-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZ6nbs4HBRWtdyD1cSDDFbs/H7ciUs814dxpc4V/2c28MwuRqJ42kUwxeR/2nJcq ELSstkmec/SNwvse0yiMIA== 0000891618-99-005119.txt : 20040503 0000891618-99-005119.hdr.sgml : 20040503 19991112124600 ACCESSION NUMBER: 0000891618-99-005119 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19991112 DATE AS OF CHANGE: 20000629 EFFECTIVENESS DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHEON CORP CENTRAL INDEX KEY: 0001009575 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 943236644 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90795 FILM NUMBER: 99748689 BUSINESS ADDRESS: STREET 1: RIVER DRIVE CENTER 2 STREET 2: 669 RIVER DR CITY: ELMWOOD PARK STATE: NJ ZIP: 07407 BUSINESS PHONE: 4088765000 MAIL ADDRESS: STREET 1: RIVER DRIVE CENTER 2 STREET 2: 669 RIVER DR CITY: ELMWOOD PARK STATE: NJ ZIP: 07407 FORMER COMPANY: FORMER CONFORMED NAME: HEALTHEON CORP DATE OF NAME CHANGE: 19980729 FORMER COMPANY: FORMER CONFORMED NAME: HEALTHSCAPE CORP DATE OF NAME CHANGE: 19970404 S-8 1 FORM S-8 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1999 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------- HEALTHEON/WebMD CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3236644 (STATE OF INCORPORATION) 400 THE LENOX BUILDING (I.R.S. EMPLOYER 3399 PEACHTREE ROAD NE IDENTIFICATION NUMBER) ATLANTA, GA 30326 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ---------------------------------------- WebMD, INC. 1997 AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN DIRECTOR STOCK OPTION PLAN OF WebMD, INC. DIRECT MEDICAL KNOWLEDGE, INC. 1997 STOCK OPTION/STOCK ISSUANCE PLAN SAPIENT HEALTH NETWORK, INC. 1996 STOCK INCENTIVE PLAN GREENBERG NEWS NETWORKS, INC. 1997 STOCK OPTION PLAN MedE AMERICA CORPORATION AND ITS SUBSIDIARIES STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN MedE AMERICA CORPORATION AND ITS SUBSIDIARIES 1998 STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN (FULL TITLE OF THE PLANS) ------------------------- JEFFREY T. ARNOLD CHIEF EXECUTIVE OFFICER W. MICHAEL LONG CHAIRMAN AND CHIEF OPERATING OFFICER HEALTHEON/WebMD CORPORATION 400 THE LENOX BUILDING 3399 PEACHTREE ROAD NE ATLANTA, GA 30326 (404) 479-7651 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) --------------------- Copy to: LARRY W. SONSINI, ESQ. JACK DENNISON, ESQ. MARTIN W. KORMAN, ESQ. VICE PRESIDENT AND GENERAL COUNSEL DANIEL R. MITZ, ESQ. HEALTHEON/WebMD CORPORATION MARK L. REINSTRA, ESQ. 400 THE LENOX BUILDING WILSON SONSINI GOODRICH & ROSATI 3399 PEACHTREE ROAD NE PROFESSIONAL CORPORATION ATLANTA, GA 30326 650 PAGE MILL ROAD (404) 479-7651 PALO ALTO, CA 94304 (415) 493-9300 2
==================================================================================================================================== CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------------ PROPOSED PROPOSED TITLE OF MAXIMUM MAXIMUM MAXIMUM SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF TO BE TO BE PRICE PER OFFERING REGISTRATION REGISTERED REGISTERED(1) SHARE PRICE FEE - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.0001 To be issued for options under the WebMD, Inc. 1997 Amended and Restated 1997 Stock Incentive Plan................ 14,920,449 shares $14.43(2) $215,302,079 $59,854 To be issued for options under the Director Stock Option Plan of WebMD, Inc. 2,486,741 shares $11.56(3) $ 28,746,726 $ 7,992 To be issued for options under the Direct Medical Knowledge, Inc. 1997 Stock Option/Stock Issuance Plan......... 870,359 shares $ 1.31(4) $ 1,140,171 $ 317 To be issued for options under the Sapient Health Network, Inc. 1996 Stock Incentive Plan........................... 2,846,741 shares $ 2.18(5) $ 6,205,896 $ 1,726 To be issued for options under the Greenberg News Networks, Inc. 1997 Stock Option Plan.............................. 514,000 shares $17.97(6) $ 9,236,580 $ 2,568 To be issued for options under the MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan............................ 490,858 shares $ 5.39(7) $ 2,645,725 $ 736 To be issued for options under the MedE America Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan ........................... 1,124,100 shares $13.00(8) $ 14,613,300 $ 4,063 TOTAL 23,253,248 SHARES $ 277,890,477 $77,256 ====================================================================================================================================
(1) For the sole purpose of calculating the registration fee, the number of shares to be registered under this Registration Statement has been broken down into seven subtotals. (2) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $14.43 per share covering outstanding options under the WebMD, Inc. 1997 Amended and Restated 1997 Stock Incentive Plan to purchase 14,920,449 shares. (3) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $11.56 per share covering outstanding options under the Director Stock Option Plan of WebMD, Inc. to purchase 2,486,741 shares. (4) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $1.31 per share covering outstanding options under the Direct Medical Knowledge, Inc. 1997 Stock Option/Stock Issuance Plan to purchase 870,359 shares. (5) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $2.18 per share covering outstanding options under the Sapient Health Network, Inc. 1996 Stock Incentive Plan to purchase 2,846,741 shares. (6) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $17.97 per share covering outstanding options under the Greenberg News Networks, Inc. 1997 Stock Option Plan to purchase 514,000 shares. (7) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $5.39 per share covering outstanding options under the MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan to purchase 490,858 shares. (8) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as amended. Such computation is based on the weighted average exercise price of $13.00 per share covering outstanding options under the MedE America Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan to purchase 1,124,100 shares. -2- 3 PART II ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. There are hereby incorporated by reference into this Registration Statement the following documents and information heretofore filed by Healtheon/WebMD Corporation (the "Registrant") with the Securities and Exchange Commission (the "Commission"): (a) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 as filed on March 31, 1999 pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Registrant's Form 10-Q for the quarterly period ended March 31, 1999 as filed on May 17, 1999 pursuant to Section 13 of the Exchange Act. (c) The Registrant's Form 10-Q for the quarterly period ended June 30, 1999 as filed on August 16, 1999 pursuant to Section 13 of the Exchange Act. (d) The description of Registrant's Common Stock contained in the Registrant's Registration Statement on Form 8-A filed on February 8, 1999 pursuant to Section 12(g) of the Exchange Act, including any amendment or report filed for the purpose of updating such description. (e) All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the Annual Report on Form 10-K referred to in (a) above. All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior to the filing of a post-effective amendment which indicates that the securities offered hereby have been sold or which deregisters the securities covered hereby then remaining unsold shall also be deemed to be incorporated by reference into this Registration Statement and to be a part hereof commencing on the respective dates on which such documents are filed. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Reference is made to Article V of the Tenth Amended and Restated Certificate of Incorporation of the Registrant filed as Exhibit 3.2 incorporated by reference; Article VI of the Bylaws of the Registrant filed as Exhibit 3.4 incorporated by reference; Section 145 of the Delaware General Corporation Law; and indemnification agreements entered into between the Company and its officers and directors which, among other things, and subject to certain conditions, authorize the Company to indemnify, or indemnify by their terms, as the case may be, the directors and officers of the Company against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer. The Company has obtained directors and officers insurance providing indemnification for certain of the Company's directors, officers, affiliates, partners or employees for certain liabilities. -3- 4 ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION -------- ----------------------------------------------------------------- 3.2 Tenth Amended and Restated Certificate of Incorporation 3.4 Bylaws 10.2 WebMD, Inc. 1997 Amended and Restated 1997 Stock Incentive Plan 10.3 Director Stock Option Plan of WebMD, Inc. 10.4 Direct Medical Knowledge, Inc. 1997 Stock Option/Stock Issuance Plan 10.5 Sapient Health Network, Inc. 1996 Stock Incentive Plan 10.6 Greenberg News Networks, Inc. 1997 Stock Option Plan 10.7 MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan 10.8 MedE America Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan 5.1 Opinion of counsel as to legality of securities being registered. 23.1 Consent of Wilson Sonsini Goodrich & Rosati, P.C. (contained in Exhibit 5.1) 23.2 Consent of Ernst & Young LLP, independent auditors 23.3 Consent of Deloitte & Touche LLP, independent auditors 24.1 Power of Attorney (see signature page)
- -------------------------------------- ITEM 9. UNDERTAKINGS. (a) The Registrant hereby undertakes: (i) To file, during any period which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (ii) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (iii) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit -4- 5 plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to law, the Registrant's Amended and Restated Certificate of Incorporation, Bylaws or indemnification agreements, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. -5- 6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on this 12th day of November, 1999. HEALTHEON/WEBMD CORPORATION By: /s/ JOHN L. WESTERMANN III ----------------------------------------- John L. Westermann III Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jack Dennison and John L. Westermann III, and each of them, as his attorney-in-fact, with full power of substitution in each, for him in any and all capacities to sign any amendments to this registration statement on Form S-8, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - -------------------------------------- ------------------------------------------- ----------------- /s/ JEFFREY T. ARNOLD Chief Executive Officer and Director November 12, 1999 - -------------------------------------- (Principal Executive Officer) Jeffrey T. Arnold /s/ W. MICHAEL LONG Chairman and Chief Operating Officer November 12, 1999 - -------------------------------------- W. Michael Long /s/ JOHN L. WESTERMANN III Chief Financial Officer November 12, 1999 - -------------------------------------- (Principal Financial Officer and Accounting John L. Westermann III Officer) /s/ JAMES H. CLARK Director November 12, 1999 - -------------------------------------- James H. Clark Director November 12, 1999 - -------------------------------------- L. John Doerr Director November 12, 1999 - -------------------------------------- William W. McGuire, MD /s/ Eric J. Gleacher Director November 12, 1999 - -------------------------------------- Eric J. Gleacher
-6- 7
SIGNATURE TITLE DATE - -------------------------------------- ------------------------------------------- ----------------- /s/ WILLIAM P. PAYNE Director November 12, 1999 - -------------------------------------- William P. Payne /s/ U. BERTRAM ELLIS, JR. Director November 12, 1999 - -------------------------------------- U. Bertram Ellis, Jr. /s/ Laura Jennings Director November 12, 1999 - -------------------------------------- Laura Jennings
-7- 8 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION -------- ----------- 3.2 Tenth Amended and Restated Certificate of Incorporation 3.4 Bylaws 10.2 WebMD, Inc. 1997 Amended and Restated 1997 Stock Incentive Plan 10.3 Director Stock Option Plan of WebMD, Inc. 10.4 Direct Medical Knowledge, Inc. 1997 Stock Option/Stock Issuance Plan 10.5 Sapient Health Network, Inc. 1996 Stock Incentive Plan 10.6 Greenberg News Networks, Inc. 1997 Stock Option Plan 10.7 MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan 10.8 MedE America Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan 5.1 Opinion of counsel as to legality of securities being registered 23.1 Consent of Wilson Sonsini Goodrich & Rosati, P.C. (contained in Exhibit 5.1) 23.2 Consent of Ernst & Young LLP, independent auditors 23.3 Consent of Deloitte & Touche LLP, independent auditors 24.1 Power of Attorney (see signature page)
- ------------- EX-3.2 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.2 HEALTHEON CORPORATION a Delaware corporation TENTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware) Healtheon Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "General Corporation Law") DOES HEREBY CERTIFY: FIRST: That this corporation was originally incorporated on December 26, 1995 under the name Healthscape Corporation, pursuant to the General Corporation Law. The corporation changed its name to "Healtheon Corporation" on June 17, 1996. SECOND: The Tenth Amended and Restated Certificate of Incorporation of Healtheon Corporation, in the form set forth below, has been duly adopted in accordance with the provisions of Sections 228, 242, and 245 of the General Corporation Law by the directors and the stockholders of the corporation. THIRD: The Tenth Amended and Restated Certificate of Incorporation, as so adopted, reads in full as set forth below: ARTICLE I The name of this corporation is Healtheon/WebMD Corporation. ARTICLE II The address of the registered office of this corporation in the State of Delaware is 15 East North Street, Dover, County of Kent, Delaware 19901. The name of its registered agent at such address is Incorporating Services, Ltd. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV This corporation is authorized to issue one class of stock to be designated "Common Stock" and another class of stock to be designated "Preferred Stock," the rights, preferences and privileges of which may from time to time be determined by the Board of Directors. The total number of shares of Common Stock that this corporation is authorized to issue is 600,000,000 with a par value of $0.0001 per share. The total number of shares of Preferred Stock that this corporation is authorized to issue is 5,000,000 with a par value of $0.0001 per share. 2 ARTICLE V To the fullest extent permitted by the General Corporation Law as the same exists or as may hereafter be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the corporation or any predecessor or the corporation or serves or served at any other enterprise as a director, officer or employee at the request of the corporation or any predecessor to the corporation. Neither any amendment nor repeal of this Article V, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article V, shall eliminate or reduce the effect of this Article V, in respect of any matter occurring, or any cause of action, suit, claim or proceeding that, but for this Article V, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE VI This corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute or this Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE VII In furtherance and not in limitation of powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the corporation. ARTICLE VIII Section 1. At any time following the closing of the first sale of Common Stock of the Corporation pursuant to a registration statement declared effective by the Securities and Exchange Corporation under the Securities Act of 1933, as amended, stockholders of the Corporation may not take any action by written consent in lieu of a meeting and any action contemplated by stockholders after such time must be taken at a duly called annual or special meeting of stockholders. Section 2. The number of directors which constitute the whole Board of Directors of the Corporation shall be fixed exclusively by one or more resolution adopted from time to time by the Board of Directors. The Board of Directors shall be divided into three classes designated as Class I, Class II, and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the date hereof, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the date hereof, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the date hereof, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. 2 3 Section 3. Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation. ARTICLE IX Elections of directors need not be by written ballot unless the Bylaws of this corporation shall so provide. ARTICLE X Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of this corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of this corporation. ARTICLE XI This corporation is to have perpetual existence. *** FOURTH: That said amendments were duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law. I hereby further declare and certify under penalty of perjury under the laws of the State of Delaware that the facts set forth in the foregoing certificate are true and correct of my own knowledge and that this certificate is my act and deed. 3 4 IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed by the Vice President, Chief Financial Officer, Secretary and Treasurer of this corporation this 12th day of November, 1999. Healtheon Corporation By: /s/ John L. Westermann III ------------------------------------ John L. Westermann III Vice President, Chief Financial Officer, Secretary and Treasurer 4 EX-3.4 3 BYLAWS 1 EXHIBIT 3.4 BYLAWS OF HEALTHEON/WEBMD CORPORATION 2 TABLE OF CONTENTS
Page ---- ARTICLE I CORPORATE OFFICES....................................................-1- 1.1 REGISTERED OFFICE...........................................-1- 1.2 OTHER OFFICES...............................................-1- ARTICLE II MEETINGS OF STOCKHOLDERS.............................................-1- 2.1 PLACE OF MEETINGS...........................................-1- 2.2 ANNUAL MEETING..............................................-1- 2.3 SPECIAL MEETING.............................................-1- 2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................-2- 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................-2- 2.6 QUORUM......................................................-2- 2.7 ADJOURNED MEETING; NOTICE...................................-2- 2.8 VOTING......................................................-3- 2.9 WAIVER OF NOTICE............................................-3- 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...................................................-3- 2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.............................................-3- 2.12 PROXIES.....................................................-4- 2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE.......................-4- ARTICLE III DIRECTORS............................................................-5- 3.1 POWERS......................................................-5- 3.2 NUMBER OF DIRECTORS.........................................-6- 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.....-6- 3.4 RESIGNATION AND VACANCIES...................................-6- 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE....................-7- 3.6 FIRST MEETINGS..............................................-7- 3.7 REGULAR MEETINGS............................................-7- 3.8 SPECIAL MEETINGS; NOTICE....................................-7- 3.9 QUORUM......................................................-7- 3.10 WAIVER OF NOTICE............................................-8- 3.11 ADJOURNED MEETING; NOTICE...................................-8- 3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING...........-8- 3.13 FEES AND COMPENSATION OF DIRECTORS..........................-8- 3.14 APPROVAL OF LOANS TO OFFICERS...............................-8- 3.15 REMOVAL OF DIRECTORS........................................-8-
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Page ---- ARTICLE IV COMMITTEES...........................................................-9- 4.1 COMMITTEES OF DIRECTORS.....................................-9- 4.2 COMMITTEE MINUTES...........................................-9- 4.3 MEETINGS AND ACTION OF COMMITTEES...........................-9- 4.4 ADVISORY COMMITTEES........................................-10- ARTICLE V OFFICERS............................................................-10- 5.1 OFFICERS...................................................-10- 5.2 ELECTION OF OFFICERS.......................................-10- 5.3 SUBORDINATE OFFICERS.......................................-10- 5.4 REMOVAL AND RESIGNATION OF OFFICERS........................-10- 5.5 VACANCIES IN OFFICES.......................................-11- 5.6 CHAIRMAN OF THE BOARD......................................-11- 5.7 CHIEF EXECUTIVE OFFICER....................................-11- 5.8 PRESIDENT..................................................-11- 5.9 VICE PRESIDENT.............................................-12- 5.10 SECRETARY..................................................-12- 5.11 CHIEF FINANCIAL OFFICER....................................-12- 5.13 ASSISTANT SECRETARY........................................-13- 5.14 ASSISTANT TREASURER........................................-13- 5.15 AUTHORITY AND DUTIES OF OFFICERS...........................-13- ARTICLE VI INDEMNITY...........................................................-13- 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS..................-13- 6.2 INDEMNIFICATION OF OTHERS..................................-13- 6.3 INSURANCE..................................................-14- ARTICLE VII RECORDS AND REPORTS.................................................-14- 7.1 MAINTENANCE AND INSPECTION OF RECORDS......................-14- 7.2 INSPECTION BY DIRECTORS....................................-15- 7.3 ANNUAL STATEMENT TO STOCKHOLDERS...........................-15- 7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............-15- ARTICLE VIII GENERAL MATTERS.....................................................-15- 8.1 CHECKS.....................................................-15- 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS...........-16- 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.....................-16-
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Page ---- 8.4 SPECIAL DESIGNATION ON CERTIFICATES........................-16- 8.5 LOST CERTIFICATES..........................................-17- 8.6 CONSTRUCTION; DEFINITIONS..................................-17- 8.7 DIVIDENDS..................................................-17- 8.8 FISCAL YEAR................................................-17- 8.9 SEAL.......................................................-17- 8.10 TRANSFER OF STOCK..........................................-18- 8.11 STOCK TRANSFER AGREEMENTS..................................-18- 8.12 REGISTERED STOCKHOLDERS....................................-18- ARTICLE IX AMENDMENTS..........................................................-18- ARTICLE X DISSOLUTION.........................................................-18- ARTICLE XI CUSTODIAN...........................................................-19- 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................-19- 11.2 DUTIES OF CUSTODIAN........................................-20-
5 BYLAWS OF HEALTHEON/WEBMD CORPORATION ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation shall be at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the principal office of the corporation. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. 2.3 SPECIAL MEETING A special meeting of the stockholders may be called, at any time by the board of directors, or by the president, or by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. -1- 6 If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2.6 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.7 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact -2- 7 any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.8 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. 2.9 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Section 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING of the Bylaws of this corporation was removed, in its entirety, effective as of the initial public offering of the corporation, by the Board of Directors. 2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: -3- 8 (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.12 PROXIES Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. 2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 2.14 NOMINATIONS AND PROPOSALS Nominations of persons for election to the board of directors of the corporation and the proposal of business to be considered by the stockholders may be made at any meeting of stockholders only (a) pursuant to the corporation's notice of meeting, (b) by or at the direction of the board of directors or (c) by any stockholder of the corporation who was a stockholder of record at the -4- 9 time of giving of notice provided for in these bylaws, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.14. For nominations or other business to be properly brought before a stockholders meeting by a stockholder pursuant to clause (c) of the preceding sentence, the stockholder must have given timely notice thereof in writing to the secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the meeting; provided, however, that in the event that less than 65 days notice of the meeting is given to stockholders, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the seventh (7th) day following the day on which the notice of meeting was mailed. In no event shall the public announcement of an adjournment of a stockholders meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (or any successor thereto) and Rule 14a-11 thereunder (or any successor thereto) (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner, and (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner. Notwithstanding any provision herein to the contrary, no business shall be conducted at a stockholders meeting except in accordance with the procedures set forth in this Section 2.14. ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. -5- 10 3.2 NUMBER OF DIRECTORS The number of directors of the corporation shall be not less than six (6) nor more than eleven (11). The exact number of directors shall be ten (10). This number may be changed, within the limits specified above, by a duly adopted amendment to the certificate of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of the holders of a majority of the stock issued and outstanding and entitled to vote or by resolution of a majority of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the date hereof, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the date hereof, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the date hereof, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing provisions of this Section 3.3, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 3.4 RESIGNATION AND VACANCIES Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other causes shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors and not by the stockholders. Newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such newly created directorship shall be filled by the stockholders, be filled only by the affirmative vote of the directors then in office, even though less than a quorum of the Board of Directors and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. -6- 11 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 FIRST MEETINGS The first meeting of each newly elected board of directors shall be held at such time and place as shall be determined by the directors. 3.7 REGULAR MEETINGS Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.8 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors may be called by the chief executive officer on three (3) days' notice to each director, either personally or by mail, telegram, telex, or telephone; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two (2) directors unless the board consists of only one (1) director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. 3.9 QUORUM At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.10 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the -7- 12 beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 3.11 ADJOURNED MEETING; NOTICE If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.13 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. 3.14 APPROVAL OF LOANS TO OFFICERS The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.15 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, only with cause, by the holders of a majority of the shares then entitled to vote at an election of directors. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. -8- 13 ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corpo ration or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of adjournment), and Section 3.12 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; -9- 14 provided, however, that the time of regular meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. 4.4 ADVISORY COMMITTEES The board of directors may, by resolution passed by a majority of the whole board, designate one or more advisory committees, with each committee to consist of one or more of the directors of the corpo ration or any other such persons as the board may appoint. The board may designate one or more persons as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Members who are not board members shall not have the responsibilities or obligations of board members nor be deemed directors of the corporation for any other purpose. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be a chief executive officer ("CEO"), a president, one or more vice presidents, a secretary, a chief financial officer ("CFO") and a treasurer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more assistant vice presidents, assistant secretaries, assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 ELECTION OF OFFICERS The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment. 5.3 SUBORDINATE OFFICERS The board of directors may appoint, or empower the CEO to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS -10- 15 Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. 5.5 VACANCIES IN OFFICES Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 5.6 CHAIRMAN OF THE BOARD The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no CEO, then the chairman of the board shall also be the CEO of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws. 5.7 CHIEF EXECUTIVE OFFICER Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the CEO of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the CEO of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. 5.8 PRESIDENT The president may assume and perform the duties of the chief executive officer in the absence or disability of the chief executive officer or whenever the office of the chief executive officer is vacant. The president of the corporation shall exercise and perform such powers and duties as may from time to time be assigned to him by the board of directors, the CEO or as may be prescribed by these bylaws. The president shall have authority to execute in the name of the corporation bonds, contracts, deeds, leases and other written instruments to be executed by the corporation. In the absence or nonexistence of the chairman of the board and chief executive officer, he shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board and the chief executive officer, at all meetings of the board of directors and shall perform such other duties as the board of directors may from time to time determine. -11- 16 5.9 VICE PRESIDENT In the absence or disability of the CEO and the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board. 