ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered as of December 26, 2001 by and
among WebMD Corporation ("Purchaser"), MMM Acquisition Company ("Purchaser's
Designee"), Xxxxx Fargo Bank Minnesota, National Association ("Xxxxx Fargo"),
Medscape, Inc. ("Medscape"), Medscape Enterprises, Inc. ("Medscape Enterprises")
and MedicaLogic/Medscape, Inc. ("Parent" and, together with Medscape and
Medscape Enterprises, "Sellers") (the "Escrow Agreement").
WITNESSETH:
WHEREAS, Purchaser, Medscape, Parent and Medscape Enterprises have entered
into that certain Asset Purchase Agreement dated December 26, 2001 (the "Asset
Purchase Agreement") pursuant to which Purchaser will acquire certain assets,
rights and properties of Medscape, Parent and Medscape Enterprises as more fully
set forth therein and Purchaser has assigned to Purchaser's Designee its rights
and obligations under the Asset Purchase Agreement.
WHEREAS, this Escrow Agreement is entered into to create a fund for the
benefit of Purchaser and Purchaser's Designee to address liabilities that
Medscape, Medscape Enterprises or Parent may have under the Asset Purchase
Agreement for (i) Damages (as defined in the Asset Purchase Agreement) pursuant
to Article VI of the Asset Purchase Agreement; and (ii) amounts due with respect
to the Accounts Receivable (as defined in the Asset Purchase Agreement)
contemplated by Section 6.03(b) of the Asset Purchase Agreement.
WHEREAS, Xxxxx Fargo desires to serve as the Escrow Agent and to hold the
escrowed funds upon the terms and conditions set forth herein.
WHEREAS, capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
and agreements herein contained, and the agreements and covenants contained in
the Asset Purchase Agreement, the parties hereby agree as follows:
Section 1. Establishment of Escrow Funds.
(a) Simultaneously with the execution and delivery hereof, Purchaser has
deducted from the Purchase Price payable under the Asset Purchase Agreement and
delivered by wire transfer of immediately available funds to the Escrow Agent
the sum of $1,500,000 (the "Escrow Funds").
(b) The Escrow Agent is hereby directed to invest the Escrow Funds in Xxxxx
Fargo 100% Treasury Money Market Fund; provided, however, that Purchaser and
Parent may jointly direct the Escrow Agent to invest the Escrow Funds in any
combination of the following:
(i) readily-marketable direct obligations of, or repurchase agreements
collateralized by direct obligations of, the United States Government or backed
by the full faith and credit of the United States Government; or (ii) insured
certificates of deposit, time deposits, money market accounts or other
interest-bearing deposits of commercial banks having total capital and surplus
of at least $250,000,000. The Escrow Agent shall have no responsibility for
determining such obligations and shall have no liability whatsoever for any
investment losses resulting from the investment or reinvestment of the Escrow
Funds, except for a breach of this Escrow Agreement, gross negligence, bad faith
or willful misconduct by the Escrow Agent.
(c) In accordance with the provisions of Section 2.1, any interest or other
income received on such investment and reinvestment of the Escrow Funds shall be
held as part of the Escrow Funds and may be used to satisfy Purchaser's claims
for (i) Damages pursuant to Article VI of the Asset Purchase Agreement; and (ii)
amounts due with respect to Accounts Receivable pursuant to Section 6.03(b) of
the Asset Purchase Agreement (the "Escrow Claims"). To the extent not so used,
such interest and income shall be disbursed to Medscape (or to such other entity
as Sellers shall designate in writing) upon release of the Escrow Funds to
Medscape (or to such other entity as Sellers shall designate in writing)
pursuant to Section 2.3 of this Escrow Agreement. Neither Medscape nor Parent
has any legal or beneficial interest in the Escrow Funds or in any interest or
other income received on the investment and reinvestment of the Escrow Funds,
unless and until such monies have been released from the Escrow Funds pursuant
to Section 2.3.
Section 2. Claims Against the Escrow Funds.
Section 2.1 Distributions From the Escrow Funds. Distributions from the
Escrow Funds shall be made only as hereinafter provided. Purchaser must deliver
written instructions ("General Claim Instructions") to the Escrow Agent, Parent
and Medscape which shall: (i) state that Purchaser is entitled to specific
amounts and setting forth such amounts, including, reasonable attorneys' fees
and expenses (the "General Claim Amount"), with respect to Escrow Claims; and
(ii) set forth a brief summary of the facts upon which Escrow Claims are based.
