Agreement
of
Reorganization and Merger
among
MedicaLogic, Inc.,
an Oregon corporation,
Medscape, Inc.,
a Delaware corporation,
and
Xxxxxxxxxx Merger Corp.,
a Delaware corporation,
February 21, 2000
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER..........................................................1
1.1 The Merger.......................................................1
1.2 Effect of Merger.................................................1
1.3 Merger Consideration.............................................2
1.3.1 Medscape Stock..........................................2
1.3.2 Merger Corp. Stock......................................2
1.3.3 Options and Warrants....................................2
1.3.4 Stock Splits, Etc.......................................3
1.4 Surrender and Cancellation of Certificates.......................3
1.4.1 Surrender of Certificates...............................3
1.4.2 No Fractional Shares....................................4
1.4.3 Escheat.................................................4
1.4.4 Option and Warrant Agreements...........................4
1.4.5 Treasury Shares.........................................4
1.5 Stock Transfer Books.............................................4
1.6 Closing..........................................................5
1.7 Subsequent Actions...............................................5
1.8 Certificate of Incorporation; Bylaws; Directors and Officers
of the Surviving Corporation....................................5
1.9 Shareholder Rights...............................................6
ARTICLE II FURTHER AGREEMENTS.................................................6
2.1 Voting Agreements................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................6
3.1 Representations and Warranties of Medscape.......................6
3.1.1 Organization and Status.................................7
3.1.2 Capitalization..........................................7
3.1.3 Corporate Authority.....................................8
3.1.4 Subsidiaries and Joint Ventures.........................8
3.1.5 SEC Reports and Financial Statements....................8
3.1.6 Information Supplied....................................9
3.1.7 Governmental Filings....................................9
3.1.8 No Adverse Consequences.................................9
3.1.9 Undisclosed Liabilities; Returns.......................10
3.1.10 Absence of Certain Changes or Events...................10
3.1.11 Litigation.............................................10
3.1.12 Employment Matters.....................................10
3.1.12.1 Labor Matters.............................10
3.1.12.2 Employee Benefits.........................11
3.1.12.3 Employment Agreements.....................12
i
3.1.13 Intellectual Property..................................12
3.1.14 [Reserved].............................................12
3.1.15 Status of Contracts....................................12
3.1.16 [Reserved].............................................13
3.1.17 Permits and Licenses...................................13
3.1.18 Taxes..................................................13
3.1.18.1 Returns...................................13
3.1.18.2 Taxes Paid or Reserved.......................14
3.1.18.3 Definitions..................................14
3.1.19 Related Party Interests................................14
3.1.20 No Powers of Attorney or Restrictions..................15
3.1.21 [Reserved].............................................15
3.1.22 Consents and Approvals.................................15
3.1.23 Brokers and Finders....................................15
3.1.24 Opinion of Medscape Financial Advisor..................15
3.1.25 No Other Agreements to Sell Medscape or its Assets.....15
3.1.26 Vote Required..........................................16
3.1.27 Certain Representations and Warranties Regarding
Code Section 368(a)(2)(E)..............................16
3.2 Representations and Warranties of MedicaLogic...................17
3.2.1 Organization and Status................................17
3.2.2 Capitalization.........................................18
3.2.3 Corporate Authority....................................18
3.2.4 Subsidiaries and Joint Ventures........................18
3.2.5 SEC Reports and Financial Statements...................18
3.2.6 Information Supplied...................................19
3.2.7 Governmental Filings...................................19
3.2.8 No Adverse Consequences................................20
3.2.9 Undisclosed Liabilities; Returns.......................20
3.2.10 Absence of Certain Changes or Events...................20
3.2.11 Litigation.............................................20
3.2.12 Employment Matters.....................................20
3.2.12.1 Labor Matters.............................20
3.2.12.2 Employee Benefits.........................21
3.2.12.3 Employment Agreements.....................22
3.2.13 Intellectual Property..................................22
3.2.14 Status of Contracts....................................22
3.2.15 Permits and Licenses...................................23
3.2.16 Taxes..................................................23
3.2.16.1 Returns...................................23
3.2.16.2 Taxes Paid or Reserved....................24
3.2.17 Related Party Interests................................24
3.2.18 No Powers of Attorney or Restrictions..................24
3.2.19 Consents and Approvals.................................25
ii
3.2.20 Brokers and Finders....................................25
3.2.21 No Other Agreements to Sell MedicaLogic or its
Assets.................................................25
3.2.22 Opinion of MedicaLogic Financial Advisor...............25
3.2.23 Vote Required..........................................25
3.2.24 Certain Representations and Warranties Regarding
Code Section 368(a)(2)(E)..............................25
3.2.25 Total eMed.............................................27
3.3 Representations and Warranties Relating to Merger Corp..........27
3.3.1 Organization and Status................................27
3.3.2 Capitalization.........................................27
3.3.3 Corporate Authority....................................27
3.3.4 Governmental Filings...................................28
3.3.5 Certain Representations and Warranties Regarding
Code Section 368(a)(2)(E)..............................28
ARTICLE IV COVENANTS.........................................................28
4.1 Mutual Covenants................................................28
4.1.1 Preparation of Registration Statement and the Joint
Proxy Statement........................................28
4.1.2 Shareholder Meetings...................................29
4.1.3 Consents and Approvals.................................30
4.1.4 Best Efforts...........................................30
4.1.5 Publicity..............................................30
4.1.6 Confidentiality........................................30
4.1.7 Antitrust Improvements Act.............................30
4.2 Covenants of Medscape...........................................30
4.2.1 Conduct of Business....................................30
4.2.2 Acquisition Proposals..................................31
4.2.3 Investigations.........................................33
4.2.4 [Reserved].............................................33
4.2.5 Notice and Cure........................................33
4.3 Covenants of MedicaLogic........................................33
4.3.1 Conduct of Business....................................34
4.3.2 Investigations.........................................34
4.3.3 Notification to Optionees..............................34
4.3.4 Officer and Director Indemnification...................34
4.3.5 MedicaLogic Board......................................35
4.3.6 Editor-in-Chief........................................35
4.3.7 Notice and Cure........................................35
4.3.8 Change of Control......................................35
4.3.9 No Amendment to Total eMed Agreement...................36
4.4 Covenants of Merger Corp........................................36
ARTICLE V CONDITIONS.........................................................36
5.1 Conditions to the Obligations of All Parties....................36
iii
5.1.1 Regulatory Approvals...................................36
5.1.2 Litigation.............................................36
5.1.3 Shareholder Approval...................................37
5.1.4 Registration of Securities; Listing....................37
5.2 Conditions to the Obligations of Medscape.......................37
5.2.1 Representations, Warranties and Covenants..............37
5.2.2 No Material Adverse Change.............................37
5.3 Conditions to the Obligations of MedicaLogic and Merger Corp....37
5.3.1 Representations, Warranties and Covenants..............38
5.3.2 No Material Adverse Change.............................38
ARTICLE VI TERMINATION.......................................................38
6.1 Termination by Mutual Consent...................................38
6.2 Termination by Either Medscape or MedicaLogic...................38
6.3 Effect of Termination and Abandonment...........................40
6.4 Termination Fees and Expenses...................................40
ARTICLE VII MISCELLANEOUS AND GENERAL........................................41
7.1 Payment of Expenses.............................................41
7.2 Entire Agreement................................................42
7.3 Assignment......................................................42
7.4 Binding Effect; No Third Party Benefit..........................42
7.5 Amendment and Modification......................................42
7.6 Waiver of Conditions............................................42
7.7 Counterparts....................................................42
7.8 Captions........................................................42
7.9 Subsidiary......................................................42
7.10 Notices.........................................................43
7.11 Choice of Law...................................................44
7.12 Separability....................................................44
7.13 Extinguishment..................................................44
iv
EXHIBITS
Exhibit A-1 Certificate of Incorporation of the Surviving Corporation
Exhibit A-2 Bylaws of the Surviving Corporation
Exhibit A-3 Directors of the Surviving Corporation
Exhibit B Form of Voting Agreement
Exhibit C Medscape Fairness Opinion
Exhibit D MedicaLogic Fairness Opinion
v
SCHEDULES
Schedule 1.3.3 Vesting of Options
Schedule 2.1 Individuals Executing Voting Agreements
Schedule 3.1 Medscape Disclosure Schedule
Schedule 3.1.2 Medscape Capitalization
Schedule 3.1.4 Medscape Subsidiaries and Joint Ventures
Schedule 3.1.11 Medscape Litigation
Schedule 3.1.12.1 Medscape Employees Who Are Not US Citizens
Schedule 3.1.12.2 Medscape Employee Benefits
Schedule 3.1.12.3 Medscape Employment Agreements
Schedule 3.1.18 Medscape Taxes
Schedule 3.1.19 Medscape Related Party Interests
Schedule 3.1.20 Medscape Powers of Attorney or Restrictions
Schedule 3.1.25 No Other Agreements to Sell Medscape or its Assets
Schedule 3.2 MedicaLogic Disclosure Schedule
Schedule 3.2.2 MedicaLogic Capitalization
Schedule 3.2.10 Absence of Certain Changes or Events
Schedule 3.2.11 MedicaLogic Litigation
Schedule 3.2.12.1 MedicaLogic Employees Who Are Not US Citizens
Schedule 3.2.12.2 MedicaLogic Employee Benefits
Schedule 3.2.12.3 MedicaLogic Employment Agreements
Schedule 3.2.16 MedicaLogic Taxes
Schedule 3.2.17 MedicaLogic Related Party Interests
Schedule 3.2.21 No Other Agreements to Sell MedicaLogic or its Assets
Schedule 4.2.1(g) Medscape Capital Expenditures
vi
INDEX OF TERMS
Term Location of Definition
Acquisition Transaction Section 4.2.2
Agreement Preamble
CBS Agreement Section 1.9
Closing Section 1.6
Closing Date Section 1.6
Code Section 1.3.3
Condition Completion Date Section 1.6
Confidentiality Agreement Section 4.1.6
Conversion Ratio Section 1.3.1
DGCL Section 1.2
ERISA Section 3.1.12.2
ERISA Plans Section 3.1.12.2
Effective Time Section 1.1
Exchange Act Section 3.1.5
GAAP Section 3.1.5
Governmental Entity Section 3.1.7
HSR Filing Section 4.1.7
Information Section 4.1.6
Intellectual Property Section 3.1.13
Joint Proxy Statement Section 3.1.6
Lien Section 3.1.13
Material Adverse Change Section 3.1
Material Adverse Effect Section 3.1
MedicaLogic Preamble
MedicaLogic Articles of Incorporation Section 3.2.1
MedicaLogic Bylaws Section 3.2.1
MedicaLogic Common Stock Section 1.1
MedicaLogic Contracts Section 3.2.14
MedicaLogic Disclosure Schedule Section 3.2
MedicaLogic ERISA Plans Section 3.2.12.2
MedicaLogic Financial Statements Section 3.2.5
MedicaLogic Representative Section 4.3.8
MedicaLogic Returns Section 3.2.16.1
MedicaLogic SEC Document Section 3.2.5
MedicaLogic Special Meeting Section 4.1.2.1
vii
INDEX OF TERMS
Term Location of Definition
Medscape Preamble
Medscape Bylaws Section 3.1.1
Medscape Certificate of Incorporation Section 3.1.1
Medscape Common Stock Section 1.1
Medscape Contracts Section 3.1.15
Medscape Disclosure Schedule Section 3.1
Medscape Financial Statements Section 3.1.5
Medscape Option Plan Section 3.1.2
Medscape SEC Document Section 3.1.5
Medscape Special Meeting Section 4.1.2.2
Merger Section 1.1
Merger Corp. Preamble
Options Section 1.3.3
Permits Section 3.1.17
Registration Statement Section 3.1.6
Representative Section 4.2.2
Returns Section 3.1.18.1
SEC Section 3.1.5
Securities Act Section 1.3.3
Subsidiary Section 7.9
Surviving Corporation Section 1.2
Taxes Section 3.1.18.3
Total eMed Agreement Section 3.2.25
Total eMed Merger Section 1.9
Transfer Agent Section 1.4.1
Voting Agreement Section 2.1
Warrants Section 3.1.2
viii
Agreement
of
Reorganization and Merger
THIS AGREEMENT OF REORGANIZATION AND MERGER (this "Agreement") is
entered into as of February 21, 2000 among MedicaLogic, Inc., an Oregon
corporation ("MedicaLogic"), Medscape, Inc., a Delaware corporation
("Medscape"), and Xxxxxxxxxx Merger Corp., a Delaware corporation ("Merger
Corp.").
AGREEMENT
In consideration of the mutual representations, warranties, covenants,
agreements and conditions contained herein, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Pursuant to the laws of the State of Delaware, and
subject to and in accordance with the terms and conditions of this Agreement,
Merger Corp. shall be merged with and into Medscape, and the outstanding shares
of common stock of Medscape (the "Medscape Common Stock") shall be converted
into the right to receive shares of common stock of MedicaLogic (the
"MedicaLogic Common Stock") in accordance with Section 1.3 of this Agreement.
Medscape and Merger Corp. shall execute a Certificate of Merger, to be filed
with the Secretary of State of Delaware, on the Closing Date, as defined in
Section 1.6, or as soon thereafter as practicable. The merger of Merger Corp.
with and into Medscape (the "Merger") shall take effect at the time when the
Certificate of Merger is duly filed with the Secretary of State of Delaware, or
at such other time as the parties may agree upon in writing pursuant to
applicable law (the "Effective Time").
