfer.
(d) No holder of Series D Common Stock shall be permitted to Transfer
any shares of Series D Common Stock until the first to occur of the following:
(i) the third anniversary of this Agreement, (ii) an Initial Public Offering,
(iii) Sale of the Corporation, or (iv) approval by the holders of not less than
two thirds (2/3) of the Participating Securities.
(e) Notwithstanding Section 5.3 or part (d) of this Section 5.1, any
Shareholder may Transfer all or any portion of any Equity Securities owned by
such Shareholder to any other corporation or partnership, all of the issued and
outstanding Voting Securities or voting interests of which are owned directly by
the transferring Shareholder, as long as the other requirements for an effective
Transfer, as set forth in parts (a), (b) and (c) of this Section 5.1, are
fulfilled in connection with such Transfer to such corporation or partnership.
5.2 LEGEND. Each Shareholder acknowledges and agrees that each
------
certificate representing Equity Securities whether presently owned or hereafter
acquired shall bear a legend reading substantially as follows:
"The securities evidenced by this certificate are
subject to restrictions on transferability and resale
contained in that certain Restated Shareholders Agreement,
dated as of October 18, 1996, among the Corporation
and the stockholders named therein, and may not be
transferred or resold except in compliance with such
restrictions. Such securities have not been registered
under the Securities Act of 1933, as amended, or any state
securities laws and may not be transferred or resold
unless so registered or an exemption from
23
<PAGE>
registration is available."
5.3 RIGHT OF FIRST REFUSAL. (a) In the event that any Shareholder has a
----------------------
binding, written offer for the Transfer of any Equity Securities, such
Shareholder (the "Selling Shareholder")shall provide to the Corporation and the
other Participating Shareholders (the "Non-Selling Shareholders") written notice
of the material terms of such offer, including the number and type of Equity
Securities subject to such offer, the proposed purchaser thereof, the
consideration to be received, the conditions, if any, associated therewith and
any other material terms of such offer (an "Offer Notice"), except as provided
in paragraph (d) below. Following receipt of the Offer Notice, the Corporation
shall have a period of 30 days to purchase such Equity Securities for such
consideration and upon such terms and conditions as are described in the Offer
Notice. In the event the Corporation does not elect to purchase all of such
Equity Securities, the Corporation shall promptly so notify the Non-Selling
Shareholders (the "Corporation Notice"). Following receipt of the Corporation
Notice, each Non-Selling Shareholder shall have a period of 30 days to elect to
purchase a portion of such Equity Securities which the Corporation has not
elected to purchase equal to the product of (i) the number of Equity Securities
subject to such Offer Notice multiplied by (ii) a fraction (the "First Refusal
Offer Fraction"), the numerator of which is the total number of Equity
Securities held by such Non-Selling Shareholder on the date of the Offer Notice
and the denominator of which is the total number of Equity Securities held by
all Non-Selling Shareholders on
24
<PAGE>
such date (the "Offer Percentage"), for such consideration and upon such terms
and conditions as are described in the Offer Notice. Provided, however, that any
-------- -------
Offer Notice issued with respect to Series C Common Stock prior to the second
anniversary of the date hereof shall be governed by paragraph (c) below.
(b) The Non-Selling Shareholders may elect to purchase the Equity
Securities that are the subject of any Offer Notice by delivering written notice
thereof to the Corporation and the Selling Shareholder within 30 days after
receipt of the Corporation Notice (or the Offer Notice in the case of an Offer
Notice governed by paragraph (c)) with respect to such Transfer (the "Offer
Period"). In the event that any Non-Selling Shareholder accepts the Selling
Shareholder's offer, the purchase and sale of the Selling Shareholder's Equity
Securities shall be consummated at a closing that shall occur within 30 days
after the termination of the Offer Period or within such longer period as the
parties shall agree upon. To the extent that any Shareholder does not elect to
purchase all of its or his pro rata portion of the Equity Securities of the
Selling Shareholder that are the subject of any Offer Notice, any portion of the
Selling Shareholder's Equity Securities that remains available shall be offered
to those Shareholders (if any) that have elected to purchase all of such Equity
Securities that were covered by their Offer Percentage. Such Shareholders may
purchase all or part of the remaining portion of the Selling Shareholder's
Equity Securities in proportion to their relative Offer Percentages (adjusted to
exclude from the denominator of the First Refusal Offer Fraction, the Equity
25
<PAGE>
Securities attributable to any Shareholders not electing to purchase all of the
Equity Securities that are the subject of such Shareholder's Offer Percentages).
At the closing of the purchase and sale of such Equity Securities, each Non-
Selling Shareholder electing to purchase such Equity Securities shall pay for
the Equity Securities elected to be purchased by delivering the purchase price
therefor in immediately available funds or such other consideration as may have
been described in the Offer Notice against delivery of certificates representing
such Equity Securities duly endorsed for transfer.
(c) Notwithstanding paragraphs (a) and (b) above, in the event an
Offer Notice issued prior to the second anniversary of the date hereof relates
to Series C Common Stock, then such Series C Common Stock shall not be offered
to the Corporation as described in paragraph (a), but rather shall be offered to
the Non-Selling Shareholders at a price of $2.00 per share of Series C Common
Stock and otherwise upon the terms, conditions and procedures set forth in
paragraphs (a) and (b) above.
(d) Notwithstanding paragraphs (a) and (b) above, Jeffrey T. Arnold
may transfer to third parties an aggregate of 1,000,000 shares of his shares of
Common Stock in one or more transactions without providing any Offer Notice or
other notice regarding such proposed or actual transactions involving up to
1,000,000 shares of such stock, and neither the Corporation nor the Non-Selling
Shareholders shall have any right to purchase any of such shares offered and
sold by Arnold.
(e) In the event that the Non-Selling Shareholders do
26
<PAGE>
not elect to purchase all of the Equity Securities that are the subject of an
Offer Notice, the Selling Shareholder may, during the 90-day period immediately
following the Offer Period, subject to the other terms of this Agreement,
Transfer the remaining Equity Securities covered by the Offer Notice that were
not purchased by the Non-Selling Shareholders for such consideration and on such
other terms and conditions as were contained in the Offer Notice. Any such
Equity Securities not transferred within such 90-day period shall again become
subject to the provisions of this Section 5.3.
5.4 INVOLUNTARY TRANSFERS. In the event that the Equity Securities owned
---------------------
by any Shareholder shall be subject to Transfer (the date of such Transfer shall
hereinafter be referred to as the "Transfer Date") by reason of (a) bankruptcy
or insolvency proceedings, whether voluntary or involuntary, (b) distraint,
levy, execution or other involuntary Transfer (including, in the case of an
Individual Shareholder, a Transfer in connection with a divorce proceeding) or
(c) death, then such Shareholder or the personal representative thereof shall
give the Corporation written notice thereof promptly upon the occurrence of such
event stating the terms of such proposed Transfer, the identity of the proposed
transferee and the price or other consideration, if readily determinable, for
which the subject Equity Securities are to be receipt, after the Corporation
otherwise obtains actual knowledge of such a proposed Transfer, the Corporation
will have the right to purchase (or to assign to the other Participating
Shareholders, pro rate, the right to purchase) all, but not less than all such
Equity
27
<PAGE>
Securities at the price and on the terms applicable to such proposed Transfer,
which right shall be exercised by written notice given by the Corporation to
such proposed transferror within 60 days following the Corporation's receipt of
such notice or, failing such receipt, the Corporation's obtaining actual
knowledge of such proposed Transfer. The closing of the purchase and sale of
such Equity Securities shall be held at the principal office of the Corporation
on a date to be established by the Corporation, which date shall in no event
shall be less than 10 nor more than 30 days from the date on which the
Corporation gives notice of its election to purchase the subject Equity
Securities. If the nature of the event giving rise to such involuntary Transfer
is such that no readily determinable consideration is to be paid for the
Transfer of such Equity Securities, the price to be paid by the Corporation (or
its assignees) shall be the then current Appraised Value.
