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Exhibit 10.9
EMPLOYMENT AND RESTRICTED STOCK
PURCHASE AGREEMENT
THIS AGREEMENT, made as of October 27, 1998, by and between
MEDSCAPE, INC., a New York corporation with offices at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 ("Medscape"), and XXXXXXX X. XXXXXXX, M.D., Ph.D., an
individual residing at 00000 Xxxxxxxx Xxxx Xxxxx, Xxxxxxx, XX 00000
("Executive"),
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution of this Agreement,
Medscape, Executive and other parties named therein are entering into a Purchase
Agreement, dated as of the date first set forth above (the "Purchase
Agreement"), pursuant to which Medscape is purchasing all the membership
interests of Healthcare Communications Group, L.L.C. ("HCG"), including all the
membership interests held by Executive; and
WHEREAS, Medscape desires to employ Executive and Executive is
willing to undertake such employment on the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:
1. Employment. Medscape hereby employs Executive during the Term (as
hereinafter defined) as the Executive Vice President of Medscape. As such,
Executive will have responsibility for the Sales and Marketing departments of
Medscape and such other duties as are reasonably assigned by the Chief Executive
Officer of Medscape. In addition, Xxxxx Xxxxx, Vice-President-Editorial, or any
successor thereto, will report to Executive with respect to (i) Medscape's
Editorial or Scientific Advisory Boards and (ii) the original, MD-authored
material published by Medscape. (Xx. Xxxxx will report to the Chief Executive
Officer of Medscape with respect to his other areas of responsibility.)
Executive shall report to the Chief Executive Officer of Medscape. Effective
upon execution and delivery of this Agreement, Executive has been elected and
agrees to serve as a member of Medscape's Board of Directors. Throughout the
term of this Agreement, Medscape shall nominate Executive for election as a
director and use its best efforts to ensure such election by the shareholders of
Medscape. Executive will not receive additional consideration for his service as
a director of Medscape or any subsidiary or affiliate of Medscape, during the
term of this Agreement.
2. Performance of Services.
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(a) Executive hereby accepts such employment and agrees that
throughout the period of his employment hereunder he will devote his full
business time, attention, knowledge and skills, faithfully, diligently and to
the best of his ability, in furtherance of the business of Medscape and will
perform the duties assigned to him pursuant to Paragraph 1 hereof, subject, at
all times, to the direction and control of the Chief Executive Officer of
Medscape, and to the policies of Medscape generally applicable to its employees.
(b) Executive will be based in the Potomac, Maryland area at
his home office for the term of this Agreement unless otherwise mutually agreed
to between the Executive and Medscape. Executive acknowledges and agrees that
the performance of his duties hereunder may require substantial out-of-town
travel, including, without limitation, to Medscape's headquarters in New York,
New York, and Executive agrees to undertake such travel as is reasonably
necessary to fulfill such duties. Executive understands and agrees that
Medscape, in its sole discretion, may, from time to time, seek to enter into a
key-man-life insurance policy with Executive as the named insured and with
Medscape as the named beneficiary. Executive's sole obligation in regard to this
insurance policy is to cooperate with reasonable requests, including submitting
to a physical exam if requested by the insurance company, and to consent to the
issuance of such a policy.
3. Term. Executive shall be employed for an initial term commencing
as of the date hereof (the "Commencement Date"), and ending on the fifth
anniversary of such date (the "Term"), unless his employment is terminated prior
to the expiration of the Term pursuant to the provisions hereof. The Term may be
renewed for successive three year terms on terms and conditions mutually agreed
to between the Executive and Medscape.
4. Compensation.
(a) Base Compensation. As compensation for his services
hereunder, during the Term, Medscape will pay to Executive a salary (the "Base
Salary") at the rate of One Hundred and Ninety-Five Thousand ($195,000.00)
Dollars per annum, payable in accordance with Medscape's standard payroll
procedures. Upon the earlier of (i) December 31, 1999 or (ii) the successful
completion of Medscape's initial public offering of securities, the Base Salary
may be adjusted upward, but not downward, upon the mutual agreement of the
Executive and the Chief Executive Officer of Medscape, subject to the approval
of the Compensation Committee of the Board of Directors.