1.2 Effect of Merger. At the Effective Time, Merger Corp. shall be
merged with and into Medscape in the manner and with the effect provided by the
Delaware General Corporation Law (the "DGCL"), the separate corporate existence
of Merger Corp. shall cease and Medscape shall be the surviving corporation (the
"Surviving Corporation"). The outstanding shares of Medscape Common Stock shall
be converted into shares of MedicaLogic Common Stock, and the outstanding shares
of capital stock of Merger Corp. shall be converted into shares of capital stock
of the Surviving Corporation, all on the basis, terms and conditions described
in Section 1.3.
1.3 Merger Consideration.
---------------------
1.3.1 Medscape Stock. Each share of Medscape Common Stock
outstanding immediately before the Effective Time will cease to exist and will
be converted into the right to receive .323 of a share of MedicaLogic Common
Stock (the "Conversion Ratio").
1.3.2 Merger Corp. Stock. Each share of common stock of Merger
Corp. issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to exist and be converted into and become one share of common stock of the
Surviving Corporation. After the Effective Time, MedicaLogic, the sole holder of
shares of Merger Corp. common stock outstanding immediately prior to the
Effective Time, shall, upon surrender for cancellation of a certificate
representing such shares to the Surviving Corporation, be entitled to receive in
exchange therefor a certificate representing the number of shares of common
stock of the Surviving Corporation into which such shares of Merger Corp. common
stock have been converted pursuant to this Section 1.3.2. Until so surrendered,
the certificates which prior to the Merger represented shares of Merger Corp.
common stock shall be deemed, for all corporate purposes, including voting
entitlement, to evidence ownership of the shares of the Surviving Corporation
common stock into which such shares of Merger Corp. common stock shall have been
converted.
1.3.3 Options and Warrants. Except as otherwise provided in
this Section 1.3.3, the terms and provisions of the stock options held by those
Medscape option holders under the Medscape Option Plans (the "Options") and the
terms and conditions of the Warrants (as defined in Section 3.1.2) will continue
in full force and effect following the Merger. By virtue of the Merger and at
the Effective Time, and without any further action on the part of any holder
thereof, each Option and Warrant will be converted into an option or warrant, as
applicable, to purchase the number of shares of MedicaLogic Common Stock equal
to the product (rounded to the nearest whole number) of (x) the number of shares
of Medscape Common Stock subject to such Option or Warrant immediately before
the Effective Time multiplied by (y) the Conversion Ratio. The exercise price
per share for each Option or Warrant after the Effective Time will be determined
by dividing the per share exercise price for such Option or Warrant immediately
before the Effective Time by the Conversion Ratio. The term, exercisability,
status as an incentive stock option under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx
Internal Revenue Code of 1986, as amended (the "Code"), if applicable, and all
other terms and conditions of each Option will to the extent permitted by law
and otherwise reasonably practicable be unchanged; provided, however, that it is
understood and agreed that the vesting of certain options as described in
Schedule 1.3.3 will be accelerated by the transactions contemplated herein and
that Medscape shall amend its outstanding Options which do not so accelerate to
provide that vesting will accelerate (either in part or in whole as may be
finally determined by Medscape's Board with the consent of MedicaLogic, which
shall not be unreasonably withheld or delayed) on the date that is one year
after the Closing Date for any option holder who is employed by MedicaLogic,
2
Medscape or any of their respective subsidiaries at such time. As promptly as
practicable after the Effective Time, MedicaLogic shall issue to each holder of
an Option a written instrument informing such holder of the assumption by
MedicaLogic of such Option. Unless all Options are, as of the Effective Time,
issuable pursuant to an effective registration statement on Form S-8 of
MedicaLogic, or in the opinion of counsel of MedicaLogic freely tradable
pursuant to Rule 701 under the Securities Act of 1933, as amended (the
"Securities Act"), as soon as practicable after the Effective Time, MedicaLogic
shall file a registration statement on Form S-8 (or any successor form) with
respect to the Options and shall use its reasonable efforts to maintain such
registration statement (or any successor form), including the current status of
any related prospectus, for so long as the Options remain outstanding.
MedicaLogic shall use its reasonable efforts to cause the MedicaLogic Common
Stock subject to the Options and Warrants to be quoted on the Nasdaq National
Market or such other system or exchange on which the MedicaLogic Common Stock is
then quoted or listed. MedicaLogic shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of MedicaLogic Common Stock
for delivery upon exercise of the Options and Warrants pursuant to this Section
1.3.3.
1.3.4 Stock Splits, Etc. If, between the date of this
Agreement and the Effective Time, the outstanding shares of either Medscape
Common Stock or MedicaLogic Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, combination, recapitalization, stock split, stock dividend,
subdivision, exchange of shares, or other extraordinary transaction, the
Conversion Ratio shall be adjusted proportionately.
1.4 Surrender and Cancellation of Certificates.
------------------------------------------
1.4.1 Surrender of Certificates. Promptly after the Effective
Time, MedicaLogic will cause its transfer agent (the "Transfer Agent") to send a
letter to each holder of shares of Medscape Common Stock that have been
converted into MedicaLogic Common Stock advising such holder that upon surrender
to the Transfer Agent of a certificate or certificates representing such shares,
along with a letter of transmittal in the form enclosed therein, the holder
shall be entitled to receive a certificate representing the number of shares of
MedicaLogic Common Stock into which such shares of Medscape Common Stock shall
have been converted pursuant to the provisions of Section 1.3. If any
certificate for shares of MedicaLogic Common Stock is to be issued in a name
other than that in which the certificate for Medscape Common Stock surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer, and that the person requesting such
exchange pay to MedicaLogic or its agent designated for such purpose any
transfer or other taxes required, or establish to the satisfaction of
MedicaLogic or its agent that such tax has been paid or is not payable. If any
holder of Medscape Common Stock canceled and retired in accordance with this
Agreement is unable to deliver a certificate or certificates representing such
shares of the holder, MedicaLogic, in the absence of actual notice that any
shares theretofore represented by
3
any such certificate have been acquired by a bona fide purchaser, shall deliver
to such holder the number of shares of MedicaLogic Common Stock to which such
holder is entitled in accordance with the provisions of this Agreement upon the
presentation of the following: (i) evidence reasonably satisfactory to
MedicaLogic (a) that such person is the owner of the shares theretofore
represented by each certificate claimed by him, her or it to be lost, wrongfully
taken or destroyed and (b) that he, she or it is the person who would be
entitled to present each such certificate for conversion pursuant to this
Agreement; and (ii) such security or indemnity as may be reasonably requested by
MedicaLogic to indemnify and hold MedicaLogic and the Transfer Agent harmless.
1.4.2 No Fractional Shares. No certificates or scrip
evidencing fractional shares of MedicaLogic Common Stock shall be issued in the
Merger. In lieu of a fractional share, MedicaLogic will pay any holder of shares
of Medscape Common Stock who would otherwise have been entitled to a fraction of
a share of MedicaLogic Common Stock upon surrender of the certificates therefor
an amount of cash (without interest) determined by multiplying (a) the closing
price per share of MedicaLogic Common Stock on the last trading day immediately
preceding the Effective Time by (b) the fractional share interest in MedicaLogic
Common Stock to which such holder would otherwise be entitled. The provisions of
this Section 1.4.2 will apply to the aggregate number of shares of Medscape
Common Stock held by each holder thereof and each such holder will be required
to simultaneously surrender all certificates relating to shares of Medscape
Common Stock held by such holder in accordance with the provisions of Section
1.4 in order to surrender any such certificate.
1.4.3 Escheat. Neither MedicaLogic nor Merger Corp. shall be
liable to any holder of shares of Medscape Common Stock for any such shares of
MedicaLogic Common Stock (or dividends or distributions with respect thereto) or
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.4.4 Option and Warrant Agreements. After the Effective Time,
each holder of an Option or Warrant outstanding immediately before the Effective
Time will be deemed to hold an option or warrant exercisable for MedicaLogic
Common Stock in accordance with the provisions of Section 1.3.3.
1.4.5 Treasury Shares. At the Effective Time, each share of
Medscape Common Stock or other Medscape capital stock held in the treasury of
Medscape immediately before the Effective Time will be canceled and extinguished
without any conversion thereof and no payment will be made with respect thereto.
1.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of Medscape will be closed and there will be no further registration of
transfers of Medscape capital stock or other securities thereafter on the
records of Medscape.
4
1.6 Closing. The closing of the Merger (the "Closing") shall take place
at the offices of Stoel Rives LLP, 000 XX Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx at 5:00
p.m. local time on the third business day following the Condition Completion
Date (as hereinafter defined), or on such other date and/or at such other place
and time as Medscape, MedicaLogic and Merger Corp. may agree (the "Closing
Date"). The "Condition Completion Date" shall be the business day on which the
last of the conditions set forth in Article V hereof shall have been fulfilled
or waived (other than those conditions which, by their terms, are to occur at
Closing).
1.7 Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to, or under any of the rights,
properties or assets of Medscape or Merger Corp. acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation are authorized to execute and deliver, in the name and on
behalf of Medscape or Merger Corp., or otherwise, all such deeds, bills of sale,
assignments and assurances, and to take and do, in the name and on behalf of
Medscape or Merger Corp., or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
1.8 Certificate of Incorporation; Bylaws; Directors and Officers of the
Surviving Corporation.
-------------------------------------------------------------------
(a) At the Effective Time, Merger Corp.'s Certificate of
Incorporation, a copy of which is attached to this Agreement as Exhibit A-1,
shall be the certificate of incorporation of the Surviving Corporation at and
after the Effective Time (until amended as provided by law and by that
certificate of incorporation).
(b) At the Effective Time, Merger Corp.'s bylaws, a copy of
which is attached to this Agreement as Exhibit A-2, shall be the bylaws of the
Surviving Corporation at and after the Effective Time (until amended as provided
by law, the certificate of incorporation of the Surviving Corporation and the
bylaws of the Surviving Corporation, as applicable).
(c) The persons listed on Exhibit A-3 shall be the directors
of the Surviving Corporation from and after the Effective Time, until their
successors are elected or appointed and qualified or until their resignation or
removal.
(d) The officers of Medscape immediately prior to the
Effective Date shall be the officers of the Surviving Corporation from and after
the Effective Time, until their successors are elected or appointed and
qualified or until their resignation or removal.
5
1.9 Shareholder Rights. Upon the Effective Date, any registration
rights existing as of the date of this Agreement with respect to the Medscape
Common Stock shall be converted into the same rights with respect to the
MedicaLogic Common Stock received in exchange therefor pursuant to the Merger.
Although the parties acknowledge that the Merger does not constitute an
assignment of that certain Stockholders Agreement dated as of August 3, 1999 by
and between Medscape and CBS Corporation (the "CBS Agreement"), MedicaLogic
agrees to provide CBS Corporation (i) the right to designate one director to the
Board of Directors of MedicaLogic so long as CBS Corporation beneficially owns
5% or more of the MedicaLogic Common Stock outstanding (without giving effect to
any reduction in such percentage due to events other than the sale of shares by
CBS Corporation) after the consummation of the Merger and the merger (the "Total
eMed Merger") contemplated by the Total eMed Agreement (as defined in Section
3.2.25) and (ii) rights providing the economic equivalent of the rights of CBS
Corporation under the CBS Agreement (other than director nomination rights).
Each of MedicaLogic and Medscape covenants and agrees to execute such documents
and take such further actions as may be necessary or desirable to effectuate the
provisions of this Section 1.9.
ARTICLE II
FURTHER AGREEMENTS
2.1 Voting Agreements. Each of the shareholders of MedicaLogic and
Medscape listed on Schedule 2.1 will execute and deliver, concurrently with the
execution of this Agreement, a Voting Agreement in the form attached as Exhibit
B (the "Voting Agreement"). Each Voting Agreement provides, among other things,
that the signing holder will vote all of the shares of MedicaLogic Common Stock
or Medscape Common Stock, as the case may be, that such holder is entitled to
vote in favor of the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Medscape. For purposes of this
Agreement, "Material Adverse Effect" or "Material Adverse Change" means any
effect, change, event, circumstance or condition which when considered with all
other effects, changes, events, circumstances or conditions would reasonably be
expected to affect materially and adversely the business, results of operations,
financial condition, or prospects of a party, in each case including its
subsidiaries together with it taken as a whole. In no event shall any of the
following constitute a Material Adverse Effect or a Material Adverse Change: (i)
any change in the trading prices of either of MedicaLogic's or Medscape's equity
securities between the date hereof and the Effective Time, in and of itself;
(ii) effects, changes, events, circumstances or conditions generally affecting
the industry in which either MedicaLogic or Medscape operates or arising from
changes in
6
general business or economic conditions; (iii) any effects, changes,
events, circumstances or conditions resulting from any change in law or
generally accepted accounting principles, which affect generally entities such
as MedicaLogic and Medscape; and (iv) any effect resulting from compliance by
MedicaLogic or Medscape with the terms of this Agreement. Medscape hereby
represents and warrant to MedicaLogic and Merger Corp. that, except as
specifically set forth in Schedule 3.1 (the "Medscape Disclosure Schedule") in a
numbered paragraph that corresponds to the section for which disclosure is made:
3.1.1 Organization and Status. Medscape and each of its
subsidiaries is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation and is duly qualified and in good standing as a
foreign corporation or limited liability company in each jurisdiction where its
properties (whether owned, leased or operated) or its business conducted require
such qualification, except where failure to be so qualified would not have a
Material Adverse Effect on Medscape. Medscape and each of its subsidiaries has
all requisite corporate or limited liability company power and authority to own,
operate and lease its property and to carry on its businesses as they are now
being conducted. Medscape has delivered to MedicaLogic complete and accurate
copies of its Certificate of Incorporation ("Medscape Certificate of
Incorporation") and Bylaws ("Medscape Bylaws"), and the charter or formation
documents of each of Medscape's subsidiaries, each as amended to the date
hereof.