5.10 SECRETARY The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. 5.11 CHIEF FINANCIAL OFFICER The CFO shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The CFO shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws. 5.12 TREASURER The treasurer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws. -12- 17 5.13 ASSISTANT SECRETARY The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 5.14 ASSISTANT TREASURER The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 5.15 AUTHORITY AND DUTIES OF OFFICERS In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNITY 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation or any subsidiary of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or any of its subsidiaries or of another enterprise at the request of such predecessor corporation or subsidiary. 6.2 INDEMNIFICATION OF OTHERS -13- 18 The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation or any subsidiary of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or any of its subsidiaries or of another enterprise at the request of such predecessor corporation or subsidiary. 6.3 INSURANCE The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation or its subsidiaries as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of Delaware. ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its shareholders listing their names and addresses and the number and class of shares held by each shareholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled -14- 19 to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. 7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the board, the CEO, the CFO or any other person authorized by the board of directors or the CEO, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. ARTICLE VIII GENERAL MATTERS 8.1 CHECKS From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. -15- 20 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special -16- 21 rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS The directors of the corporation, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL The seal of the corporation shall be such as from time to time may be approved by the board of directors. -17- 22 8.10 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of shareholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 8.12 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders or the board of directors. ARTICLE X DISSOLUTION If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of -18- 23 Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation. ARTICLE XI CUSTODIAN 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or (ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or (iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. -19- 24 11.2 DUTIES OF CUSTODIAN The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. -20- 25 CERTIFICATE OF ADOPTION OF BYLAWS OF HEALTHEON/WEBMD CORPORATION (a Delaware corporation) Adoption by Secretary The undersigned person appointed to act as the Secretary of Healtheon/WebMD Corporation hereby adopts the foregoing bylaws, comprising eighteen (18) pages, as the Bylaws of the corporation. Executed this 12th day of November, 1999. /s/ John L. Westermann III --------------------------------- John L. Westermann III, Secretary -21- EX-5.1 4 OPINION OF COUNSEL 1 EXHIBIT 5.1 November 12, 1999 HEALTHEON/WebMD Corporation 400 The Lenox Building 3399 Peachtree Road NE Atlanta, GA 30326 RE: REGISTRATION STATEMENT ON FORM S-8 Ladies and Gentlemen: We have examined the Registration Statement on Form S-8 to be filed by you with the Securities and Exchange Commission on or about November 12, 1999 (the "Registration Statement"), in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 23,253,248 shares of Common Stock, par value $0.0001 (the "Shares"), reserved for issuance pursuant to the WebMD, Inc. 1997 Amended and Restated 1997 Stock Incentive Plan, Director Stock Option Plan of WebMD, Inc., Direct Medical Knowledge, Inc. 1997 Stock Option/Stock Issuance Plan, Sapient Health Network, Inc. 1996 Stock Incentive Plan, Greenberg News Networks, Inc. 1997 Stock Option Plan, MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan, and MedE America Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan (together, the "Plans"). As your legal counsel, we have examined the proceedings taken and are familiar with the proceedings proposed to be taken by you in connection with the sale and issuance of the Shares under the Plans. It is our opinion that the Shares will be, when issued and sold in the manner referred to in the Plans, legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever appearing in the Registration Statement and any subsequent amendment thereto. Very truly yours, WILSON SONSINI GOODRICH & ROSATI Professional Corporation /s/ WILSON SONSINI GOODRICH & ROSATI EX-10.2 5 AMENDED & RESTATED 1997 STOCK INCENTIVE PLAN 1 EXHIBIT 10.2 WEBMD, INC. AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN 2 WEBMD, INC. AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN TABLE OF CONTENTS
Page ---- ARTICLE I - DEFINITIONS .................................................... 1 1.1 "Award ......................................................... 1 1.2 "Board ......................................................... 1 1.3 "Change in Control ............................................. 1 1.4 "Code .......................................................... 1 1.5 "Committee ..................................................... 2 1.6 "Company ....................................................... 2 1.7 "Covered Employees ............................................. 2 1.8 "Director ...................................................... 2 1.9 "Disinterested Person .......................................... 2 1.10 "Employee ...................................................... 2 1.11 "Employer ...................................................... 2 1.12 "Exchange Act .................................................. 2 1.13 "Exercise Price ................................................ 2 1.14 "Fair Market Value ............................................. 2 1.15 "Grantee ....................................................... 3 1.16 "Incentive Stock Option ........................................ 3 1.17 "Non-Employee Director ......................................... 3 1.18 "Officer ....................................................... 3 1.19 "Option ........................................................ 3 1.20 "Optionee ...................................................... 3 1.21 "Outside Director .............................................. 3 1.22 "Parent ........................................................ 3 1.23 "Permitted Transferee .......................................... 3 1.24 "Plan .......................................................... 3 1.25 "Purchasable ................................................... 4 1.26 "Qualified Domestic Relations Order ............................ 4 1.27 "Reload Option ................................................. 4 1.28 "Restricted Stock .............................................. 4 1.29 "Restriction Agreement ......................................... 4 1.30 "Section 16 Insider ............................................ 4 1.31 "Stock ......................................................... 4 1.32 "Stock Option Agreement ........................................ 4 1.33 "Subsidiary .................................................... 4 ARTICLE II - THE PLAN ...................................................... 4 2.1 Name ........................................................... 4 2.2 Purpose ........................................................ 4 2.3 Effective Date ................................................. 5
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Page ---- ARTICLE III - PARTICIPANTS ................................................. 5 ARTICLE IV - ADMINISTRATION ................................................ 5 4.1 Duties and Powers of the Committee ............................. 5 4.2 Interpretation; Rules .......................................... 6 4.3 No Liability ................................................... 6 4.4 Majority Rule .................................................. 6 4.5 Company Assistance ............................................. 6 ARTICLE V - SHARES OF STOCK SUBJECT TO PLAN ................................ 6 5.1 Limitations .................................................... 6 5.2 Antidilution ................................................... 7 ARTICLE VI - OPTIONS ....................................................... 8 6.1 Types of Options Granted ....................................... 8 6.2 Option Grant and Agreement...................................... 8 6.3 Optionee Limitations ........................................... 9 6.4 $100,000 Limitation ............................................ 9 6.5 Exercise Price ................................................. 9 6.6 Exercise Period ................................................ 10 6.7 Option Exercise ................................................ 10 6.8 Reload Options ................................................. 11 6.9 Nontransferability of Option ................................... 11 6.10 Termination of Employment or Service............................ 12 6.11 Employment Rights .............................................. 12 6.12 Certain Successor Options ...................................... 12 6.13 Effect of Change in Control .................................... 12 ARTICLE VII - RESTRICTED STOCK ............................................. 12 7.1 Awards of Restricted Stock ..................................... 12 7.2 Non-Transferability ............................................ 13 7.3 Lapse of Restrictions .......................................... 13 7.4 Termination of Employment ...................................... 13 7.5 Treatment of Dividends ......................................... 13 7.6 Delivery of Shares ............................................. 13 ARTICLE VIII - STOCK CERTIFICATES .......................................... 14 ARTICLE IX - TERMINATION AND AMENDMENT OF PLAN ............................. 14 ARTICLE X - RELATIONSHIP TO OTHER COMPENSATION PLANS ....................... 15 ARTICLE XI - MISCELLANEOUS ................................................. 15 11.1 Performance Goals .............................................. 15
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Page ---- 11.2 Replacement or Amended Grants .................................. 15 11.3 Forfeiture Provisions .......................................... 15 11.4 Plan Binding on Successors ..................................... 16 11.5 Singular, Plural; Gender ....................................... 16 11.6 Headings, etc. ................................................. 16 11.7 Interpretation ................................................. 16
iii 5 WEBMD, INC. AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN ARTICLE I DEFINITIONS As used herein, the following terms have the following meanings unless the context clearly indicates to the contrary: 1.1 "Award" shall mean a grant of Restricted Stock. 1.2 "Board" shall mean the Board of Directors of the Company. 1.3 "Change in Control" shall mean the occurrence of either of the following events: (a) A change in the composition of the Board of Directors as a result of which fewer than one-half of the incumbent directors are directors who either: (i) Had been directors of the Company 24 months prior to such change; or (ii) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the directors who had been directors of the Company 24 months prior to such change and who were still in office at the time of the election or nomination; or (b) Any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act), other than any person who is a shareholder of the Company on or before the effective date of the Plan, by the acquisition or aggregation of securities is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the "Base Capital Stock"); except that any change in the relative beneficial ownership of the Company's securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person's ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person's beneficial ownership of any securities of the Company. 1.4 "Code" shall mean the United States Internal Revenue Code of 1986, including effective date and transition rules (whether or not codified). Any reference herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of future law. 6 1.5 "Committee" shall mean a committee of at least two Directors appointed from time to time by the Board, having the duties and authority set forth herein in addition to any other authority granted by the Board. In selecting the Committee, the Board shall consider (i) the benefits under Section 162(m) of the Code of having a Committee composed of Outside Directors for Options granted to Covered Employees, if and when and to the extent such Section applies to the Company, and (ii) the benefits under Rule 16b-3 of having a Committee composed of either the entire Board or a Committee of at least two Directors who are Non-Employee Directors for Options granted to or held by any Section 16 Insider, if and when such rule applies with respect to officers and directors of the Company. At any time that the Board shall not have appointed a committee as described above, any reference herein to the Committee shall mean the Board. 1.6 "Company" shall mean WebMD, Inc., a Georgia corporation. 1.7 "Covered Employees" shall have the meaning set forth in Code Section 162(m)(3) and the regulations promulgated thereunder. 1.8 "Director" shall mean a member of the Board and any person who is an advisory, honorary or emeritus director of the Company if such person is considered a director for the purposes of Section 16 of the Exchange Act, as determined by reference to such Section 16 and to the rules, regulations, judicial decisions, and interpretative or "no-action" positions with respect thereto of the Securities and Exchange Commission, as the same may be in effect or set forth from time to time. 1.9 "Disinterested Person" shall have the meaning set forth in Rule 16b-3 under the Exchange Act, as the same may be in effect from time to time, or in any successor rule thereto, and shall be determined for all purposes under the Plan according to interpretative or "no-action" positions with respect thereto issued by the Securities and Exchange Commission. 1.10 "Employee" shall mean an employee of the Employer. 1.11 "Employer" shall mean the corporation that employs a Grantee. 1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934. Any reference herein to a specific section of the Exchange Act shall be deemed to include a reference to any corresponding provision of future law. 1.13 "Exercise Price" shall mean the price at which an Optionee may purpose a share of Stock under a Stock Option Agreement. 1.14 "Fair Market Value" on any date shall mean (i) the closing sales price of the Stock, regular way, on such date on the national securities exchange having the greatest volume of trading in the Stock during the thirty-day period preceding the day the value is to be determine or, if such exchange was not open for trading on such date, the next preceding date on which it was open; (ii) if the Stock is not traded on any national securities exchange, the average of the closing high bid and low asked prices of the Stock on the over-the-counter market 2 7 on the day such value is to be determined, or in the absence of closing bids on such day, the closing bids on the next preceding day on which there were bids; or (iii) if the Stock also is not traded on the over-the-counter market, the fair market value as determined in good faith by the Board or the Committee based on such relevant facts as may be available to the Board, which may include opinions of independent experts, the price at which recent sales have been made, the book value of the Stock, and the Company's current and future earnings. 1.15 "Grantee" shall mean a portion who is an Optionee or a person who has received an Award of Restricted Stock. 1.16 "Incentive Stock Option" shall mean an option to purchase any stock of the Company which complies with and is subject to term, limitations, and conditions of Section 422 of the Code and any regulations promulgated with respect thereto. 1.17 "Non-Employee Director" shall have the meaning set forth in Rule 16b-3 under the Exchange Act, as the same may be in effect from time to time, or in any successor rule thereto, and shall be determined for all purposes under the Plan according to interpretative or "no-action" positions with respect thereto issued by the Securities and Exchange Commission. 1.18 "Officer" shall mean a person who constitutes an officer of the Company for the purposes of Section 16 of the Exchange Act, as determined by reference to such Section 16 and to the rules, regulations, judicial decisions, and interpretative or "no-action" positions with respect thereto of the Securities and Exchange Commission, as the same may be in effect or set forth from time to time. 1.19 "Option" shall mean an option, whether or not an Incentive Stock Option, to purchase Stock granted pursuant to the provisions of Article VI hereof. 1.20 "Optionee" shall mean a person to whom an Option has been granted hereunder. 1.21 "Outside Director" shall have the meaning set forth in Code Section 162 and the regulators promulgated thereunder. 1.22 "Parent" shall mean any corporation (other than the Employer) in an unbroken chain of corporations ending with the Employer if, at the time of grant (or modification) of the Option, each of the corporations other than the Employer owns stock possessing 50 percent or more of the total combined voting power of the classes of stock in one of the other corporations in such chain. 1.23 "Permitted Transferee" shall mean, with respect to an Optionee, any member of such Optionee's immediate family and any charitable, religious, scientific, or educational organization, contributions to which are deductible for federal or state income tax purposes, and any trust or other vehicle for the benefit of such a family member or organization. 1.24 "Plan" shall mean the WebMD, Inc., Amended and Restated 1997 Stock Incentive Plan, the terms of which are set forth herein. 3 8 1.25 "Purchasable" shall refer to Stock which may be purchased by an Optionee under the terms of this Plan on or after a certain date specified in the applicable Stock Option Agreement. 1.26 "Qualified Domestic Relations Order" shall have the meaning set forth in the Code or in the Employee Retirement Income Security Act of 1974, or the rules and regulations promulgated under the Code or such Act. 1.27 "Reload Option" shall have the meaning set forth in Section 6.8 hereof. 1.28 "Restricted Stock" shall mean Stock issued, subject to restrictions, to a Grantee pursuant to Article VII hereof. 1.29 "Restriction Agreement" shall mean the agreement setting forth the terms of an Award and executed by a Grantee as provided in Section 7.1 hereof. 1.30 "Section 16 Insider" shall mean any person who is subject to the provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2 promulgated pursuant to the Exchange Act. 1.31 "Stock" shall mean the Common Stock, no par value, of the Company, as adjusted pursuant to Section 5.2 hereof. 1.32 "Stock Option Agreement" shall mean an agreement between the Company and an Optionee under which the Optionee may purchase Stock hereunder, a sample form of which is attached hereto as Exhibit A (which form may be varied by the Committee in granting an Option). 1.33 "Subsidiary" shall mean any corporation (other than the Employer) in an unbroken chain of corporations beginning with the Employer if, at the time of the grant (or modification) of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. ARTICLE II THE PLAN 2.1 Name. This plan shall be known as the "WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan." 2.2 Purpose. The purpose of the Plan is to advance the interests of the Company, its Subsidiaries and its shareholders by affording certain employees, Officers and Directors of the Company and its Subsidiaries as well as key consultants and advisors to the Company or any Subsidiaries and employees of the Company's suppliers and contractors an opportunity to acquire or increase their proprietary interests in the Company. The objective of the issuance of the Options and Awards is to promote the growth and profitability of the Company and its 4 9 Subsidiaries because the Grantees will be provided with an additional incentive to achieve the Company's objectives through participation in its success and growth and by encouraging their continued association with or service to the Company. In particular, with respect to the issuance of Options to employees, the purpose of the Plan also includes to attract, retain and reward employees, to increase identification with the Company's interests, and to provide incentive for remaining with and enhancing the value of the Company over the long term. 2.3 Effective Date. The Plan shall become effective on January 1, 1997, provided, however, that the Plan shall terminate, and all Options or Awards therefore granted or awarded shall become void and may not be exercised, on January 1, 1998, if the shareholders of the Company shall not by that date have approved the Plan's adoption. ARTICLE III PARTICIPANTS The class of persons eligible to participate in the Plan shall consist of all persons whose participation in the Plan the Committee determines to be in the best interests of the Company, which shall include, but not be limited to, employees, Officers and Directors, including but not limited to executive personnel, of the Company or any Subsidiary, as well as key consultants and advisors to the Company or any Subsidiary and employees of the Company's suppliers and contractors. ARTICLE IV ADMINISTRATION 4.1 Duties and Powers of the Committee. The Plan shall be administered by the Committee. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it may deem necessary. The Committee shall have the power to act by unanimous written consent in lieu of a meeting and to meet telephonically. In administering the Plan, the Committee's actions and determinations shall be binding on all interested parties. The Committee shall have the power to grant Options or Awards in accordance with the provisions of the Plan and may grant Options and Awards singly, in combination, or in tandem. Subject to the provisions of the Plan, the Committee shall have the discretion and authority to determine those individuals to whom Options or Awards will be granted and whether such Options shall be accompanied by the right to receive Reload Options, the number of shares of Stock subject to each Option or Award, such other matters as are specified herein, and any other terms and conditions of a Stock Option Agreement or Restriction Agreement. The Committee shall also have the discretion and authority to delegate to any Officer its powers to grant Options or Awards under the Plan to any person who is an employee of the Company but not an Officer or Director. To the extent not inconsistent with the provisions of the Plan, the Committee may give a Grantee an election to surrender an Option or Award in exchange for the grant of a new Option or Award, and shall have the authority to amend or modify an outstanding Option Agreement or Restriction Agreement, or to waive any provision thereof, provided that the Grantee consents to such action. 5 10 4.2 Interpretation; Rules. Subject to the express provisions of the Plan, the Committee also shall have complete authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the details and provisions of each Stock Option Agreement, and to make all other determinations necessary or advisable for the administration of the Plan, including, without limitation, the amending or altering of the Plan and any Options or Awards granted hereunder as may be required to comply with or to conform to any federal, state, or local laws or regulations. 4.3 No Liability. Neither any member of the Board nor any member of the Committee shall be liable to any person for any act or determination made in good faith with respect to the Plan or any Option or Award granted hereunder. 4.4 Majority Rule. A majority of the members of the Committee shall constitute a quorum, and any action taken by a majority at a meeting at which a quorum is present, or any action taken without a meeting evidenced by a writing executed by all the members of the Committee, shall constitute the action of the Committee. 4.5 Company Assistance. The Company shall supply full and timely information to the Committee on all matters relating to eligible persons, their employment, death, retirement, disability, or other termination of employment, and such other pertinent facts as the Committee may require. The Company shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. ARTICLE V SHARES OF STOCK SUBJECT TO PLAN 5.1 Limitations. Subject to any antidilution adjustment pursuant to the provisions of Section 5.2 hereof, the maximum number of shares of Stock that may be issued hereunder shall be five million (5,000,000). The maximum number of shares of Stock with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one Covered Employee shall be 500,000, and the maximum fair market value of any Awards (other than Options and SARs) that may be received by a Covered Employee (less any consideration paid for such Award) during any one calendar year under the Plan shall be $2,000,000. Notwithstanding anything to the contrary herein, in the event of the applicability of Section 162(m) of the Code to any grant hereunder, such grant shall comply with the requirements of the exclusion from the limitation on deductibility of compensation under Section 162(m) of the Code. Any or all shares of Stock subject to the Plan may be issued in any combination of Incentive Stock Options, non-Incentive Stock Options, or Restricted Stock, and the amount of Stock subject to the Plan may be increased from time to time in accordance with Article IX, provided that the total number of shares of Stock issuable pursuant to Incentive Stock Options may not be increased to more than five million (5,000,000) (other than pursuant to antidilution adjustments) without shareholder approval. Shares subject to an Option or issued as an Award may be either authorized and unissued shares or shares issued and later acquired by the Company. The shares covered by any unexercised portion of an Option that has terminated for any reason (except as set forth in the following paragraph), or any forfeited portion of an Award, may again be optioned or awarded under the Plan, and such shares shall 6 11 not be considered as having been optioned or issued in computing the number of shares of Stock remaining available for option or award hereunder. In the event of the issuance of Options in respect of options to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any Subsidiary of the Company), to the extent that such issuance shall not be inconsistent with the terms, limitations and conditions of Code section 422 or Rule 16b-3 under the Exchange Act, the aggregate number of shares of Stock for which Options may be granted hereunder shall automatically be increased by the number of shares subject to the Options so issued; provided, however, that the aggregate number of shares of Stock for which Options may be granted hereunder shall automatically be decreased by the number of shares covered by any unexercised portion of an Option so issued that has terminated for any reason, and the shares subject to any such unexercised portion may not be optioned to any other person. 5.2 Antidilution. (a) If at any time following October 15, 1997, the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, reorganization, recapitalization, reclassification, combination or exchange of shares, stock split or stock dividend, in the event that any spin-off, spin-out or other distribution of assets materially affects the price of the Company's stock, or in the event of any assumption and conversion to the Plan by the Company of an acquired company's outstanding options grants: (i) The aggregate number and kind of shares of Stock for which Options or Awards may be granted hereunder shall be adjusted proportionately by the Committee; and (ii) The rights of Optionees (concerning the number of shares subject to Options and the Exercise Price) under outstanding Options and the rights of the holders of Awards (concerning the terms and conditions of the lapse of any then-remaining restrictions), shall be adjusted proportionately by the Committee. (b) If the Company shall be a party to any reorganization in which it does not survive, involving merger, consolidation, or acquisition of the stock or substantially all the assets of the Company, the Committee, in its discretion, may: (i) notwithstanding other provisions hereof, declare that all Options granted under the Plan shall become exercisable immediately notwithstanding the provisions of the respective Option Agreements regarding exercisability, that all such Options shall terminate 30 days after the Committee gives written notice of the immediate right to exercise all such Options and of the decision to terminate all Options not exercised within such 30-day period, and that all then-remaining restrictions pertaining to Awards under the Plan shall immediately lapse; and /or 7 12 (ii) notify all Grantees that all Options or Awards granted under the Plan shall be assumed by the successor corporation or substituted on an equitable basis with options or restricted stock issued by such successor corporation. (c) If the Company is to be liquidated or dissolved in connection with a reorganization described in Section 5.2(b), the provisions of such section shall apply. In all other instances, the adoption of a plan of dissolution or liquidation of the Company shall, notwithstanding other provisions hereof, cause all then-remaining restrictions pertaining to Awards under the Plan to lapse, and shall cause every Option outstanding under the Plan to terminate to the extent not exercised prior to the adoption of the plan of dissolution or liquidation by the shareholders, provided that, notwithstanding other provisions hereof, the Committee may declare all Options granted under the Plan to be exercisable at any time on or before the fifth business day following such adoption notwithstanding the provisions of the respective Option Agreements regarding exercisability. (d) The adjustments described in paragraphs (a) through (c) of this section, and the manner of their application, shall be determined solely by the Committee, and any such adjustment may provide for the elimination of fractional share interests; provided, however, that any adjustment made by the Board or the Committee shall be made in a manner that will not cause an Incentive Stock Option to be other than an incentive stock option under applicable statutory and regulatory provisions. The adjustments required under this Article shall apply to any successors of the Company and shall be made regardless of the number or type of successive events requiring such adjustments. ARTICLE VI OPTIONS 6.1 Types of Options Granted. The Committee may, under this Plan, grant either Incentive Stock Options or Options which do not qualify as Incentive Stock Options. Within the limitations provided in this Plan, both types of Options may be granted to the same person at the same time, or at different times, under different terms and conditions, as long as the terms and conditions of each Option are consistent with the provisions of the Plan. Without limitation of the foregoing, Options may be granted subject to conditions based on the financial performance of the Company or any other factor the Committee deems relevant. 