5.5 REPURCHASE RIGHTS. (a) In the event any employee or officer of the
-----------------
Corporation ceases to be an employee, officer or Director of the Corporation,
the Corporation may elect to repurchase all the Equity Securities held by such
person at the Appraised Value of such Equity Securities by delivering written
notice of the election to purchase such Equity Securities within 30 days
following the termination of such Person's status as an employee or officer of
the Corporation; provided, however, that if such employee or officer is a party
to a written agreement with the Corporation at the time of such termination, and
such agreement contains provisions regarding repurchase of securities, such
provisions of such agreement shall govern the parties' rights and
28
<PAGE>
duties with respect to repurchase of securities of the Corporation. In the event
the agreement of any Consultant or Distributor with the Corporation is
terminated for Cause (as defined in the relevant agreement) or any Director of
the Corporation is removed for cause as determined by the Board of Directors,
the Corporation may elect to repurchase all the Equity Securities held by such
person at the Appraised Value of such Equity Securities by delivering written
notice of the election to purchase to such person within 30 days following the
termination of such agreement or the removal of such Director. The closing of
the purchase and sale of any Equity Securities pursuant to this provision shall
be held at the principal office of the Corporation on a date to be established
by the Corporation, which date shall be no more than 30 days from the date the
Corporation gives notice of its election to purchase the Equity Securities in
question. The Corporation may elect to pay the Appraised Value of the Equity
Securities to be repurchased in accordance with this provision in cash in whole
or in part, or by executing and delivering to the appropriate Shareholder a
promissory note dated as of the closing date for the repurchase in a principal
amount equal to the aggregate Appraised Value for the Equity Securities being
repurchased, minus the amount of any cash paid to the Shareholder in question on
the applicable closing date (the "Repurchase Note"). The Repurchase Note shall
bear interest at the minimum rate of interest required by the applicable
provisions of the Internal Revenue Code of 1986, as amended, in effect at the
time the Repurchase Note is executed. Principal and interest on the Repurchase
Note shall be payable in three
29
<PAGE>
installments, as follows: (i) the first installment shall be due upon the first
anniversary of the date of the Repurchase Note in an amount equal to 50% of the
then outstanding principal and interest payable in connection with such note;
(ii) the second installment shall be due 18 months following the date of the
Repurchase Note in an amount equal to 50% of the then outstanding principal and
interest payable with respect to the such note; and (iii) the third installment
shall be due on the second anniversary of the date of the Repurchase Note in an
amount equal to the remaining outstanding principal and interest payable in
connection with such note; provided, however, that payments of principal due
-------- -------
under the Repurchase Note shall be repayable only out of such percentage of the
Corporation's net cash flow equal to the percentage of Equity Securities of the
Corporation being purchased; provided, further, that such restriction shall not
-------- -------
apply to the final payment of principal due under the Repurchase Note. The
Corporation's obligations under the Repurchase Note shall be secured by the
Equity Securities being purchased. For purposes of this Agreement, the term "net
cash flow" for any period shall mean the amount equal to the net income after
income taxes as shown on a statement of income for such period, plus any
depreciation deducted in determining net income for such period and any net loan
proceeds during such period, less any capital expenditures and payments of
principal under any indebtedness or other cash expenditures or payments not
deducted in computing net income during such period.
30
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES. The Shareholders hereby represent and
------------------------------
warrant with respect to themselves, both as of the date hereof and as of the
Closing Date, as follows:
(a) Investment Matters. Each Shareholder owns or is purchasing the
------------------
Common Stock solely for such Shareholder's own account, for investment, and not
with a view to any distribution thereof, and that such Shareholder will not
distribute such Common Stock (or any Equity Securities subsequently acquired by
such Shareholder that become subject to this Agreement) in violation of the
Securities Act or the applicable securities laws of any state. Each Shareholder
understands that the Common Stock has not been registered under the Securities
Act or the securities laws of any state and is being offered and sold pursuant
to an exemption from the registration requirements contained in the Securities
Act and, as a result, the Common Stock to be acquired by each Shareholder in
connection with the execution and delivery of this Agreement must be held
indefinitely unless subsequently registered under the Securities Act and any
applicable state securities laws or unless an exemption from such registration
becomes or is available. Each Shareholder is financially able to hold the
Common Stock being purchased by such Shareholder for long-term investment,
believes that the nature and amount of the Common Stock being purchased by him
or it is consistent with such Shareholder's overall investment program and
financial position, recognizes that there are substantial risks involved in the
ownership of the Common Stock,
31
<PAGE>
and can afford a complete loss of such investment. Each Shareholder has had the
opportunity to ask questions of management and to review such information as
such Shareholder may deem necessary or appropriate in connection with
formulating an informed decision regarding its or his investment in the Common
Stock.
(b) Authority. The boards of directors of any Shareholders that are
---------
corporations have duly authorized the execution and delivery of this Agreement
and the transactions contemplated hereby. Any Shareholder that is a corporation
has full power and authority to execute and deliver, and to perform its
obligations under, this Agreement. Any Shareholder that is a Partnership has
full partnership power and authority to execute and deliver, and to perform its
obligations under, this Agreement. The Individual Shareholders have reviewed
the terms of this Agreement, understand the intention of the parties in entering
into this Agreement and the scope and nature of their respective obligations
hereunder and have had the opportunity to review the terms of this Agreement and
any other agreements, documents and instruments to be executed and delivered in
connection herewith with their respective attorneys, accountants and investment
advisors to the extent deemed appropriate. This Agreement constitutes a valid
and binding obligation of the Shareholders, enforceable against them in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the rights of creditors generally.
(c) Consents and Approvals. All authorizations, approvals and
----------------------
consents, if any, required to be obtained from, and
32
<PAGE>
all registrations, declarations and filings, if any, required to be made with,
all governmental authorities and regulatory bodies to permit each Shareholder to
execute and deliver, and to perform its obligations under, this Agreement have
been obtained or made, as the case may be, and all such authorizations,
approvals, consents, registrations, declarations and filings are in full force
and effect. All terms and conditions contained in, or existing in respect of,
such authorizations, approvals, consents, registrations, declarations and
filings have been, to the extent necessary prior to the date of execution and
delivery hereof, fully satisfied and performed.
(d) No Violations. Neither the execution or delivery by each
-------------
Shareholder of this Agreement, nor the consummation by each Shareholder of the
transactions herein contemplated, nor the fulfillment by each Shareholder of the
terms and provisions hereof (i) will conflict with, violate or result in a
breach of, any of the terms, conditions or provisions of any law, regulation,
order, writ, injunction, decree, determination or award of any court,
governmental department, board, agency or instrumentality or any arbitrator,
applicable to each Shareholder, (ii) will conflict with, violate or result in a
breach of, or constitute a default under, any of the terms, conditions or
provisions of the constituent documents of Shareholders that are corporations or
partnerships, (iii) will conflict with, violate or result in a breach of, or
constitute a default under, any of the terms, conditions or provisions of any
loan agreement, indenture, trust, deed or other agreement or instrument to which
each Shareholder is
33
<PAGE>
a party or by which it is bound or (iv) except as provided herein, result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature whatsoever upon any of each Shareholder's property or assets
(including, without limitation, the Common Stock owned or to be acquired by each
Shareholder in connection with this Agreement). Each Shareholder is not in
default under any agreement to which it is a party which default could impair
its ability to perform its obligations under this Agreement.
(e) Corporate Opportunity. The Individual Shareholders have made
---------------------
appropriate disclosure of their investment in the Corporation to any
corporation, trust, partnership or other entity to which they owe any fiduciary
duties. Such corporations, trusts, partnerships or other entities do not view
the Individual Shareholder's activities as usurping any opportunity to which
such corporations, partnerships, trusts or other entities may be entitled or as
otherwise providing the basis for the assertion of any claim that the purchase
of the Common Stock by each Individual Shareholder or the completion of the
transactions and agreements contemplated by this Agreement constitutes a breach
of any duty, statutory or otherwise, owned by each Individual Shareholder to any
such corporation, trust, partnership or other entity. To the extent that it is
required under any applicable laws or is customary under prevailing business
practices that formal action be taken by any such corporation, partnership,
trust or other entity to evidence or otherwise establish that the purchase by
each Individual Shareholder of the Common Stock does not constitute an
34
<PAGE>
opportunity which must first be offered to and rejected by any such corporation,
partnership, trust or other entity, all such formal action has been taken in
consultation with such entity's legal counsel, is in full force and effect as of
the date of this Agreement and has not been amended or modified in any material
respect.
ARTICLE VII
MISCELLANEOUS
7.1 TERMINATION. This Agreement shall terminate upon the earlier to occur
-----------
of (i) the written agreement of all of the undersigned holders of Equity
Securities, (ii) a Sale of the Corporation, (iii) an Initial Public Offering of
the Corporation's Common Stock, provided, however, that as a condition to the
-------- -------
Corporation's obligation to execute and deliver an underwriting agreement in
connection with any such Initial Public Offering, the Shareholders shall execute
and cause to be filed with the Secretary of State of the State of Georgia an
amendment to the Certificate to change all authorized shares (including shares
of unissued stock subject to unexercised or unvested options) and all issued or
outstanding shares of each series of Common Stock into one class of common stock
having the rights of the Series A Common Stock with each Shareholder receiving
one share of the new class of common stock for each share of Common Stock held
by each Shareholder as of the effective date of such amendment and by their
execution and delivery hereof, each Shareholder hereby appoints the then CEO of
the Corporation as such Shareholder's attorney-in-fact solely for the purpose of
executing and delivering any written consent of the
35
<PAGE>
Shareholder's necessary to approve such amendments to the Certificate or (iv)
the acquisition by a single purchaser of all of the issued and outstanding
Voting Securities.
7.2 WAIVERS. The failure at any time of any Shareholder to require
-------
performance by any other Shareholder of any responsibility or obligation
required by this Agreement shall in no way effect a Shareholder's right to
require such performance at any time thereafter, nor shall the waiver by the
Shareholders or the Board of Directors of a breach of any provision of this
Agreement by any Shareholder constitute a waiver of any other breach of the same
or any other provision of this Agreement nor constitute a waiver of the
responsibility or obligation itself.
7.3 ASSIGNABILITY. This Agreement shall be binding upon and inure to the
-------------
benefit of the successors and assigns of each party hereto. Neither this
Agreement nor any right (other than a right to receive the payment of the money)
or obligation hereunder may be assigned or delegated in whole or in part to any
other Person without the prior written consent of each Participating
Shareholder.