3.1.2 Capitalization. Medscape has authorized capital stock
consisting of 100,000,000 shares of Medscape Common Stock, $0.01 par value, of
which 44, 797,321 shares were outstanding on February 21, 2000, and 5,000,000
shares of preferred stock, $0.01 par value, of which no shares were outstanding
on February 21, 2000. As of February 21, 2000, options to purchase 5,839,457
shares of Medscape Common Stock were outstanding pursuant to grants made under
Medscape's 1996 Stock Option Plan, (the "Medscape Option Plan") and four
warrants to purchase up to 2,819,204 shares of Medscape Common Stock were
outstanding (the "Warrants"), copies of which Warrants have been made available
to MedicaLogic. All of the outstanding shares of capital stock of Medscape have
been duly authorized and are validly issued, fully paid and nonassessable, and
no shares were issued, and no options or warrants were granted, in violation of
preemptive or similar rights of any shareholder or in violation of any
applicable securities laws. Except as set forth above, or on Schedule 3.1.2,
there are no shares of capital stock of Medscape authorized, issued or
outstanding, and there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of Medscape of any character relating to the issued or
unissued capital stock or other securities of Medscape. There are no outstanding
obligations of Medscape or any of its subsidiaries to repurchase, redeem or
otherwise acquire any of the outstanding shares of capital stock of Medscape or
any of its subsidiaries.
7
3.1.3 Corporate Authority. Medscape has the corporate power
and authority and, except for the approval of its stockholders, has taken all
corporate action necessary to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized by the Board of Directors of Medscape, validly executed
and delivered by Medscape and, as of the Closing Date, will have been duly and
validly approved by the stockholders of Medscape. This Agreement constitutes the
valid and binding obligation of Medscape, enforceable against Medscape in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought.
3.1.4 Subsidiaries and Joint Ventures. Except as disclosed on
Schedule 3.1.4 Medscape has no subsidiaries and owns no stock or other interest
in any other corporation or in any partnership or limited liability company, or
other venture or entity. Except as disclosed on Schedule 3.1.4 Medscape owns all
of the issued and outstanding capital stock and other ownership interests of
each of its subsidiaries, free and clear of all encumbrances, and there are no
existing options, warrants, calls, subscriptions, convertible securities or
other securities, commitments or obligations of any character relating to the
securities of any such subsidiary.
3.1.5 SEC Reports and Financial Statements. Medscape has filed
with the Securities and Exchange Commission (the "SEC"), and has made available
to MedicaLogic true and complete copies of, all forms, reports, schedules,
statements, and other documents required to be filed by it since September 26,
1999 under the Securities Exchange Act of 1934 (the "Exchange Act") or the
Securities Act (each of such forms, reports, schedules, statements, and other
documents, to the extent filed and publicly available before the date of this
Agreement, other than preliminary filings, is referred to as a "Medscape SEC
Document"). Each Medscape SEC Document, at the time filed, (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The financial
statements included in the Medscape SEC Documents (the "Medscape Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) in all material respects the consolidated financial position of
Medscape and its consolidated subsidiaries as at the
8
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended.
3.1.6 Information Supplied. None of the information supplied
or to be supplied by Medscape specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by MedicaLogic in connection with the registration of the MedicaLogic Common
Stock to be issued in the Merger, or any of the amendments or supplements
thereto (collectively, the "Registration Statement"), will, at the time the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading, or (ii)
the proxy statement for use relating to obtaining approval of the shareholders
of MedicaLogic and Medscape of the Merger (the "Joint Proxy Statement") will, at
the time the Joint Proxy Statement is first mailed to Medscape's stockholders or
MedicaLogic's shareholders or at the time of the MedicaLogic Special Meeting and
Medscape Special Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation or warranty is made
by Medscape with respect to statements made or incorporated by reference therein
based on (i) information supplied by MedicaLogic in writing specifically for
inclusion or incorporation by reference therein or (ii) information relating to
MedicaLogic which is reviewed by MedicaLogic without objection and with the
knowledge it will be used in the Joint Proxy Statement.
3.1.7 Governmental Filings. Other than (a) the filing of the
Certificate of Merger contemplated by Article I, (b) the Joint Proxy Statement
described in Section 3.1.6 and (c) the HSR Filing to be made by Medscape and
described in Section 4.1.7, no notices, reports or other filings are required to
be made by Medscape or any of its subsidiaries with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
Medscape or any of its subsidiaries from, any domestic or foreign governmental
or regulatory authority, agency, court, commission or other entity
("Governmental Entity") in connection with the execution and delivery of this
Agreement by Medscape and the consummation by Medscape of the transactions
contemplated hereby.
3.1.8 No Adverse Consequences. Except as set forth on Schedule
3.1.8, neither the execution and delivery of this Agreement by Medscape nor the
consummation of the transactions contemplated by this Agreement will (a) result
in the creation or imposition of any lien, charge, encumbrance or restriction on
any of the assets or properties of Medscape or any of its subsidiaries, (b)
violate any provision of the Certificate of Incorporation or Bylaws of Medscape
or the comparable organizational documents of any of its subsidiaries, (c) to
the knowledge of Medscape, violate any statute, judgment, order, injunction,
decree, rule, regulation or ruling of any Governmental
9
Entity applicable to Medscape or any of its subsidiaries, or (d) either alone or
with the giving of notice or the passage of time or both, conflict with,
constitute grounds for termination of, accelerate the performance required by,
accelerate the maturity of any indebtedness or obligation under, result in the
breach of the terms, conditions or provisions of or constitute a default under
any mortgage, deed of trust, indenture, note, bond, lease, license, permit or
other agreement, instrument or obligation to which Medscape or any of its
subsidiaries is a party or by which any of them is bound.
3.1.9 Undisclosed Liabilities. Except for liabilities or
obligations which were incurred after the most recent audited balance sheet
included in a Medscape SEC Document in the ordinary course of business and of a
type and in an amount consistent with past practices, neither Medscape nor any
of its subsidiaries has any material liability or obligation (whether absolute,
accrued, contingent or otherwise, and whether due or to become due) which is not
accrued, reserved against, or identified in the most recent Medscape Financial
Statements.
3.1.10 Absence of Certain Changes or Events. Since the date of
the most recent audited balance sheet included in a Medscape SEC Document, there
has not been any Material Adverse Change in the business, results of operations,
financial condition, properties, assets or prospects of Medscape.
3.1.11 Litigation. Except as listed on Schedule 3.1.11, no
litigation, proceeding or governmental investigation is pending or, to
Medscape's knowledge, threatened against or relating to Medscape or any of its
subsidiaries, their respective officers or directors in their capacities as
such, or any of their respective properties or businesses.
3.1.12 Employment Matters.
------------------
3.1.12.1 Labor Matters. Neither Medscape nor any of
its subsidiaries is a party or otherwise subject to any collective bargaining or
other agreement governing the wages, hours or terms of employment of employees.
Medscape and each of its subsidiaries is and has been in compliance in all
material respects with all applicable laws regarding employment and employment
practices, terms and conditions of employment, wages and hours with respect to
Medscape's employees and is not and has not been engaged in any unfair labor
practice. There is no (a) unfair labor practice complaint against Medscape or
any of its subsidiaries pending before the National Labor Relations Board or any
other Governmental Entity, (b) labor strike, slowdown or work stoppage actually
occurring or, to the knowledge of Medscape, threatened against Medscape or any
of its subsidiaries, (c) representation petition respecting the employees of
Medscape or any of its subsidiaries pending before the National Labor Relations
Board or similar agency, or (d) grievance or any arbitration proceeding pending
arising out of or under collective bargaining agreements applicable to Medscape
or any of its subsidiaries. Neither Medscape nor any of its subsidiaries has
experienced any primary work stoppage or other organized work stoppage involving
its employees in the past two years.
10
Medscape is not aware of any labor strike, slowdown, or work stoppage occurring
or, to the knowledge of Medscape, threatened against any of the principal
suppliers of Medscape or any of their subsidiaries that might reasonably be
expected to have a Material Adverse Effect on Medscape. Except as set forth in
Schedule 3.1.12.1, all of the employees of Medscape and its subsidiaries working
in the United States are citizens or permanent residents of the United States.
No employee of Medscape or any of its subsidiaries is the beneficiary under an
employer-sponsored non-immigrant visa and no approvals, permits or consents of
any governmental entity are required in order for Medscape or its subsidiaries
to employ any current employee as a result of or in connection with such
employee's immigration status in the United States. Medscape and its
subsidiaries have fully completed and retained a Form I-9 for each of their
employees in accordance with applicable law, and neither Medscape nor any of its
subsidiaries is subject to examination in connection with such forms or to any
fines or other penalties under laws relating to employees who are not authorized
to work in the United States.
3.1.12.2 Employee Benefits. Schedule 3.1.12.2 lists
all pension, retirement, profit sharing, deferred compensation, bonus,
commission, incentive compensation (including cash, stock and option plans or
arrangements), life insurance, health and disability insurance, hospitalization
and all other employee benefit plans or arrangements (including, without
limitation, any contracts or agreements with trustees or insurance companies
relating to any such employee benefit plans or arrangements) established or
maintained by Medscape or any of its subsidiaries, and complete and accurate
copies of all those plans or arrangements have been made available to
MedicaLogic. The employee pension benefit plans (within the meaning of Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) established and maintained by Medscape or any of its subsidiaries
that are subject to ERISA (the "ERISA Plans") are listed separately as ERISA
Plans on Schedule 3.1.12.2. The ERISA Plans comply in all material respects with
the applicable requirements of ERISA and the Code. With respect to each ERISA
Plan intended to constitute a tax-qualified plan under Section 401(a) of the
Code, Medscape has received, or has requested or will timely request, from the
Internal Revenue Service a favorable determination that such plan and its
related trust is qualified under Section 401(a) of the Code and the related
trust is tax-exempt under Section 501(a) of the Code. To the knowledge of
Medscape, there has been no event subsequent to that determination that is
reasonably likely to result in the revocation of the tax-qualified status of the
ERISA Plans or the exemption of the related trusts. To the knowledge of
Medscape, none of the ERISA Plans, their related trusts or any trustee,
investment manager or administrator thereof has engaged in a nonexempt
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code that is reasonably expected to have a Material
Adverse Effect. Each ERISA Plan is and has been operated and administered in
material conformity with the requirements of all applicable laws and
regulations, whether or not the ERISA Plan documents have been amended to
reflect such requirements. Medscape and its subsidiaries have no liability for,
or commitment to provide, medical benefits to future or current retirees of
Medscape or any of its subsidiaries.
11
3.1.12.3 Employment Agreements. Except as set forth
on Schedule 3.1.12.3, each employee of Medscape or any of its subsidiaries is an
"at-will" employee and there are no written employment agreements of any kind
between Medscape or any of its subsidiaries and any employees.
3.1.13 Intellectual Property. Medscape or one of its
subsidiaries owns, or has a valid license to use, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, technology, know-how and
other intellectual property (the "Intellectual Property") necessary to or used
in the conduct of the business of Medscape and its subsidiaries as now conducted
and as proposed to be conducted. All Intellectual Property owned by Medscape or
any of its subsidiaries is owned by them free and clear of all liens, mortgages,
pledges, leases, restrictions and other claims and encumbrances of any nature
whatsoever (each, a "Lien"). To the knowledge of Medscape, the conduct of the
business of Medscape and its subsidiaries does not conflict with or infringe
upon any Intellectual Property rights of any other person and no claims of
conflict or infringement are pending or, threatened against Medscape or any of
its subsidiaries which, in any event, would reasonably be expected to have a
Material Adverse Effect. Medscape has made all necessary filings and
recordations and has paid all required fees and Taxes (as defined in Section
3.1.18) to maintain ownership of the Intellectual Property.
3.1.14 [Reserved].
3.1.15 Status of Contracts. There is no existing default or
violation by Medscape or its subsidiaries under any contracts, agreements,
commitments or instruments to which Medscape or any of its subsidiaries is a
party or by which it or any of them is bound (collectively, the "Medscape
Contracts") and no event has occurred which (whether with or without notice,
lapse of time or both) would constitute a default of Medscape or its
subsidiaries under any Medscape Contract, except for such defaults or violations
as would not in the aggregate have a Material Adverse Effect on Medscape. There
is no pending or, to the knowledge of Medscape, threatened, proceeding which
would interfere with the quiet enjoyment of any leasehold of which Medscape or
any of its subsidiaries is lessee or sublessee. Medscape is not aware of any
default by any other party to any Medscape Contract or of any event which
(whether with or without notice, lapse of time or both) would constitute a
material default by any other party with respect to obligations of that party
under any Medscape Contract, and, to the knowledge of Medscape, there are no
facts that exist indicating that any of the Medscape Contracts may be totally or
partially terminated or suspended by the other parties. Neither Medscape nor any
of its subsidiaries is a party to, or bound by, any Medscape Contract that
Medscape can reasonably foresee will result in any material loss to Medscape or
such subsidiary upon the performance thereof (including any liability for
penalties or damages, whether liquidated, direct, indirect, incidental or
consequential).
3.1.16 [Reserved].
12
3.1.17 Permits and Licenses. Each of Medscape and its
subsidiaries holds, and at all times has held, all material governmental
licenses, permits, franchises, easements and authorizations (collectively,
"Permits") necessary for the lawful conduct of its business pursuant to all
applicable statutes, laws, ordinances, rules and regulations of all Governmental
Entities having jurisdiction over it or any part of its operations. Each of
Medscape and its subsidiaries is in compliance in all material respects with
each of the terms of the applicable Permits, and there are no claims of
violation by Medscape or any of its subsidiaries of any of such Permits.
Complete and accurate copies of all Permits held by Medscape and its
subsidiaries have been made available to MedicaLogic. All Governmental Entities
that have issued any Permits to or with respect to Medscape, its business, or
subsidiaries have consented or prior to the Closing will have consented (where
such consent is necessary) to the consummation of the transactions contemplated
by this Agreement without requiring modification of the rights or obligations of
Medscape or its subsidiaries under any of such Permits.