6.2 Option Grant and Agreement. Each Option granted hereunder shall be evidenced by minutes of a meeting or the written consent of the Committee and by a written Stock Option Agreement executed by the Company and the Optionee. The terms of the Option, including the Option's duration, time or times of exercise, exercise price, whether the Option is intended to be an Incentive Stock Option, and whether the Option is to be accompanied by the right to receive a Reload Option, shall be stated in the Option Agreement. No Incentive Stock Option may be granted more than ten years after the earlier to occur of the effective date of the Plan or the date the Plan is approved by the Company's shareholders. Separate Option Agreements may be used for Options intended to be Incentive Stock Options and those not so intended, but any failure to use such separate agreements shall not 8 13 invalidate, or otherwise adversely affect the Optionee's interest in, the Options evidenced thereby. 6.3 Optionee Limitations. The Committee shall not grant an Incentive Stock Option to any person who, at the time the Incentive Stock Option is granted: (a) is not an employee of the Company or any of its Subsidiaries; or (b) owns or is considered to own stock possessing at least 10% of the total combined voting power of all classes of stock of the Company or any of its Parent or Subsidiary corporations; provided, however, that this limitation shall not apply if at the time an Incentive Stock Option is granted the Exercise Price is at least 110% of the Fair Market Value of the Stock subject to such Option and such Option by its terms would not be exercisable after five years from the date on which the Option is granted. For the purpose of this subsection (b), a person shall be considered to own (i) the stock owned, directly or indirectly, by or for his or her brothers or sisters (whether by whole or half blood), spouse, ancestors and lineal descendants; (ii) the stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust in proportion to such person's stock interest, partnership interest or beneficial interest therein; and (iii) the stock which such persons may purchase under any outstanding options of the Employer or of any Parent or Subsidiary of the Employer. 6.4 $100,000 Limitation. Except as provided below, the Committee shall not grant an Incentive Stock Option to, or modify the exercise provisions of outstanding Incentive Stock Options held by, any person who, at the time the Incentive Stock Option is granted (or modified), would thereby receive or hold any Incentive Stock Options of the Employer and any Parent or Subsidiary of the Employer such that the aggregate Fair Market Value (determined as of the respective dates of grant or modification of each option) of the stock with respect to which such Incentive Stock Options are exercisable for the first time during any calendar year is in excess of $100,000 (or such other limit as may be prescribed by the Code from time to time); provided that the foregoing restriction on modification of outstanding Incentive Stock Options shall not preclude the Committee from modifying an outstanding Incentive Stock Option if, as a result of such modification and with the consent of the Optionee, such Option no longer constitutes an Incentive Stock Option; and provided that, if the $100,000 limitation (or such other limitation prescribed by the Code) described in this Section is exceeded, the Incentive Stock Option the granting or modification of which resulted in the exceeding of such limit shall be treated as an Incentive Stock Option up to the limitation and the excess shall be treated as an Option not qualifying as an Incentive Stock Option. 6.5 Exercise Price. The Exercise Price of the Stock subject to each Option shall be determined by the Committee. Subject to the provisions of Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall not be less than the Fair Market Value of the Stock as of the date the Option is granted (or in the case of an Incentive Stock Option that is subsequently modified, on the date of such modification). The Exercise Price of a non-Incentive Stock Option shall not be less than the Fair Market Value of the Stock on the date that the Option is granted. 9 14 6.6 Exercise Period. The period for the exercise of each Option granted hereunder shall be determined by the Committee, but the Option Agreement with respect to each Option intended to be an Incentive Stock Option shall provide that such Option shall not be exercisable after the expiration of ten years from the date of grant (or modification) of the Option. In addition, no Option granted to a Section 16 Insider shall be exercisable prior to the expiration of six months from the date such Option is granted, other than in the case of the death or disability of the Optionee, and no Option shall be exercisable prior to shareholder approval of the Plan. 6.7 Option Exercise. (a) Unless otherwise provided in the Stock Option Agreement or Section 6.6 hereof, an Option may be exercised at any time or from time to time during the term of the Option as to any or all full shares which have become Purchasable under the provisions of the Option, but not at any time as to less than 100 shares unless the remaining shares that have become so Purchasable are less than 100 shares. The Committee shall have the authority to prescribe in any Stock Option Agreement that the Option may be exercised only in accordance with a vesting schedule during the term of the Option. (b) An Option shall be exercised by (i) delivery to the Company at its principal office a written notice of exercise with respect to a specified number of shares of Stock and (ii) payment to the Company at that office of the full amount of the Exercise Price for such number of shares in accordance with Section 6.7(c). If requested by an Optionee, an Option may be exercised with the involvement of a stockbroker in accordance with the federal margin rules set forth in Regulation T (in which case the certificates representing the underlying shares will be delivered by the Company directly to the stockbroker). (c) The Exercise Price is to be paid in full in cash upon the exercise of the Option and the Company shall not be required to deliver certificates for the shares purchased until such payment has been made; provided, however, that in lieu of cash, all or any portion of the Exercise Price may be paid by tendering to the Company shares of Stock duly endorsed for transfer and owned by the Optionee, or by authorization to the Company to withhold shares of Stock otherwise issuable upon exercise of the Option, in each case to be credited against the Exercise Price at the Fair Market Value of such shares on the date of exercise (however, no fractional shares may be so transferred, and the Company shall not be obligated to make any cash payments in consideration of any excess of the aggregate Fair Market Value of shares transferred over the aggregate option price); provided further, that the Board may provide in a Stock Option Agreement or may otherwise determine in its sole discretion at the time of exercise that, in lieu of cash or shares, all or a portion of the Exercise Price may be paid by the Optionee's execution of a recourse note equal to the Exercise Price or relevant portion thereof, subject to compliance with applicable state and federal laws, rules and regulations. (d) In addition to and at the time of payment of the Exercise Price, the Optionee shall pay to the Company in cash the full amount of any federal, state, and local income, employment, or other withholding taxes applicable to the taxable income of such Optionee resulting from such exercise; provided, however, that in the discretion of the 10 15 Committee any Option Agreement may provide that all or any portion of such tax obligations, together with additional taxes not exceeding the actual additional taxes to be owed by the Optionee as a result of such exercise, may, upon the irrevocable election of the Optionee, be paid by tendering to the Company whole shares of Stock duly endorsed for transfer and owned by the Optionee, or by authorization to the Company to withhold shares of Stock otherwise issuable upon exercise of the Option, in either case in that number of shares having a Fair Market Value on the date of exercise equal to the amount of such taxes thereby being paid, and subject to such restrictions as to the approval and timing of any such election as the committee may from time to time determine to be necessary or appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3 under the Exchange Act, if such rule is applicable. (e) The holder of an Option shall not have any of the rights of a shareholder with respect to the shares of Stock subject to the Option until such shares have been issued and transferred to the Optionee upon the exercise of the Option. 6.8 Reload Options. (a) The Committee may specify in a Stock Option Agreement (or may otherwise determine in its sole discretion) that Reload Option shall be granted, without further action of the Committee, (i) to an Optionee who exercises an Option (including a reload Option) by surrendering shares of Stock in payment of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for the same number of shares as are surrendered to pay such amounts, (iii) as of the date of such payment and at an Exercise Price equal to the Fair Market Value of the Stock on such date, and (iv) otherwise on the same terms and conditions as the Option whose exercise has occasioned such payment, except as provided below and subject to such other contingencies, conditions, or other terms as the Committee shall specify at the time such exercised Option is granted; provided that the shares surrendered by a Section 16 Insider in payment as provided above must have been held by the Optionee for at least six months prior to such surrender. (b) Unless provided otherwise in the Stock Option Agreement, a Reload Option may not be exercised by an Optionee (i) prior to the end of a one-year period from the date that the Reload Option is granted, and (ii) unless the Optionee retains beneficial ownership of the shares of Stock issued to such Optionee upon exercise of the Option referred to above in Section 6.8(a) for a period of one year from the date of such exercise. 6.9 Nontransferability of Option. (a) No Incentive Stock Option shall be transferable by an Optionee other than by will or the laws of descent and distribution, and no Option shall be transferable by an Optionee who is a Section 16 Insider prior to shareholder approval of the Plan or, after such approval, other than by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. During the lifetime of an Optionee, Incentive Stock Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). 11 16 (b) Except as provided above and unless provided otherwise in the Stock Option Agreement, Optionees and Permitted Transferees of Optionees may transfer Options to any person, including a broker-dealer, but the Option shall not be transferable by any person other than an Optionee or Permitted Transferee except by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. Except as provided above and unless provided otherwise in the Stock Option Agreement, Options shall be exercisable by any person to whom such Option has been validly transferred. 6.10 Termination of Employment or Service. The Committee shall have the power to specify, with respect to the Options granted to a particular Optionee, the effect upon such Optionee's right to exercise an Option of termination of such Optionee's employment or service under various circumstances, which effect may include immediate or deferred termination of such Optionee's rights under an Option, or acceleration of the date at which an Option may be exercised in full; provided, however, that in no event may an Incentive Stock Option be exercised after the expiration of ten years from the date of grant thereof. 6.11 Employment Rights. Nothing in the Plan or in any Stock Option Agreement shall confer on any person any right to continue in the employ of the Company or any of its Subsidiaries, or shall interfere in any way with the right of the Company or any of its Subsidiaries to terminate such person's employment at any time. 6.12 Certain Successor Options. To the extend not inconsistent with the terms, limitations and conditions of Code section 422 and any regulations promulgated with respect thereto, an Option issued in respect of an option held by an employee to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any Subsidiary of the Company) may contain terms that differ from those stated in this Article, but solely to the extent necessary to preserve for any such employee the rights and benefits contained in such predecessor option, or to satisfy the requirements of Code section 424(a). 6.13 Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable on an accelerated basis in the event that a Change in Control occurs with respect to the Company. If the Committee finds that there is a reasonable possibility that, within the succeeding six months, a Change in Control will occur with respect to the Company, then the Committee may determine that all outstanding Options shall be exercisable on an accelerated basis. ARTICLE VII RESTRICTED STOCK 7.1 Awards of Restricted Stock. The Committee may grant Awards of Restricted Stock, which shall be governed by a Restriction Agreement between the Company and the Grantee. Each Restriction Agreement shall contain such restrictions, terms, and conditions as the Committee may, in its discretion, determine, and may require that an appropriate legend be placed on the certificates evidencing the subject Restricted Stock. 12 17 Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the named of the Grantee as soon as reasonably practicable after the Award is granted, provided that the Grantee has executed the Restriction Agreement governing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute the foregoing documents within any time period prescribed by the Committee, the Award shall be void. At the discretion of the Committee, Shares issued in connection with an Award shall be deposited together with the stock powers with an escrow agent designated by the Committee. Unless the Committee determines otherwise and as set forth in the Restriction Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall have all of the rights of a shareholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares. 7.2 Non-Transferability. Until any restrictions upon Restricted Stock awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3, such shares of Restricted Stock shall not be transferable other than by will or the laws of descent and distribution, or pursuant to a Qualified Domestic Relations Order, nor shall they be delivered to the Grantee. 7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded hereunder shall lapse at such time or times (but, with respect to any award to a Grantee who is also a Section 16 Insider, not less than six months after the date of the Award) and on such terms and conditions as the Committee may, in its discretion, determine at the time the Award is granted or thereafter. 7.4 Termination of Employment. The Committee shall have the power to specify, with respect to each Award granted to any particular Grantee, the effect upon such Grantee's rights with respect to such Restricted Stock of the termination of such Grantee's employment under various circumstances, which effect may include immediate or deferred forfeiture of such Restricted Stock or acceleration of the date at which any then-remaining restrictions shall lapse. 7.5 Treatment of Dividends. At the time an Award of Restricted Stock is made the Committee may, in its discretion, determine that the payment to the Grantee of any dividends, or a specified portion thereof, declared or paid on such Restricted Stock shall be (i) deferred until the lapsing of the relevant restrictions and (ii) held by the Company for the account of the Grantee until such lapsing. In the event of such deferral, there shall be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum determined by the Committee. Payment of deferred dividends, together with interest thereon, shall be made upon the lapsing of restrictions imposed on such Restricted Stock, and any dividends deferred (together with any interest thereon) in respect of Restricted Stock shall be forfeited upon any forfeiture of such Restricted Stock. 7.6 Delivery of Shares. Except as provided otherwise in Article VIII below, within a reasonable period of time following the lapse of the restrictions on shares of Restricted Stock, the Committee shall cause a stock certificate to be delivered to the Grantee with respect to such shares and such shares shall be free of all restrictions hereunder. 13 18 ARTICLE VIII STOCK CERTIFICATES The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any Option granted hereunder or any portion thereof, or deliver any certificate for shares of Restricted Stock granted hereunder, prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which the Stock is then listed; (b) The completion of any registration or other qualification of such shares which the Committee shall deem necessary or advisable under any federal or state law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body; (c) The obtaining of any approval or other clearance from any federal or state governmental agency or body which the Committee shall determine to be necessary or advisable; and (d) The lapse of such reasonable period of time following the exercise of the Option as the Board from time to time may establish for reasons of administrative convenience. Stock certificates issued and delivered to Grantees shall bear such restrictive legends as the Company shall deem necessary or advisable pursuant to applicable federal and state securities laws. ARTICLE IX TERMINATION AND AMENDMENT OF PLAN The Board may at any time terminate the Plan, and may at any time and from time to time and in any respect amend the Plan; provided, however, that the Board (unless its actions are approved or ratified by the shareholders of the Company within twelve months of the date that the Board amends the Plan) may not amend the Plan to: (a) Increase the total number of shares of Stock issuable pursuant to Incentive Stock Options under the Plan or materially increase the number of shares of Stock subject to the Plan, in each case except as contemplated in Section 5.2 hereof; (b) Change the class of employees eligible to receive Incentive Stock Options that may participate in the Plan or materially change the class of persons that may participate in the Plan; or (c) Otherwise materially increase the benefits accruing to participate under the Plan. 14 19 No termination or amendment modification of the Plan shall affect adversely a Grantee's rights under an Option Agreement or Restriction Agreement without the consent of the Grantee or his legal representative. ARTICLE X RELATIONSHIP TO OTHER COMPENSATION PLANS The adoption of the Plan shall not affect any other stock option, incentive, or other compensation plans in effect for the Company or any of its Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of its Subsidiaries from establishing any other form of incentive or other compensation plan for employees or Directors of the Company or any of its Subsidiaries. ARTICLE XI MISCELLANEOUS 11.1 Performance Goals. The Committee may (but need not) determine that any Award granted pursuant to this Plan to an Optionee (including, but not limited to, Optionees who are Covered Employees) shall be determined solely on the basis of (a) the achievement by the Company or a Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Company's or Subsidiary's stock price, (c) the achievement by a business unit of the Company or Subsidiary of a specified target, or target growth in, net income or earnings per share, or (d) any combination of the goals set forth in (a) through (c) above. If an Award is made on such basis, the Committee has the right for any reason to reduce (but not increase) the Award, notwithstanding the achievement of a specified goal. If an Award is made on such basis, the Committee shall establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Code Section 162(m) or the regulations thereunder). Any payment of an Award granted with performance goals shall be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied. 11.2 Replacement or Amended Grants. At the sole discretion of the Committee, and subject to the terms of the Plan, the Committee may modify outstanding Options or Awards or accept the surrender of outstanding Options or Awards and grant new Options or Awards in substitution for them. However no modification of an Option or Award shall adversely affect a Grantee's rights under an Option Agreement or Restriction Agreement without the consent of the Grantee or his legal representative. 11.3 Forfeiture Provisions. (a) Restricted Stock. If the holder of any shares of Restricted Stock provides services to a competitor of the Company or any of its Subsidiaries, whether as an employee, officer, director, independent contractor, consultant, agent, or otherwise, such services being of a nature that can reasonably be expected to involve the skills and experience used or developed by such holder while an Employee, then any shares Restricted Stock held by such 15 20 holder subject to remaining restrictions shall be forfeited, subject in each case to a determination to the contrary by the Committee. (b) Options. The sample Stock Option Agreement attached hereto as Exhibit A contains provisions with respect to forfeiture of option gain, forfeiture of unexercised Options and set-off provisions, in each case applicable to Options granted to Employees. 11.4 Plan Binding on Successors. The Plan shall be binding upon the successors and assigns of the Company. 11.5 Singular, Plural; Gender. Whenever used herein, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender. 11.6 Headings, etc. Headings of Articles and Sections hereof are inserted for convenience and reference; they do not constitute part of the Plan. 11.7 Interpretation. With respect to Section 16 Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Plan administrators fails to so comply, it shall be deemed void to the extent permitted by law and deemed advisable by the Plan administrators. The deduction limits of Code Section 162(m) and the regulations thereunder do not apply to the Company until such time, if any, as any class of the Company's common equity securities is registered under Section 12 of the 1934 Act or the Company otherwise meets the definition of a "publicly held corporation" under Treasury Regulation 1.162-27(c) or any successor provision. Upon becoming a publicly held corporation, the deduction limits of Code Section 162(m) and the regulations thereunder shall not apply to compensation payable under this Plan and the expiration of the reliance period described in Treasury Regulation 1.162-27(f) or any successor regulation. * * * * * 16 21 Exhibit A to WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan - Form of Stock Option Agreement WEBMD, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this ___ day of ________________, by and between WebMD, Inc., a Georgia corporation (the "Company"), and ________________ (the "Optionee"). WHEREAS, on ________________, the Board of Directors and shareholders of the Company adopted a stock option plan known as the "WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan" (the "Plan"); and WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company's common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan. NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Incorporation of Plan. This option is granted pursuant to the provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee. 2. Grant of Option. Subject to the terms, restrictions, limitations, and conditions stated herein, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the "Option") to purchase all or any part of the number of shares of the Company's Common Stock, no par value (the "Stock"), set forth on Schedule A attached hereto and incorporated herein by reference. The Option shall be exercisable in the amounts and at the time specified on Schedule A. The Option shall expire and shall not be exercisable on the date specified on Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10 hereof. Schedule A states whether the Option is intended to be an Incentive Stock Option. A-1 22 3. Purchase Price. The price per share to be paid by the Optionee for the shares subject to this Option (the "Exercise Price") shall be as specified on Schedule A, which price shall be an amount not less than the Fair Market Value of a share of Stock as of the Date of Grant (as defined in Section 11 below) if the Option is an Incentive Stock Option. 4. Exercise Terms. The Optionee must exercise the Option for at least the lesser of 100 shares or the number of shares of Purchasable Stock as to which the Option remains unexercised. In the event this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option. 5. Restrictions on Transferability. (a) No Incentive Stock Option shall be transferable by an Optionee other than by will or the laws of descent and distribution, and no Option shall be transferable by an Optionee who is a Section 16 Insider prior to shareholder approval of the Plan or, after such approval, other than by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. During the lifetime of an Optionee, Incentive Stock Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). (b) Except as provided above [and except list any other restrictions on transfer], Optionees and Permitted Transferees of Optionees may transfer Options to any person, including a broker-dealer, but the Option shall not be transferable by any person other than an Optionee or Permitted Transferee except by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. Except as provided above [and list any other specific exceptions], Options shall be exercisable by any person to whom such Option has been validly transferred. 6. Notice of Exercise of Option. This Option may be exercised by the Optionee, or by the Optionee's administrators, executors or personal representatives, by a written notice (in substantially the form of the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or mailed to the Company as specified in Section 14 hereof to the attention of the President or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Stock which the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or cashier's check payable to the Company in payment of the total Exercise Price applicable to such shares as provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or accompanied by stock transfer powers having a Fair Market Value equal to the total Exercise Price applicable to such shares purchased hereunder, or (iii) a certified or cashier's check accompanied by the number of shares of Stock whose Fair Market Value when added to the amount of the check equals the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee's A-2 23 administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option. 7. Adjustment in Option. The number of Shares subject to this Option, the Exercise Price and other matters are subject to adjustment during the term of this Option in accordance with Section 5.2 of the Plan. 8. Termination of Employment. (a) Except as otherwise specified in Schedule A hereto, in the event of the termination of the Optionee's employment with the Company or any of its Subsidiaries, other than a termination that is either (i) for cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability or retirement, the Optionee may exercise this Option at any time within 30 days after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. (b) Except as specified in Schedule A attached hereto, in the event of a termination of the Optionee's employment that is either (i) for cause or (ii) voluntary on the part of the Optionee and without the written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. (c) Unless and to the extent otherwise provided in Exhibit A hereto, in the event of the retirement of the Optionee at the normal retirement date as prescribed from time to time by the Company or any Subsidiary, the Optionee shall continue to have the right to exercise any Options for shares which were Purchasable at the date of the Optionee's retirement. This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its Subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its Subsidiaries. 9. Disabled Optionee. In the event of termination of employment because of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her personal representative) may exercise this Option at any time within three months after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. 10. Death of Optionee. Except as otherwise set forth in Schedule A with respect to the rights of the Optionee upon termination of employment under Section 8(a) above, hereof, in the event of the Optionee's death while employed by the Company or any of its Subsidiaries or within three months after a termination of such employment (if such termination was neither (i) for cause nor (ii) voluntary on the part of the Optionee and without the written consent of the Company), the appropriate persons described in Section 6 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 5 hereof may exercise this Option at any time within a period ending on the earlier of (a) the last day of the three month A-3 24 period following the Optionee's death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, this Option may be so exercised to the extent of the number of shares that were Purchasable hereunder at the date of death. If the Optionee's employment terminated prior to his or her death, this Option may be exercised only to the extent of the number of shares covered by this Option which were Purchasable hereunder at the date of such termination. 11. Date of Grant. This Option was granted by the Board of Directors of the Company on the date set forth in Schedule A (the "Date of Grant"). 12. Compliance with Regulatory Matters. The Optionee acknowledges that the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section. 13. Restriction on Disposition of Shares. The shares purchased pursuant to the exercise of an Incentive Stock Option shall not be transferred by the Optionee except pursuant to the Optionee's will or the laws of descent and distribution until such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option. 14. Stock Option Forfeiture Provisions. The purpose of the Company's issuance of Options to Employees is to attract, retain and reward Employees, to increase their stock ownership and identification with the Company's interests, and to provide incentive for remaining with and enhancing the value of the Company over the long term. In return for granting this Option to Employee, please acknowledge by signing below that Employee has read and agrees to the following: (a) Forfeiture of option gain and unexercised Options if Employee engages in certain activities. If, at any time within (a) the term of this Option or (b) within one year after termination of employment or (c) within one year after the exercise any portion of this Option, whichever is the latest, Optionee engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including but not limited to: (i) conduct related to Optionee's employment for which either criminal or civil penalties against Optionee may be sought, (ii) violation of Company policies, including, without limitation, the Company's insider trading policy, (iii) accepting employment with or serving as a consultant, advisor or in any other capacity to an employer that is in competition with or acting against the interest of the Company, including employing or recruiting any present, former or future employee of the Company, (iv) disclosing or misusing any confidential information or material concerning the Company, or (v) participating in a hostile takeover attempt, then (1) this Option shall terminate effective the date on which Optionee enters into such activity, unless A-4 25 terminating sooner by operation of another term or condition of this Option or the Plan, and (2) any option gain realized by Optionee from exercising all or a portion of this Option shall be paid by Optionee to the Company. (b) Right of Set-off. By accepting this Agreement, Optionee consents to a deduction from any amounts the Company owes Optionee from time to time (including amounts owed to Optionee as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Optionee by the Company), to the extent of the amounts Optionee owes the Company under paragraphs (a) and (b) of this Section 14 above. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount Optionee owes it, calculated as set forth above, Optionee agrees to pay immediately the unpaid balance to the Company. (c) Committee Discretion. Optionee may be released from Optionee's obligations under paragraphs (a), (b) and (c) of this Section 14 only if the Committee (or its duly appointed agent) determines in its sole discretion that such action is in the best interests of the Company. 15. Miscellaneous. (a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns. (b) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Georgia. (c) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, upon actual delivery thereof to the designated recipient, or three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to the executive offices of the Company at 400 The Lenox Building, 3399 Peachtree Road, N.E., Atlanta, Georgia 30326. (d) This Agreement may not be modified except in writing executed by each of the parties hereto. (e) THE OPTIONEE ACKNOWLEDGES THAT THIS OPTION AND ALL SHARES OF STOCK ACQUIRED PURSUANT TO THE EXERCISE OF THIS OPTION ARE DEEMED TO BE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED PURSUANT TO THE SECURITIES ACT OF 1933 AND, THEREFORE, RESALE OF SUCH SHARES MUST BE MADE PURSUANT TO THE REGISTRATION PROVISIONS OF SUCH ACT OR AN EXEMPTION THEREFROM. IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock Option Agreement to be executed on behalf of the Company and the Company's seal to be affixed hereto and attested by the Secretary or an Assistant Secretary of the Company, and the A-5 26 Optionee has executed this Stock Option Agreement under seal, all as of the day and year first above written. COMPANY: WEBMD, INC. Attest: By: - --------------------------- ------------------------------- Secretary Name: [SEAL] ----------------------------- Title: ---------------------------- OPTIONEE: ----------------------------------- Name: ----------------------------- Address: --------------------------- --------------------------- --------------------------- A-6 27 SCHEDULE A TO STOCK OPTION AGREEMENT BETWEEN WEBMD, INC. AND [Name of Optionee] Dated __________________ 1. Number of Shares Subject to Option: ________________ Shares. 2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option. 3. Option Exercise Price: $__________ per Share. 4. Date of Grant: ____________________________ 5. Option Vesting Schedule: Check one: [ ] Options are exercisable with respect to all shares on or after the date hereof [ ] Options are exercisable with respect to the number of shares indicated below on or after the date indicated next to the number of shares: No. of Shares Vesting Date ------------- ------------ 6. Option Exercise Period: Check One: [ ] All options expire and are void unless exercised on or before __________________________. [ ] Options expire and are void unless exercised on or before the date indicated next to the number of shares: No. of Shares Expiration Date ------------- --------------- 28 7. Effect of Termination of Employment of Optionee (if different from that set forth in Sections 8 and 10 of the Stock Option Agreement): 29 SCHEDULE B TO STOCK OPTION AGREEMENT BETWEEN WEBMD, INC. AND [Name of Optionee] Dated ____________ NOTICE OF EXERCISE The undersigned hereby notifies WebMD, Inc. (the "Company") of this election to exercise the undersigned's stock option to purchase _______ shares of the Company's common stock, no par value (the "Common Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the undersigned and the Company dated _____________. Accompanying this Notice is (1) a certified or a cashier's check in the amount of $_________ payable to the Company, and/or (2)________ shares of the Company's Common Stock presently owned by the undersigned and duly endorsed or accompanied by stock transfer powers, having an aggregate Fair Market Value (as defined in the WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan) as of the date hereof of $______, such amounts being equal, in the aggregate, to the purchase price per share set forth in Section 3 of the Agreement multiplied by the number of shares being purchased hereby (in each instance subject to appropriate adjustment pursuant to Section 7 of the Agreement). IN WITNESS WHEREOF, the undersigned has set his hand and seal, this _____ day of ________, _________. OPTIONEE [OR OPTIONEE'S ADMINISTRATOR, EXECUTOR OR PERSONAL REPRESENTATIVE] ---------------------------------- Name: Position (if other than Optionee): 30 AMENDMENT TO THE WEBMD, INC. AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN This Amendment ("Amendment") to the WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan (the "Plan") is made and executed this 19th day of March, 1999, to be effective as of the date hereof. WHEREAS, the Board of Directors of WebMD, Inc. (the "Corporation") has deemed it to be in the best interests of the Corporation and its shareholders to effect certain amendments to the Plan pursuant to Article IX of the Plan, which amendments do not require shareholder approval; NOW, THEREFORE, in accordance with Article IX of the Plan, the Plan is hereby amended as follows: 1. PERMITTED TRANSFEREES. The current Section 1.23 of the Plan is hereby deleted in its entirety and the following is substituted therefor: 1.23 "Permitted Transferee" with respect to any Optionee means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Optionee's household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interests, a foundation in which these persons (or the Optionee) control the management of assets, and any other entity in which these persons (or the Optionee) own more than fifty percent of the voting interests. 2. TRANSFERABILITY OF OPTIONS. The current Section 6.9 of the Plan is hereby deleted in its entirety and the following is substituted therefor: 6.9 Restrictions on Transferability. No Option shall be assignable or transferable by the Optionee other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Option under the Plan; provided, however, that the Committee may (but need not) permit transfers to Permitted Transferees of the Optionee where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any factors 31 deemed relevant, including without limitation, any state or federal tax or securities laws or regulations applicable to transferable options. During the lifetime of an Optionee, Incentive Stock Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed) or by any Permitted Transferee to whom such Option has been validly transferred as set forth above. 3. ELIMINATION OF FORFEITURE PROVISIONS. The current Section 11.3 of the Plan is hereby deleted in its entirety, and the current Sections 11.4, 11.5, 11.6 and 11.7 are renumbered accordingly. 4. AMENDMENTS TO EXHIBIT A TO THE PLAN. (a) The current Section 5 of Exhibit A to the Plan is hereby deleted in its entirety and the following is substituted therefor: 5. Restrictions on Transferability. This Option is not assignable or transferable by the Optionee other than by will or the laws of descent and distribution or, unless this Option is an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Option under the Plan; provided, however, that the Committee may (but need not) permit transfers to Permitted Transferees of the Optionee where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (ii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, any state or federal tax or securities laws or regulations applicable to transferable options. During the lifetime of the Optionee, this Option shall be exercisable only by the Optionee (or by the Optionee's guardian or legal representative, should one be appointed) or by any Permitted Transferee to whom such Option has been validly transferred as set forth above. (b) The last sentence of the current Section 6 of Exhibit A to the Plan is hereby deleted in its entirety and the following is substituted therefor: Any shares of Stock so surrendered in full or partial payment of the Exercise Price shall have been held by the Optionee for at least six months. Upon receipt of any such notice and accompanying payment, as subject to the terms hereof, the Company agrees to issue to the Optionee (or the person exercising the Option) stock certificates for the number of shares specified in such notice registered in the name of the person exercising the Option. Notwithstanding the above exercise procedures, if requested by the Optionee, the Option may be exercised with the involvement of a stockbroker in a "cashless exercise" transaction -2- 32 conducted in accordance with the federal margin rules set forth in Regulation T of the Federal Reserve Board (in which case the certificates representing the underlying shares will be delivered by the Company directly to the stockbroker). (c) The current Sections 13 and 14 of Exhibit A to the Plan are hereby deleted in their entirety and the current Section 15 is renumbered as Section 13. 5. EFFECT OF AMENDMENT. As modified hereby, the provisions of the Plan, as heretofore amended, shall remain in full force and effect, and the plan shall be restated, as amended hereby, in its entirety. IN WITNESS WHEREOF, the Corporation has caused this Amendment to be duly executed as of the date first above written. WEBMD, Inc. By: /s/ JEFF ARNOLD ------------------------------- Name: Jeff Arnold Title: CEO -3- 33 AMENDMENT TO THE WEBMD, INC. AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN This Amendment ("Amendment") to the WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan (the "Plan") is made and executed this 7th day of April, 1999, to be effective as of the date of the approval thereof by the shareholders of the WebMD, Inc. (the "Corporation"). WHEREAS, the Board of Directors of the Corporation has deemed it to be in the best interests of the Corporation and its shareholders to increase the number of shares available for issuance under the Plan; and WHEREAS, pursuant to Article IX of the Plan, such amendment requires shareholder approval; NOW, THEREFORE, subject to approval of the shareholders of the Corporation, the Plan is hereby amended as follows: 1. AVAILABLE SHARES. Section 5.1 of the Plan is hereby amended by deleting the term "five million (5,000,000)" as it appears in the first and fourth sentences thereof and substituting therefor, in each case, the term "six million (6,000,000)". 2. EFFECT OF AMENDMENT. As modified hereby, the provisions of the Plan, as heretofore amended, shall remain in full force and effect, and the Plan shall be restated, as amended hereby, in its entirety. IN WITNESS WHEREOF, the Corporation has caused this Amendment to be duly executed as of the date first above written. WEBMD, INC. By: /s/ JEFFREY T. ARNOLD ------------------------------------ Name: JEFFREY T. ARNOLD Title: Chairman & CEO 34 AMENDMENTS TO THE WEBMD, INC., SECOND AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN This Amendment ("Amendment") to the WebMD, Inc. Second Amended and Restated 1997 Stock Incentive Plan (the "Plan") is made and executed as of the 17th day of August, 1999, to be effective as of the date hereof. WHEREAS, the Board of Directors of the Corporation has deemed it to be in the best interests of the Corporation and its shareholders to provide a definite termination date, as required by California law; and WHEREAS, pursuant to Article IX of the Plan, such amendment does not require shareholder approval; NOW, THEREFORE, the Plan is hereby amended as follows: 1. TERMINATION DATE. Article IX of the Plan is hereby amended by inserting as the first two sentences thereof the following sentences: "No Options or Awards may be granted under the Plan after January 1, 2007. Any Options or Awards outstanding on January 1, 2007 shall continue to be outstanding for the remainder of their respective terms in accordance with the provisions of the Plan and the applicable award agreement." 2. EFFECT OF AMENDMENT. As modified hereby, the provisions of the Plan, as heretofore amended, shall remain in full force and effect, and the Plan shall be restated, as amended hereby, in its entirety. IN WITNESS WHEREOF, the Corporation has caused this Amendment to be duly executed as of the date first above written. WEBMD,INC. By: /s/ JEFF ARNOLD ------------------------------------ Name: Jeff Arnold Title: Chairman & CEO EX-10.3 6 DIRECTOR STOCK OPTION PLAN OF WEBMD, INC. 1 EXHIBIT 10.3 DIRECTOR STOCK OPTION PLAN OF WEBMD, INC. ADOPTED: NOVEMBER 13, 1998 2 TABLE OF CONTENTS
Page ---- 1. Purpose..................................................................... 1 2. Definitions................................................................. 1 3. Total Aggregate Shares...................................................... 2 4. Rule 16b-3 Plan and Shareholder Approval.................................... 3 5. Type of Options............................................................. 3 6. Grants of Options........................................................... 3 7. Exercise Price, Vesting Schedule and Term of Option......................... 4 8. Exercise of Option.......................................................... 5 9. Termination of Option Period................................................ 5 10. Assignability of Options.................................................... 5 11. Adjustments................................................................. 5 12. Purchase for Investment..................................................... 6 13. Amendments, Modifications, Suspension or Discontinuance of this Plan........ 6 14. Governmental Regulation..................................................... 7 15. Miscellaneous............................................................... 8 16. Effective Date and Termination Date......................................... 8
i 3 DIRECTOR STOCK OPTION PLAN OF WEBMD, INC. 1. PURPOSE. The Director Stock Option Plan of WEBMD, INC. (the "Company") is intended as an incentive to retain, as directors of the Company, persons of training, experience and ability, to encourage the sense of proprietorship of such persons and to stimulate the active interest of such persons in the development and financial success of the Company. 2. DEFINITIONS. As used herein, the following terms shall have the meanings indicated: (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the Common Stock Series D of the Company, without par value per share, for so long as such Series of Common Stock remains outstanding or, if all Common Stock Series D of the Company has been converted into or exchanged for another class or series of securities, "Common Stock" shall mean such class or series of securities. (d) "Date of Grant" shall mean the date on which an Option is granted to an Eligible Person pursuant to Section 6(c) hereof. (e) "Director" shall mean a member of the Board. (f) "Eligible Person(s) shall mean those persons who are, as of a specified date, non-employee Directors of the Company. (g) "ERISA" shall mean the Employee Retirement Income Security Act, as amended. (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (i) "Fair Market Value" of a Share on any date of reference shall be the Closing Price on the business day preceding such date. For this purpose, the "Closing Price" of the Shares on any business day shall be: (i) if the Shares are listed or admitted for trading on any United States national securities exchange, the last reported sale price of Shares on such exchange, as reported in any newspaper of general circulation; (ii) if Shares are quoted on NASDAQ, or any similar system of automated dissemination of quotations of securities prices in common use, the average of the closing high bid and low asked quotations for such day of Shares on such system; (iii) if neither clause (i) or (ii) is applicable, the average of the high bid and low 1 4 asked quotations for Shares as reported by the National Quotation Bureau, Incorporated if at least two securities dealers have inserted both bid and asked quotations for Shares on at least five of the ten preceding days; (iv) in lieu of the above, if actual transactions in the Shares are reported on a consolidated transaction reporting system, the last sale price of the Shares for such day and on such system; or (v) prior to an Initial Public Offering, the fair market value of such Shares as determined by the Board which, in making such determination, shall consider and rely upon the prices at which securities of the Company have previously been sold in transactions between: (x) the Company and parties who were not, at the time of such sale, affiliated with the Company; and (y) parties who are were not, at the time of such sale, affiliated with the Company. (j) "Initial Grant Date" shall mean the date upon which this Plan is approved by the Board. (k) "Initial Public Offering" shall mean the offer and sale by the Company of its equity securities in a transaction underwritten by an investment banking firm following the completion of which (i) such equity securities are listed for trading on any national securities exchange or (ii) there are at least two market makers who are making a market in such equity securities through the NASDAQ National Market System. (l) "Nonqualified Stock Option" shall mean a stock option that is not an incentive stock option, as defined in Section 422 of the Code. (m) "Options" shall mean any option granted under this Plan. (n) "Option Agreement" shall mean an option agreement between the Company and an Optionee. (o) "Optionee" shall mean a person to whom an Option is granted under this Plan or any person who succeeds to the rights of such person under this Plan by reason of the death or disability of such person. (p) "Plan" shall mean this Director Stock Option Plan of WebMD, Inc. (r) "Shares(s)" shall mean a share or shares of the Common Stock. (q) "Subsidiary" shall mean any corporation (other than the Company) in any unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chains. 3. Total Aggregate Shares. Subject to the adjustments set forth in Section 11 hereof, a total of 1,000,000 Shares shall be subject to the Plan. The Shares subject to the Plan shall consist of unissued Shares or previously issued Shares reacquired and held by the Company, or any Subsidiary, and such number of Shares shall be and hereby is reserved for sale for such 2 5 purpose. Any of such Shares that may remain unsold and that are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan, the Company shall at all times reserve a sufficient number of Shares to meet the requirements of the Plan. Should any Option expire or be canceled prior to its exercise in full, the Shares theretofore subject to such Option may again be the subject of any Option under the Plan. 4. RULE 16b-3 PLAN AND SHAREHOLDER APPROVAL. The Company intends for this Plan to comply with the requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission pursuant to the Exchange Act. Accordingly, this Plan will be subject to approval by shareholders of the Company owning a majority of the issued and outstanding shares of Common Stock present or represented and entitled to vote at a meeting duly held in accordance with applicable law. 5. TYPE OF OPTIONS. An Option granted hereunder shall be a Nonqualified Stock Option. 6. GRANTS OF OPTIONS. (a) Options shall be granted only to Eligible Persons. Each Option shall be evidenced by an Option Agreement, which shall contain terms that are not inconsistent with this Plan or applicable laws. (b) The Options granted to Directors under this Plan shall be in addition to regular director's fees, if any, or other benefits, if any, with respect to the Director's position with the Company or its Subsidiaries. Neither the Plan nor any Options granted under the Plan shall confer upon any person any right to continue to serve as a Director. (c) Options shall automatically be granted as follows: (i) on the Initial Grant Date, each Eligible Person shall automatically be granted an Option to acquire 20,000 shares of Common Stock for his service as a Director; (ii) each Eligible Person who becomes an Eligible Person by reason of being elected as a Director after the Initial Grant Date of the adoption of this Plan shall automatically be granted on the date of his initial election an Option to acquire 20,000 shares of Common Stock for his service as a Director; and (iii) on January 1 of each calendar year, each Eligible Person shall automatically be granted an Option to acquire 5,000 shares of Common Stock for his service as a Director. 3 6 (d) Except for the automatic grants of Options under Section 6(c), no Options shall otherwise be granted hereunder, and the Board shall not have any discretion with respect to the grant of Options within the meaning of Rule 16b-3 promulgated under the Exchange Act, or any successor rule. 7. EXERCISE PRICE, VESTING SCHEDULE AND TERM OF OPTION. (a) The exercise price of each Share placed under an Option pursuant to this Plan shall be the Fair Market Value of such Share on the Date of Grant. (b) Each grant shall vest immediately on the Date of Grant. (c) Each Option granted under this Plan shall have a term of ten years from the Date of Grant of such Option. 8. EXERCISE OF OPTION. (a) After the six-month anniversary of the Date of Grant of an Option, such Option may be exercised at any time and from time to time during the term of such Option, in whole or in part. (b) Options may be exercised: (i) during the Optionee's lifetime, solely by the Optionee; (ii) if an Option has been assigned pursuant to Section 10 hereof, by the successor Optionee; or (iii) after Optionee's death, by the personal representative of the Optionee's estate or the person or persons entitled thereto under his will or under the laws of descent and distribution. (c) An Option shall be deemed exercised when: (i) the Company has received written notice of such exercise delivered to the Company in accordance with the notice provisions of the applicable Option Agreement; (ii) full payment of the aggregate exercise price of the Shares as to which the Option is exercised has been tendered to the Company; and (iii) arrangements that are satisfactory to the Board in its sole discretion have been made for the Optionee's payment to the Company of the amount, if any, that the Company determines to be necessary for the Company to withhold in accordance with the applicable federal or state income tax withholding requirements. (d) The exercise price of any Shares purchased shall be paid, at the option of the Optionee (i) solely in cash by certified check, cashier's check, money order or personal check (if approved by the Board); (ii) in Common Stock, of any series theretofore owned by such Optionee; or (iii) without the exchange of any funds, by the Optionee electing to receive the full number of shares purchasable under the Option then being exercised less that number of Shares that have a value (i.e., the Fair Market Value of the Shares less the Exercise Price with respect to such Shares) being equal to the Exercise Price (or by a combination of the above); provided, however, that, in the case of the preceding clause (ii), if the Optionee acquired such stock to be surrendered directly or indirectly from the Company, he shall have owned such stock for six months prior to using such stock to exercise an Option; provided, further, however, that such 4 7 exercise transaction shall not result in a violation of Section 16 of the Exchange Act. For purposes of determining the amount, if any, of the exercise price satisfied by payment in Common Stock, such Common Stock shall be valued at its Fair Market Value on the date of exercise. Any Common Stock delivered in satisfaction of all or a portion of the exercise price shall be appropriately endorsed for transfer and assignment to the Company. (e) The Optionee shall not be, nor have any of the rights or privileges of, a shareholder of the Company with respect to any Shares purchasable upon the exercise of any part of an Option unless and until certificates representing such Shares shall have been issued by the Company to the Optionee. 9. TERMINATION OF OPTION PERIOD. The unexercised portion of an Option shall automatically and without notice terminate and become null and void and be forfeited upon the earliest to occur of the following: (i) if the Optionee's position as a Director of the Company terminates, other than by reason of such Optionee's death or disability, 180 days after the date that the Optionee's position as a Director of the Company terminates; (ii) one year after the death of Optionee; (iii) one year after the date on which the Optionee's position as Director is terminated by reason of a mental or physical disability determined by a medical doctor satisfactory to the Company; or (iv) five years after the Date of Grant of such Option. 10. ASSIGNABILITY OF OPTIONS. No Option shall be assignable or otherwise transferable, except to members of the Optionee's immediate family or by will, or the laws of descent and distribution, and no Option shall be transferrable by an Optionee in violation of Section 16 of the Exchange Act. 11. ADJUSTMENTS. (a) If at any time there shall be an increase or decrease in the number of issued and outstanding Shares, through the declaration of a stock dividend or through any recapitalization resulting in a stock split, combination or exchange of Shares, then appropriate proportional adjustment shall be made in the number of Shares (and, with respect to Options, the exercise price per Share): (i) subject to outstanding Options; (ii) reserved under the Plan; and (iii) granted as subsequent Options. (b) In the event of a merger, consolidation or other reorganization of the Company under the terms of which the Company is not the surviving corporation, but the surviving corporation elects to assume an Option, each Optionee shall be entitled to receive, upon 5 8 the exercise of such Option, with respect to each Share: (i) the number of shares of stock of the surviving corporation (or equity interest in any other entity); and (ii) any other notes, evidences of indebtedness or other property, that the Optionee would have received in connection with such merger, consolidation or other reorganization had he exercised the Option with respect to such Shares immediately prior to such merger, consolidation or other reorganization. (c) Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class or securities convertible into shares of capital stock of any class, either in connection with direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect and no adjustments by reason thereof shall be made with respect to, the number of or exercise price of Shares then subject to outstanding Options granted under the Plan. (d) Without limiting the generality of the foregoing, the existence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate: (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issuance by the Company of debt securities or preferred stock that would rank above the Shares subject to outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. 12. PURCHASE FOR INVESTMENT. As a condition of any issuance of a stock certificate for Shares, the Board may obtain such agreements or undertakings, if any, as it may deem necessary or advisable to assure compliance with any provision of this Plan or any law or regulation, including, but not limited to, the following: (a) a representation and warranty by the Optionee to the Company, at the time his Option is exercised, that he is acquiring the Shares to be issued to him for investment and not with a view to, or for sale in connection with, the distribution of any such Shares; and (b) a representation, warranty or agreement to be bound by any legends that are, in the opinion of the Board, necessary or appropriate to comply with the provisions of any securities law deemed by the Board to be applicable to the issuance of the Shares and are endorsed upon the certificates representing the Shares. 13. AMENDMENTS, MODIFICATIONS, SUSPENSION OR DISCONTINUANCE OF THIS PLAN. For the purpose of complying with changes in the Code or ERISA, the Board may amend, modify, suspend or terminate the Plan at any time. For the purpose of meeting or addressing any other changes in legal requirements or any other purpose, the Board may amend, modify, suspend or terminate the Plan only once every six months. 6 9 14. GOVERNMENTAL REGULATION. This Plan and the granting of Options and the exercise of Options hereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. 15. MISCELLANEOUS. (a) If any provision of this Plan is held invalid for any reason, such holding shall not affect the remaining provisions hereof, but instead this Plan shall be construed and enforced as if such provision had never been included in this Plan. (b) This Plan shall be governed by the laws of the State of Georgia. (c) Headings contained in this Plan are for convenience only and shall in no manner be construed as part of this Plan. (d) Any reference to the masculine, feminine or neuter gender shall be a reference to such other gender as is appropriate. 7 10 16. EFFECTIVE DATE AND TERMINATION DATE. The effective date of this Plan is November 13, 1998, the date on which the Board adopted this Plan, but is subject to the approval of the holders of a majority of the common stock, without series designation, present either in person or by proxy and entitled to vote at a duly held meeting of the shareholders of the Company at which a quorum is present representing a majority of all outstanding voting common stock, without series designation. In the event that such shareholder approval is not obtained, all options granted pursuant to the Plan shall be null and void. The Plan shall terminate on the tenth anniversary of the effective date. WEBMD, INC. By: ----------------------------------- Name (Print): ---------------------- Title: ----------------------------- 8 11 AMENDMENT TO THE DIRECTOR STOCK OPTION PLAN OF WEBMD, INC. This Amendment ("Amendment") to the Director Stock Option Plan of WebMD, Inc. (the "Plan") is made and executed this 19th day of March, 1999, to be effective as of the date hereof. WHEREAS, the Board of Directors of WebMD, Inc. (the "Corporation") has deemed it to be in the best interests of the Corporation and its shareholders to effect an amendment to the Plan pursuant to Section 13 of the Plan, which amendment does not require shareholder approval; NOW, THEREFORE, in accordance with Section 13 of the Plan, the Plan is hereby amended as follows: 1. TERMINATION OF OPTION PERIOD. The current Section 9(iv) of the Plan is hereby deleted in its entirety and the following is substituted therefor: (iv) ten years after the Date of Grant of such Option. 