(b) Cash Performance Bonus. For the calendar year ending
December 31, 1998, Executive will receive a cash bonus equal to that portion of
$50,000 pro rated by the ratio of (x) the number of days between the
Commencement Date and December 31, 1998 to (y) Three Hundred and Sixty-Five
(365), if Medscape's Revenues (as defined in Annex A) are at least six million,
five hundred thousand dollars
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($6,500,000) on a consolidated basis. For the calendar year ending December 31,
1999, Executive will receive a cash bonus of $50,000 if the Target Performance
Goal for that period (as defined in Annex A) is achieved or surpassed. For the
calendar years ending December 31, 2000 and December 31, 2001, Executive will
receive a cash bonus in an amount to be determined by the Chief Executive
Officer, subject to the approval of the Compensation Committee, if, for each
such year, the Target Performance Goal for that year (as defined in Annex A) is
achieved or surpassed. For all periods of the Term after December 31, 2001,
Executive will receive cash bonuses in such amounts and subject to achieving
such performance goals as are determined by the Chief Executive Officer, subject
to the approval of the Compensation Committee.
(c) Restricted Share Purchase. Effective upon execution and
delivery of this Agreement, Medscape shall sell to Executive and Executive shall
purchase from Medscape, in accordance with the terms of the note (the "Note")
attached hereto as Exhibit 1 and the pledge agreement (the ("Pledge Agreement")
attached hereto as Exhibit 2, at a purchase price of $0.86 per share, 730,174
restricted shares of Medscape's non-voting Class B Common Stock, $0.01 par value
per share (the "Restricted Shares") (such number of shares being equal to, as of
the date hereof, ten (10%) percent of the equity of Medscape on a fully diluted
basis assuming that all shares of Medscape's preferred stock are converted into
shares of Medscape's common stock at the applicable conversion ratio, all
outstanding stock options are exercised and that options to purchase all
additional shares of Medscape's common stock currently reserved under the
Medscape Stock Award Plan are made and such options are exercised but excluding
any shares of Medscape's stock issued pursuant to the Purchase Agreement to the
Sellers (as defined in the Purchase Agreement)). The Restricted Shares may not
be transferred by Executive until they have vested in accordance with the terms
of Annex A and are released as collateral from the Pledge Agreement, and shall
be subject to the repurchase option and the other terms and conditions set forth
on Annex A. Additionally, the Restricted Shares shall be subject to the terms
and conditions of that certain Stockholders' Agreement dated October 31, 1997,
as amended as of February 19, 1998 and as of the date hereof, by and among
Medscape and the stockholders of Medscape (the "Stockholders' Agreement").
(d) Other Benefits. Executive shall be entitled to all family
health and medical benefits (including dental) and all life and disability
insurance as are provided to the senior executives of Medscape. For any Company
benefit plan dependent upon years of service, to the extent permitted under
applicable law, Executive shall be credited for all years during which he was
employed by, or served as managing member of, HCG.
5. Expenses. Medscape shall reimburse Executive for all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder and the business of Medscape, including, without limitation, the
purchase of a laptop computer and similar office equipment for Executive's home
office, the payment of a reasonable utilities reimbursement and reimbursement
for coach air fare in connection
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with business travel, upon the submission to Medscape of appropriate vouchers
therefor, all in accordance with Medscape's policies and procedures as in effect
from time to time for senior executive officers.
6. Vacation. Executive shall be entitled to paid vacation at full
pay each year during the period of his employment hereunder in accordance with
Medscape's vacation policy for its senior executives, such vacation to be taken
at times mutually agreeable to Executive and the Chief Executive Officer of
Medscape. Executive shall be credited for all years during which he was employed
by, or served as a managing member of, HCG, in connection with determining his
vacation eligibility under Medscape's policies.