3.1.18 Taxes.
-----
3.1.18.1 Returns. Medscape and each of its
subsidiaries has filed on a timely basis all federal, state, local, foreign and
other returns, reports, forms, declarations and information returns required to
be filed by it with respect to Taxes (as defined below) which relate to its
business, results of operations, financial condition, properties or assets for
all periods (collectively, the "Returns") and has paid on a timely basis all
Taxes shown to be due and payable on the Returns. All Returns filed are complete
and accurate in all material respects and no additional Taxes are owed by
Medscape or any of its subsidiaries with respect to the periods covered by the
Returns or for any other period. Medscape has made available to MedicaLogic
complete and accurate copies of all Returns. Neither Medscape nor any of its
subsidiaries has been a member of an affiliated group filing consolidated
returns or has any liability for Taxes of any person (other than itself),
whether arising under federal, state, local or foreign law, as a transferee or
successor, by contract, pursuant to Treas. Reg. ss. 1.1502-6 or otherwise.
Except as set forth on Schedule 3.1.18, neither Medscape nor any of its
subsidiaries is currently the beneficiary of any extension of time within which
to file any Return. Except as set forth on Schedule 3.1.18, no Returns have been
examined by the applicable taxing authorities for any period and, except as set
forth on Schedule 3.1.18, Medscape has not received any notice of audit or
review with respect to any Return or any fiscal year, has no knowledge of any
planned audit or review, and there are no outstanding agreements or waivers
extending the applicable statutory periods of limitation for Taxes for any
period. No claim has ever been made by an authority in a jurisdiction where
Medscape and its subsidiaries do not file Returns that they are or may be
subject to taxation by that jurisdiction. All Taxes that are or have been
required to be withheld or collected by Medscape, its predecessors or its
subsidiaries have been duly withheld and collected and, to the extent required,
have been properly paid or deposited as required by applicable laws. Neither
Medscape nor any of its predecessors or subsidiaries has made any payment, or is
obligated to make any payment, or is a party to an agreement that in certain
circumstances could obligate it to make a payment, that is not deductible under
Section 280G of the
13
Code. Except as set forth in Schedule 3.1.18, neither Medscape nor any of its
subsidiaries is an obligor on, and none of its assets have been financed
directly or indirectly by, any tax exempt bonds. Neither Medscape nor any of its
subsidiaries is now or during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code has ever been a United States real property holding
corporation as defined in Section 897(c)(2) of the Code. Neither Medscape nor
any of its subsidiaries has filed a consent pursuant to Section 341(f) of the
Code nor has it agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by it.
3.1.18.2 Taxes Paid or Reserved. The unpaid Taxes of
Medscape and its subsidiaries (a) did not as of the date of the most recent
audited balance sheet included in a Medscape SEC Document exceed the reserve for
Tax liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of such
balance sheet (rather than in any notes thereto) and (b) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Medscape and its subsidiaries in
filing their Returns.
3.1.18.3 Definitions. The term "Taxes" shall mean all
federal, state, local or foreign taxes, charges, fees, levies or other
assessments, however documented, including, without limitation, all net income,
gross income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise, estimated
severance, stamp, occupation, property, transfer, workers' compensation, Pension
Benefit Guaranty Corporation premiums, or other taxes, fees, assessments or
charges of any kind whatsoever that Medscape or any of its subsidiaries is
required to pay or collect, together with any interest and any penalties
(including penalties for failure to file in accordance with applicable
information reporting requirements), and additions to tax imposed by a taxing
authority.
3.1.19 Related Party Interests. Except as listed in Schedule
3.1.19, no officer or director of Medscape or any of its subsidiaries (or any
entity owned or controlled by one or more of such parties) (a) has any interest
in any property, real or personal, tangible or intangible, used in or pertaining
to the business of Medscape or any of its subsidiaries, (b) is indebted to
Medscape or any of its subsidiaries, or (c) has any material financial interest,
direct or indirect, in any supplier or customer of, or other outside business
which has significant transactions with Medscape or any of its subsidiaries.
True and complete copies of all agreements listed on Schedule 3.1.19 have been
provided to MedicaLogic. Neither Medscape nor any of its subsidiaries is
indebted to any of its shareholders, directors or officers (or any entity owned
or controlled by one or more of such parties) except for amounts due under
normal salary arrangements and for reimbursement of ordinary business expenses.
The consummation of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any payment (severance or other) becoming due from
Medscape or any of its subsidiaries to any of their respective
14
shareholders, officers, directors or employees (or any entity owned or
controlled by one or more of such parties).
3.1.20 No Powers of Attorney or Restrictions. No power of
attorney or similar authorization given by Medscape or any of its subsidiaries
is presently in effect or outstanding. No contract or agreement to which
Medscape or any of its subsidiaries is a party or is bound or to which any of
its properties or assets is subject limits its freedom to compete in any line of
business or with any person. To the knowledge of Medscape, none of the employees
of Medscape or its subsidiaries is obligated under any contract (including
licenses, covenants or commitments of any nature), or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of his or her best efforts to promote the interests of Medscape and its
subsidiaries or that would conflict with the business of Medscape or any of its
subsidiaries as now conducted or proposed to be conducted.
3.1.21 [Reserved].
3.1.22 Consents and Approvals. Except as set forth in Section
3.1.7, no consent, approval, or authorization of, or filing or registration
with, any court, regulatory authority, governmental body, or any other entity or
person not a party to this Agreement is required to be obtained by Medscape or
any of its subsidiaries for the consummation of the transactions described in
this Agreement.
3.1.23 Brokers and Finders. Except for fees owing to Lazard
Freres & Co. LLC and to Xxxxxxxxx, Xxxxxx & Xxxxxxxx, neither Medscape nor any
of its subsidiaries has incurred any liability for any brokerage or investment
banking fees, commissions or finders' fees in connection with the Merger.
3.1.24 Opinion of Medscape Financial Advisor. Medscape has
received from Lazard Freres & Co. LLC an opinion that the Conversion Ratio is
fair, from a financial point of view, to the holders of Medscape Common Stock. A
copy of such opinion is attached as Exhibit C.
3.1.25 No Other Agreements to Sell Medscape or its Assets.
Except as set forth in Schedule 3.1.25, neither Medscape nor any of its
subsidiaries has any legal obligation, absolute or contingent, to any other
person to sell any material portion of its assets, to sell its capital stock or
other ownership interests, or to effect any merger, consolidation or other
reorganization or to enter into any agreement with respect thereto. As of the
date hereof, Medscape is not engaged, directly or indirectly, in any discussions
or negotiations with any other party with respect to an Acquisition Transaction,
as defined in Section 4.2.2.
15
3.1.26 Vote Required. The approval by a majority of the voting
power represented by the outstanding shares of Medscape Common Stock is the only
votes of the holders of any class or series of Medscape capital stock necessary
to approve the transactions contemplated by this Agreement.
3.1.27 Certain Representations and Warranties Regarding Code
Section 368(a)(2)(E).
-----------------------------------------------------
3.1.27.1 Immediately following the Merger, Surviving
Corporation will hold at least 90% percent of the fair market value of
Medscape's net assets and at least 70% of the fair market value of Medscape's
gross assets held immediately prior to the Merger. For purposes of this
representation, amounts paid by Medscape to its shareholders who receive cash or
other property, Medscape assets used to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by
Medscape prior to and in connection with the Merger, will be included as assets
of Medscape held immediately prior to the Merger.
3.1.27.2 There is no intercorporate indebtedness
existing between MedicaLogic and Medscape or between Merger Corp. and Medscape
that was issued, acquired, or will be settled at a discount.
3.1.27.3 Medscape has no plan or intention to issue
additional shares of its stock that would result in MedicaLogic losing control
of Medscape within the meaning of Section 368(c) of the Code. At the time of the
Merger, Medscape will not have outstanding any warrants, options, convertible
securities, or any other type of right pursuant to which any person could
acquire stock in Medscape that, if exercised or converted, would affect
MedicaLogic's acquisition or retention or control of Surviving Corporation, as
defined in Section 368(c) of the Code. As defined in Section 368(c) of the Code,
"control" means the direct ownership of stock possessing at least 80% of the
total combined voting power for the election of directors of all classes of
stock entitled to vote and at least 80% of the total number of shares of all
other classes of stock.
3.1.27.4 Medscape is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.1.27.5 On the date of the Merger, the fair market
value of the assets of Medscape will exceed the sum of its liabilities plus the
amount of liabilities, if any, to which its assets are subject.
3.1.27.6 Medscape is not under the jurisdiction of a
court in a title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
3.1.27.7 None of the compensation received by any
16
shareholder-employee of Medscape will be separate consideration for, or
allocable to, any of his or her shares of Medscape stock; none of the shares of
MedicaLogic stock received by any shareholder-employee will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employee will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
3.1.27.8 Except as set forth in Schedule 3.1.27.8,
during the past five years, neither Medscape nor any person related to Medscape
(as defined in Treas. Reg. ss. 1.368-1(e)(3) has directly or through any
transaction, agreement, or arrangement with any other person, (i) acquired stock
of Medscape with consideration other than common stock of MedicaLogic or
Medscape, or (ii) redeemed or made distributions with respect to Medscape stock.
3.1.27.9 Medscape has not paid dividends financed,
directly or indirectly, with borrowed funds.
3.1.27.10 No Medscape shareholder has guaranteed any
debt of Medscape.
3.1.27.11 Except as otherwise provided in this
Agreement, Medscape will pay its own expenses, if any, incurred in connection
with the Merger and will not pay expenses of MedicaLogic or Merger Corp.
3.1.27.12 In the Merger, shares of Medscape stock
representing control of Medscape, as defined in Section 368(c) of the Code, will
be exchanged solely for voting stock of MedicaLogic.
3.2 Representations and Warranties of MedicaLogic. MedicaLogic hereby
represents and warrants to Medscape that, except as specifically set forth in
Schedule 3.2 (the "MedicaLogic Disclosure Schedule") in a numbered paragraph
that corresponds to the section for which disclosure is made:
3.2.1 Organization and Status. MedicaLogic is a corporation
duly organized and validly existing under the laws of its jurisdiction of
incorporation and is duly qualified and in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated,
or the business conducted, by it require such qualification, except where the
failure to so qualify or be in good standing, when taken together with all such
failures, would not have a Material Adverse Effect on MedicaLogic. MedicaLogic
and each of its subsidiaries has all requisite corporate power and authority to
own, operate and lease its property and to carry on its businesses as they are
now being conducted. MedicaLogic has delivered to Medscape complete and accurate
copies of its Articles of Incorporation ("MedicaLogic Articles of
Incorporation") and Bylaws ("MedicaLogic Bylaws").
17
3.2.2 Capitalization. MedicaLogic has authorized capital stock
consisting of 100,000,000 shares of MedicaLogic Common Stock, no par value, of
which 32,417,478 shares were outstanding on February 21, 2000, and 50,000,000
shares of Preferred Stock, of which no shares were outstanding on February 21,
2000. As of February 21, 2000, options to purchase 3,164,792 shares of
MedicaLogic Common Stock were outstanding pursuant to grants made under
MedicaLogic's 1996 Stock Incentive Plan and MedicaLogic's 1993 Stock Incentive
Plan. All of the outstanding shares of capital stock of MedicaLogic have been
duly authorized and are validly issued, fully paid and nonassessable, and no
shares were issued, and no options were granted, in violation of preemptive or
similar rights of any shareholder or in violation of any applicable securities
laws. Except as set forth above, or on Schedule 3.2.2, there are no shares of
capital stock of MedicaLogic authorized, issued or outstanding, and there are no
preemptive rights or any outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of MedicaLogic of any
character relating to the issued or unissued capital stock or other securities
of MedicaLogic. There are no outstanding obligations of MedicaLogic to
repurchase, redeem or otherwise acquire any of its outstanding shares of capital
stock.
3.2.3 Corporate Authority. MedicaLogic has the corporate power
and authority and has taken all corporate action necessary to execute and
deliver this Agreement and, upon receipt of the shareholder approval
contemplated in Section 4.1.2, to consummate the transactions contemplated
hereby. This Agreement has been duly and validly authorized by the Board of
Directors of MedicaLogic and duly and validly executed and delivered by
MedicaLogic and as of the Closing Date will be validly authorized by MedicaLogic
shareholders. This Agreement constitutes the valid and binding obligation of
MedicaLogic, enforceable against MedicaLogic in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought.
3.2.4 Subsidiaries and Joint Ventures. As of the date of this
Agreement, there are no subsidiaries or joint ventures of MedicaLogic that are
material to MedicaLogic.
3.2.5 SEC Reports and Financial Statements. MedicaLogic has
filed with the SEC, and has made available to Medscape true and complete copies
of, all forms, reports, schedules, statements, and other documents required to
be filed by it since December 8, 1999 under the Exchange Act or the Securities
Act (each of such forms, reports, schedules, statements, and other documents, to
the extent filed and publicly available before the date of this Agreement, other
than preliminary filings, is referred to as a "MedicaLogic SEC Document"). Each
MedicaLogic SEC Document, at the time filed, (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
18
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. The financial statements included in the
MedicaLogic SEC Documents (the "MedicaLogic Financial Statements") comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present in all material respects (subject, in
the case of the unaudited statements, to normal, recurring audit adjustments)
the consolidated financial position of MedicaLogic and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
3.2.6 Information Supplied. None of the information supplied
or to be supplied by MedicaLogic specifically for inclusion or incorporation by
reference in the Joint Proxy Statement for use relating to obtaining approval of
the shareholders of MedicaLogic and Medscape of the Merger will, at the time the
Joint Proxy Statement is first mailed to Medscape's stockholders or
MedicaLogic's shareholders or at the time of the MedicaLogic Special Meeting and
Medscape Special Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation or warranty is made
by MedicaLogic with respect to statements made or incorporated by reference
therein based on (i) information supplied by Medscape in writing specifically
for inclusion or incorporation by reference therein or (ii) information relating
to Medscape which is reviewed by Medscape without objection and with knowledge
that it will be used in the Joint Proxy Statement.