2. EFFECT OF AMENDMENT. As modified hereby, the provisions of the Plan, as heretofore amended, shall remain in full force and effect, and the Plan shall be restated, as amended hereby in its entirety. IN WITNESS WHEREOF, the Corporation has caused this Amendment to be duly executed as of the date first above written. WEBMD, INC. By: /s/ JEFF ARNOLD ------------------------------- Name: Jeff Arnold ------------------------ Title: CEO ------------------------ EX-10.4 7 DIRECT MEDICAL 1997 STOCK OPTION/STOCK INSSUANCE 1 EXHIBIT 10.4 DIRECT MEDICAL KNOWLEDGE, INC. 1997 STOCK OPTION/STOCK ISSUANCE PLAN ARTICLE ONE GENERAL PROVISIONS I. PURPOSE OF THE PLAN This 1997 Stock Option/Stock Issuance Plan is intended to promote the interests of Direct Medical Knowledge, Inc., a California corporation, by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix. II. STRUCTURE OF THE PLAN A. The Plan shall be divided into two (2) separate equity programs: (i) the Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, and (ii) the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary). B. The provisions of Articles One and Four shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan. 2 III. ADMINISTRATION OF THE PLAN A. The Plan shall be administered by the Board. However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee. B. The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any option or stock issuance thereunder. IV. ELIGIBILITY A. The persons eligible to participate in the Plan are as follows: (i) Employees, (ii) non-employee members of the Board or the non-employee members of the board of directors of any Parent or Subsidiary, and (iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). B. The Plan Administrator shall have full authority to determine, (i) with respect to the grants under the Option Grant Program, which eligible persons are to receive the option grants, the time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding, and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive such stock issuances, the time or times when those issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to be paid by the Participant for such shares. 2. 3 C. The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program. V. STOCK SUBJECT TO THE PLAN A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 350,000 shares. B. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) the options expire or terminate for any reason prior to exercise in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of Article Two. Unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the option exercise or direct issue price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation's preferred stock into shares of Common Stock. 3. 4 ARTICLE TWO OPTION GRANT PROGRAM I. OPTION TERMS Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. A. EXERCISE PRICE. 1. The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions: (i) The exercise price per share shall not be less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the option grant date. (ii) If the person to whom the option is granted is a 10% Shareholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section 1 of Article Four and the documents evidencing the option, be payable in cash or check made payable to the Corporation. Should the Common Stock be registered under Section 12(g) of the 1934 Act at the time the option is exercised, then the exercise price may also be paid as follows: (i) in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or (ii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions (A) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, 4. 5 state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (B) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option grant date. C. EFFECT OF TERMINATION OF SERVICE. 1. The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death: (i) Should the Optionee cease to remain in Service for any reason other than death, Disability or Misconduct, then the Optionee shall have a period of three (3) months following the date of such cessation of Service during which to exercise each outstanding option held by such Optionee. (ii) Should Optionee's Service terminate by reason of Disability, then the Optionee shall have a period of twelve (12) months following the date of such cessation of Service during which to exercise each outstanding option held by such Optionee. (iii) If the Optionee dies while holding an outstanding option, then the personal representative of his or her estate or the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance shall have a twelve (12)-month period following the date of the Optionee's death to exercise such option. (iv) Under no circumstances, however, shall any such option be exercisable after the specified expiration of the option term. (v) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable 5. 6 exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to be outstanding with respect to any and all option shares for which the option is not otherwise at the time exercisable or in which the Optionee is not otherwise at that time vested. (vi) Should Optionee's Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to remain outstanding. 2. The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: (i) extend the period of time for which the option is to remain exercisable following Optionee's cessation of Service or death from the limited period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or (ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Service. D. SHAREHOLDER RIGHTS. The holder of an option shall have no shareholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. E. UNVESTED SHARES. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. The Plan Administrator may not impose a vesting schedule upon the option grant or any shares of Common Stock subject to that option which is more restrictive than twenty percent (20%) per year vesting, with the initial vesting to occur not later than one (1) year after the option grant date. However, such limitation shall not be applicable 6 7 to any option grants made to individuals who are officers of the Corporation, non-employee Board members or independent consultants. F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first registered under Section 12(g) of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Optionee (or any successor in interest) of any shares of Common Stock issued under the Plan. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right. G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, the option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee's death. H. WITHHOLDING. The Corporation's obligation to deliver shares of Common Stock upon the exercise of any options granted under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. II. INCENTIVE OPTIONS The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of the Plan shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options shall not be subject to the terms of this Section II. A. ELIGIBILITY. Incentive Options may only be granted to Employees. B. EXERCISE PRICE. The exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one (1) calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 7 8 D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Shareholder, then the option term shall not exceed five (5) years measured from the option grant date. III. CORPORATE TRANSACTION A. The shares subject to each option outstanding under the Plan at the time of a Corporate Transaction shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, the shares subject to an outstanding option shall not vest on such an accelerated basis if and to the extent: (i) such option is assumed by the successor corporation (or parent thereof) in the Corporate Transaction and the Corporation's repurchase rights with respect to the unvested option shares are concurrently assigned to such successor corporation (or parent thereof) or (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. B. All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. C. Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). D. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction, had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to (i) the number and class of securities available for issuance under the Plan following the consummation of such Corporate Transaction and (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. 8 9 E. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration (in whole or in part) of one or more outstanding options (and the immediate termination of the Corporation's repurchase rights with respect to the shares subject to those options) upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed in the Corporate Transaction. F. The Plan Administrator shall also have full power and authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to structure such option so that the shares subject to that option will automatically vest on an accelerated basis should the Optionee's Service terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which the option is assumed and the repurchase rights applicable to those shares do not otherwise terminate. Any option so accelerated shall remain exercisable for the fully-vested option shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation's outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate on an accelerated basis, and the shares subject to those terminated rights shall accordingly vest at that time. G. The portion of any Incentive Option accelerated in connection with a Corporate Transaction shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. H. The grant of options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. IV. CANCELLATION AND REGRANT OF OPTIONS The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Plan and to grant in substitution therefor new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new option grant date. 9. 10 ARTICLE THREE STOCK ISSUANCE PROGRAM 1. STOCK ISSUANCE TERMS Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. A. Purchase Price. 1. The purchase price per share shall be fixed by the Plan Administrator but shall not be less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the issue date. However, the purchase price per share of Common Stock issued to a 10% Shareholder shall not be less than one hundred and ten percent (110%) of such Fair Market Value. 2. Subject to the provisions of Section I of Article Four, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: (i) cash or check made payable to the Corporation, or (ii) past services rendered to the Corporation (or any Parent or Subsidiary). B. Vesting Provisions. 1. Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant's period of Service or upon attainment of specified performance objectives. However, the Plan Administrator may not impose a vesting schedule upon any stock issuance effected under the Stock Issuance Program which is more restrictive than twenty percent (20%) per year vesting, with initial vesting to occur not later than one (1) year after the issuance date. Such limitation shall not apply to any Common Stock issuances made to the officers of the Corporation, non-employee Board members or independent consultants. 10. 11 2. Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant's unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant's unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 3. The Participant shall have full shareholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant's interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 4. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further shareholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant's purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such surrendered shares. 5. The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to such shares. Such waiver shall result in the immediate vesting of the Participant's interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant's cessation of Service or the attainment or non-attainment of the applicable performance objectives. C. First Refusal Rights. Until such time as the Common Stock is first registered under Section 12(g) of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Participant (or any successor in interest) of any shares of Common Stock issued under the Stock Issuance Program. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right. 11. 12 II. CORPORATE TRANSACTION A. Upon the occurrence of a Corporate Transaction, all outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's repurchase rights with respect to those shares remain outstanding, to provide that those rights shall automatically terminate on an accelerated basis, and the shares of Common Stock subject to those terminated rights shall immediately vest, in the event the Participant's Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which those repurchase rights are assigned to the successor corporation (or parent thereof). III. SHARE ESCROW/LEGENDS Unvested shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares. 12. 13 ARTICLE FOUR MISCELLANEOUS I. FINANCING The Plan Administrator may permit any Optionee or Participant to pay the option exercise price or the purchase price for shares issued to such person under the Plan by delivering a full-recourse, interest-bearing promissory note payable in one or more installments and secured by the purchased shares. However, any promissory note delivered by a consultant must be secured by collateral in addition to the purchased shares of Common Stock. In no event shall the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. II. EFFECTIVE DATE AND TERM OF PLAN A. The Plan shall become effective when adopted by the Board, but no option granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation's shareholders. If such shareholder approval is not obtained within twelve (12) months after the date of the Board's adoption of the Plan, then all options previously granted under the Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. Subject to such limitation, the Plan Administrator may grant options and issue shares under the Plan at any time after the effective date of the Plan and before the date fixed herein for termination of the Plan. B. The Plan shall terminate upon the earliest of (i) the expiration of the ten (10)-year period measured from the date the Plan is adopted by the Board, (ii) the date on which all shares available for issuance under the Plan shall have been issued as vested shares or (iii) the termination of all outstanding options in connection with a Corporate Transaction. All options and unvested stock issuances outstanding at that time under the Plan shall continue to have full force and effect in accordance with the provisions of the documents evidencing such options or issuances. III. AMENDMENT OF THE PLAN A. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the 13. 14 Participant consents to such amendment or modification. In addition, certain amendments may require shareholder approval to applicable laws and regulations. B. Options may be granted under the Option Grant Program and shares may be issued under the Stock Issuance Program which are in each instance in excess of the number of shares of Common Stock then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained shareholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such shareholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. IV. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. V. WITHHOLDING The Corporation's obligation to deliver shares of Common Stock upon the exercise of any options or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. VI. REGULATORY APPROVALS The implementation of the Plan, the granting of any options under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any option or (ii) under the Stock Issuance Program shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the Shares of Common Stock issued pursuant to it. VII. NO EMPLOYMENT OR SERVICE RIGHTS Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby 14. 15 expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause. VIII. FINANCIAL REPORTS The Corporation shall deliver a balance sheet and an income statement at least annually to each individual holding an outstanding option under the Plan, unless such individual is a key Employee whose duties in connection with the Corporation (or any Parent or Subsidiary) assure such individual access to equivalent information. 15. 16 APPENDIX The following definitions shall be in effect under this Plan: A. BOARD shall mean the Corporation's Board of Directors. B. CODE shall mean the Internal Revenue Code of 1986, as amended. C. COMMITTEE shall mean a committee of two (2) or more Board members appointed by the Board to exercise one or more administrative functions under the Plan. D. COMMON STOCK shall mean the Corporation's common stock. E. CORPORATE TRANSACTION shall mean either of the following shareholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. F. CORPORATION shall mean Direct Medical Knowledge, Inc., a California corporation, and any successor corporation to all or substantially all of the assets or voting stock of Direct Medical Knowledge, Inc. which shall by appropriate action adopt the Plan. G. DISABILITY shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment and shall be determined by the Plan Administrator on the basis of such medical evidence as the Plan Administrator deems warranted under the circumstances. H. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. I. EXERCISE DATE shall mean the date on which the Corporation shall have received written notice of the option exercise. A-1. 17 J. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (iii) If the Common Stock is at the time neither listed on any Stock Exchange nor traded on the Nasdaq National Market, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate. K. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422. L. INVOLUNTARY TERMINATION shall mean the termination of the Service of any individual which occurs by reason of: (i) such individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or (ii) such individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonuses under any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected without the individual's consent. A-2. 18 M. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary). N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended. O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. P. OPTION GRANT PROGRAM shall mean the option grant program in effect under the Plan. Q. OPTIONEE shall mean any person to whom an option is granted under the Plan. R. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. S. PARTICIPANT shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. T. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance Plan, as set forth in this document. U. PLAN ADMINISTRATOR shall mean either the Board or the Committee acting in its capacity as administrator of the Plan. V. SERVICE shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant. W. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange. A-3. 19 X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program. Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan. Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. AA. 10% SHAREHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). A-4. 20 DIRECT MEDICAL KNOWLEDGE, INC. STOCK PURCHASE AGREEMENT AGREEMENT made this _____ day of ____________ 199__, by and between Direct Medical Knowledge, Inc., a California corporation, and ________________, Optionee under the Corporation's 1997 Stock Option/Stock Issuance Plan. All capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement or in the attached Appendix. A. EXERCISE OF OPTION 1. EXERCISE. Optionee hereby purchases _______ shares of Common Stock (the "Purchased Shares") pursuant to that certain option (the "Option") granted Optionee on _________________, 199__ (the "Grant Date") to purchase up to ____________ shares of Common Stock (the "Option Shares") under the Plan at the exercise price of $___________ per share (the "Exercise Price"). 2. PAYMENT. Concurrently with the delivery of this Agreement to the Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in accordance with the provisions of the Option Agreement and shall deliver whatever additional documents may be required by the Option Agreement as a condition for exercise, together with a duly-executed blank Assignment Separate from Certificate (in the form attached hereto as Exhibit I) with respect to the Purchased Shares. 3. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises the Repurchase Right or the First Refusal Right, Optionee (or any successor in interest) shall have the rights of a shareholder (including voting, dividend and liquidation rights) with respect to the Purchased Shares, subject, however, to the transfer restrictions of Articles B and C. B. SECURITIES LAW COMPLIANCE 1. RESTRICTED SECURITIES. The Purchased Shares have not been registered under the 1933 Act and are being issued to Optionee in reliance upon the exemption from such registration provided by SEC Rule 701 for stock issuances under compensatory benefit plans such as the Plan. Optionee hereby confirms that Optionee has been informed that the Purchase Shares are restricted securities under the 1933 Act and may not be resold or transferred unless the Purchased Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Optionee hereby acknowledges that Optionee is prepared to hold the Purchased Shares for an indefinite 21 period and that Optionee is aware that SEC Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted securities is not presently available to exempt the resale of the Purchased Shares from the registration requirements of the 1933 Act. 2. Restrictions on Disposition of Purchased Shares. Optionee shall make no disposition of the Purchased Shares (other than a Permitted Transfer) unless and until there is compliance with all of the following requirements: (i) Optionee shall have provided the Corporation with a written summary of the terms and conditions of the proposed disposition. (ii) Optionee shall have complied with all requirements of this Agreement Applicable to the disposition of the Purchased Shares. (iii) Optionee shall have provided the Corporation with written assurances, in form and substance satisfactory to the Corporation, that (a) the proposed disposition does not require registration of the Purchased Shares under the 1933 Act or (b) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken. The Corporation shall not be required (i) to transfer on its books any Purchased Shares which have been sold or transferred in violation of the provisions of this Agreement or (ii) to treat as the owner of the Purchased Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Purchased Shares have been transferred in contravention of this Agreement. 3. Restrictive Legends. The stock certificated for the Purchased Shares shall be endorsed with one or more of the following restrictive legends: "The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares may not be sold or offered for sale in the absence of (a) an effective registration statement for the shares under such Act, (b) a "no action" letter of the Securities and Exchange Commission with respect to such sale or offer or (c) satisfactory assurances to the Corporation that registration under such Act is not required with respect to such sale or offer." "The shares represented by this Certificate are subject to certain repurchase rights and rights of first refusal granted to the Corporation and accordingly may not be sold, assigned, transferred, encumbered, or in any manner disposed of except in conformity with the terms of a written 2 22 agreement dated ___________, 199__ between the Corporation and the registered holder of the shares (or the predecessor in interest to the shares). A copy of such agreement is maintained at the Corporation's principal corporate offices." C. TRANSFER RESTRICTIONS 1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer, Optionee shall not transfer, assign, encumber or otherwise dispose of any of the Purchased Shares which are subject to the Repurchase Right. In addition, Purchased Shares which are released from the Repurchase Right shall not be transferred, assigned, encumbered or otherwise disposed of in contravention of the First Refusal Right or the Market Stand-Off. 2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation) to whom the Purchased Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Corporation that such person is bound by the provisions of this Agreement and that the transferred shares are subject to (i) the Repurchase Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same extent such shares would be so subject if retained by Optionee. 3. MARKET STAND-OFF. (a) In connection with an underwritten public offering by the Corporation of its equity securities pursuant to an effective registration statement filed under the 1933 Act, including the Corporation's initial public offering, Owner shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to, any Purchased Shares without the prior written consent of the Corporation or its underwriters. Such restriction (the "Market Stand-Off") shall be in effect for such period of time from and after the effective date of the final prospectus for the offering as may be requested by the Corporation or such underwriters. In no event, however, shall such period exceed one hundred eighty (180) days and the Market Stand-Off shall in all events terminate two (2) years after the effective date of the Corporation's initial public offering. (b) Owner shall be subject to the Market Stand-Off provided and only if the officers and directors of the Corporation are also subject to similar restrictions. (c) Any new, substituted or additional securities which are by reason of any Recapitalization or Reorganization distributed with respect to the Purchased Shares shall be immediately subject to the Market Stand-Off, to the same extent the Purchased Shares are at such time covered by such provisions. 3. 23 (d) In order to enforce the Market Stand-Off, the Corporation may impose stop-transfer instructions with respect to the Purchased Shares until the end of the applicable stand-off period. D. REPURCHASE RIGHT 1. GRANT. The Corporation is hereby granted the right (the "Repurchase Right"), exercisable at any time during the sixty (60)-day period following the date Optionee ceases for any reason to remain in Service or (if later) during the sixty (60)-day period following the execution date of this Agreement, to repurchase at the Exercise Price any or all of the Purchased Shares in which Optionee is not, at the time of his or her cessation of Service, vested in accordance with the Vesting Schedule applicable to those shares or the special acceleration provisions of Paragraph D.6 of this Agreement (such shares to be hereinafter referred to as the "Unvested Shares"). 2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be exercisable by written notice delivered to each Owner of the Unvested Shares prior to the expiration of the sixty (60)-day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice. The certificates representing the Unvested Shares to be repurchased shall be delivered to the Corporation on or before the close of business on the date specified for the repurchase. Concurrently with the receipt of such stock certificates, the Corporation shall pay to Owner, in cash or cash equivalents (including the cancellation of any purchase-money indebtedness), an amount equal to the Exercise Price previously paid for the Unvested Shares which are to be repurchased from Owner. 3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall terminate with respect to any Unvested Shares for which it is not timely exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate and cease to be exercisable with respect to any and all Purchased Shares in which Optionee vests in accordance with the Vesting Schedule. All Purchased Shares as to which the Repurchase Right lapses shall, however, remain subject to (i) the First Refusal Right and (ii) the Market Stand-Off. 4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more than one increment so that Optionee is a party to one or more other Stock Purchase Agreements (the "Prior Purchase Agreements") which are executed prior to the date of this Agreement, then the total number of Purchased Shares as to which Optionee shall be deemed to have a fully-vested interest under this Agreement and all Prior Purchase Agreements shall not exceed in the aggregate the number of Purchased Shares in which Optionee would otherwise at the time be vested, in accordance with the Vesting Schedule, had all the Purchased Shares (including those acquired under the Prior Purchase Agreements) been acquired exclusively under this Agreement. 4. 24 5. RECAPITALIZATION. Any new, substituted or additional securities or other property (including cash paid other than as a regular cash dividend) which is by reason of any Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to the Repurchase Right and any escrow requirements hereunder, but only to the extent the Purchased Shares are at the time covered by such right or escrow requirements. Appropriate adjustments to reflect such distribution shall be made to the number and/or class of Purchased Shares subject to this Agreement and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon the Corporation's capital structure; provided, however, that the aggregate purchase price shall remain the same. 6. CORPORATE TRANSACTION. (a) The Repurchase Right shall automatically terminate in its entirety, and all the Purchased Shares shall vest in full, immediately prior to the consummation of any Corporate Transaction, except to the extent the Repurchase Right is to be assigned to the successor entity in such Corporate Transaction. (b) To the extent the Repurchase Right remains in effect following a Corporate Transaction, such right shall apply to any new securities or other property (including any cash payments) received in exchange for the Purchased Shares in consummation of the Corporate Transaction, but only to the extent the Purchased Shares are at the time covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Right to reflect the effect of the Corporate Transaction upon the Corporation's capital structure; provided, however, that the aggregate purchase price shall remain the same. The new securities or other property (including any cash payments) issued or distributed with respect to the Purchased Shares in consummation of the Corporate Transaction shall be immediately deposited in escrow with the Corporation (or the successor entity) and shall not be released from escrow until Optionee vests in such securities or other property in accordance with the same Vesting Schedule in effect for the Purchased Shares. (c) The Repurchase Right may also terminate on an accelerated basis, and the Purchased Shares shall immediately vest in full, in accordance with the terms and conditions of any special addendum attached to this Agreement. E. RIGHT OF FIRST REFUSAL 1. GRANT. The Corporation is hereby granted the right of first refusal (the "First Refusal Right"), exercisable in connection with any proposed transfer of the Purchased Shares in which Optionee has vested in accordance with the provisions of Article D. For purposes of this Article E, the term "transfer" shall include any sale, assignment, pledge, encumbrance or other disposition of the Purchased Shares intended to be made by Owner, but shall not include any Permitted Transfer. 5. 