7.4 NOTICES. In any case where any notice or other communication is
-------
required or permitted to be given hereunder (including, without limitation, any
change in the information set forth in this Section 7.4) such notice or
communication shall be in writing and (a) personally delivered, (b) sent by
registered United States mail, postage prepaid, return receipt requested, (c)
transmitted by telecopy, confirmed by telephone or (d) sent by way of a
recognized overnight courier service, postage prepaid, return
36
<PAGE>
receipt requested with instructions to deliver on the next business day, in each
case as follows:
(a) If to the Corporation, to:
Endeavor Technologies Inc.
100 Lake Hearn Drive, Suite 310
Atlanta, Georgia 30342-1524
Attention: Jeffrey T. Arnold
with a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
400 Colony Square, Suite 2200
1201 Peachtree Street
Atlanta, Georgia 30361
Attention: Robert D. Pannell
(b) If to any Shareholder, to the address set forth below such
Shareholder's name on the signature pages hereto.
All such notices or other communications shall be deemed to have been
given or received (i) upon receipt if personally delivered, (ii) on the fifth
business day following posting if by registered United States mail, (iii) when
sent if by confirmed telecopy or (iv) on the next business day following deposit
with an overnight courier.
7.5 THIRD PARTY RIGHTS. Nothing in this Agreement, whether express or
------------------
implied, is intended or shall be construed to confer, directly or indirectly,
upon or give to any Person other than the Corporation, the Shareholders and
their respective Affiliates, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any covenant, condition or other provision
contained herein.
7.6 CHOICE OF LAW. This Agreement shall be construed and enforced in
-------------
accordance with and governed by the laws of the State of Georgia without giving
effect to the principles of conflict of
37
<PAGE>
laws thereof.
7.7 INTERPRETATION. Should a provision of this Agreement require judicial
--------------
interpretation, it is agreed that the judicial body interpreting or construing
the same shall not apply the assumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of construction that
any instrument is to be construed more strictly against the party which itself
or through its agent prepared the same, it being agreed that the agents of all
the parties have participated in the preparation hereof equally.
7.8 SEVERABILITY. Should any provision of this Agreement be deemed in
------------
contradiction with the laws of any jurisdiction in which it is to be performed
or unenforceability for any reason, such provision shall be deemed null and
void, but this Agreement shall remain in force in all other respects. Should
any provision of this Agreement be or become ineffective because of changes in
applicable laws or interpretation thereof or should this Agreement fail to
include a provision that is required as a matter of law, the validity of the
other provisions of this Agreement shall not be affected thereby. If such
circumstances arise, the parties hereto shall negotiate in good faith
appropriate modifications to this Agreement to reflect those changes that are
required by law.
7.9 ENFORCEMENT OF AGREEMENT. The parties agree that the Equity
------------------------
Securities are unique and that any failure to perform the obligations under this
Agreement will result in irreparable damage to the other parties and that in
addition, and not in lieu of any other legal or equitable remedies available,
specific performance
38
<PAGE>
of the obligations of the Shareholders hereunder may be enforced by a suit in
equity. Any action or proceeding brought by any party to this Agreement on its
own behalf, or on behalf of the Corporation, in connection with or relating to
this Agreement or any provision hereof shall be brought only in a federal or
state court of competent jurisdiction in the State of Georgia. Each of the
parties here, solely in connection with any such action or proceeding, does
hereby (a) submit to the jurisdiction of any such court, (b) waive any defense
of or relating to lack of jurisdiction with respect to any such action or
proceeding in any such court, (c) waive any defense of or relating to service of
process in any such action or proceeding in any such court and (d) irrevocably
appoints the Corporation as its agent to accept service of process in such
action, provided that if the Corporation is the party commencing such action or
proceeding, it shall give reasonably prompt notice thereof of the other party
named in such action or proceeding.
7.10 REFERENCES TO MONEY. References to "cash," "$," "Dollars" or other
-------------------
money amounts refer to currency of the United States.
7.11 REFERENCES TO AGREEMENT. Any reference herein to this Agreement shall
-----------------------
be deemed to be a reference to such Agreement as the same may be modified,
varied, amended or supplemented from time to time by the Shareholders in
accordance with the provisions hereof. Unless the context otherwise expressly
requires, the words "herein," "hereof" and "hereunder" and other words of
similar importance refer to this Agreement as a whole and not to any
39
<PAGE>
particular Article, Section or other subdivision.
7.12 ENTIRE AGREEMENT. This Agreement and the other agreements and
----------------
documents contemplated herein, constitute the entire agreement between the
parties hereto and supersede any prior agreement or understanding between the
parties hereto whether oral or written, with respect to the matters contemplated
hereby.
7.13 HEADINGS, ETC. The Article and Section headings in this Agreement,
--------------
and the table of contents included herein, are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
Whenever the context shall require, each terms stated in either the singular or
plural shall include the singular and the plural. References herein to
masculine, feminine or neuter pronouns shall be construed to refer to another
gender when the context may require.
7.14 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
7.15 SURVIVAL. The provisions of Sections 4.2 and 4.3 and all
--------
representations and warranties made herein shall survive the execution and
delivery of this Agreement and any termination of this Agreement for a period of
two years following the effective date of any such termination.
7.16 AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by Shareholders holding both (i) a majority of the
issued and outstanding Series A Common Stock and (ii) a majority of issued and
outstanding Participating Securities, without prior notice to the other
Shareholders. Upon
40
<PAGE>
delivery to the Corporation of an instrument amending the Agreement executed by
the requisite number of Shareholders in accordance with the preceding sentence,
the Corporation shall execute such instrument and all Shareholders shall be
bound thereby. The Corporation shall promptly provide a copy of such instrument
to each Shareholder.
[BALANCE OF PAGE INTENTIONALLY BLANK.]
41
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the day and year first above written.
ENDEAVOR TECHNOLOGIES INC.
By: /s/ Jeffrey T. Arnold
------------------------------
Jeffrey T. Arnold
Chief Executive Officer
SHAREHOLDERS:
/s/ Jeffrey T. Arnold /s/ Jouko J. Rissanen
- --------------------------- ------------------------------
Jeffrey T. Arnold Jouko J. Rissanen
Address: Address:
___________________________ ______________________________
___________________________ ______________________________
/s/ Lucius E. Burch, III /s/ Robert A. Frist, M.D.
- --------------------------- ------------------------------
Lucius E. Burch, III Robert A. Frist, M.D.
Address: Address:
___________________________ ______________________________
___________________________ ______________________________
Pursuant to Section 4.1 of this Agreement each undersigned has executed
this Agreement for the limited purpose of subjecting herself and her community
property interest in Equity Securities to the applicable provisions of this
Agreement.
___________________________ ______________________________
___________________________ ______________________________
___________________________ ______________________________
___________________________ ______________________________
___________________________ ______________________________
42
<PAGE>
SCHEDULE
TO
RESTATED SHAREHOLDERS AGREEMENT, AS AMENDED
PARTIES TO RESTATED SHAREHOLDERS AGREEMENT TECHNOLOGIES INC.
Jeffrey T. Arnold
Jouko J. Rissanen
Lucius E. Burch, III
Robert A. Frist
J. Rex Fuqua
Fuqua Holdings I, L.P.
K. Robert Draughon
U. Bertram Ellis
The Joel Company
Melkus Partners, Ltd.
S. Taylor Glover
Woodlane L.L.C.
R. Kenyon Wells
Louis P. Ferrero
Stephens, Inc., Custodian for
James C. Gilstrap IRA
Fred C. Goad
Jim D. Kever Annuity Trust II
Peachtree Allergy and Asthma Clinic Profit Sharing Plan
Donald C. McLean, M.D.
Boland T. Jones
J. Fleming Norvell
IRA FBO J. Fleming Norvell, Smith Barney as Rollover Custodian
Robert L. Jones U/A DTD. 2/29/96
Michael A. Jones
Michael L. Tittle
Werner Born
Timothy C. Berry
B.T. Alex. Brown Incorporated, as Custodian for
IRA FBO Jeffrey Alan Allred
B.T. Alex. Brown Incorporated, as Custodian for
IRA FBO Patrick G. Jones
GFKK Partnership
Robert A. Jetmundsen
Richard E. Otto
George W. Baker
Cam Garner
George W. Baker, Jr.
Kim Lund
Austin Mahon
Robert S. Galante
James C. Gilstrap
Joseph L. Mathias IV
Apex Ventures, L.P.
certifiedemail.com, Inc.
Premiere Technologies, Inc.
HBO & Company of Georgia
Matria Healthcare, Inc.
43
<PAGE>
EXHIBIT 10.48
FIRST AMENDMENT
TO
RESTATED SHAREHOLDERS AGREEMENT
OF
ENDEAVOR TECHNOLOGIES, INC.
THIS FIRST AMENDMENT ("First Amendment"), dated as of the 15th day of
December, 1997, is made and entered into by and among Endeavor Technologies, a
Georgia corporation (the "Corporation"), Jeffrey T. Arnold ("Arnold"), Jouko J.