7. Confidentiality.
(a) Executive shall not, at any time during or following
expiration or termination of his employment hereunder, regardless of the manner,
reason, time or cause thereof, directly or indirectly reveal, report, publish,
disclose, transfer or furnish to any person not entitled to receive the same for
the immediate benefit of Medscape, any Proprietary Information. The term
"Proprietary Information" means all information of any nature whatsoever, and in
any form, which at the time or times concerned relates to any aspect of the
business of Medscape and which is confidential, proprietary and not generally
known to persons engaged in businesses similar to that conducted by Medscape.
Proprietary Information includes, but is not limited to, items, materials and
information concerning the following: marketing plans or strategies; budgets;
designs; promotional strategies; client preferences and policies; creative
activities for clients; concepts; trade secrets; product plans; financial
information and all documentation, reports and data (recorded in any form)
relating to the foregoing. Notwithstanding the foregoing, "Proprietary
Information" shall not include (i) any information to the extent it becomes
generally known through no fault of Executive, (ii) any information known to
Executive prior to the disclosure thereof by Medscape (as evidenced by the
written records of Executive), (iii) any information which Executive is required
to disclose as a result of a subpoena or other legal process or (iv) any
information available on a non-confidential basis from a source other than
Medscape.
(b) Executive agrees that all memoranda, notes, records,
papers or other documents and all copies thereof, computer disks, computer
software programs and the like (collectively, "documents") relating to the
operations or businesses of Medscape, its affiliates or their respective clients
(even if prepared by him) and involving Proprietary Information, in any way
obtained by him during his employment hereunder or his prior employment by HCG
shall be the property of Medscape. Except for use for the benefit of Medscape,
Executive shall not copy or duplicate any of the aforementioned documents or
objects, nor remove them from Medscape's facilities. Executive shall comply with
any and all procedures which Medscape may adopt for all Medscape employees from
time to time to preserve the confidentiality of Proprietary Information and the
confidentiality of property of the types
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described immediately above, whether or not such property contains a legend
indicating its confidential nature.
(c) Upon termination of Executive's employment with Medscape
for any reason whatsoever and at any other time upon Medscape's request,
Executive (or his personal representative) shall deliver to Medscape all
property described in this Paragraph 7 which is in his possession or control.
8. Representation and Warranty. Executive represents and warrants to
Medscape that he is not a party to any prior employment agreement or other
agreement which restricts, interferes with or impairs, or which might be claimed
to restrict, interfere with or impair, in any way, Executive's use of any
information or Executive's execution or performance of this Agreement.
9. Intellectual Property. In consideration of Medscape's employment
of Executive hereunder and the compensation of Executive as provided herein,
Executive agrees that all of his work for Medscape and its affiliates during the
term of this Agreement is work for hire and shall be the sole and absolute
property of Medscape. Executive agrees that he will, at Medscape's request and
cost, do whatever is reasonably necessary to secure the rights thereto and
therein to Medscape.
10. Restrictive Covenants.
(a) Executive agrees that his services hereunder are of a
special, unique, extraordinary and intellectual character, and his position with
Medscape places him in a position of confidence and trust with the customers and
employees of Medscape and its affiliates. Executive further acknowledges that
the rendering of services to the customers of Medscape and its affiliates
necessarily requires the disclosure of Proprietary Information of Medscape. The
parties hereto agree that in the course of Executive's employment with Medscape,
Executive may develop a personal acquaintanceship and relationship with
Medscape's and its affiliates' customers, and a knowledge of those customers'
affairs and requirements which may constitute the primary contact of Medscape
and its affiliates with such customers. Executive acknowledges that Medscape's
and its affiliates' relationships with its established customers may therefore
be placed in Executive's hands in confidence and trust. Executive consequently
agrees that it is reasonable and necessary for the protection of the goodwill
and business of Medscape that Executive make the covenants contained herein.