3.2.7 Governmental Filings. Other than (a) the filing of the
Certificate of Merger contemplated by Article I, (b) the HSR Filing to be made
by MedicaLogic and Medscape described in Section 4.1.7 and (c) the Registration
Statement and Joint Proxy Statement described in Section 4.1.1, no notices,
reports or other filings are required to be made by MedicaLogic with, nor are
any consents, registrations, approvals, permits or authorizations required to be
obtained by MedicaLogic from, any Governmental Entity in connection with the
execution and delivery of this Agreement by MedicaLogic and the consummation by
MedicaLogic of the transactions contemplated hereby.
3.2.8 No Adverse Consequences. Neither the execution and
delivery of this Agreement by MedicaLogic nor the consummation of the
transactions contemplated by this Agreement will (a) result in the creation or
imposition of any Lien on any of the assets or properties of MedicaLogic or any
of its subsidiaries, (b) violate any provision of the Articles of Incorporation
or Bylaws of MedicaLogic or any of its subsidiaries, (c) to the knowledge of
MedicaLogic, violate any statute, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority applicable to MedicaLogic or
any
19
of its subsidiaries, or (d) either alone or with the giving of notice or the
passage of time or both, conflict with, constitute grounds for termination of,
accelerate the performance required by, accelerate the maturity of any
indebtedness or obligation under, result in the breach of the terms, conditions
or provisions of or constitute a default under any mortgage, deed of trust,
indenture, note, bond, lease, license, permit or other agreement, instrument or
obligation to which either MedicaLogic or any of its subsidiaries is a party or
by which any of them is bound.
3.2.9 Undisclosed Liabilities. Except for liabilities or
obligations which were incurred after September 30, 1999 in the ordinary course
of business and of a type and in an amount consistent with past practices,
MedicaLogic has no material liability or obligation (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) which is not accrued,
reserved against, or identified in the most recent MedicaLogic Financial
Statements.
3.2.10 Absence of Certain Changes or Events. Except as set
forth on Schedule 3.2.10, since September 30, 1999 there has not been a Material
Adverse Change in MedicaLogic.
3.2.11 Litigation. Except as listed on Schedule 3.2.11, no
litigation, proceeding or governmental investigation is pending or, to
MedicaLogic's knowledge, threatened against or relating to MedicaLogic, its
officers or directors in their capacities as such, or any of MedicaLogic's
properties, businesses or subsidiaries.
3.2.12 Employment Matters.
------------------
3.2.12.1 Labor Matters. Neither MedicaLogic nor any of its
subsidiaries is a party or otherwise subject to any collective bargaining or
other agreement governing the wages, hours or terms of employment of employees.
MedicaLogic and each of its subsidiaries is and has been in compliance in all
material respects with all applicable laws regarding employment and employment
practices, terms and conditions of employment, wages and hours with respect to
MedicaLogic's employees and is not and has not been engaged in any unfair labor
practice. There is no (a) unfair labor practice complaint against MedicaLogic or
any of its subsidiaries pending before the National Labor Relations Board or any
other Governmental Entity, (b) labor strike, slowdown or work stoppage actually
occurring or, to the knowledge of MedicaLogic, threatened against MedicaLogic or
any of its subsidiaries, (c) representation petition respecting the employees of
MedicaLogic or any of its subsidiaries pending before the National Labor
Relations Board or similar agency, or (d) grievance or any arbitration
proceeding pending arising out of or under collective bargaining agreements
applicable to MedicaLogic or any of its subsidiaries. Neither MedicaLogic nor
any of its subsidiaries has experienced any primary work stoppage or other
organized work stoppage involving its employees in the past two years.
MedicaLogic is not aware of any labor strike, slowdown, or work stoppage
occurring or, to the knowledge of MedicaLogic, threatened against any of the
principal suppliers of MedicaLogic or any of their subsidiaries that might be
expected to
20
have a Material Adverse Effect on MedicaLogic. Except as set forth in Schedule
3.2.12.1, all of the employees of MedicaLogic and its subsidiaries working in
the United States are citizens or permanent residents of the United States. No
employee of MedicaLogic or any of its subsidiaries is the beneficiary under an
employer-sponsored non-immigrant visa and no approvals, permits or consents of
any governmental entity are required in order for MedicaLogic or its
subsidiaries to employ any current employee as a result of or in connection with
such employee's immigration status in the United States. MedicaLogic and its
subsidiaries have fully completed and retained a Form I-9 for each of their
employees in accordance with applicable law, and neither MedicaLogic nor any of
its subsidiaries is subject to examination in connection with such forms or to
any fines or other penalties under laws relating to employees who are not
authorized to work in the United States.
3.2.12.2 Employee Benefits. Schedule 3.2.12.2 lists
all pension, retirement, profit sharing, deferred compensation, bonus,
commission, incentive compensation (including cash, stock and option plans or
arrangements), life insurance, health and disability insurance, hospitalization
and all other employee benefit plans or arrangements (including, without
limitation, any contracts or agreements with trustees or insurance companies
relating to any such employee benefit plans or arrangements) established or
maintained by MedicaLogic or any of its subsidiaries, and complete and accurate
copies of all those plans or arrangements have been made available to Medscape.
The employee pension benefit plans (within the meaning of Section 3(2) of ERISA)
established and maintained by MedicaLogic or any of its subsidiaries that are
subject to ERISA (the "MedicaLogic ERISA Plans") are listed separately as ERISA
Plans on Schedule 3.2.12.2. The MedicaLogic ERISA Plans comply in all material
respects with the applicable requirements of ERISA and the Code. With respect to
each MedicaLogic ERISA Plan intended to constitute a tax-qualified plan under
Section 401(a) of the Code, MedicaLogic has received, or has requested or will
timely request, from the Internal Revenue Service a favorable determination that
such plan and its related trust is qualified under Section 401(a) of the Code
and the related trust is tax-exempt under Section 501(a) of the Code. To the
knowledge of MedicaLogic, there has been no event subsequent to that
determination that is reasonably likely to result in the revocation of the
tax-qualified status of the MedicaLogic ERISA Plans or the exemption of the
related trusts. To the knowledge of MedicaLogic, none of the MedicaLogic ERISA
Plans, their related trusts or any trustee, investment manager or administrator
thereof has engaged in a nonexempt "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code that is reasonably
expected to have a Material Adverse Effect on MedicaLogic. Each MedicaLogic
ERISA Plan is and has been operated and administered in material conformity with
the requirements of all applicable laws and regulations, whether or not the
MedicaLogic ERISA Plan documents have been amended to reflect such requirements.
MedicaLogic and its subsidiaries have no liability for, or commitment to
provide, medical benefits to future or current retirees of MedicaLogic or any of
its subsidiaries.
21
3.2.12.3 Employment Agreements. Except as set forth
on Schedule 3.2.12.3, each employee of MedicaLogic or any of its subsidiaries is
an "at-will" employee and there are no written employment agreements of any kind
between MedicaLogic or any of its subsidiaries and any employees.
3.2.13 Intellectual Property. MedicaLogic or one of its
subsidiaries owns, or has a valid license to use, all Intellectual Property
necessary to or used in the conduct of the business of MedicaLogic and its
subsidiaries as now conducted and as proposed to be conducted. All Intellectual
Property owned by MedicaLogic or any of its subsidiaries is owned by them free
and clear of all Liens. To the knowledge of MedicaLogic, the conduct of the
business of MedicaLogic and its subsidiaries does not conflict with or infringe
upon any Intellectual Property rights of any other person and no claims of
conflict or infringement are pending or threatened against MedicaLogic or any of
its subsidiaries which, in any event, would reasonably be expected to have a
Material Adverse Effect. MedicaLogic has made all necessary filings and
recordations and has paid all required fees and Taxes to maintain ownership of
the Intellectual Property.
3.2.14 Status of Contracts. There is no existing default or
violation by MedicaLogic or its subsidiaries under any contracts, agreements,
commitments or instruments to which MedicaLogic or any of its subsidiaries is a
party or by which it or any of them is bound (collectively, the "MedicaLogic
Contracts") and no event has occurred which (whether with or without notice,
lapse of time or both) would constitute a default of MedicaLogic or its
subsidiaries under any MedicaLogic Contract, except for such defaults or
violations as would not in the aggregate have a Material Adverse Effect on
MedicaLogic. There is no pending, or to the knowledge of MedicaLogic,
threatened, proceeding which would interfere with the quiet enjoyment of any
leasehold of which MedicaLogic or any of its subsidiaries is lessee or
sublessee. MedicaLogic is not aware of any default by any other party to any
MedicaLogic Contract or of any event which (whether with or without notice,
lapse of time or both) would constitute a material default by any other party
with respect to obligations of that party under any MedicaLogic Contract, and,
to the knowledge of MedicaLogic, there are no facts that exist indicating that
any of the MedicaLogic Contracts may be totally or partially terminated or
suspended by the other parties. Neither MedicaLogic nor any of its subsidiaries
is a party to, or bound by, any MedicaLogic Contract that MedicaLogic can
reasonably foresee will result in any material loss to MedicaLogic or such
subsidiary upon the performance thereof (including any liability for penalties
or damages, whether liquidated, direct, indirect, incidental or consequential).
3.2.15 Permits and Licenses. Each of MedicaLogic and its
subsidiaries holds, and at all times has held, all material Permits necessary
for the lawful conduct of its business pursuant to all applicable statutes,
laws, ordinances, rules and regulations of all Governmental Entities having
jurisdiction over it or any part of its operations. Each of MedicaLogic and its
subsidiaries is in compliance in all material respects with each of the terms of
the applicable Permits, and there are no claims of violation by MedicaLogic or
any of its subsidiaries of any of such Permits. Complete and accurate copies of
all Permits
22
held by MedicaLogic and its subsidiaries have been made available to Medscape.
All Governmental Entities that have issued any Permits to or with respect to
MedicaLogic, its business, or subsidiaries have consented or prior to the
Closing will have consented (where such consent is necessary) to the
consummation of the transactions contemplated by this Agreement without
requiring modification of the rights or obligations of MedicaLogic or its
subsidiaries under any of such Permits.
3.2.16 Taxes.
-----
3.2.16.1 Returns. MedicaLogic has filed on a timely
basis all federal, state, local, foreign and other returns, reports, forms,
declarations and information returns required to be filed by it with respect to
Taxes which relate to the business, results of operations, financial condition,
properties or assets of MedicaLogic for all periods (collectively, the
"MedicaLogic Returns") and has paid on a timely basis all Taxes shown to be due
and payable on the MedicaLogic Returns. All MedicaLogic Returns filed are
complete and accurate in all material respects and no additional Taxes are owed
by MedicaLogic or its subsidiaries with respect to the periods covered by the
MedicaLogic Returns or for any other period. MedicaLogic has made available to
Medscape complete and accurate copies of all MedicaLogic Returns. MedicaLogic
has no liability for Taxes of any person (other than itself), whether arising
under federal, state, local or foreign law, as a transferee or successor, by
contract, pursuant to Treas. Reg. ss. 1.1502-6 or otherwise. Except as set forth
on Schedule 3.2.16, MedicaLogic is not currently the beneficiary of any
extension of time within which to file any MedicaLogic Return. Except as set
forth on Schedule 3.2.16, no MedicaLogic Returns have been examined by the
applicable taxing authorities and, except as set forth on Schedule 3.2.16,
MedicaLogic has not received any notice of audit or review with respect to any
MedicaLogic Return or any fiscal year, has no knowledge of any planned audit or
review, and there are no outstanding agreements or waivers extending the
applicable statutory periods of limitation for Taxes for any period. No claim
has ever been made by an authority in a jurisdiction where MedicaLogic does not
file MedicaLogic Returns that they are or may be subject to taxation by that
jurisdiction. All Taxes that are or have been required to be withheld or
collected by MedicaLogic or its predecessors have been duly withheld and
collected and, to the extent required, have been properly paid or deposited as
required by applicable laws. Neither MedicaLogic nor any of its predecessors has
made any payment, or is obligated to make any payment, or is a party to an
agreement that in certain circumstances could obligate it to make a payment,
that is not deductible under Section 280G of the Code. Except as set forth in
Schedule 3.2.16, MedicaLogic is not an obligor on, and none of its assets have
been financed directly or indirectly by, any tax exempt bonds. MedicaLogic is
not now nor during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code has ever been a United States real property holding corporation as
defined in Section 897(c)(2) of the Code. MedicaLogic has not filed a consent
pursuant to Section 341(f) of the Code nor has MedicaLogic agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by MedicaLogic.
23
3.2.16.2 Taxes Paid or Reserved. The unpaid Taxes of
MedicaLogic (A) did not as of the date of the most recent audited balance sheet
included in a MedicaLogic SEC Document exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of such balance
sheet (rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of MedicaLogic in filing its MedicaLogic Returns.
3.2.17 Related Party Interests. Except as listed in Schedule
3.2.17, no officer or director of MedicaLogic (or any entity owned or controlled
by one or more of such parties) (a) has any interest in any property, real or
personal, tangible or intangible, used in or pertaining to MedicaLogic's
business, (b) is indebted to MedicaLogic or its subsidiaries, or (c) has any
material financial interest, direct or indirect, in any supplier or customer of,
or other outside business which has significant transactions with MedicaLogic.