Rissanen ("Rissanen"), Lucius E. Burch, III ("Burch"), Robert A. Frist
("Frist"), Premiere Technologies, Inc. ("Premiere"), and the parties named or to
be named on the signature pages hereto (collectively with Arnold, Rissanen,
Burch and Frist, the "Shareholders"), in respect of the RESTATED SHAREHOLDERS
AGREEMENT (the "Original Agreement," and, as amended by this First Amendment,
the "Agreement").
W I T N E S S E T H :
--------------------
WHEREAS, in connection with the issuance and sale by the Corporation
to Premiere of 1,100,000 shares of Series E Common Stock of the Corporation, it
has been agreed that Premiere is to be added as a Shareholder under the
Agreement;
WHEREAS, the Shareholders have agreed to certain changes in the
constitution of the Board of Directors, as set forth in this Amendment;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto, subject to the terms and conditions set forth
below, hereby agree as follows:
1. Premiere. Premiere is hereby added as a "Shareholder" for
--------
purposes of the Agreement. For purposes of Section 1.17 of the Agreement,
"Equity Securities" shall include, without limitation, the Series E Common Stock
of the Corporation. Exhibit A to the Agreement (as referred to in Article II of
---------
the Agreement) is hereby updated as provided in Exhibit A hereto. For purposes
---------
of Section 1.29 of the Agreement, "Participating Securities" shall include,
without limitation, the Series E Common Stock of the Corporation.
2. Board of Directors. Section 3.1 of the Agreement is hereby
------------------
amended by replacing the phrase "seven Directors" with the phrase "at least
seven Directors" and by adding the following paragraph (e), to provide as
follows:
"(e) For so long as Premiere owns at least 3% of the
Corporation's Equity Securities on a Fully Diluted Basis, Premiere
shall be entitled to designate one Director."
References in Section 3.2 of the Agreement to "Arnold, Rissanen, Burch and
Frist," as the Shareholders individually entitled to
<PAGE>
designate one or more Directors pursuant to Section 3.1 of the Agreement, shall
hereafter be to "Arnold, Rissanen, Burch, Frist and Premiere," as the context
requires.
3. Fundamental Corporate Transactions. Section 3.4 of the Agreement
----------------------------------
is hereby amended by changing the phrase "at least five Directors" with the
phrase "a majority of the Directors then in office, including at least five of
the Directors designated by Arnold, Rissanen, Burch, Frist and Premiere as
provided in Section 3.1 hereof." The following paragraph (i) is hereby added to
Section 3.4 of the Agreement:
(i) Action by the Board of Directors to set designations, voting
powers, preferences, relative rights, qualifications, limitations and
restrictions of or for any Special Stock which are or would be
materially more favorable to the holders thereof than any class or
series of Common Stock then already authorized, as determined by the
Board of Directors at the time.
4. Competition. Section 4.2 of the Agreement shall not apply to
-----------
Premiere as a Shareholder.
5. Effectiveness. As provided in Section 7.16 of the Original
-------------
Agreement, this Amendment shall be effective on the first date it has been
executed by Shareholders holding (i) a majority of the issued and outstanding
Series A Common Stock and (ii) a majority of issued and outstanding
Participating Securities, provided that the Series E Common Stock to be issued
and sold by the Corporation to Premiere shall not be considered Participating
Securities for such purpose.
6. Further Amendment. The Agreement may be amended or modified in
-----------------
such a manner as to adversely and disparately affect the rights of Premiere as a
Shareholders, relative to other Participating Shareholders, only if, in addition
to the requirements of Section 7.16 of the Original Agreement, Premiere consents
in writing to such amendment or modification.
7. Survival. Except as expressly provided otherwise in this
--------
Amendment, all other terms and conditions of the Original Agreement shall remain
in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the day and year first above written.
ENDEAVOR TECHNOLOGIES INC.
By: /s/ Jeffrey T. Arnold
---------------------------
Jeffrey T. Arnold
Chief Executive Officer
SHAREHOLDERS:
FINN PARTNERS
/s/ Jeffrey T. Arnold /s/ Jouko J. Rissanen
- --------------------------- --------------------------------
Jeffrey T. Arnold By: Jouko J. Rissanen
Address: Address:
___________________________ ________________________________
___________________________ ________________________________
/s/ Lucius E. Burch, III
- --------------------------- ________________________________
Lucius E. Burch, III Robert A. Frist, M.D.
Address: Address:
___________________________ ________________________________
___________________________ ________________________________
___________________________ ________________________________
S. Taylor Glover J. Rex Fuqua
Address: Address:
___________________________ ________________________________
___________________________ ________________________________
___________________________ Fuqua Holdings I, L.P.
K. Robert Draughon By Fuqua Holdings, Inc.
Address:
___________________________ By:_____________________________
___________________________ J. Rex Fuqua, President
Melkus Partners, Ltd. ________________________________
Joel C. Gordon
Address:
By:________________________ ________________________________
Kenneth L. Melkus ________________________________
[Signatures continued on next page.]
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the day and year first above written.
____________________________ Woodlane L.L.C.
U. Bertram Ellis, Jr.
By:_____________________________
Address: J. Littleton Glover
____________________________
____________________________ Address:
________________________________
________________________________
____________________________ ________________________________
R. Kenyon Wells Louis P. Ferrero
Address: Address:
____________________________ ________________________________
____________________________ ________________________________
____________________________ ________________________________
James C. Gilstrap Robert L. Jones
Address: Address:
____________________________ ________________________________
____________________________ ________________________________
____________________________
Michael A. Jones
Address:
____________________________
____________________________
[Signatures continued on next page.]
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the day and year first above written.
PREMIERE TECHNOLOGIES, INC.
By: /s/ Patrick G. Jones
------------------------------
Its: Senior Vice President
--------------------------
Address:
3399 Peachtree Road, N.E.
Lenox Building, Suite 400
Atlanta, GA 30326
To change, upon occupancy of the
------
Lenox Building by The Corporation
to Suite 700
5
<PAGE>
EXHIBIT 10.49
SECOND AMENDMENT TO RESTATED
SHAREHOLDERS AGREEMENT
OF
WEBMD, INC.
THIS SECOND AMENDMENT, made and entered into as of the 24th day of August,
1998 by and among WebMD, Inc., a Georgia corporation, formerly known as Endeavor
Technologies, Inc. (the "Company"); HBO & Company of Georgia, a Delaware
corporation (the "Purchaser"); and Jeffrey T. Arnold, Jouko J. Rissanen, Lucius
E. Burch, III, Robert A. Frist and Premiere Technologies, Inc. (collectively
with the Purchaser, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company and certain shareholders of the Company are parties to
a certain Restated Shareholders Agreement of the Company dated October 18, 1996,
as amended by that certain First Amendment to Restated Shareholders Agreement of
Endeavor Technologies, Inc., dated December 15, 1997 (as amended, the "Restated
Shareholders Agreement"), pursuant to which such shareholders set forth the
terms and conditions pursuant to which the Company would be organized and the
business of the Company would be operated;
WHEREAS, the Company desires to sell, and the Purchaser desires to acquire,
six hundred sixty-seven thousand (667,000) shares (the "Purchased Shares") of
Series A Preferred Stock of the Company (the "Preferred Stock") pursuant to the
terms and conditions of a certain Investment Agreement dated August 24, 1998 by
and between the Company and the Purchaser (the "Investment Agreement");
WHEREAS, it is a condition to the Purchaser's obligation to invest in the
Company pursuant to the terms of the Investment Agreement that certain of the
Shareholders amend the Restated Shareholders Agreement to provide the Purchaser
with certain rights of first refusal regarding any series of the common stock of
the Company owned by them or issuable to them upon exercise of options held by
them;
WHEREAS, the Restated Shareholders Agreement provides that it may be
amended or modified only by a written instrument executed by parties thereto
holding both (i) a majority of the issued and outstanding shares of Common
Stock, without series designation, of the Company and (ii) a majority of issued
and outstanding "Participating Securities" (as defined in the Restated
Shareholders Agreement), without prior notice to the other Shareholders; and
WHEREAS, the parties signatory hereto represent the requisite number of
shares necessary to effect an amendment to the Restated Shareholders Agreement,
which is amended by virtue of this Second Amendment.
1
<PAGE>
NOW, THEREFORE, to induce the Purchaser to enter into the Investment
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Addition of the Purchaser. The parties hereto agree that this
--------------------------
Second Amendment shall constitute an amendment to the Restated Shareholders
Agreement such that Purchaser shall be deemed to be a party to such agreement,
but only for purposes of Section 5.3 (Right of First Refusal) thereof and that
----------------------
such agreement is hereby amended to permit the same, with the Purchaser being
deemed a "Participating Shareholder," a "Shareholder" and the holder of "Equity
Securities" (each as defined in the Restated Shareholders Agreement) and being
entitled to all rights and benefits provided for therein; provided that such
Section 5.3 shall not be applicable to a sale or proposed sale by Purchaser of
Preferred Stock.
2. Definition of Corporation. Section 1.13 of the Restated
-------------------------
Shareholders Agreement shall be deleted in its entirety and replaced with the
following:
1.13 "CORPORATION" shall mean WebMD, Inc., a Georgia corporation,
formerly known as Endeavor Technologies, Inc.