Parent or Medscape shall have until 5:00 p.m. (New York City time) on the fifth
business day following delivery of the General Claim Instructions to object to
the General Claim Instructions by delivering written notice (the "General
Dispute Notice") to the Purchaser and Escrow Agent with respect to such
distribution in accordance with Section 3.6. The General Dispute Notice shall
contain a brief summary of the basis of such dispute. If the Escrow Agent does
not receive a General Dispute Notice by 5:00 p.m. (New York City time) on the
twentieth (20th) business day following the date the Escrow Agent received the
General Claim Instructions, the Escrow Agent shall promptly distribute on the
next succeeding business day the General Claim Amount in accordance with the
General Claim Instructions. Any disputes set forth in the General Dispute Notice
shall be resolved pursuant to Section 3.6.
Section 2.2 Nonexclusive Remedy. Purchaser's and Purchaser's Designee's
rights to claims against the Escrow Funds as provided herein shall be
Purchaser's and Purchaser's Designee's nonexclusive remedy against Parent,
Medscape and Medscape Enterprises with respect to any Escrow Claims, as well as
all other expenses of Purchaser and Purchaser's Designee, arising under or
related to the Asset Purchase Agreement and shall be supplemental to any other
remedies Purchaser and Purchaser's Designee may have against
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Parent, Medscape and Medscape Enterprises at law or in equity with respect to
any escrow claim, and Parent's, Medscape's and Medscape Enterprises' liability
under the Asset Purchase Agreement shall not be limited in any manner to the
outstanding balance of funds and other property in the Escrow Funds.
Section 2.3 Release of Escrow Funds. From time to time, Purchaser may give
written instructions to the Escrow Agent to release to Medscape (or to such
other entity as Sellers shall designate in writing) portions of the Escrow Funds
pursuant to the terms of Section 6.03(b) of the Asset Purchase Agreement. Upon
the earlier of (A) one year after the Closing Date, or (B) the closing of an
acquisition involving the sale of all or substantially all of the stock or
assets of the MDLI Business by a company that (i) expressly accepts and agrees,
in writing, to guarantee payment and performance of Sellers' indemnification
obligations pursuant to Article VI of the Asset Purchase Agreement and (ii) is
rated an investment grade credit rating on a subordinated basis by either
Standard & Poor's or Xxxxx'x, Purchaser, on the one hand, and Parent, on the
other hand, will give joint written instructions to the Escrow Agent to release
to Medscape (or to such other entity as Sellers shall designate in writing) the
balance of the Escrow Funds less all General Claim Amounts not yet distributed
pursuant to General Claim Instructions then pending in accordance with Section
2.1 or a judicial decision rendered pursuant to Section 3.6.
Section 3. Escrow Agent.
Section 3.1 Duties. The Escrow Agent's obligations and duties in connection
herewith are those specifically enumerated in this Escrow Agreement. The Escrow
Agent also will deliver copies of reports, invoices, and other documents related
to the Escrow Claims that it has received, as well as an accounting of the
Escrow Funds, to each of the parties on written request. The Escrow Agent's
duties will be determined only by reference to this Escrow Agreement and
applicable laws, and the Escrow Agent is not charged with any duties or
responsibilities in connection with any other document or agreement. The parties
acknowledge that the Escrow Agent shall not be responsible for any diminution in
Escrow Funds due to losses resulting from authorized investments. The Escrow
Agent may use its own bond department in executing purchases and sales of
authorized investments.
Section 3.2 Liabilities.
(a) The Escrow Agent will not be in any manner liable or responsible for
the sufficiency, correctness, genuineness, or validity of any instruments
deposited with it or with reference to the form of execution thereof, or the
identity, authority, or rights of any person executing or depositing same, and
the Escrow Agent will not be liable for any loss that may occur by reason of
forgery, false representation, or the exercise of its discretion in any
particular manner or for any other reason, except for its own gross negligence,
bad faith or willful misconduct. Except in instances of the Escrow Agent's own
gross negligence, bad faith or willful misconduct, Purchaser, Purchaser's
Designee, Parent, Medscape and Medscape Enterprises will jointly and severally
indemnify, defend, and hold the Escrow Agent harmless from any demands, suits,
or causes of action arising out of this Escrow Agreement (including reasonable
attorneys' fees). The Escrow Agent shall be fully protected in acting in
accordance with any written instructions given to it hereunder and believed by
it to have been executed by
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the proper party or parties. The Escrow Agent may consult with counsel regarding
any of its duties or obligations hereunder, and shall be fully protected in any
action taken in good faith in accordance with such advice. The costs and
expenses of enforcing this right of indemnification also shall be paid by
Purchaser, Purchaser's Designee, Parent, Medscape and Medscape Enterprises. The
right of indemnification shall survive the termination of this Escrow Agreement
and/or the resignation or removal of the Escrow Agent.