True and complete copies of all agreements listed on Schedule 3.2.17 have been
provided to Medscape. MedicaLogic is not indebted to any of its shareholders,
directors or officers (or any entity owned or controlled by one or more of such
parties) except for amounts due under normal salary arrangements and for
reimbursement of ordinary business expenses. The consummation of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any act or event, or with the lapse of time, or both) result in
any payment (severance or other) becoming due from MedicaLogic to any of its
shareholders, officers, directors or employees (or any entity owned or
controlled by one or more of such parties).
3.2.18 No Powers of Attorney or Restrictions. No power of
attorney or similar authorization given by MedicaLogic or any of its
subsidiaries is presently in effect or outstanding. No contract or agreement to
which MedicaLogic or any of its subsidiaries is a party or is bound or to which
any of its properties or assets is subject limits the freedom of MedicaLogic to
compete in any line of business or with any person. To the knowledge of
MedicaLogic, none of the employees of MedicaLogic or its subsidiaries is
obligated under any contract (including licenses, covenants or commitments of
any nature), or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of MedicaLogic or any of its subsidiaries or
that would conflict with the business of MedicaLogic or its subsidiaries as now
conducted or proposed to be conducted.
3.2.19 Consents and Approvals. Except as set forth in Section
3.2.3, no consent, approval, or authorization of, or filing or registration
with, any court, regulatory authority, governmental body, or any other entity or
person not a party to this Agreement is required to be obtained by MedicaLogic
or its subsidiaries for the consummation of the transactions described in this
Agreement.
24
3.2.20 Brokers and Finders. Except for fees to be paid by
MedicaLogic to Xxxxxxxxx, Xxxxxx and Xxxxxxxx in connection with a fairness
opinion, neither MedicaLogic nor any of its subsidiaries has incurred any
liability for any brokerage or investment banking fees, commissions or finders'
fees in connection with the Merger.
3.2.21 No Other Agreements to Sell MedicaLogic or its Assets.
As of the date hereof, MedicaLogic is not engaged, directly or indirectly, in
any discussions or negotiations with any other party with respect to a
transaction that would result in a Change of Control (as defined in Section
4.3.8).
3.2.22 Opinion of MedicaLogic Financial Advisor. MedicaLogic
has received from Xxxxxxxxx, Lufkin and Xxxxxxxx an opinion that the Conversion
Ratio is fair, from a financial point of view, to MedicaLogic. A copy of such
opinion is attached hereto as Exhibit D.
3.2.23 Vote Required. The approval by a majority of the voting
power represented by the outstanding shares of MedicaLogic Common Stock is the
only vote of the holders of any class or series of MedicaLogic capital stock
necessary to approve the issuance of MedicaLogic Common Stock in the Merger.
3.2.24 Certain Representations and Warranties Regarding Code
Section 368(a)(2)(E).
-----------------------------------------------------
3.2.24.1 Immediately following the Merger, Surviving
Corporation will hold at least 90% of the fair market value of Merger Corp.'s
net assets and at least 70% of the fair market value of Merger Corp.'s gross
assets held immediately prior to the Merger. For purposes of this
representation, amounts paid by Merger Corp. to Medscape shareholders who
receive cash or other property and Merger Corp. assets used to pay
reorganization expenses will be included as assets of Merger Corp. held
immediately prior to the Merger.
3.2.24.2 Prior to the Merger, MedicaLogic will be in
control of Merger Corp. within the meaning of Section 368(c) of the Code.
3.2.24.3 MedicaLogic has no plan or intention to
cause or allow Surviving Corporation to issue additional shares of its stock
that would result in MedicaLogic losing control of Surviving Corporation within
the meaning of Section 368(c) of the Code.
3.2.24.4 Prior to or in the Merger, neither
MedicaLogic nor any person related to MedicaLogic (as defined in Treas.
Reg.ss.1.368(e)(3)) will have acquired directly or through any transaction,
agreement or arrangement with any other person, stock of Medscape with
consideration other than common stock of MedicaLogic. There is no plan or
intention by MedicaLogic or any person related to MedicaLogic (as defined in
Treas. Reg.ss.1.368-1(e)(3)) to acquire or redeem any of the stock of
MedicaLogic
25
issued in the Merger either directly or through any transaction, agreement, or
arrangement with any other person.
3.2.24.5 MedicaLogic has no plan or intention to
liquidate Surviving Corporation; to merge Surviving Corporation with and into
another corporation; to sell or otherwise dispose of the stock of Surviving
Corporation; or to cause Surviving Corporation to sell or otherwise dispose of
any of the assets of Medscape or Merger Corp., except for dispositions made in
the ordinary course of business or transfers of assets to a corporation
controlled by Surviving Corporation.
3.2.24.6 Merger Corp. will have no liabilities
assumed by Surviving Corporation and will not transfer to Surviving Corporation
in the Merger any assets subject to liabilities.
3.2.24.7 Following the Merger, MedicaLogic will cause
Surviving Corporation to continue the historic business of Medscape or to use a
significant portion of Medscape's business assets in a business, in each case
within the meaning of Treas. Reg.ss.1.368-1(d).
3.2.24.8 MedicaLogic does not own, nor has it owned
during the past five years, any shares of the stock of Medscape.
3.2.24.9 MedicaLogic is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.2.24.10 The payment of cash in lieu of fractional
shares of MedicaLogic stock is solely for the purpose of avoiding the expense
and inconvenience to MedicaLogic of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash consideration
that will be paid in the Merger to the Medscape shareholders instead of issuing
fractional shares of MedicaLogic stock will not exceed one percent of the total
consideration that will be issued in the Merger to the Medscape shareholders in
exchange for their shares of Medscape stock. The fractional share interests of
each Medscape shareholder will be aggregated, and no Medscape shareholder will
receive cash in an amount equal to or greater than the value of one full share
of MedicaLogic stock.
3.2.24.11 Following and in connection with the
Merger, MedicaLogic will not transfer any shares of Medscape Common Stock to (a)
a corporation that is not a member of MedicaLogic's "qualified group" as defined
in Treas. Xxx.xx. 1.368-1(d)(4)(ii) or (b) a partnership.
3.2.24.12 MedicaLogic will not redeem any of the
MedicaLogic Common Stock exchanged for Medscape Common Stock in connection with
the Merger, other than pursuant to an ongoing stock repurchase program not
created or modified in connection with the Merger.
26
3.2.24.13 No person related to MedicaLogic, as
defined in Treas. Reg.ss.1.368-1(e)(3) will acquire, with consideration other
than a proprietary interest in MedicaLogic, Medscape Common Stock exchanged for
MedicaLogic Common Stock in the Merger.
3.2.24.14 Except as otherwise provided in this
Agreement, MedicaLogic will pay its own expenses, if any, incurred in connection
with the Merger and will not pay expenses of Medscape or Merger Corp.
3.2.24.15 In the Merger, shares of Medscape stock
representing control of Medscape, as defined in Section 368(c) of the Code, will
be exchanged solely for voting stock of MedicaLogic.
3.2.25 Total eMed. A true, complete and correct copy
of the Reorganization and Merger Agreement, dated as of the date hereof, between
MedicaLogic and Total eMed (the "Total eMed Agreement") has been delivered to
Medscape.
3.3 Representations and Warranties Relating to Merger Corp. MedicaLogic
and Merger Corp. hereby represent and warrant to Medscape that:
3.3.1 Organization and Status. Merger Corp. is a corporation
duly organized and validly existing under the laws of the State of Delaware.
Merger Corp. does not own any properties (other than the initial cash
subscription for shares) nor has it commenced any business or operations.
3.3.2 Capitalization. Merger Corp. has an authorized capital
stock consisting of 100 shares of Common Stock. All of the issued and
outstanding shares of capital stock of Merger Corp. are owned by MedicaLogic.
3.3.3 Corporate Authority. Merger Corp. has the corporate
power and authority and has taken all corporate action necessary to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The Agreement has been duly and validly authorized by the Board of Directors and
sole shareholder of Merger Corp., duly and validly executed and delivered by
Merger Corp. and constitutes the valid and binding obligation of Merger Corp.,
enforceable against Merger Corp. in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought.
3.3.4 Governmental Filings. Other than the filing of the
Certificate of Merger contemplated by Article I, no notices, reports or other
filings are required to be made by Merger Corp. with, nor are any consents,
registrations, approvals, permits or
27
authorizations required to be obtained by Merger Corp. from, any Governmental
Entity in connection with the execution and delivery of this Agreement by Merger
Corp. and the consummation by Merger Corp. of the transactions contemplated
hereby.
3.3.5 Certain Representations and Warranties Regarding Code
Section 368(a)(2)(E).
-----------------------------------------------------
3.3.5.1 Merger Corp. is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.3.5.2 Except as otherwise provided in this
Agreement, Merger Corp. will pay its own expenses, if any, incurred in
connection with the Merger and will not pay expenses of MedicaLogic or Medscape.
3.3.5.3 Merger Corp. has been formed solely in order
to consummate the Merger, and Merger Corp. has not conducted and will not
conduct any business activities or other operations of any kind other than the
issuance of its stock to MedicaLogic, prior to the Effective Date.
ARTICLE IV
COVENANTS
4.1 Mutual Covenants. Medscape and MedicaLogic mutually covenant and
agree as follows:
4.1.1 Preparation of Registration Statement and the Joint
Proxy Statement. Promptly following the date of this Agreement, Medscape and
MedicaLogic shall prepare and file with the SEC the Joint Proxy Statement, and
MedicaLogic shall prepare and file with the SEC the Registration Statement, in
which the Joint Proxy Statement will be included as a prospectus. Each of
Medscape and MedicaLogic shall use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Each of Medscape and MedicaLogic will use its
reasonable best efforts to cause the Joint Proxy Statement to be mailed to its
respective shareholders as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. MedicaLogic shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified) required to be taken under any applicable
state securities law in connection with the issuance of MedicaLogic Common Stock
in the Merger, and Medscape shall furnish all information concerning Medscape
and the holders of Medscape Common Stock and rights to acquire Medscape Common
Stock as may be reasonably required in connection with any such action. Each of
MedicaLogic and Medscape shall furnish all information concerning itself to the
other as may be reasonably requested in connection with any such action and the
preparation, filing and distribution of the Registration Statement and the
preparation, filing and distribution of the Joint Proxy Statement. Medscape and
28
MedicaLogic each agree to correct any information provided by it for use in the
Registration Statement or the Joint Proxy Statement which shall have become
false or misleading.
4.1.2 Shareholder Meetings.
--------------------
4.1.2.1 MedicaLogic shall (i) promptly and duly call,
give notice of, convene and hold as soon as practicable following the date upon
which the Registration Statement becomes effective a meeting of the holders of
MedicaLogic Common Stock for the purpose of voting to approve the issuance of
the MedicaLogic Common Stock in the Merger (the "MedicaLogic Special Meeting"),
and (ii) take all reasonable and lawful action to solicit and obtain such
approval. Unless the MedicaLogic Board of Directors determines in good faith
after receipt of a written opinion from outside legal counsel experienced in
such matters that such action would be a breach of their respective fiduciary
duties under applicable law, the MedicaLogic Board of Directors shall
unanimously recommend that the shareholders of MedicaLogic approve the issuance
of MedicaLogic Common Stock in the Merger and shall not withdraw or modify such
recommendation, and MedicaLogic shall include in the Joint Proxy Statement the
recommendation of the MedicaLogic Board of Directors in favor of issuance of
MedicaLogic Common Stock in the Merger. At the MedicaLogic Special Meeting,
MedicaLogic shall propose and recommend that its Articles of Incorporation be
amended at the Effective Time to change its name to MedicaLogic/Medscape, Inc.
4.1.2.2 Medscape shall (i) promptly and duly call,
give notice of, convene and hold a meeting of the holders of Medscape Common
Stock for the purpose of voting to approve the Merger (the "Medscape Special
Meeting"), and (ii) take all reasonable and lawful action to solicit and obtain
such approval. Unless the Medscape Board of Directors determines in good faith
after receipt of a written opinion from outside legal counsel experienced in
such matters that such action would be a breach of their respective fiduciary
duties under applicable law, the Medscape Board of Directors shall unanimously
recommend that the stockholders of Medscape approve this Agreement and the
transactions contemplated herein and shall not withdraw or modify such
recommendation, and Medscape shall include in the Joint Proxy Statement the
recommendation of the Medscape Board of Directors in favor of the Merger.
4.1.3 Consents and Approvals. Medscape and MedicaLogic each
will use reasonable best efforts to secure, and MedicaLogic will cause Merger
Corp. to use its reasonable best efforts to secure, all consents, approvals,
licenses or permits which may be required in connection with the Merger, and
each will cooperate with the other to secure all such consents, approvals,
licenses or permits in a form mutually satisfactory to Medscape and MedicaLogic.
4.1.4 Best Efforts. Subject to the terms of this Agreement,
Medscape and MedicaLogic each will use reasonable best efforts, and MedicaLogic
will cause Merger Corp. to use its reasonable best efforts, to effectuate the
transactions
29
contemplated hereby and to fulfill the conditions of their respective
obligations under this Agreement.
4.1.5 Publicity. Except as required by law, no party will
issue any press releases or otherwise make any public statements with respect to
the transactions contemplated hereby without the prior written consent of
MedicaLogic and Medscape, in each case not to be unreasonably withheld.
4.1.6 Confidentiality. The provisions of the Nondisclosure
Agreement (the "Confidentiality Agreement") between MedicaLogic and Medscape,
effective as of January 4, 2000, shall apply to all "Information" (as defined in
the Confidentiality Agreement) obtained by any party pursuant to this Agreement.