3. Definition of Equity Securities. Section 1.17 of the Restated
-------------------------------
Shareholders Agreement shall be deleted in its entirety and replaced with the
following:
1.17 "EQUITY SECURITIES" shall mean any capital stock of the
Corporation or any securities convertible into, or exercisable or
exchangeable for, capital stock of the Corporation, currently outstanding
or issued in the future, including, without limitation, the Common Stock
and the Series B, Series C, Series D and Series E Common Stock and the
Series A Preferred Stock of the Corporation and any options or warrants to
acquire any of the foregoing.
4. Definition of Common Stock.
--------------------------
(a) Section 1.38 of the Restated Shareholders Agreement shall be
deleted in its entirety and replaced with the following:
1.38 "COMMON STOCK" shall mean the Common Stock, without series
designation, of the Corporation.
(b) All references to "Series A Common Stock" shall be replaced with
"Common Stock" in the Restated Shareholders Agreement, the reference to "Common
Stock" in Section 5.3(d) of the Related Shareholders Agreement shall be changed
to refer to "Series D Common Stock," and the references in Section 6.1 of the
Restated Shareholders Agreement to "Common Stock" shall be changed to refer to
"Equity Securities."
2
<PAGE>
5. Calculation of Offer Percentage. The last two sentences of
-------------------------------
Section 5.3(a) of the Restated Shareholders Agreement shall be deleted in their
entirety and replaced with the following:
Following receipt of the Corporation Notice, each Non-Selling
Shareholder shall have a period of 30 days to elect to purchase a
portion of such Equity Securities which the Corporation has not
elected to purchase equal to the product of (i) the number of Equity
Securities subject to such Offer Notice multiplied by (ii) a fraction
(the "First Refusal Offer Fraction"), the numerator of which is the
total number of Equity Securities (which shall mean, in the case of
Equity Securities that are convertible into, or exercisable or
exchangeable for, shares of Common Stock the number of shares of
Common Stock into or for which such Equity Securities are convertible,
exercisable or exchangeable) held by such Non-Selling Shareholder on
the date of the Offer Notice, and the denominator of which is the
total number of Equity Securities (which shall mean, in the case of
Equity Securities that are convertible into, or exercisable or
exchangeable for, Shares of Common Stock the number of shares of
Common Stock into or for which such Equity Securities are convertible,
exercisable or exchangeable) held by all Non-Selling Shareholders on
such date (the "Offer Percentage"), for such consideration and upon
such terms and conditions as are described in the Offer Notice;
provided, however, that any Offer Notice issued with respect to
-------- -------
Series C Common Stock prior to October 18, 1998 shall be governed by
paragraph (c) below.
6. Amendment of Restated Shareholders Agreement. Section 7.16 of
--------------------------------------------
the Restated Shareholders Agreement shall be amended by adding the following to
the end of such section:
Notwithstanding the foregoing, no amendment hereto that
adversely affects the rights of HBO & Company of Georgia, a
Delaware corporation ("HBOC"), shall be effective unless the
written instrument evidencing such amendment is executed by
HBOC.
7. Amendment. Except to the extent expressly amended by the terms
---------
of this Second Amendment, all terms and conditions of the Restated Shareholders
Agreement shall remain in full force and effect in accordance with these terms.
This Second Amendment may be amended, supplemented or otherwise modified only by
written instrument executed by the parties hereto.
8. Governing Law. This Second Amendment shall be construed in
-------------
accordance with the laws of the State of Georgia, without reference to its
principles regarding conflicts of laws.
9. Counterparts. This Second Amendment may be executed in any
------------
number of counterparts, each of which shall constitute one agreement, binding on
the parties hereto.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Second Amendment as of the day and year first written above.
WEBMD, INC.
By: /s/ Jeffrey T. Arnold
---------------------------------------
Jeffrey T. Arnold
Chairman and Chief Executive Officer
HBO & COMPANY OF GEORGIA
By: /s/ Russell G. Overton
---------------------------------------
Russell G. Overton
Senior Vice President
Corporate Planning and
Business Development
/s/ Jeffrey T. Arnold
-------------------------------------------
JEFFREY T. ARNOLD
FINN PARTNERS
By: /s/ Jouko J. Rissanen
----------------------------------------
Name: Jouko J. Rissanen
Title: General Partner
___________________________________________
LUCIUS E. BURCH, III
___________________________________________
ROBERT A. FRIST
4
<PAGE>
PREMIERE TECHNOLOGIES, INC.
By: /s/ Jeffrey A. Allred
-------------------------------------------
Name: Jeffrey A. Allred
Title: Executive Vice President of Strategic
Development
5
<PAGE>
EXHIBIT 10.50
THIRD AMENDMENT TO RESTATED
SHAREHOLDERS AGREEMENT
OF
WEBMD, INC.
THIS THIRD AMENDMENT is made and entered into as of the 1st day of
September, 1998.
W I T N E S S E T H:
WHEREAS, WebMD, Inc., a Georgia corporation, formerly known as Endeavor
Technologies, Inc. (the "Company"), and certain shareholders of the Company are
parties to that certain Restated Shareholders Agreement of the Company dated
October 18, 1996, as amended by that certain First Amendment to Restated
Shareholders Agreement of Endeavor Technologies, Inc., dated December 5, 1997
and as amended by that certain Second Amendment to Restated Shareholders
Agreement of WebMD, Inc. dated August 24, 1998 (as amended, the "Restated
Shareholders Agreement"), pursuant to which shareholders of the Company set
forth the terms and conditions pursuant to which the Company would be organized
and the business of the Company would be operated;
WHEREAS, the Company desires to sell to Matria Healthcare, Inc. (the
"Purchaser"), and the Purchaser desires to acquire, One Hundred Thirty-Four
Thousand (134,000) shares of Series A Preferred Stock of the Company pursuant to
the terms and conditions of a certain Investment Agreement dated September 1,
1998 by and between the Company and the Purchaser (the "Investment Agreement");
WHEREAS, the Purchaser desires that the Restated Shareholders Agreement be
amended;
WHEREAS, the Restated Shareholders Agreement provides that it may be
amended or modified only by a written instrument executed by parties thereto
holding both (i) a majority of the issued and outstanding shares of Common
Stock, without series designation, of the Company and (ii) a majority of issued
and outstanding "Participating Securities" (as defined in the Restated
Shareholders Agreement); and
WHEREAS, the parties signatory hereto represent the requisite number of
shares necessary to effect an amendment to the Restated Shareholders Agreement,
which is amended by virtue of this Third Amendment.
NOW, THEREFORE, to induce the Purchaser to enter into the Investment
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Section 4.2 of the Restated Shareholders Agreement, which is entitled
"Competition," shall not apply to the Purchaser.
1
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Third Amendment as of the day and year first written above.
WEBMD, INC.
By: /s/ Jeffrey T. Arnold
-----------------------------------
Jeffrey T. Arnold
Chairman and Chief Executive Officer
HBO & COMPANY OF GEORGIA
By: /s/ Jay Gilbertson
------------------------------------
Name: Jay Gilbertson
---------------------------
Title: President, COO and CFO
--------------------------
/s/ Jeffrey T. Arnold
---------------------------------------
JEFFREY T. ARNOLD
FINN PARTNERS
By: /s/ Jouko J. Rissanen
------------------------------------
Name: Jouko J. Rissanen
------------------------------
Title: General Partner
-----------------------------
/s/ Lucius E. Burch, III
---------------------------------------
LUCIUS E. BURCH, III
/s/ Robert A. Frist
---------------------------------------
ROBERT A. FRIST
PREMIERE TECHNOLOGIES, INC.
By:____________________________________
Name:______________________________
Title:_____________________________
2
<PAGE>
EXHIBIT 10.51
FOURTH AMENDMENT TO RESTATED
SHAREHOLDERS AGREEMENT
OF
WEBMD, INC.
THIS FOURTH AMENDMENT TO RESTATED SHAREHOLDERS AGREEMENT is made and
entered into as of the 21st day of January, 1999.
W I T N E S S E T H:
WHEREAS, WebMD, Inc., a Georgia corporation, formerly known as
Endeavor Technologies, Inc. (the "Company"), and certain shareholders of the
Company are parties to that certain Restated Shareholders Agreement of the
Company dated October 18, 1996, as amended by that certain First Amendment to
Restated Shareholders Agreement of Endeavor Technologies, Inc., dated December
5, 1997, as amended by that certain Second Amendment to Restated Shareholders
Agreement of WebMD, Inc. dated August 24, 1998, and as amended by that certain
Third Amendment to Restated Shareholders Agreement of WebMD, Inc. dated
September 1, 1998 (as amended, the "Restated Shareholders Agreement"), pursuant
to which shareholders of the Company set forth the terms and conditions pursuant
to which the Company would be organized and the business of the Company would be
operated;
WHEREAS, the Company may desire to sell to certain purchasers (the
"Purchasers"), and the Purchasers may desire to acquire, shares of Series B or
Series C Preferred Stock of the Company pursuant to the terms and conditions of
Investment or Stock Purchase Agreements by and between the Company and such
Purchasers (the "Investment Agreements");
WHEREAS, such Purchasers may desire that the Restated Shareholders
Agreement be amended;
WHEREAS, the Restated Shareholders Agreement provides that it may be
amended or modified only by a written instrument executed by parties thereto
holding both (i) a majority of the issued and outstanding shares of Common
Stock, without series designation, of the Company and (ii) a majority of issued
and outstanding "Participating Securities" (as defined in the Restated
Shareholders Agreement); and
WHEREAS, the parties signatory hereto represent the requisite number
of shares necessary to effect an amendment to the Restated Shareholders
Agreement, which is amended by virtue of this Fourth Amendment;
NOW, THEREFORE, to induce the Purchasers to enter into the Investment
Agreements, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. The Restated Shareholders Agreement, in the form attached hereto
as Exhibit A, is the agreement between the Company and the shareholders of the
---------
Company with respect to the subject matter thereof and is currently in full
force and effect.