(b) Neither the Escrow Agent nor any of its officers, directors or
employees shall be liable to any person or party for any action taken or omitted
to be taken by it or any of its officers, directors or employees under this
Escrow Agreement, except in the case of Escrow Agent's gross negligence, bad
faith or willful misconduct
Section 3.3 Receipt. By its execution and delivery of this Escrow
Agreement, the Escrow Agent acknowledges receipt from the Purchaser of the
Escrow Funds.
Section 3.4 Fees. The Escrow Agent's fees hereunder will be as set forth in
Schedule 1 and Purchaser, Purchaser's Designee, Parent, Medscape and Medscape
Enterprises shall be jointly and severally responsible for such fees. The fees
are intended as full compensation for the Escrow Agent's services as
contemplated by this Escrow Agreement; provided, however, that if the Escrow
Agent or its counsel renders any material service not contemplated in this
Escrow Agreement, or if any material controversy arises hereunder that results
in significant additional services by the Escrow Agent or its counsel, or the
Escrow Agent is made a party to or justifiably intervenes in any litigation
pertaining to this Escrow Agreement, or the subject matter hereof, the Escrow
Agent will be reasonably compensated by Purchaser, Purchaser's Designee, Parent,
Medscape and Medscape Enterprises (jointly and severally) for such extraordinary
service and reimbursed by Purchaser, Purchaser's Designee, Parent, Medscape and
Medscape Enterprises (jointly and severally) for all reasonable costs and
expenses, including reasonable attorneys' fees, occasioned by any controversy or
event. As to Purchaser, Purchaser's Designee, Parent, Medscape and Medscape
Enterprises only, all fees and expenses due to the Escrow Agent pursuant to this
Section 3.4 shall be borne half by Purchaser and half by Parent and Medscape
Enterprises.
Section 3.5 Successor Escrow Agent. The Escrow Agent will have the right to
resign as escrow agent hereunder by delivering 30 days' prior notice in writing
to Purchaser, Purchaser's Designee, Parent, Medscape and Medscape Enterprises.
Purchaser, Purchaser's Designee, Parent, Medscape and Medscape Enterprises will
have the right to remove the Escrow Agent at any time by written notice
delivered to the Escrow Agent. If the Escrow Agent resigns or is removed, a
successor escrow agent will be appointed by agreement of Purchaser, on the one
hand, and Parent and Medscape, on the other hand, and such resignation or
removal will take effect upon such appointment. Any successor escrow agent at
any time serving hereunder will be entitled to all rights, powers, and
indemnities granted to the Escrow Agent hereunder as if originally named herein.
If a successor escrow agent is not named within twenty (20) days after the
notice of resignation, the Escrow Agent may apply to a court of competent
jurisdiction for the appointment of a successor escrow agent.
Section 3.6 Disputes. In the event that any dispute arises with respect to
this Escrow Agreement or in the event that any claim is made with respect to the
Escrow Funds, then
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the Escrow Agent, upon receipt of written notice of such dispute, is authorized
and directed to retain in its possession without liability to any person or
party, all of the Escrow Funds until such dispute shall have been settled either
by the mutual agreement of the parties involved or by a final, unappealable
order, decree or judgment of a court of competent jurisdiction.
Section 3.7 Federal Income Tax. The parties agree that for U.S. federal
income, and applicable state income, tax purposes, all interest and other income
earned on the Escrow Funds shall be includible in the gross income, for federal
income tax purposes, of Medscape. The Escrow Agent annually shall file
information returns with the United States Internal Revenue Service and payee
statements with Medscape, documenting such income. Medscape shall provide the
Escrow Agent with all forms and information necessary to complete such
information returns and payee statements. Medscape agrees to provide the Escrow
Agent with a certified tax identification number by signing and returning a Form
W-9 to the Escrow Agent within 30 days from the date hereof. Should the Escrow
Agent become liable for the payment of taxes, including withholding taxes,
relating to income derived from any funds held by it in the Escrow Account or
any payment made hereunder the Escrow Agent may pay such taxes from the Escrow
Account.