4.1.7 Antitrust Improvements Act. Each of MedicaLogic and
Medscape will timely and promptly make the filing required to be made by it
under the Antitrust Improvements Act of 1976, as amended (each such filing an
"HSR Filing"). MedicaLogic and Medscape will furnish to one another such
information and assistance as the other party may reasonably request in
connection with the other party's preparation of filings or submissions to any
governmental agency, including, without limitation, any HSR Filing. As
reasonably requested by the other party, MedicaLogic and Medscape will supply
one another with copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between MedicaLogic and Medscape
or their respective representatives, on the one hand, and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice or
any other governmental agency or authority or members of their respective
staffs, on the other hand, with respect to this Agreement or the transaction
contemplated hereby.
4.2 Covenants of Medscape. Medscape covenants and agrees as follows:
4.2.1 Conduct of Business. Prior to the Effective Time,
Medscape and each of its subsidiaries will carry on its business in the ordinary
and usual manner and maintain its existing relationships with suppliers,
customers, employees and business associates, and will not, without the prior
written consent of MedicaLogic, which consent will not be unreasonably delayed
or withheld:
(a) enter into any new agreements or modify existing
agreements respecting an increase in compensation or benefits payable to its
officers or employees except for normal year-to-year adjustments consistent with
past practices (it being agreed that the current employee compensation proposals
of Medscape for year 2000 previously disclosed by Medscape to MedicaLogic will
not require prior MedicaLogic approval);
(b) split, combine, reclassify any of the outstanding shares
of its capital stock or otherwise change its authorized capitalization;
30
(c) declare, set aside or pay any dividends payable in cash,
stock or property with respect to shares of its capital stock;
(d) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class (other than pursuant to the Options issued in the
ordinary course and consistent with past practice or the Warrants) or release
any holder of Medscape Common Stock from any provision restricting the sale or
other transfer of Medscape Common Stock;
(e) redeem, purchase or otherwise acquire any shares of its
capital stock, merge into or consolidate with any other entity or permit any
other entity to merge into or consolidate with it, liquidate or sell or dispose
of any of its assets, or close any plant or business operation;
(f) except for short-term indebtedness and indebtedness
incurred pursuant to Medscape's revolving credit agreement and renewals,
replacements and amendments thereof not in excess of the current maximum under
such credit agreement incurred in the ordinary course of business, incur, assume
or guarantee any indebtedness, or modify or prepay any existing indebtedness;
(g) except as set forth in the capital budget provided to
MedicaLogic or as set forth on Exhibit 4.2.1(g), authorize capital expenditures
other than in the ordinary course of business, form any subsidiary, or make any
acquisition of, or investment in, assets or stock of any other person or entity;
(h) change its method of accounting as in effect at the date
of the most recent Medscape SEC Document, except as required by changes in
generally accepted accounting principles as concurred with by Medscape's
independent auditors, or change its fiscal year; or
(i) authorize or enter into an agreement to do any of the
actions referred to in paragraphs (a) through (h) above.
4.2.2 Acquisition Proposals. Unless and until this Agreement
shall have been terminated pursuant to Section 6.1 or Section 6.2, neither
Medscape, nor any of its subsidiaries or other affiliates, shall, directly or
indirectly, and it shall use its reasonable best efforts to cause their
respective agents or representatives (each, a "Representative") not to, (i)
encourage, initiate or solicit, on or after the date hereof, any inquiries or
the submission of any proposals or offers from any person relating to any
merger, consolidation, sale of a material amount of its assets or similar
business transaction involving Medscape or any of its subsidiaries (each, an
"Acquisition Transaction"); (ii) participate in any negotiations regarding,
furnish to any other person any information with respect to, or otherwise assist
or participate in, any attempt by any third party to propose or offer any
Acquisition Transaction; (iii) enter into or execute any agreement
31
relating to an Acquisition Transaction; or (iv) make or authorize any public
statement, recommendation or solicitation in support of any Acquisition
Transaction or any proposal or offer relating to an Acquisition Transaction, in
each case other than with respect to the Merger. Notwithstanding the foregoing,
nothing contained herein shall prohibit Medscape from:
(a) complying with Rule 14e-2(a) promulgated under the
Exchange Act with regard to an Acquisition Transaction proposal;
(b) providing information in response to a request therefor by
a person who has made an unsolicited bona fide written Acquisition Transaction
proposal if the Medscape Board of Directors receives from the person so
requesting such information an executed confidentiality agreement on terms
substantially equivalent to those contained in the Confidentiality Agreement;
(c) engaging in any negotiations or discussions with any
person who has made an unsolicited bona fide written Acquisition Transaction
proposal; or
(d) withdrawing or modifying the approval or recommendation by
the Medscape Board of Directors of this Agreement or the Merger in connection
with recommending an unsolicited bona fide written Acquisition Transaction
proposal to the stockholders of Medscape;
if and only to the extent that, both (i) in each case referred to in clause (c)
or (d) above, the Medscape Board of Directors determines in good faith after
receipt of a written opinion from outside legal counsel experienced in such
matters that such action is necessary in order for its directors to comply with
their respective fiduciary duties under applicable law and (ii) in each case
referred to in clause (c) or (d) above, the Medscape Board of Directors
determines in good faith (after consultation with its financial advisors) that
such Acquisition Transaction, if accepted, is reasonably likely to be completed,
taking into account all legal, financial and regulatory aspects of the proposal
and the person making the proposal and would, if completed, result in a
transaction superior to the transaction contemplated by this Agreement, taking
into account, among other things, the long term prospects and interests of
Medscape and its stockholders.
Medscape will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Medscape agrees it will take the necessary
steps to inform promptly its Representatives of the obligations undertaken in
this Section 4.2.2 and in the Confidentiality Agreement. Medscape will promptly
notify MedicaLogic if any such inquiries, proposals or offers are received by,
and such information is requested from, or any such discussions or negotiations
are sought to be initiated or continued with, Medscape or any of its
Representatives relating to an Acquisition Transaction proposal, indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers and thereafter shall keep MedicaLogic
informed,
32
on a current basis, of the status and terms of any such proposals or offers and
the status of any such negotiations or discussions. Prior to providing any such
information or commencing any such discussions or negotiations, Medscape shall
give MedicaLogic not less than five business days' notice. Medscape also will
promptly request each person that has heretofore executed a confidentiality
agreement in connection with its consideration of any Acquisition Transaction
proposal to return all confidential information heretofore furnished to such
person by or on behalf of it or any of its subsidiaries.
4.2.3 Investigations. Medscape agrees to give MedicaLogic and
its representatives and agents reasonable access to all its officers, key
employees, premises, books and records and agreements and files and to cause its
officers of Medscape to furnish MedicaLogic with such financial and operating
data and other information with respect to its business and properties as
MedicaLogic shall from time to time reasonably request. Any such investigations
(a) shall be conducted in such manner as not to interfere unreasonably with the
operation of Medscape's business; and (b) shall not diminish any of the
representations and warranties hereunder.
4.2.4 [Reserved].
4.2.5 Notice and Cure. Medscape will notify MedicaLogic in
writing of, and will use all commercially reasonable efforts to cure before the
Closing, any event, transaction or circumstance, as soon as practical after it
becomes known to Medscape, that causes or will cause any covenant or agreement
of Medscape under this Agreement to be breached or that renders or will render
untrue in any material respect any representation or warranty of Medscape
contained in this Agreement. Medscape also will notify MedicaLogic in writing
of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach, as soon as practical after it becomes known to
Medscape, of any representation, warranty, covenant or agreement made by
Medscape. No notice given pursuant to this Section 4.2.5 shall have any effect
on the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein.
4.3 Covenants of MedicaLogic. MedicaLogic covenants and agrees as
follows:
4.3.1 Conduct of Business. Prior to the Effective Time,
MedicaLogic and each of its subsidiaries will carry on its business in the
ordinary and usual manner and maintain its existing relationships with
suppliers, customers, employees and business associates, and will not, without
the prior written consent of Medscape, which consent will not be unreasonably
delayed or withheld:
(a) split, combine, reclassify any of the outstanding shares
of its capital stock or otherwise change its authorized capitalization;
(b) declare, set aside or pay any dividends payable in cash,
stock or property with respect to shares of its capital stock;
33
(c) except as to the Total eMed Merger, merge into or
consolidate with any other entity or permit any other entity to merge into or
consolidate with it, or acquire any other entity, if any such transaction would
prevent the Merger from occurring on or prior to August 31, 2000 or if such
transaction is with an entity outside of the healthcare industry;
(d) change its method of accounting as in effect at the date
of the most recent MedicaLogic SEC Document, except as required by changes in
generally accepted accounting principles as concurred with by MedicaLogic's
independent auditors, or change its fiscal year; or
(e) authorize or enter into an agreement to do any of the
actions referred to in paragraphs (a) through (d) above.
4.3.2 Investigations. MedicaLogic agrees to give Medscape and
its representatives and agents reasonable access to all its officers, key
employees, premises, books and records and agreements and files and to cause its
officers of MedicaLogic to furnish Medscape with such financial operating data
and other information with respect to its business and properties as Medscape
shall from time to time reasonably request. Any such investigations (a) shall be
conducted in such manner as not to interfere unreasonably with the operation of
MedicaLogic's business; and (b) shall not diminish any of the representations
and warranties hereunder.
4.3.3 Notification to Optionees. Promptly after the Effective
Date, MedicaLogic will notify in writing each holder of an Option of the
exchange of the Option for an option to purchase MedicaLogic Common Stock in
accordance with Section 1.3.3 of this Agreement.
4.3.4 Officer and Director Indemnification. For a period of
six years from the Closing Date, MedicaLogic agrees to indemnify the officers
and directors of Medscape for all actions taken prior to Closing to the extent
authorized in Medscape's Certificate of Incorporation and Bylaws prior to
Closing. For a period of three years from the Closing Date, MedicaLogic agrees
to maintain officer and director liability coverage, with respect to claims
arising from facts or events that occurred prior to Closing, for the benefit of
the present or former officers and directors of Medscape as of the Closing Date
in such amounts and on such terms that are no less beneficial to officers and
directors than the coverage maintained by Medscape prior to the Effective Time;
provided that in no event shall MedicaLogic be obligated to expend in order to
maintain or procure insurance coverage pursuant to this Section 4.3.4 any amount
per annum in excess of 150% of the aggregate premiums payable by Medscape and
its subsidiaries in 1999 (on an annualized basis) for such purpose.
34
4.3.5 MedicaLogic Board. Effective on the Closing, MedicaLogic
will cause three nominees of Medscape to be elected or appointed to the
MedicaLogic Board and shall fix its Board at not more than eleven members.
4.3.6 Editor-in-Chief. Effective on the Closing, MedicaLogic
will appoint Xxxxxx X. Xxxxxxxx, M.D., as the Editor-in-Chief of MedicaLogic.
4.3.7 Notice and Cure. MedicaLogic will notify Medscape in
writing of, and will use all commercially reasonable efforts to cure before the
Closing, any event, transaction or circumstance, as soon as practical after it
becomes known to MedicaLogic, that causes or will cause any covenant or
agreement of MedicaLogic under this Agreement to be breached or that renders or
will render untrue in any material respect any representation or warranty of
MedicaLogic contained in this Agreement. MedicaLogic also will notify Medscape
in writing of, and will use all commercially reasonable efforts to cure, before
the Closing, any violation or breach, as soon as practical after it becomes
known to MedicaLogic, of any representation, warranty, covenant or agreement
made by MedicaLogic. No notice given pursuant to this Section 4.3.7 shall have
any effect on the representations, warranties, covenants or agreements contained
in this Agreement for purposes of determining satisfaction of any condition
contained herein.
4.3.8 Change of Control. MedicaLogic agrees that (a) neither
it nor any of its subsidiaries or other affiliates shall, and it shall use its
reasonable best efforts to cause their respective agents or representatives
(each, a "MedicaLogic Representative") not to, directly or indirectly, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders) with respect to any transaction that would constitute a Change of
Control (as defined below), (b) it will notify Medscape promptly if any such
inquiries, proposals or offers are received by MedicaLogic and (c) will keep
Medscape appropriately informed of the status of any such inquiries, proposals
or offers. Nothing contained herein shall prohibit MedicaLogic from providing
information in response to such proposal or offer, engaging in negotiations or
discussions with any person who has made such proposal or offer, or entering
into or consummating any such transaction. A "Change of Control" shall occur if
any of the following applies: (A) any "Person", as such term is used in Sections
13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of MedicaLogic representing 50% or more of the combined voting power
of MedicaLogic's outstanding capital stock; (B) the shareholders of MedicaLogic
approve a merger or other consolidation of MedicaLogic with any other company
where the former shareholders of MedicaLogic do not own at least 50% of combined
voting power of the surviving or resulting corporation; or (C) MedicaLogic sells
50% or more of its assets to a buyer that is not a subsidiary of MedicaLogic.
4.3.9 No Amendment to Total eMed Agreement. Without the prior
written consent of Medscape, MedicaLogic shall not consent to any amendment of
the Total eMed Agreement or the waiver of any provision thereof that would be
materially
35
adverse to Medscape or its stockholders. Nothing herein shall be construed to
require MedicaLogic to consummate the Total eMed Merger.
4.4 Covenants of Merger Corp. Merger Corp. covenants and agrees that,
except as is contemplated by this Agreement, prior to the Effective Time, Merger
Corp., will not engage in any business activities or liquidate, merge into or
consolidate with any other corporation or permit any other corporation to merge
into or consolidate with it; or increase its authorized capital stock; or issue
options, rights or warrants to purchase any of its capital stock.
ARTICLE V
CONDITIONS
5.1 Conditions to the Obligations of All Parties. The obligations of
Medscape, MedicaLogic and Merger Corp. to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or before the
Closing of each of the following conditions:
5.1.1 Regulatory Approvals. The parties shall have made all
filings and received all approvals of any Governmental Entity of competent
jurisdiction necessary in order to consummate the Merger, and each of such
approvals shall be in full force and effect at the Closing and not subject to
any condition which requires the taking or refraining from taking of any action
which would have a Material Adverse Effect on Medscape or on MedicaLogic.