1
<PAGE>
2. Section 4.2 of the Restated Shareholders Agreement, which is
entitled "Competition," shall not apply to any Purchaser that the Chief
Executive Officer or President may designate, such designation to be evidenced
conclusively by the execution of either of such officers of a joinder agreement
or other similar agreement with respect to the Shareholders Agreement that
specifically excludes any of such Purchasers from the operation of Section 4.2.
3. Section 5.1(e) of the Restated Shareholders Agreement shall be
deleted in its entirety and replaced with the following:
"Notwithstanding Section 5.3 or part (d) of this Section 5.1, any
Shareholder may Transfer all or any portion of any Equity Securities owned by
such Shareholder (i) to such Shareholder's spouse, parents, children, or
siblings, in the case of a Shareholder who is an individual, (ii) to a trust
established by the Shareholder for the benefit of such Shareholder's spouse,
parents, children, siblings and/or a charitable organization (as defined by
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended), (iii) by
means of a bona fide gift to a charitable organization, (iv) to the owners of
such Shareholder, in the case of a Shareholder which is a corporation,
partnership or other entity, (v) to the beneficiaries or other participants upon
its dissolution, if such Shareholder is a profit-sharing or other employee
benefit plan, (vi) any other corporation or partnership, all of the issued and
outstanding Voting Securities or voting interests of which are owned directly by
the transferring Shareholder, or (vii) any other Person approved by a majority
of the Shareholders, provided, that (x) the other requirements for an effective
Transfer, as set forth in parts (a), (b) and (c) of this Section 5.1, are
fulfilled in connection with any such Transfer described in (i) (vi) above, (y)
such donee or transferee agrees to be bound by any future modifications to the
Agreement and (z) any shares of Equity Securities so transferred shall remain
subject to the terms of the Agreement, and for purposes of Section 5.3 hereof,
such donee or transferee shall shall be treated as if a "Shareholder" and for
purposes of Sections 5.4 and 5.5 hereof, the Equity Securities held by such
donee or transferee shall remain subject to Sections 5.4 and 5.5 with respect to
involuntary Transfers by the transferring Shareholder or the transferring
Shareholder's termination of employment, respectively."
The Company and the Shareholders hereby agree that any Transfers (as
defined in the Restated Shareholders Agreement) occurring prior to the date of
this Fourth Amendment which would have complied with Section 5.1(e) as amended
by this Fourth Amendment had it been in effect at the time of such Transfer
shall be ratified and approved, shall not be void and shall remain in full force
and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Fourth Amendment as of the day and year first written above.
WEBMD, INC.
By: /s/ Jeffrey T. Arnold
-------------------------------------
Jeffrey T. Arnold
Chairman and Chief Executive Officer
HBO & COMPANY OF GEORGIA
By: /s/ Albert J. Bergonzi
-------------------------------------
Name: Albert J. Bergonzi
------------------------------
Title: President
------------------------------
/s/ Jeffrey T. Arnold
-------------------------------------
JEFFREY T. ARNOLD
PREMIERE TECHNOLOGIES, INC.
By: /s/ Patrick G. Jones
-------------------------------------
Name: Patrick G. Jones
------------------------------
Title: Senior Vice President
------------------------------
3
<PAGE>
EXHIBIT 10.52
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement"), made as of this 24th day
of August, 1998, by and among Jeffrey T. Arnold ("Arnold"), T. Blake Whitney
("Whitney"), K. Robert Draughon ("Draughon"), W. Michael Heekin ("Heekin"), and
Bruce A. Springer ("Springer"; together with Arnold, Whitney, Draughon and
Heekin being collectively referred to hereinafter as the "Managers" and
individually as a "Manager"); HBO & COMPANY OF GEORGIA, a Delaware corporation
(the "Purchaser"; the Purchaser and the Managers being referred to hereinafter
collectively as the "Shareholders"); and WEBMD, INC., a Georgia corporation,
formerly known as Endeavor Technologies, Inc. (the "Company");
W I T N E S S E T H:
-------------------
WHEREAS, Arnold currently owns in the aggregate 3,000,000 shares of the
Company's Common Stock, no par value per share, and 900,000 shares of the
Company's Common Stock Series D, no par value per share, and is the Founder of
the Company and currently serves as its Chairman and Chief Executive Officer;
WHEREAS, Whitney, Draughon, Heekin and Springer currently serve in
executive or otherwise key positions with the Company, and the Company has
granted them options for the purchase of an aggregate of 1,165,000 shares of the
Company's Common Stock Series D;
WHEREAS, Draughon owns 50,000 shares of the Company's Common Stock Series
D;
WHEREAS, the Purchaser and the Company have entered into a certain
Investment Agreement dated August 24, 1998 (the "Investment Agreement"),
pursuant to which the Purchaser has agreed to purchase a total of 667,000 shares
(the "Purchased Shares") of Series A Preferred Stock, no par value per share, of
the Company ("Preferred Stock");
WHEREAS, it is a condition of the Purchaser's obligation to invest in the
Company under the terms of the Investment Agreement that the parties agree upon
certain matters with respect to the election of a director to be designated by
the Purchaser and certain rights of co-sale regarding any series of common stock
of the Company (hereinafter, "Common Stock") owned by them as of the date
hereof, issuable to them upon exercise of options or otherwise subsequently
acquired by them and addressing certain matters relating to the governance of
the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
to induce the Purchaser to enter into the Investment Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Shareholders do hereby agree as follows:
1. Purchaser Board Nominee.
-----------------------
1.1 Purchaser Board Nominee. At the meeting of the Board of Directors of
-----------------------
the Company (the "Board") next succeeding the date hereof, or at a special
meeting of shareholders called for such purpose (which may be among other
purposes), the Board of Directors or the
<PAGE>
Shareholders, as the case may be, shall cause Jay P. Gilbertson or, in lieu of
Mr. Gilbertson, such other person as may be designated in writing by the
Purchaser to serve as the member of the Board to be elected by the holders of
the Preferred Stock in accordance with the designations thereof until the third
(3rd) anniversary hereof (regardless of any automatic conversion of such
Preferred Stock into Common Stock upon an Initial Public Offering) and to serve
as a member of the Board until the next election of directors of the Company.
During such period, at any time that the shareholders of the Company shall have
the right to vote for directors of the Company, then, and in each such event
each of the Shareholders shall vote the shares of stock held of record or
controlled by such Shareholder to elect Mr. Gilbertson or, in lieu of Mr.
Gilbertson, such other person as may be designated in writing by the Purchaser,
to the Board. Any vote taken to fill any seat vacated by the resignation of the
director elected pursuant to this Section 1.1 shall be subject to the provisions
of this Section 1.1.
1.2 Not Assignable. Notwithstanding the provisions of Section 4.2 hereof,
---------------
the Purchaser shall have no right to assign its rights pursuant to this Section
1, and no Permitted Transferee (as herein defined) of the Purchaser shall
acquire any right to exercise such rights.
2. Right of Co-Sale.
----------------
2.1 Grant of Right of Co-Sale. If the Purchaser does not elect to
-------------------------
exercise the right of first refusal (the "Right of First Refusal") provided in
Section 5.3 of the Restated Shareholders Agreement of the Company dated October
18, 1996, as amended from time to time (the "Shareholders Agreement") then the
Purchaser shall have a right of co-sale (as described in Subsection 2.2) with
respect to any shares of Common Stock (the "Subject Shares") of a Manager (the
"Selling Manager") that such Manager proposes to sell, assign, gift or otherwise
transfer (the "Right of Co-Sale").
2.2 Notice of Proposed Transfer. Before effecting any proposed transfer
----------------------------
of Common Stock subject to Section 2.1 above, the Selling Manager shall give
written notice to the Company and the Purchaser describing fully the proposed
transfer, including the number of shares of Common Stock proposed to be
transferred, the name and address of the proposed transferee(s) and the proposed
transfer price, and the fair market value of any proposed non-cash consideration
as provided in Section 3 hereof, which may be the same notice as is provided in
Section 5.3 of the Restated Shareholders Agreement (the "Transfer Notice"). The
Transfer Notice shall contain an accurate summary of the offer of the proposed
transferee(s), which must be a bona fide offer.