Section 3.8 Merger, Consolidation, etc. Any corporation or association in
which the Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its corporate trust business
and assets as a whole or substantially as a whole, or any corporation or
association resulting from any such conversion, sale, merger, consolidation or
transfer to which it is a party, shall be and become successor escrow agent
hereunder and vested with all of the title to the assets and all the trusts,
powers, discretions, immunities, privileges and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 3.9 Consent to Jurisdiction. Purchaser, Purchaser's Designee,
Parent, Medscape and Medscape Enterprises consent and submit to the jurisdiction
of the courts of the State of New York and of any federal court in the State of
New York in connection with any actions or proceedings brought against them by
the Escrow Agent arising out of or in relating to this Escrow Agreement. In any
such action or proceeding Purchaser, Purchaser's Designee, Parent, Medscape and
Medscape Enterprises hereby absolutely and irrevocably waive personal service of
any summons, complaint, declaration or other process and agrees that service
thereof may be made by certified or registered first class mail directed to
Purchaser, Purchaser's Designee, Parent, Medscape and Medscape Enterprises at
the addresses set forth in this Escrow Agreement.
Section 4. Interaction of Documents.
Medscape, Parent, Medscape Enterprises, Purchaser and Purchaser's Designee
agree that nothing in this Escrow Agreement modifies their rights and
obligations under the Asset Purchase Agreement.
Section 5. Miscellaneous.
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Section 5.1 Binding Effect. This Escrow Agreement will inure to the benefit
of and will be binding upon Purchaser, Purchaser's Designee, Parent, Medscape
and Medscape Enterprises and the Escrow Agent and their respective successors
and assigns.
Section 5.2 Governing Law. This Escrow Agreement will be governed by and
construed and enforced in accordance with the internal laws of New York without
giving effect to the principles of conflict of laws thereof.
Section 5.3 Headings. This section headings contained in this Escrow
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Escrow Agreement.
Section 5.4 Notices. Any notices, request, instruction, or other document
to be given hereunder by a party hereto will be in writing, will be given to all
other parties hereunder, and will be deemed to have been delivered, (a) when
received if given in person, (b) on the date of transmission if sent by telex,
facsimile or other wire transmission confirmed by the addressee or (c) four
business days after being deposited in the mail, certified or registered,
postage prepaid:
If to Medscape, Medscape Enterprises or Parent, addressed to:
MedicaLogic/Medscape, Inc.
00000 XX Xxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxx 00000-0000
Attention: Legal Department
With a copy to:
Stoel Rives L.L.P.
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
Email: xxxxxxxx@xxxxx.xxx
With a copy to:
Xxxxxx, Xxxx and Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxxxx.xxx
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If to Purchaser or Purchaser's Designee, addressed to:
WebMD Corporation
000 Xxxxx Xxxxx, Xxxxxx 0
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
With a copy to:
WebMD Corporation
000 Xxxxx Xxxxx, Xxxxxx 0
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
Email: xxxxxxx.xxxxxx@xx.xxx
If to Escrow Agent, addressed to:
Xxxxx Fargo Bank Minnesota, N.A.
Attn: Corporate Trust Services
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Fax: (000) 000-0000
Email: xxxxxx.xxxxxxxx@xxxxxxxxxx.xxx
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
Section 5.5 Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which will be deemed to be an original but all of
which together will constitute one and the same instrument.
Section 5.6 Entire Agreement; Modification. This Escrow Agreement and the
Asset Purchase Agreement, together with all exhibits and schedules thereto,
constitutes the entire agreement among the parties pertaining to the Escrow
Claims. This Escrow Agreement may be modified only by a written instrument
signed by authorized representatives of each of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed their Agreement as of
the date first written above.
MEDSCAPE, INC.
By:________________________________
Name:
Title:
MEDICALOGIC/MEDSCAPE, INC.
By:________________________________
Name:
Title:
MEDSCAPE ENTERPRISES, INC.
By:________________________________
Name:
Title:
WEBMD CORPORATION
By:________________________________
Name:
Title:
MMM ACQUISITION COMPANY
By:________________________________
Name:
Title:
XXXXX FARGO BANK MINNESOTA, N.A.,
as Escrow Agent
By:________________________________
Name:
Title:
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SCHEDULE 1 TO ESCROW AGREEMENT
In connection with the services provided hereunder by the Escrow Agent,
including, without limitation, serving as escrow agent, the Escrow Agent shall
be limited to receive payment of fees in an amount equal to [$_______] annually,
plus investment fees related thereto.