25 2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of Purchased Shares in which Optionee has vested desires to accept a bona fide third-party offer for the transfer of any or all of such shares (the Purchased Shares subject to such offer to be hereinafter referred to as the "Target Shares"). Owner shall promptly (i) deliver to the Corporation written notice (the "Disposition Notice") of the terms of the offer, including the purchase price and the identity of the third-party offeror, and (ii) provide satisfactory proof that the disposition of the Target Shares to such third-party offeror would not be in contravention of the provisions set forth in Articles B and C. 3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a period of twenty-five (25) days following receipt of the Disposition Notice, have the right to repurchase any or all of the Target Shares subject to the Disposition Notice upon the same terms as those specified therein or upon such other terms (not materially different from those specified in the Disposition Notice) to which Owner consents. Such right shall be exercisable by delivery of written notice (the "Exercise Notice") to Owner prior to the expiration of the twenty-five (25)-day exercise period. If such right is exercised with respect to all the Target Shares, then the Corporation shall effect the repurchase of such shares, including payment of the purchase price, not more than five (5) business days after delivery of the Exercise Notice; and at such time the certificates representing the Target Shares shall be delivered to the Corporation. Should the purchase price specified in the Disposition Notice be payable in property other than cash or evidences of indebtedness, the Corporation shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. If Owner and the Corporation cannot agree on such cash value within ten (10) days after the Corporation's receipt of the Disposition Notice, the valuation shall be made by an appraiser of recognized standing selected by Owner and the Corporation of, if they cannot agree on an appraiser within twenty (20) days after the Corporation's receipt of the Disposition Notice, each shall select an appraiser of recognized standing and the two (2) appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be shared equally by Owner and the Corporation. The closing shall then be held on the later of (i) the fifth (5th) business day following delivery of the Exercise Notice or (ii) the fifth (5th) business day after such valuation shall have been made. 4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the Exercise Notice if not given to Owner prior to the expiration of the twenty-five (25)-day exercise period, Owner shall have a period of thirty (30) days thereafter in which to sell or otherwise dispose of the Target Shares to the third-party offeror identified in the Disposition Notice upon terms (including the purchase price) no more favorable to such third-party offeror than those specified in the Disposition Notice; provided, however, that any such sale or disposition must not be effected in contravention of the provisions of Articles B and C. The third-party offeror shall acquire the Target Shares free and clear of the First Refusal Right, but the acquired shares shall remain subject to the provisions of Article B and Paragraph 6. 26 C.3. In the event Owner does not effect such sale or disposition of the Target Shares within the specified thirty (30)-day period, the First Refusal Right shall continue to be applicable to any subsequent disposition of the Target Shares by Owner until such right lapses. 5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the Corporation makes a timely exercise of the First Refusal Right with respect to a portion, but not all, of the Target Shares specified in the Disposition Notice, Owner shall have the option, exercisable by written notice to the Corporation delivered within five (5) business days after Owner's receipt of the Exercise Notice, to effect the sale of the Target Shares pursuant to either of the following alternatives: (i) sale or other disposition of all the Target Shares to the third-party offeror identified in the Disposition Notice, but in full compliance with the requirements of Paragraph E.4, as if the Corporation did not exercise the First Refusal Right; or (ii) sale to the Corporation of the portion of the Target Shares which the Corporation has elected to purchase, such sale to be effected in substantial conformity with the provisions of Paragraph E.3. The First Refusal Right shall continue to be applicable to any subsequent disposition of the remaining Target Shares until such right lapses. Owner's failure to deliver timely notification to the Corporation shall be deemed to be an election by Owner to sell the Target Shares pursuant to alternative (i) above. 6. RECAPITALIZATION/REORGANIZATION. (a) Any new, substituted or additional securities or other property which is by reason of any Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to the First Refusal Right, but only to the extent the Purchased Shares are at the time covered by such right. (b) In the event of a Reorganization, the First Refusal Right shall remain in full force and effect and shall apply to the new capital stock or other property received in exchange for the Purchased Shares in consummation of the Reorganization, but only to the extent the Purchased Shares are at the time covered by such right. 7. LAPSE. The First Refusal Right shall lapse upon the earliest to occur of (i) the first date on which shares of the Common Stock are held of record by more than five hundred (500) persons, (ii) a determination is made by the Board that a public market exists for the outstanding shares of Common Stock or (iii) a firm commitment underwritten public offering, pursuant to an effective registration statement under the 1933 Act, covering the offer and sale of the Common Stock in the aggregate amount of at least ten million 7. 27 dollars ($10,000,000). However, the Market Stand-Off shall continue to remain in full force and effect following the lapse of the First Refusal Right. F. SPECIAL TAX ELECTION The acquisition of the Purchased Shares may result in adverse tax consequences which may be avoided or mitigated by filing an election under Code Section 83(b). Such election must be filed within thirty (30) days after the date of this Agreement. A description of the tax consequences applicable to the acquisition of the Purchased Shares and the form for making the Code Section 83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF. G. GENERAL PROVISIONS 1. ASSIGNMENT. The Corporation may assign the Repurchase Right and/or the First Refusal Right to any person or entity selected by the Board, including (without limitation) one or more shareholders of the Corporation. If the assignee of the Repurchase Right is other than (i) a wholly owned subsidiary of the Corporation or (ii) the parent corporation owning one hundred percent (100%) of the Corporation's outstanding capital stock, then such assignee must make a cash payment to the Corporation, upon the assignment of the Repurchase Right, in an amount equal to the excess (if any) of (i) the Fair Market Value of the Purchased Shares at the time subject to the assigned Repurchase Right over (ii) the aggregate repurchase price payable for the Purchased Shares. 2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee's Service at any time for any reason, with or without cause. 3. NOTICES. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such party's signature line on this Agreement or at such other address as such party may designate by ten (10) days advance written notice under this paragraph to all other parties to this Agreement. 8. 28 4. NO WAIVER. The failure of the Corporation in any instance to exercise the Repurchase Right or the First Refusal Right shall not constitute a waiver of any other repurchase rights and/or rights of first refusal that may subsequently arise under the provisions of this Agreement or any other agreement between the Corporation and Optionee. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 5. CANCELLATION OF SHARES. If the Corporation shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Purchased Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and the Corporation shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement. H. MISCELLANEOUS PROVISIONS 1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever additional action and execute whatever additional documents the Corporation may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Optionee or the Purchased Shares pursuant to the provisions of this Agreement. 2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan. 3. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without resort to that State's conflict-of-laws rules. 4. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and upon Optionee, Optionee's permitted assigns and the legal representatives, heirs and legatees of Optionee's estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms hereof. 9. 29 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above. DIRECT MEDICAL KNOWLEDGE, INC. By: _________________________________ Title: ______________________________ Address: ____________________________ ____________________________ _________________________________ OPTIONEE Address: ____________________________ ____________________________ 10. 30 SPOUSAL ACKNOWLEDGMENT The undersigned spouse of Optionee has read and hereby approves the foregoing Stock Purchase Agreement. In consideration of the Corporation's granting Optionee the right to acquire the Purchased Shares in accordance with the terms of such Agreement, the undersigned hereby agrees to be irrevocably bound by all the terms of such Agreement, including (without limitation) the right of the Corporation (or its assigns) to purchase any Purchased Shares in which Optionee is not vested at time of his or her cessation of Service. ---------------------------------------- OPTIONEE'S SPOUSE Address: ------------------------------- ---------------------------------------- 11. 31 EXHIBIT 1 ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED _______________ hereby sell(s), assign(s) and transfer(s) unto Direct Medical Knowledge, Inc. (the "Corporation"), _______________ (__________) shares of the Common Stock of the Corporation standing in his or her name on the books of the Corporation represented by Certificate No. _________________ herewith and do(es) hereby irrevocably constitute and appoint __________________ Attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises. Dated: _____________ Signature ------------------------------- INSTRUCTION: Please do not fill in any blanks other than the signature line. Please sign exactly as you would like your name to appear on the issued stock certificate. The purpose of this assignment is to enable the Corporation to exercise the Repurchase Right without requiring additional signatures on the part of Optionee. 32 EXHIBIT II FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) TAX ELECTION I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR EXERCISE OF NON-STATUTORY OPTION. If the Purchased Shares are acquired pursuant to the exercise of a Non-Statutory Option, as specified in the Grant Notice, then under Code Section 83, the excess of the Fair Market Value of the Purchased Shares on the date any forfeiture restrictions applicable to such shares lapse over the Exercise Price paid for such shares will be reportable as ordinary income on the lapse date. For this purpose, the term "forfeiture restrictions" includes the right of the Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right. However, Optionee may elect under Code Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather than when and as such Purchased Shares cease to be subject to such forfeiture restrictions. Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of the Agreement. Even if the Fair Market Value of the Purchased Shares on the date of the Agreement equals the Exercise Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. The form for making this election is attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE. II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 93(b) ELECTION FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired pursuant to the exercise of an Incentive Option, as specified in the Grant Notice, then the following tax principles shall be applicable to the Purchased Shares: (i) For regular tax purposes, no taxable income will be recognized at the time the Option is exercised. (ii) The excess of (a) the Fair Market Value of the Purchased Shares on the date the Option is exercised or (if later) on the date any forfeiture restrictions applicable to the Purchased Shares lapse over (b) the Exercise Price paid for the Purchased Shares will be includible in Optionee's taxable income for alternative minimum tax purposes. (iii) If Optionee makes a disqualifying disposition of the Purchased Shares, then Optionee will recognize ordinary income in the year of such disposition equal in amount to the excess of (a) the Fair Market Value of the Purchased Shares on the date the Option is exercised or (if later) on the date any forfeiture restrictions applicable to the Purchased Shares lapse over (b) the Exercise Price paid for the Purchased Shares. Any additional gain recognized upon the disqualifying disposition will be either II-1. 33 short-term or long-term capital gain depending upon the period for which the Purchased Shares are held prior to the disposition. (iv) For purposes of the foregoing, the term "forfeiture restrictions" will include the right of the Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right. The term "disqualifying disposition" means any sale or other disposition(1) of the Purchased Shares within two (2) years after the Grant Date or within one (1) year after the exercise date of the Option. (v) In the absence of final Treasury Regulations relating to Incentive Options, it is not certain whether Optionee may, in connection with the exercise of the Option for any Purchased Shares at the time subject to forfeiture restrictions, file a protective election under Code Section 83(b) which would limit (a) Optionee's alternative minimum taxable income upon exercise and (b) Optionee's ordinary income upon a disqualifying disposition to the excess of the Fair Market Value of the Purchased Shares on the date the Option is exercised over the Exercise Price paid for the Purchased Shares. Accordingly, such election if properly filed will only be allowed to the extent the final Treasury Regulations permit such a protective election. Page 2 of the attached form for making the election should be filed with any election made in connection with the exercise of an Incentive Option. - ------------ (1) Generally, a disposition of shares purchased under an Incentive Option includes any transfer of legal title, including a transfer by sale, exchange or gift, but does not include a transfer to the Optionee's spouse, a transfer into joint ownership with right of survivorship if Optionee remains one of the joint owners, a pledge, a transfer by bequest or inheritance or certain tax free exchanges permitted under the Code. II-2. 34 SECTION 83(b) ELECTION This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2. (1) The taxpayer who performed the services is: Name: Address: Taxpayer Ident. No.: (2) The property with respect to which the election is being made is __________ shares of the common stock of Direct Medical Knowledge, Inc. (3) The property was issued on ___________, 199__. (4) The taxable year in which the election is being made is the calendar year 199__. (5) The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property at the original purchase price if for any reason taxpayer's employment with the issuer is terminated. The issuer's repurchase right lapses in a series of installments over a five (5)-year period ending on ____________, 200__. (6) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $______ per share. (7) The amount paid for such property is $______ per share. (8) A copy of this statement was furnished to Direct Medical Knowledge, Inc. for whom taxpayer rendered the services underlying the transfer of property. (9) This statement is executed on _____________, 199__. ____________________________ ____________________________ Spouse (if any) Taxpayer This election must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns and must be made within thirty (30) days after the execution date of the Stock Purchase Agreement. This filing should be made by registered or certified mail, return receipt requested. Optionee must retain two (2) copies of the completed form for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records. 35 The property described in the above Section 83(b) election is comprised of shares of common stock acquired pursuant to the exercise of an incentive stock option under Section 422 of the Internal Revenue Code (the "Code"). Accordingly, it is the intent of the Taxpayer to utilize this election to achieve the following tax results: 1. The purpose of this election is to have the alternative minimum taxable income attributable to the purchased shares measured by the amount by which the fair market value of such shares at the time of their transfer to the Taxpayer exceeds the purchase price paid for the shares. In the absence of this election, such alternative minimum taxable income would be measured by the spread between the fair market value of the purchased shares and the purchase price which exists on the various lapse dates in effect for the forfeiture restrictions applicable to such shares. The election is to be effective to the full extent permitted under the Code. 2. Section 421(a)(1) of the Code expressly excludes from income any excess of the fair market value of the purchased shares over the amount paid for such shares. Accordingly, this election is also intended to be effective in the event there is a "disqualifying disposition" of the shares, within the meaning of Section 421(b) of the Code, which would otherwise render the provisions of Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer hereby elects to have the amount of disqualifying disposition income measured by the excess of the fair market value of the purchased shares on the date of transfer to the Taxpayer over the amount paid for such shares. Since Section 421(a) presently applies to the shares which are the subject of this Section 83(b) election, no taxable income is actually recognized for regular tax purposes at this time, and no income taxes are payable, by the Taxable as a result of this election. THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS. 36 APPENDIX The following definitions shall be in effect under the Agreement: A. AGREEMENT shall mean this Stock Purchase Agreement. B. BOARD shall mean the Corporation's Board of Directors. C. CODE shall mean the Internal Revenue Code of 1986, as amended. D. COMMON STOCK shall mean the Corporation's common stock. E. CORPORATE TRANSACTION shall mean either of the following shareholder-approved transactions: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. F. CORPORATION shall mean Direct Medical Knowledge, Inc., a California corporation, and any successor corporation to all or substantially all of the assets or voting stock of Direct Medical Knowledge, Inc. which shall by appropriate action adopt the Plan. G. DISPOSITION NOTICE shall have the meaning assigned to such term in Paragraph E.2. H. EXERCISE NOTICE shall have the meaning assigned to such term in Paragraph E.3. I. EXERCISE PRICE shall have the meaning assigned to such term in Paragraph A.1. J. FAIR MARKET VALUE of a share of Common stock on any relevant date, prior to the initial public offering of the Common Stock, shall be determined by the Plan Administrator after taking into account such factors as it shall deem appropriate. K. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in accordance with Article E. A-1 37 L. GRANT DATE shall have the meaning assigned to such term in Paragraph A.1. M. GRANT NOTICE shall mean the Notice of Grant of Stock Option pursuant to which Optionee has been informed of the basic terms of the Option. N. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422. O. MARKET STAND-OFF shall mean the market stand-off restriction specified in Paragraph C.3. P. 1933 ACT shall mean the Securities Act of 1933, as amended. Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended. R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. S. OPTION shall have the meaning assigned to such term in Paragraph A.1. T. OPTION AGREEMENT shall mean all agreements and other documents evidencing the Option. U. OPTIONEE shall mean the person to whom the Option is granted under the Plan. V. OWNER shall mean Optionee and all subsequent holders of the Purchased Shares who derive their chain of ownership through a Permitted Transfer from Optionee. W. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. X. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Purchased Shares, provided and only if Optionee obtains the Corporation's prior written consent to such transfer, (ii) a transfer of title to the Purchased Shares effected pursuant to Optionee's will or the laws of intestate succession following Optionee's death or (iii) a transfer to the Corporation in pledge as security for any purchase-money indebtedness incurred by Optionee in connection with the acquisition of the Purchased Shares. Y. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance Plan. A-2 38 Z. PLAN ADMINISTRATOR shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan. AA. PRIOR PURCHASE AGREEMENT shall have meaning assigned to such term in Paragraph D.4. AB. PURCHASED SHARES shall have the meaning assigned to such term in Paragraph A.1. AC. RECAPITALIZATION shall mean any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Corporation's outstanding Common Stock as a class without the Corporation's receipt of consideration. AD. REORGANIZATION shall mean any of the following transactions: (i) a merger or consolidation in which the Corporation is not the surviving entity, (ii) a sale, transfer or other disposition of all or substantially all of the Corporation's assets, (iii) a reverse merger in which the Corporation is the surviving entity but in which the Corporation's outstanding voting securities are transferred in whole or in part to a person or persons different from the persons holding those securities immediately prior to the merger, or (iv) any transaction effected primarily to change the state in which the Corporation is incorporated or to create a holding company structure. AE. REPURCHASE RIGHT shall mean the right granted to the Corporation in accordance with Article D. AF. SEC shall mean the Securities and Exchange Commission. AG. SERVICE shall mean the Optionee's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an employee, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance, a non-employee member of the board of directors or an independent consultant. A-3 39 AH. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. AI. TARGET SHARES shall have the meaning assigned to such term in Paragraph E.2. AJ. VESTING SCHEDULE shall mean the vesting schedule specified in the Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a series of installments over his or her period of Service. AK. UNVESTED SHARES shall have the meaning assigned to such term in Paragraph D.1. A-4 40 DIRECT MEDICAL KNOWLEDGE, INC. STOCK ISSUANCE AGREEMENT AGREEMENT made this _____ day of ____________ 199__, by and between Direct Medical Knowledge, Inc., a California corporation, and ________________, Participant in the Corporation's 1997 Stock Option/Stock Issuance Plan. All capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement or in the attached Appendix. A. PURCHASE OF SHARES 1. PURCHASE. Purchaser hereby purchases _______ shares of Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock Issuance Program at the purchase price of $___________ per share (the "Purchase Price"). 2. PAYMENT. Concurrent with the delivery of this Agreement to the Corporation, Participant shall pay the Purchase Price for the Purchased Shares in cash or cash equivalent and shall deliver a duly-executed blank Assignment Separate from Certificate (in the form attached hereto as Exhibit I) with respect to the Purchased Shares. 3. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises the Repurchase Right or the First Refusal Right, Participant (or any successor in interest) shall have all shareholder rights (including voting, dividend and liquidation rights) with respect to the Purchased Shares, subject, however, to the transfer restrictions of Articles B and C. B. SECURITIES LAW COMPLIANCE 1. RESTRICTED SECURITIES. The Purchased Shares have not been registered under the 1933 Act and are being issued to Participant in reliance upon the exemption from such registration provided by SEC Rule 701 for stock issuances under compensatory benefit plans such as the Plan. Participant hereby confirms that Participant has been informed that the Purchased Shares are restricted securities under the 1933 Act and may not be resold or transferred unless the Purchased Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Participant hereby acknowledges that Participant is prepared to hold the Purchased Shares for an indefinite and that Participant is aware that SEC Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted securities is not presently available to exempt the resale of the Purchased Shares from the registration requirements of the 1933 Act. 41 2. DISPOSITION OF PURCHASED SHARES. Participants shall make no disposition of the Purchased Shares (other than a Permitted Transfer) unless and until there is compliance with all of the following requirements: (i) Participant shall have provided the Corporation with a written summary of the terms and conditions of the proposed disposition. (ii) Participant shall have complied with all requirements of this Agreement applicable to the disposition of the Purchased Shares. (iii) Participant shall have provided the Corporation with written assurances, in form and substance satisfactory to the Corporation, that (a) the proposed disposition does not require registration of the Purchased Shares under the 1933 Act or (b) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken. The Corporation shall not be required (i) to transfer on its books any Purchased Shares which have been sold or transferred in violation of the provisions of this Agreement or (ii) to treat as the owner of the Purchased Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Purchased Shares have been transferred in contravention of this Agreement. 3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased Shares shall be endorsed with one or more of the following restrictive legends: "The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares may not be sold or offered for sale in the absence of (a) an effective registration statement for the shares under such Act, (b) a "no action" letter of the Securities and Exchange Commission with respect to such sale or offer or (c) satisfactory assurances to the Corporation that registration under such Act is not required with respect to such sale or offer." "The shares represented by this certificate are subject to certain repurchase rights and rights of first refusal granted to the Corporation and accordingly may not be sold, assigned, transferred, encumbered, or in any manner disposed of except in conformity with the terms of a written agreement dated ___________, 199__ between the Corporation and the registered holder of the shares (or the predecessor in interest to the shares). A copy of such agreement is maintained at the Corporation's principal corporate offices." 2. 42 C. TRANSFER RESTRICTIONS 1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer, Participant shall not transfer, assign, encumber or otherwise dispose of any of the Purchased Shares which are subject to the Repurchase Right. In addition, Purchased Shares which are released from the Repurchase Right shall not be transferred, assigned, encumbered or otherwise disposed of in contravention of the First Refusal Right or the Market Stand-Off. 2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation) to whom the Purchased Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Corporation that such person is bound by the provisions of this Agreement and that the transferred shares are subject to (i) the Repurchase Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same extent such shares would be so subject if retained by Participant. 3. MARKET STAND-OFF. (a) In connection with any underwritten public offering by the Corporation of its equity securities pursuant to an effective registration statement filed under the 1933 Act, including the Corporation's initial public offering, Owner shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to, any Purchased Shares without the prior written consent of the Corporation or its underwriters. Such restriction (the "Market Stand-Off") shall be in effect for such period of time from and after the effective date of the final prospectus for the offering as may be requested by the Corporation or such underwriters. In no event, however, shall such period exceed one hundred eighty (180) days and the Market Stand-Off shall in all events terminate two (2) years after the effective date of the Corporation's initial public offering. (b) Owner shall be subject to the Market Stand-Off provided and only if the officers and directors of the Corporation are also subject to similar restrictions. (c) Any new, substituted or additional securities which are by reason of any Recapitalization or Reorganization distributed with respect to the Purchased Shares shall be immediately subject to the Market Stand-Off, to the same extent the Purchased Shares are at such time covered by such provisions. (d) In order to enforce the Market Stand-Off, the Corporation may impose stop-transfer instructions with respect to the Purchased Shares until the end of the applicable stand-off period. 3. 43 D. REPURCHASE RIGHT 1. GRANT. The Corporation is hereby granted the right (the "Repurchase Right"), exercisable at any time during the sixty (60)-day period following the date Participant ceases for any reason to remain in Service, to repurchase at the Purchase Price any or all of the Purchased Shares in which Participant is not, at the time of his or her cessation of Service, vested in accordance with the Vesting Schedule set forth in Paragraph D.3 or the special acceleration provisions of Paragraph D.5 (such shares to be hereinafter referred to as the "Unvested Shares"). 2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be exercisable by written notice delivered to each Owner of the Unvested Shares prior to the expiration of the sixty (60)-day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice. The certificates representing the Unvested Shares to be repurchased shall be delivered to the Corporation on or before the close of business on the date specified for the repurchase. Concurrently with the receipt of such stock certificates, the Corporation shall pay to Owner, in cash or cash equivalents (including the cancellation of any purchase-money indebtedness), an amount equal to the Purchase Price previously paid for the Unvested Shares which are to be repurchased from Owner. 3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall terminate with respect to any Unvested Shares for which it is not timely exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate and cease to be exercisable with respect to any and all Purchased Shares in which Participant vests in accordance with the following Vesting Schedule: Participant shall vest in twenty-five percent (25%) of the Purchased Shares, and the Repurchase Right shall concurrently lapse with respect to those Purchased Shares, upon Participant's completion of one (1) year of Service measured from _______________, 199__. Participant shall vest in the remaining seventy-five percent (75%) of the Purchased Shares, and the Repurchase Right shall concurrently lapse with respect to those Purchased Shares, in a series of thirty-six (36) successive equal monthly installments upon Participant's completion of each additional month of Service over the thirty-six (36)-month period measured from the date on which the first twenty-five percent (25%) of the Purchased shares vests hereunder. All Purchased Shares as to which the Repurchase Right lapses shall, however, remain subject to (i) the First Refusal Right and (ii) the Market Stand-Off. 4. 