2.3 Exercise of Right of Co-Sale. The Right of Co-Sale shall entitle the
----------------------------
Purchaser to cause the Selling Manager to include in the proposed transfer
described in the Transfer Notice, in substitution for an equal number of Subject
Shares, a number of shares of Common Stock held by the Purchaser equal to the
Co-Sale Number (as defined below), which shares may include Common Stock of any
series issued to the Purchaser during the Co-Sale Period (as defined below), on
the terms and conditions (including price per share) set forth in the Transfer
Notice (such shares being referred to as the "Co-Sale Shares"). The Purchaser
may exercise the Right of Co-Sale by delivering to the Selling Manager and the
Company notice of such election (the "Election Notice") during the forty (40)-
day period immediately following the delivery of the Transfer Notice described
in Subsection 2.2 (the "Co-Sale Period"). As used herein, the "Co-Sale Number"
with respect to the Purchaser means the number of shares of Common Stock equal
2
<PAGE>
to the product obtained by multiplying (i) the aggregate number of Subject
Shares by (ii) a fraction, the numerator of which is the number of shares of
Common Stock held by the Purchaser at the time of the sale or transfer plus the
number of shares of Common Stock then issuable to the Purchaser upon conversion
of any Preferred Stock or upon exercise of any warrant held by the Purchaser at
the time of the sale or transfer, and the denominator of which is the total
number of shares of Common Stock owned by the Selling Manager and the Purchaser
(including for such purpose all shares of Common Stock issuable to the Purchaser
upon conversion of any Preferred Stock or upon exercise of any warrant held by
the Purchaser) at the time of the sale or transfer; provided, however, that if
Sirrom Investments, Inc. ("Sirrom") shall exercise the right of co-sale it has
been granted pursuant to that certain Stock Purchase Warrant dated August 29,
1997 issued originally to Sirrom Capital Corp., the assignor to Sirrom (the
"Sirrom Warrant"), then the denominator of the fraction described in (ii) above
shall be the total number of shares of Common Stock owned by the Selling
Manager, the Purchaser and Sirrom (which shall mean in the case of the
Purchaser, all shares of Common Stock then owned by the Purchaser and all shares
of Common Stock into which shares of Preferred Stock may be converted by the
Purchaser and, in the case of Sirrom, all shares of Common Stock either owned by
Sirrom or issuable pursuant to the Sirrom Warrant) at the time of the sale or
transfer. The exercise or non-exercise of the Right of Co-Sale hereunder shall
not adversely affect the right of the Purchaser to participate in subsequent
sales of Subject Shares to which such right is granted under Subsection 2.1
hereof.
2.4 Closing of Sales. The Purchaser, if exercising its Right of Co-Sale,
----------------
may sell its Co-Sale Shares to the proposed transferee(s) (or the Company or the
non-selling Shareholders (the "Remaining Shareholders"), as the case may be,
should the Right of First Refusal be exercised), and the Selling Manager may
sell such portion of the Subject Shares as remains after exercise by the
Purchaser of its Right of Co-Sale, all on the terms and conditions otherwise
described in the Transfer Notice. The closing of such purchase and sale of such
Subject Shares and the Co-Sale Shares to such proposed transferees (or the
Company or the Remaining Shareholders, as the case may be) shall be held
simultaneously at such place and at such date and time as determined pursuant to
the provisions of the Shareholders Agreement should the Right of First Refusal
be exercised, or as agreed upon by the Selling Manager and the proposed
transferee(s) should the Right of First Refusal not be exercised. Such closing
shall take place not more than one hundred twenty (120) days following delivery
of the Transfer Notice. If the Purchaser has exercised its Right of Co-Sale, at
such closing, the Selling Manager shall remit or cause to be remitted to the
Purchaser that portion of the sale proceeds to which the Purchaser is entitled
by reason of the Purchaser's exercise of the Right of Co-Sale. To the extent
that any prospective purchaser, or purchasers, prohibit such assignment or
otherwise refuse to purchase Co-Sale Shares from the Purchaser, the Selling
Manager shall not sell to such prospective purchaser or purchasers any Subject
Shares unless and until, simultaneously with such sale, the Selling Manager
shall purchase such Co-Sale Shares from the Purchaser. Any proposed transfer on
terms or conditions differing materially from those described in the Transfer
Notice, as well as any proposed transfer by the Selling Manager after expiration
of such one hundred twenty (120)-day period, shall again require compliance by
the Selling Manager with the procedures hereof.
3. Non-Cash Consideration for Transfers. In the event the consideration
------------------------------------
proposed to be paid to the Selling Manager as described in the Transfer Notice
referred to in Section 2.2 hereof includes non-cash consideration, the Transfer
Notice shall state the fair market value thereof,
3
<PAGE>
which valuation shall be conclusive and binding on the Purchaser in the absence
of a timely challenge made in accordance with this Section 3. The Purchaser may,
within ten (10) days after delivery of the Transfer Notice, by written notice to
the Selling Manager, challenge such valuation by specifying the Purchaser's
valuation of such non-cash consideration. In the case of such a challenge, the
value of non-cash consideration shall be determined by averaging the values set
by the Transfer Notice and by the Purchaser, provided that the difference
between the two values is within ten percent (10%) of the higher of such values.
If such difference is not equal to or less than such 10% amount, then the
Selling Manager and the Purchaser shall agree upon one independent appraiser,
who shall determine the fair market value of the non-cash consideration for
these purposes. In the event that such parties are unable to agree upon such an
appraiser, the parties agree that the American Arbitration Association ("AAA")
shall be employed to choose an independent appraiser and shall use their best
efforts to cause AAA to designate an independent appraiser within a maximum of
fourteen (14) days, and such person shall promptly determine the fair market
value of the non-cash consideration for these purposes. In the event the
appraisal process is utilized, (i) the party whose valuation of the shares less
closely approximates the value determined by the appraiser, measured by absolute
dollar amounts and not by percentages, shall pay all costs of the independent
appraiser and (ii) the relevant time periods for the consummation of any
transfer shall be tolled from the time a challenge is made to the Selling
Manager's valuation of the non-cash consideration until the independent
appraiser determines the fair market value thereof.
4. Agreement's Application to Transferees.
--------------------------------------
4.1 Permitted Transferees. The Right of Co-Sale described in Section 2
---------------------
hereof shall not apply to (i) any pledge of shares of Common Stock made pursuant
to a bona fide loan transaction that creates a mere security interest; (ii) any
transfer of shares of Common Stock by gift or bequest or through inheritance to,
or for the benefit of, any ancestor or descendant, or the spouse or any ancestor
or descendant of the spouse, of a Manager; (iii) any transfer of shares of
Common Stock by a Manager to a trust for the benefit of any person described in
clause (ii), (iv) up to 550,000 shares of Common Stock currently held by Arnold
to Jouko J. Rissanen and (v) the exchange by Arnold of up to an additional
100,000 shares of Common Stock currently held by him for shares of common stock
of certifiedemail.com, Inc. held by the chief executive officer of that company
(persons to whom or which the transfers described in this Subsection 4.1 are
made being referred to herein as "Permitted Transferees"); provided, however,
that each Permitted Transferee, other than a Permitted Transferee taking through
inheritance or pursuant to clauses (iv) and (v) above, shall be subject to the
terms of Subsection 4.3 below. Such transferred Common Stock shall remain
subject to the terms of this Agreement, and, for purposes of Sections 1, 2 and
3 hereof, such donee or transferee shall be treated as a "Manager."
4.2 Rights and Duties of Transferees. The provisions hereof shall be
--------------------------------
binding upon the successors and permitted assigns of the Shareholders. Except
as limited by this Agreement and by the Investment Agreement, all rights,
remedies and entitlement of the Shareholders hereunder may be assigned in full
or in part to any Permitted Transferee or Permitted Transferees of any shares of
capital stock of the Company together with the securities being assigned.
4.3 Written Agreement. All transferees of any capital stock owned on the
-----------------
date hereof by the Managers, or of any capital stock issued upon exercise of any
options or as dividends with respect to any of such capital stock, or of any
interest therein, other than a transferee who is
4
<PAGE>
already a party hereto, shall be required as a condition of such transfer to
agree in writing that they will receive and hold such shares of capital stock or
interest therein subject to the provisions of this Agreement. For such purposes,
transferees of any Manager shall be subject to the rights and obligations of
such Manager provided for in this Agreement. Any sale or transfer of any such
shares shall be void unless the provisions of this Subsection 4.3 are met.
5. Agreement to Co-Operate. Each Manager agrees that, in the event the
-----------------------
Purchaser takes any action to exercise or enforce its rights under this
Agreement or the Investment Agreement, such Manager shall take such actions in
his capacity as an officer or shareholder of the Company or any of its
subsidiaries as the Purchaser may reasonably request, subject only to such
obligations as such Manager may have as a matter of law, or pursuant to the
order of any court having jurisdiction over such Manager, to furnish support to
the Purchaser in such exercise or enforcement, to cause the Company to comply
with its obligations in respect thereof, to prevent the Company or any
subsidiary thereof from doing anything to defeat or diminish the Purchaser's
rights and remedies, and not knowingly to become a party to any proceeding
whereby the Company or any such subsidiary does anything to defeat or diminish
such rights or remedies.