5.1.2 Litigation. There shall not be in effect any order,
decree or injunction of a federal or state court of competent jurisdiction
restraining, enjoining or prohibiting the consummation of the transactions
contemplated by this Agreement (each party agreeing to use its reasonable best
efforts, including appeals to higher courts, to have any such non-final,
appealable order, decree or injunction set aside or lifted), and no action shall
have been taken, and no statute, rule or regulation shall have been enacted, by
any state or federal government or governmental agency in the United States
which would prevent the consummation of the Merger.
5.1.3 Shareholder Approval. This Merger shall have been
approved by the affirmative vote of the holders of a majority of the outstanding
shares of Medscape Common Stock. The issuance of MedicaLogic Common Stock in the
Merger shall have been approved by the affirmative vote of the holders of a
majority of the shares of MedicaLogic Common Stock.
5.1.4 Registration of Securities; Listing. The shares of
MedicaLogic Common Stock to be issued pursuant to this Agreement shall have been
registered under the Securities Act, and under the securities laws of such
states registrations or
36
qualification as counsel for MedicaLogic or Medscape, as the case may be, deems
necessary or exemptions from such state registration or qualification will have
been determined by such counsel to be available, and shall have been listed on
the Nasdaq National Market.
5.2 Conditions to the Obligations of Medscape. The obligations of
Medscape to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions:
5.2.1 Representations, Warranties and Covenants. The
representations and warranties of MedicaLogic and Merger Corp. contained in this
Agreement qualified by "Material Adverse Effect" or other materiality qualifiers
shall be true and correct in all respects, and all other representations and
warranties of MedicaLogic and Merger Corp. contained in this Agreement shall be
true and correct in all respects (except where the failure to be true and
correct would not have a Material Adverse Effect on MedicaLogic), except for
representations and warranties made as of a specific date, which representations
and warranties need only be true and correct as of such date, and for changes
specifically contemplated by this Agreement, and MedicaLogic and Merger Corp.
shall have performed in all material respects all of their respective covenants
and obligations hereunder to be performed as of the Closing. Medscape shall have
received at the Closing certificates to the foregoing effect, dated the Closing
Date, and executed on behalf of MedicaLogic by an executive officer of
MedicaLogic and on behalf of Merger Corp. by an executive officer of Merger
Corp.
5.2.2 No Material Adverse Change. Since September 30, 1999,
there shall have been no Material Adverse Change in MedicaLogic, or discovery of
a condition or occurrence of an event which has resulted or reasonably can be
expected to result in a Material Adverse Change in MedicaLogic.
5.3 Conditions to the Obligations of MedicaLogic and Merger Corp. The
obligations of MedicaLogic and Merger Corp. to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or before the
Closing of each of the following conditions:
5.3.1 Representations, Warranties and Covenants. The
representations and warranties of Medscape contained in this Agreement qualified
by "Material Adverse Effect" or other materiality qualifiers shall be true and
correct in all respects, and all other representations and warranties of
Medscape contained in this Agreement shall be true and correct in all respects
(except where the failure to be true and correct would not have a Material
Adverse Effect on Medscape), except for representations and warranties made as
of a specific date, which representations and warranties need only be true and
correct as of such date, and for changes specifically contemplated by this
Agreement, and Medscape shall have performed in all material respects all of its
covenants and obligations hereunder to be performed as of the Closing.
MedicaLogic shall have received at the Closing
37
certificates to the foregoing effect, dated the Closing Date, and executed on
behalf of Medscape by an executive officer of Medscape.
5.3.2 No Material Adverse Change. Since the date of the most
recent audited balance sheet in a Medscape SEC Document, there shall have been
no Material Adverse Change in Medscape, or discovery of a condition or
occurrence of an event which has resulted or reasonably can be expected to
result in a Material Adverse Change in Medscape.
ARTICLE VI
TERMINATION
6.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
mutual consent of Medscape and MedicaLogic.
6.2 Termination by Either Medscape or MedicaLogic. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time:
(a) by MedicaLogic or Medscape if the Merger shall not have
become effective on or prior to August 31, 2000, provided, however, that the
right to terminate this Agreement pursuant to this Section 6.2(a) shall not be
available to any party whose breach of any covenant of this Agreement has been
the cause of, or resulted in, the failure of the Merger to occur on or before
such date;
(b) by MedicaLogic or Medscape if:
(1) any court of competent jurisdiction in the United
States or any state shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining,
enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
(2) any required approval of the stockholders of
Medscape for this Agreement or the Merger shall not have been
obtained by reason of the failure to obtain the required vote
upon a vote held at a duly held meeting of stockholders or at
any adjournment thereof; or
(3) the required approval of the shareholders of
MedicaLogic for the issuance of MedicaLogic Common Stock
pursuant to this Agreement shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of shareholders or at any
adjournment there;
38
(c) by MedicaLogic if the Board of Directors of Medscape (or
any committee thereof) (i) shall have withdrawn, amended or modified in a manner
adverse to MedicaLogic its approval or recommendation of the Merger, this
Agreement or the transactions contemplated hereby, (ii) shall fail to reaffirm
such approval or recommendation upon MedicaLogic's request, (iii) shall have
recommended or taken no position with respect to an Acquisition Transaction in
any communication to the stockholders of Medscape, or (iv) shall resolve to take
any of the foregoing actions;
(d) by MedicaLogic if Medscape or its Representatives shall
have taken any of the actions that would be proscribed by Section 4.2.2, other
than actions taken in the exercise of the fiduciary duties of Medscape's Board
of Directors and satisfying all the conditions of Section 4.2.2;
(e) by MedicaLogic if Medscape fails to include in the Joint
Proxy Statement the recommendation of the Board of Directors of Medscape in
favor of the Merger;
(f) by MedicaLogic if a tender offer or exchange offer
relating to Medscape Common Stock shall have been commenced by a third party and
Medscape shall not have promptly thereafter sent its stockholders a statement
recommending rejection of such tender offer or exchange offer;
(g) by MedicaLogic if there has been a material breach by
Medscape of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within a
reasonable time (but in no event more than 30 days) after written notice of such
breach is given by MedicaLogic to Medscape;
(h) by Medscape if MedicaLogic or the MedicaLogic
Representatives shall have taken any of the actions that would be proscribed by
Section 4.3.8 other than actions satisfying all the conditions of Section 4.3.8;
or
(i) by Medscape if there has been a material breach by
MedicaLogic of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within a
reasonable time (but in no event more than 30 days) after written notice of such
breach is given by Medscape to MedicaLogic;
(j) by Medscape if the Board of Directors of MedicaLogic (or
any committee thereof) (i) shall have withdrawn, amended or modified in a manner
adverse to Medscape its approval or recommendation of the issuance of the
MedicaLogic Common Stock in the Merger, (ii) shall fail to reaffirm such
approval or recommendation upon Medscape's request, or (iii) shall resolve to
take any of the foregoing actions; or
(k) by Medscape if MedicaLogic fails to include in the Joint
Proxy Statement the recommendation of the Board of Directors of MedicaLogic in
favor of the issuance of the MedicaLogic Common Stock in the Merger.
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6.3 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the Merger pursuant to this Article VI, (i)
this Agreement immediately will become void and of no effect, except that
Sections 4.1.6, 6.3, 6.4 and 7.1 will survive the event of termination; and (ii)
no party hereto (or any of its directors of officers) shall have any liability
or further obligation to any other party to this Agreement, except that nothing
herein shall relieve any party for any willful breach of this Agreement.
6.4 Termination Fees and Expenses.
-----------------------------
6.4.1 Medscape agrees to pay MedicaLogic (provided that
MedicaLogic is not then in material breach of any representation, warranty,
covenant or agreement contained in this Agreement) within two business days
after the termination of this Agreement (or, in the case of (ii) and (iii)
below, as provided therein) by wire transfer, the sum of $30,000,000 in
immediately available funds in the event that any of the following shall have
occurred:
(i) this Agreement shall have been terminated pursuant to
Section 6.2(c), Section 6.2(d), Section 6.2(e), Section 6.2(f) or
Section 6.2(g) or because of a breach of Section 4.2.2 by Medscape,
provided that if this Agreement is terminated pursuant to Section
6.2(g) as a result of a non-intentional breach by Medscape, Medscape
shall pay to MedicaLogic MedicaLogic's actual out-of-pocket expenses
rather than the aforesaid $30,000,000 sum;
(ii) prior to the meeting of Medscape stockholders duly
convened and held to vote in respect to this Agreement and the Merger,
an Acquisition Transaction shall have been made to Medscape and made
known to its stockholders generally or shall have been made directly to
its stockholders generally or any person shall have publicly announced
an intention (whether or not conditional) to make an Acquisition
Transaction, and thereafter this Agreement shall have been terminated
pursuant to Section 6.2(b)(2) (in which circumstances the amounts
payable under this Section 6.4.1 shall be payable on the first business
day after the date of such stockholder vote); or
(iii) this Agreement shall have been terminated pursuant to
Section 6.2(b)(2) and, within twelve months of such termination
Medscape enters into an agreement with any person with respect to an
Acquisition Transaction or an Acquisition Transaction is consummated
(in which circumstances the amounts payable under this Section 6.4.1
shall be payable upon the signing of such agreement or, if no agreement
is signed, then at the closing (and as a condition to the closing,
which condition may not be waived without the express written consent
of MedicaLogic) of such Acquisition Transaction;
40
6.4.2 MedicaLogic agrees to pay Medscape (provided that
Medscape is not then in material breach of any representation, warranty,
covenant or agreement contained in this Agreement) by wire transfer, the sum of
$30,000,000 in immediately available funds in the event that the following shall
have occurred: (i) this Agreement shall have been terminated pursuant to Section
6.2(b)(3), 6.2(h), 6.2(i), 6.2(j) or 6.2(k), provided that if this Agreement is
terminated pursuant to Section 6.2(i) as a result of a non-intentional breach by
MedicaLogic, MedicaLogic shall pay to Medscape Medscape's actual out-of-pocket
expenses rather than the aforesaid $30,000,000 sum.
6.4.3 Each of Medscape and MedicaLogic acknowledge that the
agreements contained in Section 6.4 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the
respective parties would not enter into this Agreement; accordingly, if either
party fails to promptly pay the amount due pursuant to this Section 6.4 and, in
order to obtain such payment, the other party commences a suit which results in
a judgment for the fee set forth therein, the losing party shall pay to the
other its reasonable costs and expenses (including attorneys' fees) in
connection with such suit, together with interest from the date of termination
of this Agreement on the amounts owed at the prime rate as announced by Key Bank
of Oregon in effect from time to time during such period plus two percent.
ARTICLE VII
MISCELLANEOUS AND GENERAL
7.1 Payment of Expenses. Subject to Section 6.4, if the Merger is not
consummated, each party shall pay its own out-of-pocket legal, accounting,
investment banking and other expenses incidental to this Agreement and the
transactions contemplated by this Agreement, except for the HSR Filing fees,
which shall be shared equally by Medscape and MedicaLogic. Nothing in this
Agreement is meant to limit the right of a non-breaching party to obtain
reimbursement of expenses and other damages, including attorneys' fees, incurred
as a result of a breach of this Agreement by the other party.
7.2 Entire Agreement. This Agreement, including the schedules and the
exhibits hereto, constitutes the entire agreement between the parties hereto and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
7.3 Assignment. This Agreement shall not be assignable by any of the
parties to this Agreement without the prior written consent of each of
MedicaLogic and Medscape.
41
7.4 Binding Effect; No Third Party Benefit. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns, subject to the restrictions on assignment contained in
Section 7.3. Except as provided in Section 4.3.4 of this Agreement, nothing
express or implied in this Agreement is intended or shall be construed to confer
upon or give to a person, firm or corporation other than the parties hereto any
rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
7.5 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented at any time prior to or at
the Closing, whether before or after the votes of shareholders of Medscape or
MedicaLogic, by written agreement executed and delivered by the duly authorized
officers of Medscape and MedicaLogic.
7.6 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law; provided, however, that any waiver by a party must be in
writing.
7.7 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
7.8 Captions. The article, section and paragraph captions herein are
for convenience of reference only, do not constitute a part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
7.9 Subsidiary. When a reference is made in this Agreement to a
subsidiary of a party, the term "subsidiary" means any corporation or other
organization, whether incorporated or unincorporated, of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or more of its
subsidiaries.
7.10 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or facsimile (in each case with evidence of confirmed transmission) as
follows:
42
If to Medscape, to it at:
Medscape, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx
with copies to:
Patterson, Belknap, Xxxx & Tyler LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
If to MedicaLogic or Merger Corp., to it at:
MedicaLogic, Inc.
000 Xxxxx Xxxxxx xx Xxxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
with copies to:
Stoel Rives LLP
000 X.X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
or to such other person or address as any party shall specify by notice in
writing. All such notices, requests, demands, waivers and communications shall
be deemed to have been received on the date of delivery or on the third business
day after the mailing thereof.
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7.11 Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon, exclusive of choice of law
or conflicts of law rules, provisions, or principles, except that the provisions
of this Agreement relating to the Merger shall also be governed by the merger
provisions of the DGCL.
7.12 Separability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
7.13 Extinguishment. This Agreement, including all representations,
warranties and covenants, shall be extinguished and be of no further force or
effect after the Effective Time, except for Section 4.3.4, which will continue
in accordance with its terms.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
herein above written.
MEDICALOGIC, INC.
By: XXXX X. XXXXXXX
-----------------------------------
Name: Xxxx X. Xxxxxxx, M.D.
Title: CEO
MEDSCAPE, INC.
By: XXXX X. XXXXXX
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: CEO
XXXXXXXXXX MERGER CORP.
By: XXXXX X. XXXXXXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
Title: President