Accordingly, Executive agrees that, so long as he shall be in Medscape's employ
and for a period of one year after the termination of such employment for any
reason whatsoever, he shall not, whether as an owner, shareholder (other than in
his capacity as holder of less than 2% of the shares of any corporation whose
shares are traded on a national securities exchange or over the counter which
shall be excepted from this restriction), partner, employee, consultant,
advisor, independent contractor or otherwise, directly or indirectly compete
with the business of Medscape in any manner. Additionally, Executive agrees that
so long as
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he shall be in Medscape's employ and for a period of one year after the
termination of such employment for any reason whatsoever, Executive will not,
within the United States and its territories and possessions, or in any other
geographical area in which Medscape has an office or a client (the "Medscape
Territory"), directly or indirectly, on Executive's own behalf or on behalf of
anyone else engaged in a business which is directly competitive with Medscape,
without the prior written consent of Medscape, (i) persuade or attempt to
persuade any customer of Medscape or its affiliates as of the date of the
termination of Executive's employment, to cease doing business with, or to
reduce the amount of business it does with, Medscape or its affiliates or
solicit the business of any of Medscape's or its affiliates' customers as of the
date of the termination of Executive's employment hereunder, (ii) render to or
for any customer of Medscape as of the date of the termination of Executive's
employment hereunder any services of the type rendered by Medscape to its
customers unless such services are rendered as an employee or consultant of
Medscape or (iii) solicit or encourage to leave the employ of Medscape or its
affiliates, or to become employed by any person other than Medscape, any
employee of Medscape or its affiliates, or any individual who was an employee of
Medscape or its or affiliates during the one year prior to the termination of
Executive's employment. Executive further agrees that so long as he shall be in
Medscape's employ and for a period of six months after the termination of such
employment for any reason whatsoever, Executive will not, within the Medscape
Territory, directly or indirectly, on Executive's own behalf or on behalf of
anyone else engaged in a business which is directly competitive with Medscape,
without the prior written consent of Medscape, employ any employee of Medscape
or its affiliates, or any individual who was an employee of Medscape or its
affiliates during the three months prior to the termination of Executive's
employment.
(b) Executive has carefully considered the nature and extent
of the restrictions upon him and the rights and remedies conferred upon Medscape
under this Agreement, and hereby acknowledges and agrees that the same (i) are
reasonable in time and territory, (ii) are designed to eliminate competition
which otherwise would be unfair to Medscape, (iii) do not stifle the inherent
skill and experience of Executive, (iv) would not operate as a bar to
Executive's sole means of support, (v) are fully required to protect the
legitimate interests of Medscape and (vi) do not confer a benefit upon Medscape
disproportionate to the detriment to Executive or the benefit otherwise afforded
him by this Agreement and the Purchase Agreement.
(c) Executive and Medscape acknowledge and agree that the
restrictions and obligations imposed on Executive by virtue of this Paragraph 10
are, in light of the circumstances, fair and reasonable as to type, scope and
period of time, and are reasonably required for the protection of Medscape and
the goodwill associated with the business of Medscape. Additionally, Medscape
and Executive understand that such restrictions are entered into in connection
with the Purchase Agreement. However, it is the intent of Executive and Medscape
that this Agreement be enforceable and restrict Executive's activities only to
the extent permitted by applicable law. Therefore, if any provision of this
Paragraph 10 as presently written shall be construed
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to be illegal, invalid or unenforceable by a court of competent jurisdiction,
said illegal, invalid or unenforceable provision shall be deemed to be amended
and shall be construed by the court to have the broadest type, scope and
duration permissible under applicable law, and if no validating construction is
possible, shall be severable from the rest of this Agreement, and the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
11. Certain Remedies. The parties hereto acknowledge that, in the
event of a breach or a threatened breach by Executive of any of his obligations
under Paragraphs 7, 9 or 10 of this Agreement, Medscape will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach by Executive, Medscape shall be entitled to such equitable and
injunctive relief as may be available to restrain Executive and any business,
firm, partnership, individual, corporation or entity participating in such
breach or threatened breach from the violation of the provisions hereof. Nothing
herein shall be construed as prohibiting Medscape from pursuing any other
remedies available at law or in equity for such breach, including the recovery
of damages.