6. Miscellaneous.
-------------
6.1 Legends. In addition to any legends required by applicable securities
-------
laws, all certificates representing any shares, or rights to acquire shares, of
capital stock of the Company subject to the provisions of this Agreement shall
have endorsed thereon legends substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A CERTAIN SHAREHOLDERS' AGREEMENT
DATED AUGUST _24, 1998, TO WHICH THE REGISTERED HOLDER, OR
HIS OR ITS PREDECESSOR IN INTEREST, IS A PARTY, WHICH
AGREEMENT PROVIDES FOR CERTAIN VOTING RIGHTS AND OBLIGATIONS
OF SALE AND PURCHASE. SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE ISSUER AND AFFECTS THE
TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS
CERTIFICATE.
6.2 Transfers in Violation of Agreement. The Company shall not (a)
-----------------------------------
transfer on its books any shares of capital stock that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) treat as owner of such shares, or accord the right to vote as such owner,
or pay dividends to, any transferee to whom any such shares shall have been so
transferred.
6.3 Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement. Each Shareholder agrees upon the
written request of the Company to issue promptly an estoppel certificate to the
Company or entity designated by the Company as to facts reasonably required by
such entity pertaining to the rights and obligations of the respective parties
under this Agreement.
6.4 Termination. Unless provisions of this Agreement are earlier
-----------
terminated pursuant to their terms, this Agreement shall terminate and shall be
of no further force or effect upon the
5
<PAGE>
soonest to occur of (a) the passage of twenty (20) years; (b) the written
consent of the holders of not less than two-thirds (2/3) of the then outstanding
shares of Preferred Stock and two-thirds (2/3) of the then outstanding shares of
Common Stock, the holders of which are subject to this Agreement; (c) except
with respect to Section 1 hereof, immediately prior to the closing of an Initial
Public Offering as defined in the Company's Articles of Incorporation; and (d)
with respect to Section 1 hereof, the third (3rd) anniversary of the date
hereof.
6.5 Gender. Any pronoun used herein shall be deemed to cover all genders.
------
6.6 Titles. The titles of the sections of this Agreement are for
------
convenience of reference only and are not to be considered in construing this
Agreement.
6.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.8 Governing Law. This Agreement shall be governed by the provisions of
-------------
the law of the State of Georgia, without reference to its principles of
conflicts of laws.
6.9 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement among the parties with regard to the subjects
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated orally, except by a written instrument signed by all
parties hereto.
6.10 Notices. Except where telephonic notice is expressly permitted
-------
herein, any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or three (3) business
days after deposit in the United States Postal Service, by certified mail,
return receipt requested, postage prepaid, addressed to the other party hereto
at his or its address hereinafter shown below his or its signature or at such
other address as such party may designate by like notice to all other parties
hereto.
6.11 Stock Dividends. If, from time to time, during the term of this
---------------
Agreement there is any stock dividend, stock split or similar other change in
the character or amount of any of the outstanding capital stock of the Company,
then in such event any and all such new, substituted or additional securities to
which the Shareholders are entitled by reason of their ownership of capital
stock shall be immediately subject or entitled to the terms of this Agreement
with the same force and effect as the shares of capital stock presently subject
to this Agreement.
6.12 Subsequent Issuances and Purchases. All shares of capital stock that
----------------------------------
are issued to or purchased by any Manager after the date hereof, including
without limitation, any obtained by exercise of any stock option or warrant
previously granted or granted hereafter to a Manager, shall become immediately
subject or entitled to the terms of this Agreement without further action by the
parties to this Agreement.
6.13 Additional Parties. Each of the Managers agrees that all shares of
-------------------
Common Stock issued to him pursuant to stock options or warrants held by him
currently or granted to him in the future shall be subject to the terms and
conditions of this Agreement. The Company shall not issue, and the Shareholders
shall vote their shares of Common Stock and Preferred Stock in an effort to
prevent the Company from issuing, any shares or grant any options, warrants or
similar
6
<PAGE>
rights for the purchase of shares of the Company's capital stock hereafter to
any future executive officer of the Company unless, as a condition thereto, such
person is or becomes a party to this Agreement and assumes all the obligations
of a "Manager" hereunder.
6.14 Severability. Any provision hereof that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive
any provision of law that renders any such provision prohibited or unenforceable
in any respect.
[SIGNATURES APPEAR ON IMMEDIATELY FOLLOWING PAGE]
7
<PAGE>
[SIGNATURES TO SHAREHOLDERS' AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement either
themselves or by their duly authorized representatives as of the day and year
first written above.
/s/ Jeffrey T. Arnold
------------------------------------------
JEFFREY T. ARNOLD, individually
Address: 3399 Peachtree Road, NE #400
-------------------------------
Atlanta, GA 30326
-------------------------------
__________________________________________
/s/ T. Blake Whitney
------------------------------------------
T. BLAKE WHITNEY, individually
Address: 3399 Peachtree Road, NE #400
-------------------------------
Atlanta, GA 30326
-------------------------------
__________________________________________
/s/ K. Robert Draughon
------------------------------------------
K. ROBERT DRAUGHON, individually
Address: 3399 Peachtree Road, NE #400
-------------------------------
Atlanta, GA 30326
-------------------------------
__________________________________________
/s/ W. Michael Heekin
------------------------------------------
W. MICHAEL HEEKIN, individually
Address: 3399 Peachtree Road, NE #400
-------------------------------
Atlanta, GA 30326
-------------------------------
__________________________________________
8
<PAGE>
/s/ Bruce A. Springer
------------------------------------------
BRUCE A. SPRINGER, individually
Address: 3399 Peachtree Road, NE #400
-------------------------------
Atlanta, GA 30326
-------------------------------
__________________________________________
HBO & COMPANY OF GEORGIA
By: /s/ Russell G. Overton
--------------------------------------
RUSSELL G. OVERTON
Senior Vice President
Corporate Planning and Business Development
Address: 301 Perimeter Center North.
Atlanta, Georgia 30326
WEBMD, INC.
By: /s/ Jeffrey T. Arnold
--------------------------------------
JEFFREY T. ARNOLD
Chairman and Chief Executive Officer
Address: 400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
9
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF WEBMD, INC.
Endeavor Technologies, Inc.
Telemedics, Inc.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
July 21, 1998, in the Registration Statement (Form S-1) and related Prospectus
of WebMD, Inc. for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Atlanta, Georgia
January 28, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Sapient Health Network, Inc.:
We consent to the use of our report dated November 18, 1998 in the WebMD
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on or about January 28, 1999 relating to the balance sheets of
Sapient Health Network, Inc. as of September 30, 1997 and 1998, and the
related statements of operations, stockholders' deficit, and cash flows for
the period from November 21, 1995 (date of inception) through September 30,
1996 and each of the years in the two-year period ended September 30, 1998 and
to the reference to our firm under the heading "Experts" in the Prospectus.
Our report dated November 18, 1998 contains an explanatory paragraph that
states that the Company has suffered recurring losses from operations and has
a net capital deficiency, which raises substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
January 28, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the WebMD registration statement on Form S-1 of
our report dated March 6, 1998, except for Notes 8 and 9, for which the date
is January 18, 1999, on our audits of the financial statements of Direct
Medical Knowledge, Inc. as of December 31, 1997 and for the year then ended
and for the period from May 24, 1995 (date of incorporation) to December 31,
1997. The financial statements of Direct Medical Knowledge, Inc. for the
period from May 24, 1995 (date of incorporation) to December 31, 1996 were
audited by other auditors, and our report relies on the report of these other
auditors insofar as it relates to this period. Our report contains an
explanatory paragraph about Direct Medical Knowledge, Inc.'s recurring losses
and negative cash flows from operations which raise substantial doubt about
Direct Medical Knowledge, Inc.'s ability to continue as a going concern. We
also consent to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
San Francisco, California
January 27, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated January 16, 1999 with respect to the Financial Statements of
Direct Medical Knowledge, Inc., for the period from May 24, 1995 (date of
incorporation) to December 31, 1995, and of our report dated February 7, 1997,
except for Note 1(J), Note 3 and Note 5 as to which the date is January 16,
1999 with respect to the Financial Statements of Direct Medical Knowledge,
Inc. for the year ended December 31, 1996.
We also consent to the references to our report under the caption "Experts."
/s/ Berg & Company
January 27, 1999
San Francisco, California
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1998
<PERIOD-END> DEC-31-1998 SEP-30-1998
<CASH> 2,696 11,737
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 1,956
<CURRENT-ASSETS> 153 1,320
<PP&E> 76 2,290
<DEPRECIATION> (3) (114)
<TOTAL-ASSETS> 9,190 17,222
<CURRENT-LIABILITIES> 5,044 1,667
<BONDS> 0 0
0 0
0 12,015
<COMMON> 9,354 17,376
<OTHER-SE> (5,208) (13,836)
<TOTAL-LIABILITY-AND-EQUITY> 9,190 17,222
<SALES> 0 75
<TOTAL-REVENUES> 0 75
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,594 14,516
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 725 177
<INCOME-PRETAX> (3,319) (14,618)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,319) (14,618)
<DISCONTINUED> (1,030) 7,719
<EXTRAORDINARY> 0 (930)
<CHANGES> 0 0
<NET-INCOME> (4,349) (7,829)
<EPS-PRIMARY> (0.52) (0.67)
<EPS-DILUTED> 0 0
</TABLE>