44 4. RECAPITALIZATION. Any new, substituted or additional securities or other property (including cash paid other than as a regular cash dividend) which is by reason of any Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to the Repurchase Right and any escrow requirements hereunder, but only to the extent the Purchased Shares are at the time covered by such right or escrow requirements. Appropriate adjustments to reflect such distribution shall be made to the number and/or class of Purchased Shares subject to this Agreement and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon the Corporation's capital structure; provided, however, that the aggregate purchase price shall remain the same. 5. CORPORATE TRANSACTION. (a) The Repurchase Right shall automatically terminate in its entirety, and all the Purchased Shares shall vest in full, immediately prior to the consummation of any Corporate Transaction, except to the extent the Repurchase Right is to be assigned to the successor entity in such Corporate Transaction. (b) To the extent the Repurchase Right remains in effect following a Corporate Transaction, such right shall apply to any new securities or other property (including any cash payments) received in exchange for the Purchased Shares in consummation of the Corporate Transaction, but only to the extent the Purchased Shares are at the time covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Right to reflect the effect of the Corporate Transaction upon the Corporation's capital structure; provided, however, that the aggregate purchase price shall remain the same. The new securities or other property (including any cash payments) issued or distributed with respect to the Purchased Shares in consummation of the Corporate Transaction shall be immediately deposited in escrow with the Corporation (or the successor entity) and shall not be released from escrow until Optionee vests in such securities or other property in accordance with the same Vesting Schedule in effect for the Purchased Shares. (c) The Repurchase Right may also terminate on an accelerated basis, and the Purchased Shares shall immediately vest in full, in accordance with the terms and conditions of any special addendum attached to this Agreement. E. RIGHT OF FIRST REFUSAL 1. GRANT. The Corporation is hereby granted the right of first refusal (the "First Refusal Right"), exercisable in connection with any proposed transfer of the Purchased Shares in which Participant has vested in accordance with the provisions of Article D. For purposes of this Article E, the term "transfer" shall include any sale, assignment, pledge, encumbrance or other disposition of the Purchased Shares intended to be made by Owner, but shall not include any Permitted Transfer. 5 45 2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of Purchased Shares in which Participant has vested desires to accept a bona fide third-party offer for the transfer of any or all of such shares (the Purchased Shares subject to such offer to be hereinafter referred to as the "Target Shares"), Owner shall promptly (i) deliver to the Corporation written notice (the "Disposition Notice") of the terms of the offer, including the purchase price and the identity of the third-party offeror, and (ii) provide satisfactory proof that the disposition of the Target Shares to such third-party offeror would not be in contravention of the provisions set forth in Articles B and C. 3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a period of twenty-five (25) days following receipt of the Disposition Notice, have the right to repurchase any or all of the Target Shares subject to the Disposition Notice upon the same terms as those specified therein or upon such other terms (not materially different from those specified in the Disposition Notice) to which Owner consents. Such right shall be exercisable by delivery of written notice (the "Exercise Notice") to Owner prior to the expiration of the twenty-five (25) day exercise period. If such right is exercised with respect to all the Target Shares, then the Corporation shall effect the repurchase of such shares, including payment of the purchase price, not more than five (5) business days after delivery of the Exercise Notice; and at such time the certificates representing the Target Shares shall be delivered to the Corporation. Should the purchase price specified in the Disposition Notice be payable in property other than cash or evidences of indebtedness, the Corporation shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. If Owner and the Corporation cannot agree on such cash value within ten (10) days after the Corporation's receipt of the Disposition notice, the valuation shall be made by an appraiser of recognized standing selected by Owner and the Corporation or, if they cannot agree on an appraiser within twenty (20) days after the Corporation's receipt of the Disposition Notice, each shall select an appraiser of recognized standing and the two (2) appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be agreed equally by Owner and the Corporation. The closing shall then be held on the later of (i) the fifth (5th) business day following delivery of the Exercise Notice or (ii) the fifth (5th) business day after such valuation shall have been made. 4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the Exercise Notice is not given to Owner prior to the expiration of the twenty-five (25)-day exercise period, Owner shall have a period of thirty (30) days thereafter in which to sell or otherwise dispose of the Target Shares to the third-party offeror identified in the Disposition Notice upon terms (including the purchase price) no more favorable to such third-party offeror than those specified in the Disposition Notice; provided, however, that any such sale or disposition must not be effected in contravention of the provisions of Articles B and C. The third-party offeror shall acquire the Target Shares free and clear of the First Refusal Right. 6. 46 but the acquired shares shall remain subject to the provisions of Article B and Paragraph C.3. In the event Owner does not effect such sale or disposition of the Target Shares within the specified thirty (30)-day period the First Refusal right shall continue to be applicable to any subsequent disposition of the Target Shares by Owner until such right lapses. 5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the corporation makes a timely exercise of the First Refusal Right with respect to a portion, but not all, of the Target Shares specified in the Disposition Notice, Owner shall have the option, exercisable by written notice to the Corporation delivered within five (5) business days after Owner's receipt of the Exercise Notice, to effect the sale of the Target Shares pursuant to either of the following alternatives: (i) sale or other disposition of all the Target Shares to the third-party offeror identified in the Disposition Notice, but in full compliance with the requirements of Paragraph E.4. as if the Corporation did not exercise the First Refusal Right; or (ii) sale to the Corporation of the portion of the Target Shares which the Corporation has elected to purchase, such sale to be effected in substantial conformity with the provisions of Paragraph E.3. The First Refusal Right shall continue to be applicable to any subsequent disposition of the remaining Target Shares until such right lapses. Owner's failure to deliver timely notification to the Corporation shall be deemed to be an election by Owner to sell the Target Shares pursuant to alternative (i) above. 6. RECAPITALIZATION/REORGANIZATION. (a) Any new, substituted or additional securities or other property which is by reason of any Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to the First Refusal Right, but only to the extent the Purchased Shares are at the time covered by such right. (b) In the event of a Reorganization, the First Refusal Right shall remain in full force and effect and shall apply to the new capital stock or other property received in exchange for the Purchased Shares in consummation of the Reorganization, but only to the extent the Purchased Shares are at the time covered by such right. 7. LAPSE. The First Refusal Right shall lapse upon the earliest to occur of (i) the first date on which shares of the Common Stock are held of record by more than five hundred (500) persons, (ii) a determination is made by the Board that a public market exists for the outstanding shares of Common Stock or (iii) a firm commitment underwritten public offering, pursuant to an effective registration statement under the 1933 Act, covering 7. 47 the offer and sale of the Common Stock in the aggregate amount of at least ten million dollars ($10,000,000). However, the Market Stand-Off shall continue to remain in full force and effect following the lapse of the First Refusal Right. F. SPECIAL TAX ELECTION 1. SECTION 83(b) ELECTION. Under Code Section 83, the excess of the Fair Market Value of the Purchased Shares on the date any forfeiture restrictions applicable to such shares lapse over the Purchase Price paid for such shares will be reportable as ordinary income on the lapse date. For this purpose, the term "forfeiture restrictions" includes the right of the Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right. Participant may elect under Code Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather than when and as such Purchased Shares cease to be subject to such forfeiture restrictions. Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of this Agreement. Even if the Fair Market Value of the Purchased Shares on the date of this Agreement equals the Purchase Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE. 2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF. G. GENERAL PROVISIONS 1. ASSIGNMENT. The Corporation may assign the Repurchase Right and/or the First Refusal Right to any person or entity selected by the Board, including (without limitation) one or more shareholders of the Corporation. If the assignee of the Repurchase Right is other than (i) a wholly owned subsidiary of the Corporation or (ii) the parent corporation owning one hundred percent (100%) of the Corporation's outstanding capital stock, then such assignee must make a cash payment to the Corporation, upon the assignment of the Repurchase Right, in an amount equal to the excess (if any) of (i) the Fair Market Value of the Purchased Shares at the time subject to the assigned Repurchase Right over (ii) the aggregate repurchase price payable for the Purchased Shares. 2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the 8. 48 Corporation (or any Parent or Subsidiary employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant's Service at any time for any reason, with or without cause. 3. NOTICES. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such party's signature line on this Agreement or at such other address as such party may designate by ten (10) days advance written notice under this paragraph to all other parties to this Agreement. 4. NO WAIVER. The failure of the Corporation in any instance to exercise the Repurchase Right or the First Refusal Right shall not constitute a waiver of any other repurchase rights and/or rights of first refusal that may subsequently arise under the provisions of this Agreement or any other agreement between the Corporation and Participant. No waiver or any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 5. CANCELLATION OF SHARES. If the Corporation shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Purchased Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and the Corporation shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement. H. MISCELLANEOUS PROVISIONS 1. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without resort to that State's conflict-of-laws rules. 2. PARTICIPANT UNDERTAKING. Participant hereby agrees to take whatever additional action and execute whatever additional documents the Corporation may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Participant or the Purchased Shares pursuant to the provisions of this Agreement. 9. 49 3. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan. 4. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 5. SUCCESSOR AND ASSIGNS. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and upon Participant, Participant's assigns and the legal representatives, heirs and legatees of Participant's estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms hereof. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above. DIRECT MEDICAL KNOWLEDGE, INC. By: ------------------------------------ Title: --------------------------------- Address: ------------------------------- ------------------------------- ---------------------------------------- PARTICIPANT Address: ------------------------------- ------------------------------- 10. EX-10.5 8 SAPIENT HEALTH 1996 STOCK INCENTIVE PLAN 1 EXHIBIT 10.5 EXHIBIT B SAPIENT HEALTH NETWORK, INC. 1996 STOCK INCENTIVE PLAN 1. PURPOSES AND SCOPE OF THE PLAN. 1.1 PURPOSES OF PLAN. The purposes of this Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Employees and Consultants of the Company and to promote the success of the Company's business. 1.2 SCOPE OF PLAN. Options granted hereunder may be either "incentive stock options," as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or "nonqualified stock options," at the discretion of the Board and as reflected in the terms of the written option agreement. In addition, shares of the Company's Common Stock may be Sold hereunder independent of any Option grant. 2. DEFINITIONS. As used herein, the following definitions shall apply: 2.1 "BOARD" shall mean the Committee, if one has been appointed, or the Board of Directors of the Company, if no Committee is appointed. 2.2 "CODE" shall mean the Internal Revenue Code of 1986, as amended. 2.3 "COMMON STOCK" shall mean the Common Stock of the Company. 2.4 "COMPANY" shall mean SAPIENT HEALTH NETWORK, INC., an Oregon corporation. 2.5 "COMMITTEE" shall mean the Committee appointed by the Board of Directors in accordance with Section 4.1 of the Plan, if one is appointed. 2.6 "CONSULTANT" shall mean any person who is engaged by the Company or any Subsidiary to render consulting services and is compensated for such consulting services and any director of the Company whether compensated for such services or not. 2.7 "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave, military leave, or any other leave of absence approved by the Board; provided that such leave is for a period of not more than ninety days or reemployment upon the expiration of such leave is guaranteed by contract or statute. 2 2.8 "EMPLOYEE" shall mean any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. 2.9 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. 2.10 "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. 2.11 "NONQUALIFIED STOCK OPTION" shall mean an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. 2.12 "OPTION" shall mean a stock option granted pursuant to the Plan. 2.13 "OPTIONED STOCK" shall mean the Common Stock subject to an Option. 2.14 "OPTIONEE" shall mean an Employee or Consultant who receives an Option. 2.15 "PARENT" shall mean a "parent corporation," whether now or hereafter, as defined in Section 424 of the Code. 2.16 "PLAN" shall mean this Stock Incentive Plan. 2.17 "SALE" or "SOLD" shall include, with respect to the sale of Shares under the Plan, the sale of Shares for consideration in the form of cash or notes, as well as a grant of Shares without consideration, except past or future services. 2.18 "SHARE" shall mean a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan. 2.19 "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424 of the Code. 3. STOCK SUBJECT TO THE PLAN. 3.1 SIZE OF PLAN POOL. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be optioned and/or Sold under the Plan is 1,000,000 shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common stock. 3.2 RETURN OF UNEXERCISED OPTION SHARES. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future Option grants and/or Sales under the Plan. 2 3 3.3 RETURN OF UNVESTED OR RESTRICTED SHARES. If Shares Sold under the Plan or purchased upon the exercise of an Option are repurchased by the Company pursuant to restrictions applicable to such Shares, the number of Shares repurchased shall, unless the Plan shall have been terminated, become available for future Option grants and/or Sales under the Plan. 3.4 RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which requisite authority shall not have been obtained. 4. ADMINISTRATION OF THE PLAN. 4.1 PROCEDURE. The Plan shall be administered by the Board of Directors of the Company. 4.1.1 COMMITTEE. Subject to subparagraph 4.1.3, the Board of Directors may appoint a Committee consisting of not less than two (2) members of the Board of Directors to administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as the Board of Directors may prescribe. Once appointed, the Committee shall continue to serve until otherwise directed by the Board of Directors. From time to time the Board of Directors may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan. 4.1.2 CONFLICTS. Members of the Board who are either eligible for Options and/or Sales or have been granted Options or Sold Shares may vote on any matters affecting the administration of the Plan or the grant of any Options or Sale of any Shares pursuant to the Plan, except that no such member shall act upon the granting of an Option or Sale of Shares to himself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board during which action is taken with respect to the granting of Options or Sale of Shares to him. 4.1.3 GRANTS FOLLOWING REGISTRATION, TO OFFICERS OR DIRECTORS, ONLY BY DISINTERESTED PERSONS. Notwithstanding the foregoing subparagraph 4.1.1, if and in any event the Company registers any class of any equity security pursuant to Section 12 of the Securities Exchange Act of 1934, from the effective date of such registration until six (6) months after the termination of such registration, any grants of Options to officers or directors shall only be made by the Board if each member of the Board is a disinterested person, or if every member of the Board is not a disinterested person, by a committee of two or more directors, each of whom is a disinterested person. A "disinterested person" is a director who has not, during the one year period prior to service as an administrator of the Plan, or during such service, been 3 4 granted or awarded equity securities pursuant to the Plan or any other plan to the Company or any of its affiliates, with these qualifications: a) FORMULA PLANS DON'T DISQUALIFY. Participation in a formula plan meeting the conditions in paragraph (c)(2)(ii) of SEC Rule 16b-3 shall not disqualify a director from being a disinterested person. b) ACQUISITION PLANS DON'T DISQUALIFY. Participation in an ongoing securities acquisition plan meeting the conditions in paragraph (d)(2)(i) of SEC Rule 16b-3 shall not disqualify a director from being a disinterested person. c) ANNUAL RETAINERS IN STOCK DON'T DISQUALIFY. An election to receive an annual retainer fee in either cash or an equivalent amount of securities, or partly in cash and partly in securities, shall not disqualify a director from being a disinterested person. d) DISQUALIFICATION APPLIES ONLY TO PLAN IN WHICH DIRECTOR PARTICIPATES. Participation in a plan shall not disqualify a director from being a disinterested person for the purpose of administering another plan that does not permit participation by directors. 4.2 POWERS OF THE BOARD. Subject to the provisions of the Plan, the Board shall have the authority, in its discretion, to do any or all of these things: 4.2.1 GRANT OPTIONS. To grant Incentive Stock options in accordance with Section 422 of the Code, or Nonqualified Stock Options. 4.2.2 AUTHORIZE SALES. To authorize Sales of Shares of Common Stock hereunder. 4.2.3 DETERMINE FAIR MARKET VALUE. To determine, upon review of relevant information and in accordance with Section 8.5 of the Plan, the fair market value of the Common Stock. 4.2.4 DETERMINE EXERCISE OR PURCHASE PRICE. To determine the exercise/purchase price per Share of Options to be granted or Shares to be Sold, which exercise/purchase price shall be determined in accordance with Section 8.1 of the Plan. 4.2.5 DECIDE WHO GETS OPTIONS. To determine the Employees or Consultants to whom, and the time or times at which, Options shall be granted and the number of Shares to be represented by each Option. 4.2.6 DECIDE WHO GETS STOCK. To determine the Employees or Consultants to whom, and the time or times at which, Shares shall be Sold and the number of Shares to be Sold. 4.2.7 INTERPRET PLAN. To interpret the Plan. 4 5 4.2.8 MAKE RULES ABOUT PLAN. To prescribe, amend and rescind rules and regulations relating to the Plan. 4.2.9 SET AND AMEND OPTION TERMS. To determine the terms and provisions of each Option granted (which need not be identical) and, with the consent of the holder thereof, modify or amend each Option. 4.2.10 SET AND AMEND SALE TERMS. To determine the terms and provisions of each Sale of Shares (which need not be identical) and, with the consent of the purchaser thereof, modify or amend each Sale. 4.2.11 CHANGE EXERCISE DATES OF OPTIONS. To accelerate or defer (with the consent of the Optionee) the exercise date of any Option. 4.2.12 CHANGE VESTING RESTRICTIONS. To accelerate or defer (with the consent of the Optionee or purchaser of Shares) the vesting restrictions applicable to Shares Sold under the Plan or pursuant to Options granted under the Plan. 4.2.13 AUTHORIZE SIGNERS. To authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option or Sale of Shares previously granted or authorized by the Board. 4.2.14 ESTABLISH SHAREHOLDER AGREEMENT RESTRICTIONS. To determine the restrictions on transfer, vesting restrictions, repurchase rights, or other restrictions applicable to Shares issued under the Plan. 4.2.15 CANCEL AND REISSUE OPTIONS (SUBJECT TO PRICE RESTRICTIONS). To effect, at any time and from time to time, with the consent of the affected Optionees, the cancellation of any or all outstanding Options under the Plan and to grant in substitution therefor new Options under the Plan covering the same or different numbers of Shares, but having an Option price per Share consistent with the provisions of Section 8 of this Plan as of the date of the new Option grant. 4.2.16 MAKE CASE BY CASE EXCEPTIONS AT TERMINATION OF EMPLOYMENT. To establish, on a case-by-case basis, different terms and conditions pertaining to exercise or vesting rights upon termination of employment, whether at the time of an Option grant or Sale of Shares, or thereafter. 4.2.17 DO OTHER THINGS NEEDED OR ADVISABLE. To make all other determinations deemed necessary or advisable for the administration of the Plan. 4.3 EFFECT OF BOARD'S DECISION. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan or Shares Sold under the Plan. 5 6 5. ELIGIBILITY. 5.1 PERSONS ELIGIBLE. Options may be granted and/or Shares Sold only to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option or Sold Shares may, if he is otherwise eligible, be granted an additional Option or Options or Sold additional Shares. 5.2 ISO LIMITATION. No Incentive Stock Option may be granted to an Employee which, when aggregated with all other Incentive Stock Options granted to such Employee by the Company or any Parent or Subsidiary, would result in Shares having an aggregate fair market value (determined for each Share as of the date of grant of the Option covering such Share) in excess of $100,000 becoming first available for purchase upon exercise of one or more Incentive Stock Options during any calendar year. 5.3 SECTION 5.2 LIMITATIONS. Section 5.2 of the Plan shall apply only to an Incentive Stock Option evidenced by an "Incentive Stock Option Agreements which sets forth the intention of the Company and the Optionee that such Option shall qualify as an Incentive Stock Option. Section 5.2 of the Plan shall not apply to any Option evidenced by a "Nonqualified Stock Option Agreements which sets forth the intention of the Company and the Optionee that such Option shall be a Nonqualified Stock Option. 5.4 NO RIGHT TO CONTINUED EMPLOYMENT. The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time. 6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the stockholders of the Company as described in Section 16 of the Plan. It shall continue in effect for a term of ten (10) years, unless sooner terminated under Section 14 of the Plan. 7. TERM OF OPTIONS. 7.1 TERM OF ISOs TO 10% OR LESS HOLDERS. The term of each Incentive Stock Option shall be ten (10) years from the date of grant thereof or such shorter tern as may be provided in the Stock Option Agreement. 7.2 TERM OF NONQUALIFIED OPTIONS TO 10% OR LESS HOLDERS. The term of each Nonqualified Stock Option shall be ten (10) years and one (1) day from the date of grant thereof or such other term as may be provided in the Stock Option Agreement. 7.3 TERMS FOR HOLDERS OF MORE THAN 10%. In the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the Option shall be five (5) years from the date of grant thereof or such shorter time as may be provided in the Stock Option Agreement, or (b) if the Option is a Nonqualified Stock Option, the term of the Option shall be 6 7 five (5) years and one (1) day from the date of grant thereof or such other term as may be provided in the Stock Option Agreement. 8. EXERCISE/PURCHASE PRICE AND CONSIDERATION. 8.1 EXERCISE/PURCHASE PRICE. The per Share exercise/purchase price for the Shares to be issued pursuant to exercise of an Option or a Sale (other than a Sale which is a grant for which no purchase price is payable) shall be such price as is determined by the Board, but shall be subject to the requirements of this Section 8. 8.2 ISO PRICE. 8.2.1. ISO PRICE TO HOLDERS OF MORE THAN 10%. In the case of an Incentive Stock Option granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the fair market value per Share on the date of the grant. 8.2.2 ISO PRICE TO HOLDERS OF 10% OR LESS. In the case of an Incentive Stock Option granted to any other Employee, the per Share exercise price shall be no less than one hundred percent (100%) of the fair market value per Share on the date of grant. 8.3 NONQUALIFIED OPTION AND SALE PRICE. 8.3.1 NONQUALIFIED PRICE TO HOLDERS OF MORE THAN 10%. In the case of a Nonqualified Stock Option or Sale granted or Sold to a person who, at the time of the grant of such Option or authorization of such Sale, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise/purchase price shall be no less than one hundred ten percent (110%) of the fair market value per Share on the date of the grant or authorization of Sale, unless otherwise expressly determined by the Board of Directors. 8.3.2 NONQUALIFIED PRICE TO HOLDERS OF 10% OR LESS. In the case of a Nonqualified Stock Option or Sale granted or Sold to any other person, the per Share exercise/purchase price shall be no less than eighty-five percent (85%) of the fair market value per Share on the date of grant or authorization of Sale, unless otherwise expressly determined by the Board of Directors. 8.3.3 REQUIREMENT FOR BELOW MARKET OPTIONS AND SALES. Any determination to sell stock at less than fair market value on the date of the grant or authorization of Sale shall be accompanied by an express finding by the Board of Directors specifying that the sale is in the best interest of the Company, and specifying both the fair market value and the grant or sale price of the stock. 8.4 SALES AFTER REGISTRATION. In the case of an Option granted or Sale authorized on or after the effective date of registration of any class of equity security of the Company pursuant to Section 12 of the Exchange Act and prior to six (6) months after the 7 8 termination of such registration, the per Share exercise/purchase price shall be no less than one hundred percent (100%) of the fair market value per Share on the date of grant or authorization of Sale. 8.5 FAIR MARKET VALUE. The fair market value per Share shall be determined by the Board in its discretion; provided, however, that where there is a public market for the Common Stock, the fair market value per Share shall be the closing price of the Common Stock for the date of grant or authorization of Sale, as reported in The Wall Street Journal (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a stock exchange, the fair market value per Share shall be the closing price on such exchange on the date of grant of the Option or authorization of Sale, as reported in The Wall Street Journal. 8.6 CONSIDERATION. The consideration to be paid for the Shares to be issued upon exercise of an Option or pursuant to a Sale, including the method of payment, shall be determined by the Board and may consist in whole or part of: 8.6.1 CASH, CHECK, NOTE. Cash, Check, or Promissory Note. 8.6.2. TRANSFERRED OR WITHHELD SHARES. Transfer to the Company of Shares having a Fair Market Value at the time of such exercise equal to the Option exercise price, or delivery of instructions to the Company to withhold from the Shares that would otherwise be issued on the exercise that number of Shares having a Fair Market Value at the time of such exercise equal to the Option exercise price. If the Fair Market Value of the number of whole Shares transferred or the number of whole Shares surrendered is less than the total exercise price of the Option, the shortfall must be made up in cash or by check. 9. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all purposes, be the date on which the Board makes the determination granting such Option. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 10. OPTION AGREEMENT. Options shall be evidenced by written option agreements in such form as the Board shall approve. 11. NONTRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will, or by the laws of descent and distribution, and may be exercised during the lifetime of the Optionee only by the Optionee or, if incapacitated, by his or her legal guardian or legal representative. 12. EXERCISE OF OPTION. 12.1 WHEN EXERCISABLE. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. 8 9 12.2 NO FRACTIONAL SHARES. An Option may not be exercised for a fraction of a Share. 12.3 HOW EXERCISED. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8.6 of the Plan. 12.3.1 DEPOSITS FOR WITHHOLDING TAXES. Each Optionee who exercised an Option shall, upon notification of the amount due (if any) and prior to or concurrent with delivery of the certificate representing the Shares, pay to the Company amounts necessary to satisfy applicable federal, state and local tax withholding requirements. 12.3.2 SHAREHOLDER AGREEMENTS. An Optionee must also provide a duly executed copy of any stock transfer agreement then in effect and determined to be applicable by the Board. 12.4 NO SHAREHOLDER RIGHTS OR ADJUSTMENTS UNTIL ISSUANCE. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 13 of the Plan. 12.5 EFFECT OF EXERCISE ON PLAN POOL. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 12.6 TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. If an Employee or consultant ceases to serve as an Employee or Consultant (as the case may be), he may, but only within three (3) months (or such other period of time not exceeding the limitations of Section 7 above as is determined by the Board at the time of grant of any Option or thereafter) after the date he ceases to be an Employee or Consultant (as the case may be) of the Company, exercise his Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of such termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. 12.7 DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 12.6 above, in the event an Employee or Consultant is unable to continue his employment or consulting relationship (as the case may be) with the Company as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), he may, but only within twelve (12) months (or such other period of time not exceeding the limitations of 9 10 Section 7 above as is determined by the Board at the time of grant of an Option or thereafter) from the date of termination, exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. 