12. Termination of Employment; Compensation. Executive's employment
hereunder shall terminate upon his resignation or death and may be terminated by
Medscape at any time for Good Cause (as defined below) or by reason of
Executive's incapacity. In the event that Executive's employment is terminated
by reason of his resignation (other than for Good Reason as hereinafter
defined), death or incapacity, or by Medscape for Good Cause, Executive shall be
entitled only to his base salary to the date of termination. In the event that
Executive's employment is terminated by Medscape without Good Cause and not
because of Executive's incapacity or by Executive for Good Reason during the
Term hereof, Executive shall be entitled to receive his base salary (plus any
accrued but unpaid vacation and bonus pay, if any) through the date of
termination, plus a severance amount equal to 12 months Base Salary and the
continuation of health benefits until the first anniversary of such termination.
For purposes of this Agreement, "incapacity" shall mean
Executive's inability, by reason of a physical or mental infirmity, or both,
actively to perform, on a full-time basis, the executive and managerial services
contemplated under this Agreement for a continuous period of sixty (60) days or
for an aggregate period of one hundred eighty (180) days in any consecutive
twelve month period. Medscape shall have the right to terminate the employment
of Executive hereunder at any time following his incapacity.
For purposes of this Agreement, "Good Cause" shall mean gross
misconduct, gross neglect of duties (including by reason of alcohol or drug
dependency), acts involving moral turpitude, conviction of a felony, material
breach by Executive of this employment agreement in each case that is not
substantially cured within thirty (30) business days after receipt of written
notice from Medscape of such
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breach, or any act or omission involving fraud, embezzlement or misappropriation
of any property of Medscape by Executive.
For purposes of this Agreement "Good Reason" means that (i)
Medscape has significantly reduced the nature or scope of the authority, powers,
functions or duties attached to Executive's position as the Executive Vice
President of Medscape (a "Demotion"), (ii) Executive is not elected as a
director or ceases to be a director of Medscape when he is willing to so serve
and there does not exist Good Cause and Executive is not in a state of
incapacity (a "Board Removal"), or (iii) Medscape has otherwise committed any
material breach of this Agreement, and in any such case has not substantially
cured such within thirty (30) days after Executive's written notice thereof to
Company. Notwithstanding the foregoing, a Demotion or a Board Removal in any
year following a year where Executive has failed to achieve at least 50% of the
Target Performance Goal for that prior year shall not constitute Good Reason.
13. Entire Agreement. This Agreement (including Annex A and Exhibit
1 which form an integral part hereof) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and no amendment,
waiver or modification hereof shall be valid or binding unless made in writing
and signed by the party against whom enforcement thereof is sought. This
Agreement supersedes all prior agreements, representations and understandings of
the parties hereto relating to the employment of Executive by Medscape.
14. No Reliance. The parties hereto each represent to the other that
in executing this Agreement each does not rely upon, and has not relied upon,
any representation or statement not set forth herein with regard to the subject
matter, basis or effect of this Agreement or otherwise.
15. Notices. All notices, consents, waivers or other communications
required or permitted to be given or made pursuant to any of the provisions of
this Agreement (collectively, "Notices") shall be in writing and shall be deemed
to have been duly given or made for all purposes if sent by certified or
registered mail, return receipt requested, and postage prepaid, hand delivered,
sent by confirmed telecopy or other confirmed electronic means or by express
mail service or other verified overnight courier service to the party at its or
his address as it appears on the first page of this Agreement, or at such other
address as either party may specify by Notice give to the other party in
accordance with this Paragraph 15 and with copies to the parties indicated
below. A Notice shall only be deemed given or received on a business day (any
day other than Saturday, Sunday or Federal legal holiday). The date any such
Notice shall be deemed given and received is: (i) if hand delivered, on the date
of hand delivery; (ii) if sent by registered or certified mail, three business
days following the posting of the mail; (iii) if sent by express mail or other
verified overnight courier service, the date received; or (iv) if sent by
confirmed telecopy or other confirmed electronic means, the date when receipt is
confirmed by the same means (The telecopy number
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for Medscape presently being: (000) 000-0000. The telecopy number for Executive
presently being: (000) 000-0000).
If a notice is being provided to Executive, a copy shall also be provided to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: H. Xxxxx Xxxxxx, Esq.
Xxxx X. Xxxx, Esq.
If a notice is being provided to Medscape, a copy shall also be provided to:
Patterson, Belknap, Xxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
16. No Assignment. Neither this Agreement nor the right to receive
any payments hereunder may be assigned by Executive. This Agreement shall be
binding upon Executive, his heirs, executors and administrators and upon
Medscape, its successors and assigns.
17. No Modification. No termination, alteration, modification or
variation or waiver of this Agreement or any of the provisions hereof shall be
effective unless in writing executed by the parties hereto, or in the case of a
waiver, by the party or parties waiving compliance. No waiver of any default or
breach of this Agreement shall be deemed a continuing waiver or a waiver of any
other breach or default. No course of dealing nor any delay on the part of
either party in exercising any rights hereunder shall operate as a waiver of any
such rights.
18. Governing Law. This Agreement shall be governed, interpreted and
construed according to the internal laws of the State of New York without regard
to conflict of laws principles. Any legal action or proceeding with respect to
this Agreement or any transaction related hereto shall be brought in the courts
of the State of New York or of the United States District Court for the Southern
District of New York, and, by the execution and delivery of this Agreement, each
of the parties hereto hereby consents for itself and in respect of its property
to the exclusive jurisdiction of the aforesaid courts and agrees that service of
process in any legal action or proceeding with respect to this Agreement or any
transaction related hereto may be made on such party by delivery of such process
by certified mail, return receipt requested, to such party at its address set
forth in the heading hereof with the same effect as if such process was
personally served on such party within the State of New York. Each of the
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parties hereto hereby irrevocably waives, to the extent permitted by applicable
law, any objection, including, but not limited to, any objection to the laying
of venue or based on the ground of forum non conveniens, which it may now or
hereafter have to the bringing of any action or proceeding in such jurisdictions
in respect of this Agreement or any transaction related hereto. Nothing
contained herein shall affect the right of any party hereto to serve process in
any other manner permitted by law.
19. Severability. Should any clause, paragraph or part of this
Agreement be held or declared to be void or illegal for any reason by a court of
competent jurisdiction, such provision shall be ineffective, but all other
clauses, paragraphs or parts of this Agreement which can be effected without
such illegal clause, paragraph or part shall nevertheless remain in full force
and effect.
20. Headings The headings and captions contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
21. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by Medscape hereunder to the Executive shall be
subject to withholding of such amounts relating to taxes as Medscape may
reasonably determine it should withhold pursuant to any applicable law or
regulation.
22. Survival. The provisions of Paragraphs 7, 8, 9,10, 11, 12,13, 18
and 19 and of this Paragraph 22 shall survive the termination or expiration of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year first above written.
MEDSCAPE, INC.
By: /s/ Xxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
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Xxxx X. Xxxxxx Xxxxxxx X. Xxxxxxx, M.D., Ph.D.
President and Chief Executive Officer
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ANNEX A
TERMS AND CONDITIONS AND
PERFORMANCE GOALS FOR RESTRICTED SHARES
GOAL THRESHOLD TARGET
12/31/99
Revenue* $10 million $11.3 million
12/31/00
Revenue* $19.8 million $22 million
12/31/01
Revenue* $31.5 million $35 million
* Revenue - means all revenues recognized under Medscape's written recognition
policy from CME educational grants, the sale of advertising (banners,
sponsorships, etc.) in Xxxxxxxx.xxx and related print publications, clinical
content (e.g., premium tier, pay-per-view, etc.), and meetings revenue.
"Revenues" shall not include any revenues generated by Medscape other than those
listed above, including, without limitation, revenues or fees from the sale,
licensing or other exploitation of Medscape International (e.g., Medscape
Canada) or Medscape Profiles (online research, data mining, etc.), or licensing
fees or from non-clinical content areas such as Money & Medicine, Medscape
Travel or similar features except, in any such case, for revenues generated by
you or by the sales group reporting to you, and shall not include revenues
included in Medscape's consolidated revenues as a result of any acquisition,
merger or other combination of Medscape and another entity (other than HCG).
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Vesting Pursuant to Target Goal Achievement. Up to one-third of the
Restricted Shares will vest on December 31 of each of 1999, 2000 and 2001 (the
"Performance Vesting Dates") provided (i) Executive achieves the annual Revenue
Goals ("Performance Goals") set forth above; and (ii) Executive is an employee
of Medscape and there does not exist Good Cause to terminate the Executive on
each such Performance Vesting Date. Subject to clause (ii) above, 100% of the
Restricted Shares subject to vesting on a Performance Vesting Date will vest if
the Target
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Performance Goal (the "Target Performance Goal" for any year being represented
by the right-most column above under the heading "Target" and the "Threshold
Performance Goal" for any year being represented by the middle column under the
heading "Threshold") for such Performance Vesting Date is achieved. Subject to
clause (ii) above, 90% of the Restricted Shares subject to vesting on a
Performance Vesting Date will vest if the Threshold Performance Goal for such
Performance Vesting Date is achieved. If Executive is not an employee on a
Performance Vesting Date or there exists Good Cause to terminate the Executive
on such date, no Restricted Shares will vest on such date. Additionally, if the
Threshold Performance Goal is not met at the time of any Performance Vesting
Date, then none of the Restricted Shares applicable to such period will vest.
The actual number of Restricted Shares vested on any Performance Vesting Date
will be calculated on a linear basis between the Threshold Level and the Target
Level (based upon a scale between 90% at the Threshold Level and 100% at the
Target Level).
Other Vesting Provisions. In addition, (a) all previously unvested
Restricted Shares will vest on the seventh anniversary of the Commencement Date
provided Executive remains an employee of Medscape and there does not exist Good
Cause to terminate the Executive on such date and (b) the portion of previously
unvested Restricted Shares for which the Performance Vesting Date has not yet
occurred shall vest upon the termination (or constructive termination, upon the
Executive's resignation for Good Reason (as defined in the Agreement to which
this Annex A is appended)) by Medscape of Executive's employment other than for
(x) Good Cause (as defined in the Agreement to which this Annex A is appended)
or (y) Executive's failure to attain at least 50% of the Target Revenue Goal in
any year; provided, however, with respect to clause (y), such clause shall cease
to be applicable if in any year subsequent to the year in which the Executive
fails to attain at least 50% of the Target Revenue Goal, Executive attains at
least 50% of the Target Revenue Goal applicable to that subsequent year.
Further, if (a) the Stockholders' Agreement is further amended without the
consent of the Executive in a manner which materially adversely affects the
rights of the Executive expressed therein as of the date hereof or (b) after the
first anniversary of the Commencement Date but prior to the second anniversary
of such date there is a Change of Control (as defined below) of Medscape and
Executive resigns, one-half of the portion of previously unvested Restricted
Shares for which the Performance Vesting Date has not occurred shall immediately
vest. If after the second anniversary of the Commencement Date but prior to the
third anniversary of such date, there is a Change of Control of Medscape and
Executive resigns, all of the previously unvested Restricted Shares for which
the Performance Vesting Date has not occurred shall immediately vest. For
purposes of this Annex A, if the Chief Executive Officer of Medscape has actual
notice of Good Cause, Medscape must notify Executive within 30 days of such
notice or that particular instance of Good Cause shall be waived for purposes of
determining the vesting of Restricted Shares hereunder. "Change of Control" for
purposes in this Annex A means and includes each of the following: (i) the
acquisition, in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act of 1934, as amended (the
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"Exchange Act")) by any person or entity or any group of persons or entities who
constitute a group (within the meaning of Section 13(d)(3) of the Exchange Act),
and who are not stockholders of Medscape as of the date hereof, of any
securities of Medscape such that, as a result of such acquisition, such person,
entity or group beneficially owns (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, more than 50% of Medscape's outstanding
voting securities entitled to vote on a regular basis for a majority of the
members of the Board of Directors of Medscape, (ii) the stockholders of Medscape
approve a merger or consolidation of Medscape with any other corporation or
other entity, other than a merger or consolidation which would result in the
voting securities of Medscape outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of Medscape or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of Medscape approve a plan of complete liquidation of Medscape or an agreement
for the sale or disposition by Medscape of (in one or more transactions) all or
substantially all of Medscape's assets or (iii) any sale of all or substantially
all of Medscape's assets. Any Restricted Shares which do not vest in accordance
with the terms of this Annex A, or which can no longer vest at any time in
accordance with the provisions of this Annex A, shall be forfeited by Executive
and he shall have no further rights with respect to any such forfeited shares
except as may be provided for in the Repurchase Option. Medscape shall hold a
master certificate in respect to any Restricted Shares that have not yet vested
and, subject to the provisions of the Note and Pledge, upon the request of the
Executive, shall promptly provide to Executive a certificate for any Restricted
Shares which have vested. Executive shall have all the rights of a holder of
Class B Common Stockholder for all Restricted Shares not yet vested except as
provided herein or in any other agreement by which Executive may be bound or
restricted.
Repurchase Option; Repayment Upon Acceleration of Note and Pledge.
In the event Executive ceases to be employed by Medscape for any reason (a
"Termination Event"), Medscape shall have the right and option (the "Repurchase
Option") to repurchase all, but not less than all, of the unvested Restricted
Shares (immediately after giving effect such termination) (the "Unvested
Shares") at a per share repurchase price equal to $0.86 (adjusted for stock
splits, stock dividends and the like). Medscape may elect to exercise its
Repurchase Option pursuant to the provisions of the immediately succeeding
paragraph. In the event that Medscape does not elect to exercise its Repurchase
Option, all of the Unvested Shares shall thereafter be deemed to be vested
Shares. In the event that Medscape accelerates the due date of the Note in
accordance with the terms thereof upon Executive's termination of employment
with Medscape, Executive will be entitled to satisfy his obligations thereunder
with a cash payment or with a payment of Medscape Shares at their then fair
market value as agreed between Executive and Medscape or with a combination of
cash or Medscape Shares so valued.
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Exercise of Repurchase Option and Closing. Medscape will be deemed
to have exercised the Repurchase Option on the date which is 45 days after the
Termination Event (or on such other date to which the parties may mutually
agree) unless it provides written notice to Executive within 45 days after the
Termination Event, in the manner set forth in Section 15 of the Agreement to
which this Annex A is appended, of its election not to exercise the Repurchase
Option. If and to the extent the Repurchase Option is not so exercised within
such 45-day period, the Repurchase Option shall expire and terminate effective
upon the expiration of such 45-day period. The closing of any such repurchase of
Unvested Shares shall be held at the principal office of Medscape, or at such
other locations as the parties to such repurchase may mutually determine. At any
such closing, Medscape shall pay to the Executive or any holder of the Unvested
Shares the aggregate repurchase price for the Unvested Shares to be purchased by
certified or bank check. At such time, the Executive or any holder of the
Unvested Shares shall deliver to Medscape the certificate or certificates
representing the Unvested Shares so repurchased, duly endorsed for transfer,
free and clear of any liens or encumbrances.
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