12.8 DEATH OF OPTIONEE. In the event of the death of an Optionee during the term of the Option who is at the time of his death an Employee or Consultant of the Company and who shall have been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised, at any time within twelve (12) months (or such other period of time not exceeding the limitations of Section 7 above as is determined by the Board at the time of grant of an Option or thereafter) following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise as of the date of death. 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER 13.1 STOCK SPLITS AND THE LIKE. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or Sales made or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall effect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. 13.2 TERMINATION ON DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. 13.3 SUBSTITUTION OR EXERCISE ON SALE OR MERGER. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such 10 11 assumption or substitution, that the Optionee shall have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice or such shorter period as the Board may specify in the notice, and the Option will terminate upon the expiration of such period. 14. AMENDMENT AND TERMINATION OF THE PLAN 14.1 AMENDMENT AND TERMINATION. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable; provided, however, that if required to qualify the Plan under Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended, no amendment shall be made more than once every six months that would change the amount, price or timing of the option grants, other than to comport with changes in the Internal Revenue Code of 1986, as amended, or the rules and regulations promulgated thereunder; and provided, further, that, if required to qualify the Plan under rule 16b-3, no amendment shall be made without the approval of the stockholders of the Company in the manner described in Section 16 of the Plan if the amendment would: 14.1.1 INCREASE SHARES. Increase the number of Shares subject to the Plan, other than in connection with an adjustment under Section 13 of the Plan; 14.1.2 CHANGE CLASS OF EMPLOYEE OR CONSULTANT ELIGIBLE. Make a change in the designation of the class of Employees or Consultants eligible to be granted Options; or 14.1.3 INCREASE BENEFITS AFTER REGISTRATION. If the Company has a class of equity security registered under Section 12 of the Exchange Act at the time of such revision or amendment, cause any material increase in the benefits accruing to participants under the Plan. 14.2 STOCKHOLDER APPROVAL. If any amendment requiring stockholder approval under Section 14.1 of the Plan is made subsequent to the first registration of any class of equity security by the Company under Section 12 of the Exchange Act, such stockholder approval shall be solicited as described in Section 16.1 of the Plan. 14.3 EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination of the Plan shall not affect Options already granted, and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 15. CONDITIONS UPON ISSUANCE OF SHARES. 15.1 GENERAL COMPLIANCE REQUIREMENT. Shares shall not be issued pursuant to the exercise of an Option or a Sale unless the exercise of such Option or 11 12 consummation of the Sale and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, applicable state securities laws, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange (including NASDAQ) upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. 15.2 INVESTMENT INTENT WARRANTY. As a condition to the exercise of an Option or a Sale, the Company may require the person exercising such Option or to whom Shares are being sold to represent and warrant at the time of any such exercise or Sale that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. 16. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval by the stockholders of the Company within twelve months before or after the date the Plan is adopted. If such stockholder approval is obtained at a duly held stockholders' meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding shares of the Company, such holders being present or represented and entitled to vote thereon. If and in the event that the Company registers any class of any equity security pursuant to Section 12 of the Exchange Act, the approval of such stockholders of the Company shall be obtained as follows: 16.1 SOLICITATION. Approval shall be solicited substantially in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder, or solicited after the Company has furnished in writing to the holders entitled to vote substantially the same information concerning the Plan as that which would be required by the rules and regulations in effect under Section 14(a) of the Exchange Act at the time such information is furnished. 16.2 TIME. Approval shall be obtained at or prior to the first annual meeting of stockholders held subsequent to the first registration of any class or equity securities of the Company under Section 12 of the Exchange Act. 16.3 IF BY WRITTEN CONSENT; COMPLIANCE WITH STATE LAW. If such stockholder approval is obtained by written consent, it must be obtained by the written consent of stockholders of the Company in compliance with the requirements of applicable state law. 17. SIX MONTH HOLDING PERIOD FOR AFFILIATES. If the Company registers any class of any equity security pursuant to Section 12 of the Exchange Act, then from the effective date of such registration until six (6) months after the termination of such registration (the Public Period), these limits will apply to each officer, director and beneficial owner of ten percent (10%) or more of any class of equity securities of the Company (Affiliates). During the Public Period, any Affiliate shall hold Shares Sold hereunder at least six months from the date of Sale. During the Public Period, at least six months must elapse from the date of grant of an Option to an Affiliate to the date the Affiliate disposes of the Shares acquired upon exercise of the Option, or (if the Option is disposed of other than by exercise) to the date of disposition of the Option itself. 12 13 [DRAFT: 11/10/97] GREENBERG NEWS NETWORKS, INC. NON-QUALIFIED STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated _______________ (the "Option Date"), is entered into by Greenberg News Networks, Inc., a Delaware corporation having its principal place of business at 3060 Peachtree Road, Suite 505, Atlanta, Georgia 30305 ("GNN"), and ____________, whose home address is _________________________________________ ("Key Employee"). GNN's Board of Directors has adopted the Greenberg News Networks, Inc. 1997 Stock Option Plan ("Plan") under which GNN is authorized to issue stock options. Key Employee is expected to provide valuable service to GNN, and the Board of Directors of GNN has authorized the grant of options to Key Employee under the Plan, subject to the terms and conditions of this Option Agreement. In consideration of the mutual promises and agreements set forth in this Option Agreement, the parties agree as follows: 1. Option Grant. GNN hereby grants to Key Employee, under the Plan, an option ("Option") to purchase an aggregate of _______ shares of GNN's common stock ("Option Shares"), subject to all the terms and conditions of the Plan and all of the terms and conditions set forth in this Option Agreement. All of the terms defined in the Plan have the same meaning in this Option Agreement, unless otherwise specified in this Option Agreement. A copy of the terms defined in the Plan is attached hereto as Exhibit A. A copy of the Plan will be delivered to Key Employee with this Option Agreement. 2. Option Price. The purchase price for each Option Share is $_________ per share ("Option Price"). 3. Status as NQO. GNN intends that the Option will not constitute an incentive stock option under Section 422 of the Code. 4. Accrual of Exercise Right. So long as Key Employee remains in the employ of GNN, the right to exercise the Option granted by this Option Agreement shall accrue and become exercisable as follows: (a) on or after the first anniversary of the Option Date, 1/3 of the Option Shares first may be purchased, and the Option thereafter may be exercised in whole or in part to that extent; 14 (b) on or after the second anniversary of the Option Date, an additional 1/3 of the Option Shares first may be purchased, and the Option thereafter may be exercised in whole or in part (to the extent not previously exercised) for a total of 2/3 of the Option Shares; and (c) on or after the third anniversary the Option Date, the remaining 1/3 of the Option Shares first may be purchased, and the Option thereafter may be exercised in whole or in part (to the extent not previously exercised) for all of the Option Shares. [DISCUSS VESTING SCHEDULE] 5. Life of Option. The Option shall expire when exercised in full; provided, however, the Option shall expire, to the extent not exercised in full, on the earlier of (a) the date which is the tenth anniversary of the date the Option was granted or (b) the date provided under Section 8 of this Option Agreement. 6. Method of Exercise of the Option. Subject to the other provisions of this Option Agreement, Key Employee may exercise the Option before the date the Option expires on any normal business day of GNN by written notice to the Corporate Secretary of GNN delivered personally or mailed, via first class mail, to GNN at its principal office, 3060 Peachtree Road, Suite 505, Atlanta, Georgia 30305. Such notice must state that Key Employee has elected to exercise the Option, must indicate the number of Option Shares to be purchased pursuant to exercise, must be signed by Key Employee, and must be accompanied by (i) payment in full of the Option Price for the Option Shares to be purchased pursuant to such exercise; and (ii) a fully executed counterpart copy of a Stockholders Agreement in the form attached to this Option Agreement as Exhibit B (the "Stockholders Agreement"). Payment must be made in cash, which may be in the form of a check payable to GNN. The Option may be exercised only in units of 100 shares or multiples thereof (except that if all Option Shares that are then vested under the Option are being purchased, the Option may be exercised as to all the Option Shares that are vested regardless of number). The effective date of exercise of the Option shall be the date on which the Key Employee's written notice, payment and executed counterpart Stockholders Agreement are received by GNN. After receipt of Key Employee's notice of exercise in proper form accompanied by payment of the amount due and executed counterpart Stockholders Agreement, GNN shall issue a certificate or certificates evidencing the number of authorized fully-paid and nonassessable shares of Stock which have thereby been purchased. 7. Non-transferability of the Option. The Option is personal to Key Employee, may be exercisable during Key Employee's lifetime only by him or her, and may not be transferred, except by Key Employee's will or in accordance with the applicable laws of descent and distribution. The person or persons to whom the Option is transferred by will or by the applicable laws of descent and distribution thereafter shall be treated as Key Employee under this Option Agreement. -2- 15 8. Termination of Employment, Death or Disability (a) If Key Employee's employment is terminated on any date (1) by GNN with cause (as determined in the discretion of the Board) or (2) by Key Employee without the written consent of GNN, then the Option, to the extent not previously exercised, shall expire immediately and automatically on such date. (b) If Key Employee's employment is terminated for any reason other than that described in Section 8(a), death or permanent and total disability, then the Option, to the extent previously exercisable under Section 4 and to the extent not previously exercised, shall expire immediately and automatically on the last day of the 90 consecutive day period that immediately follows the last day of Key Employee's employment. (c) If Key Employee (1) dies while employed by GNN or (2) terminates employment and is entitled to the 90 day exercise period described in Section 8(b) but dies before the Option expires under such section, then the Option, to the extent previously exercisable under Section 4 and to the extent not previously exercised, may be exercised at any time during the 12 consecutive month period immediately following the date of Key Employee's death by the person or persons to whom Key Employee's rights under the Option pass in accordance with Section 7 of this Option Agreement and shall expire immediately and automatically on the last day of such 12 month period. (d) If Key Employee becomes permanently and totally disabled (within the meaning as referenced in Section 422(c)(6) of the Code) while employed by GNN, then the Option, to the extent previously exercisable under Section 4 and to the extent not previously exercised, may be exercised at any time during the 12 consecutive month period immediately following termination of Key Employee's employment because of such disability and shall expire immediately and automatically on the last day of such 12 month period. (e) For purposes of determining whether Key Employee had terminated employment with GNN, (1) a transfer of employment between or among GNN, a Parent and a Subsidiary shall not be treated as a termination of Key Employee's continuous employment with GNN and (2) if Key Employee is employed solely by a Subsidiary, the sale of such Subsidiary (by a Stock sale or sale of substantially all of the assets of that Subsidiary) shall be treated as a termination of Key Employee's continuous employment with GNN. 9. Adjustments for Changes in Corporate Structure or Shares. GNN shall have the right to modify, amend or cancel the Option in accordance with the terms of the Plan. 10. Shareholder Rights not Granted by the Option. Key Employee is not entitled by virtue of the Option or this Option Agreement to any rights of any kind or description whatsoever as a shareholder of GNN. Key Employee shall have no rights as a shareholder with respect to the Option Shares until GNN has received Key Employee's notice of exercise in proper form -3- 16 accompanied by payment of the amount due and GNN has actually delivered the Stock subject to the Option to Key Employee. As provided in Section 6 above, Key Employee must execute and deliver a Stockholders Agreement in the form attached as Exhibit B as a condition to the exercise of the Option. 11. Investment Representation. If the Option Shares are not registered under the Securities Act of 1933 (the "1933 Act"), or comparable state securities laws, at the time or times Key Employee exercises the Option, Key Employee shall execute a written representation to Greenberg News Networks, in form and substance satisfactory to Greenberg News Networks at such time or times, that by such exercise he or she shall purchase Option Shares solely for investment purposes for his or her own account and not with a view to the subsequent resale or distribution to the public in violation of the 1933 Act, or comparable state securities laws, and that such Option Shares will not be sold or otherwise disposed of unless a registration statement under the 1933 Act and comparable state securities laws is then in effect with respect thereto or Key Employee has received an opinion, in form and substance satisfactory to Greenberg News Networks, of legal counsel satisfactory to Greenberg News Networks, to the effect that registration is not required under the 1933 Act or comparable state securities laws. 12. Legend. The certificate evidencing the Option Shares may include 1 or more legends that reference or describe the provisions of Section 10 and Section 11 of this Option Agreement. 13. Notices. All notices hereunder to GNN shall be delivered personally or mailed to it, via first class mail, addressed to GNN, Inc., 3060 Peachtree Road, Suite 505, Atlanta, Georgia 30305; Attn: Secretary, and all notices hereunder to Key Employee shall be delivered personally or mailed, via first class mail, to Key Employee at Key Employee's address as noted in this Option Agreement. Such addresses for the service of notices may be changed at any time provided written notice of the change is furnished in advance to GNN or to Key Employee, as the case may be. 14. Plan and Plan Interpretations as Controlling. The Option hereby granted and the terms and conditions herein set forth are subject in all respects to the terms and conditions of the Plan, which are controlling. All determinations and interpretations of the Board shall be binding and conclusive upon Key Employee and his or her legal representatives with regard to any question arising hereunder or under the Plan. 15. Registration or Qualification of Shares. If at any time the Board determines, in its discretion, that the registration or qualification of the shares covered hereby under the any state or federal law is necessary or desirable as a condition for the delivery of shares upon exercise of this Option, the exercise of this Option shall be deferred until such registration or qualification shall have been effected. 16. Income Tax Withholding. GNN may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all federal, state, local and other taxes -4- 17 required by law to be withheld with respect to the exercise of the Option and the issuance of the Option Shares, including, but not limited to, deducting the amount of any such withholding obligations from any other amount then or thereafter payable to Key Employee by GNN, requiring Key Employee, or the person or persons to whom Key Employee's rights under the Option pass in accordance with Section 7 of this Option Agreement, to pay to GNN the amount required to be withheld or to execute such documents as GNN deems necessary or desirable to enable it to satisfy its withholding obligations, or permitting Key Employee to elect to satisfy withholding obligations through a reduction in the number of shares of Stock actually transferred to Key Employee or to such other person or persons as a result of exercise of the Option. 17. Governing Law. This Option Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware. 18. Entire Agreement. This Option Agreement constitutes a single integrated contract expressing the entire agreement of the parties hereto. There are no agreements, written or oral, express or implied, between the parties hereto, concerning the subject matter hereof, except as set forth in this Option Agreement and the Plan. All other agreements, whether written or oral, between the parties concerning the subject matter hereof are superseded by this Option Agreement and the Plan. IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the date first above written. GREENBERG NEWS NETWORKS, INC. By: _____________________________________ Title: __________________________________ _________________________________________ (Key Employee's Signature) _________________________________________ (Social Security Number) -5- 18 EXHIBIT A 1. "BOARD" -- means the Board of Directors of GNN. 2. "CHANGE IN CONTROL" -- means (a) the sale of all or substantially all of the assets of GNN, whether in a single transaction or in a series of transactions occurring within any single 12 month period, (b) the sale by one or more shareholders of GNN, in a single transaction or in series of transactions occurring within any single 12 month period, of more than 50% of the issued and outstanding capital stock of GNN to any individual, corporation, trust or other entity which is not a shareholder, or is not controlled by a shareholder, of GNN as of the date of grant of an Option; (c) a merger, reorganization, exchange of stock or other securities, or other business combination between GNN and another corporation, trust or other business entity which results in the present shareholders of GNN owning less than 51% of the total issued and outstanding capital stock of the surviving entity; or (d) the issuance of capital stock of GNN after the date of grant of an Option, whether by private placement or public offering or pursuant to the exercise of warrants, options or conversion rights, which causes the existing shareholders of GNN to own less than 51% of the total issued and outstanding stock of GNN. 3. "CODE" -- means the Internal Revenue Code of 1986, as amended. 4. "DIRECTOR" -- means any member of the Board who is not any employee of GNN or a Parent or Subsidiary. 5. "FAIR MARKET VALUE" -- means as of any date (a) the price that the Board acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts; provided, however, if the Stock is publicly traded on such date, "Fair Market Value" means (b) the closing price on such date for a share of Stock as reported by The Wall Street Journal under the quotation system under which such closing price is reported or, if The Wall Street Journal does not report such closing price, such closing price as reported by a newspaper or trade journal selected by the Board or, if no such closing price is available on such date, (c) such closing price as so reported in accordance with 5(b) for the immediately preceding business day or, if no newspaper or trade journal reports such closing price or if no such price quotation is available, (d) the price as determined in accordance with 5(a). 6. "GREENBERG NEWS NETWORKS" -- means Greenberg News Networks, Inc. and any successor to such corporation. 19 7. "ISO" - means an option granted under the Plan to purchase Stock that is intended to satisfy the requirements of Section 422 of the Code. 8. "KEY EMPLOYEE" - means an employee of GNN or any Parent or Subsidiary, or a non-employee consultant retained by GNN or any Parent or Subsidiary, who, in the judgment of the Board acting in its absolute discretion, is a key to the success of GNN or a Parent or Subsidiary. 9. "1933 ACT" - means the Securities Act of 1933, as amended. 10. "NQO" - means an option granted under the Plan to purchase stock that by its terms provides that it will not be treated as an incentive stock option under Section 422 of the Code or that fails to satisfy the requirements of Section 422 of the Code. 11. "OPTION" - means an ISO or a NQO. 12. "OPTION AGREEMENT" - means the written agreement or instrument that sets forth the terms of an Option granted to a Key Employee or Director under the Plan. 13. "OPTION PRICE" - means the price that shall be paid to purchase one share of Stock upon the exercise of an Option granted under the Plan. 14. "PARENT" - means any corporation that is a parent corporation (within the meaning of Section 424(e) of the Code) of GNN. 15. "PLAN" - means the GNN, Inc. 1997 Stock Option Plan as amended from time to time thereafter. 16. "STOCK" - means the $.01 par value Common Stock of GNN. 17. "SUBSIDIARY" - means any corporation that is a subsidiary corporation (within the meaning of Section 424(f) of the Code) of GNN. 18. "TEN PERCENT SHAREHOLDER" - means a person who owns (after taking into account the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of either GNN, a Parent or a Subsidiary. -2- EX-10.6 9 GREENBERG NEWS 1997 STOCK OPTION PLAN 1 EXHIBIT 10.6 GREENBERG NEWS NETWORKS, INC. 1997 STOCK OPTION PLAN 2 TABLE OF CONTENTS
Page ---- Section 1. PURPOSE.............................................. 1 Section 2. DEFINITIONS.......................................... 1 2.1. "BOARD"............................ 1 2.2. "CHANGE IN CONTROL"................ 1 2.3. "CODE"............................. 2 2.4. "DIRECTOR"......................... 2 2.5. "FAIR MARKET VALUE"................ 2 2.6. "GREENBERG NEWS NETWORKS".......... 3 2.7. "ISO".............................. 3 2.8. "KEY EMPLOYEE"..................... 3 2.10. "NOO".............................. 3 2.11. "OPTION"........................... 3 2.12. "OPTION AGREEMENT"................. 3 2.13. "OPTION PRICE"..................... 3 2.14. "PARENT"........................... 3 2.15. "PLAN"............................. 3 2.16. "STOCK"............................ 4 2.17. "SUBSIDIARY"....................... 4 2.18. "TEN PERCENT SHAREHOLDER".......... 4 Section 3. SHARES SUBJECT TO OPTIONS........................... 4 Section 4. EFFECTIVE DATE...................................... 4 Section 5. ADMINISTRATION...................................... 5 Section 6. ELIGIBILITY......................................... 5 Section 7. GRANT OF OPTIONS.................................... 6 7.1. Grant.............................. 6 7.2. $100,000 Limit..................... 6 Section 8. OPTION PRICE........................................ 7 Section 9. EXERCISE PERIOD..................................... 8 Section 10. NONTRANSFERABILITY.................................. 9
i 3
Page ---- Section 11. SECURITIES REGISTRATION AND RESTRICTIONS...................... 9 11.1. Investment Representation.................... 9 11.2. Registration or Qualification of Shares...... 10 Section 12. LIFE OF PLAN.................................................. 10 Section 13. ADJUSTMENT.................................................... 11 Section 14. CHANGE IN CONTROL............................................. 12 Section 15. AMENDMENT OR TERMINATION...................................... 12 Section 16. MISCELLANEOUS................................................. 13 16.1. No Shareholder Rights........................ 13 16.2. Employment................................... 13 16.3. Shareholder Agreement........................ 13 16.4. Withholding.................................. 13 16.5. Construction................................. 14
ii 4 SECTION 1. PURPOSE The purpose of this Plan is to promote the interests of Greenberg News Networks and its related companies by granting Options to purchase Stock to Key Employees and Directors in order (a) to encourage a sense of proprietorship on the part of Key Employees and Directors who will be largely responsible for the continued growth of Greenberg News Networks, (b) to furnish such Key Employees and Directors with further incentive to develop and promote the business and financial success of Greenberg News Networks and (c) to induce such Key Employees and Directors to continue in the service of Greenberg News Networks, by providing a means whereby such selected individuals may purchase stock in Greenberg News Networks. SECTION 2. DEFINITIONS Each term set forth in this Section 2 shall have the meaning set forth opposite such term for purposes of this Plan and, for purposes of such definitions, the singular shall include the plural and the plural shall include the singular. 2.1 "BOARD" - means the Board of Directors of Greenberg News Networks. 2.2 "CHANGE IN CONTROL" - means (a) the sale of all or substantially all of the assets of Greenberg News Networks, whether in a single transaction or in a series of transactions occurring within any single 12 month period, (b) the sale by one or more shareholders of Greenberg News Networks, in a single transaction or in series of transactions occurring within any single 12 month period, of more than 50% of the issued and outstanding capital stock of Greenberg News 5 Networks to any individual, corporation, trust or other entity which is not a shareholder, or is not controlled by a shareholder, of Greenberg News Networks as of the date of grant of an Option; or (c) a merger, reorganization, exchange of stock or other securities, or other business combination between Greenberg News Networks and another corporation, trust or other business entity which results in the then-current shareholders of Greenberg News Networks owning less than 51% of the total issued and outstanding capital stock of the surviving entity. 2.3 "CODE" - means the Internal Revenue Code of 1986, as amended. 2.4 "DIRECTOR" - means any member of the Board who is not any employee of Greenberg News Networks or a Parent or Subsidiary. 2.5 "FAIR MARKET VALUE" - means as of any date (a) the price that the Board acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts; provided, however, if the Stock is publicly traded on such date, "Fair Market Value" means (b) the closing price on such date for a share of Stock as reported by The Wall Street Journal under the quotation system under which such closing price is reported or, if The Wall Street Journal does not report such closing price, such closing price as reported by a newspaper or trade journal selected by the Board or, if no such closing price is available on such date, (c) such closing price as so reported in accordance with Section 2.5(b) for the immediately preceding business day or, if no newspaper or trade journal reports such closing price or if no such price quotation is available, (d) the price as determined in accordance with Section 2.5(a). 2 6 2.6. "GREENBERG NEWS NETWORKS" -- means Greenberg News Networks, Inc. and any successor to such corporation. 2.7. "ISO" -- means an option granted under this Plan to purchase Stock that is intended to satisfy the requirements of Section 422 of the Code. 2.8. "KEY EMPLOYEE" -- means an employee of Greenberg News Networks or any Parent of Subsidiary, or a non-employee consultant retained by Greenberg News Networks or any Parent or Subsidiary, who, in the judgment of the Board acting in its absolute discretion, is a key to the success of Greenberg News Networks or a Parent or Subsidiary. 2.9. "1933 ACT" -- means the Securities Act of 1933, as amended. 2.10. "NQO" -- means an option granted under this Plan to purchase stock that by its terms provides that it will not be treated as an incentive stock option under Section 422 of the Code or that fails to satisfy the requirements of Section 422 of the Code. 2.11. "OPTION" -- means an ISO or a NQO. 2.12. "OPTION AGREEMENT" -- means the written agreement or instrument that sets forth the terms of an Option granted to a Key Employee or Director under this Plan. 2.13. "OPTION PRICE" -- means the price that shall be paid to purchase one share of Stock upon the exercise of an Option granted under this Plan. 2.14. "PARENT" -- means any corporation that is a parent corporation (within the meaning of Section 424(e) of the Code) of Greenberg News Networks. 2.15. "PLAN" -- means this Greenberg News Networks, Inc. 1997 Stock Option Plan as amended from time to time. 3 7 2.16. "STOCK" -- means the $.01 par value Common Stock of Greenberg News Networks. 2.17. "SUBSIDIARY" -- means any corporation that is a subsidiary corporation (within the meaning of Section 424(f) of the Code) of Greenberg News Networks. 2.18. "TEN PERCENT SHAREHOLDER" -- means a person who owns (after taking into account the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of either Greenberg News Networks, a Parent or a Subsidiary. SECTION 3. SHARES SUBJECT TO OPTIONS There shall be 1,000,000 shares of Stock reserved for use under this Plan. Such shares of Stock shall be reserved to the extent that the Board deems appropriate from authorized but unissued shares of Stock and from shares of Stock that have been reacquired by Greenberg News Networks. Any shares of Stock subject to an Option that remain unissued after the cancellation, expiration or exchange of such Option for another Option shall again become available for use under this Plan, but any shares of Stock used to satisfy a withholding obligation under Section 16.4 of this Plan shall not again be available for use under this Plan. SECTION 4. EFFECTIVE DATE The effective date of this Plan shall be the date the Plan is adopted by the Board, provided Greenberg News Networks's shareholders (acting at a duly called meeting of such 4 8 shareholders) approve the establishment of this Plan within 12 months after the date the Board adopts this Plan. Any Option granted before such shareholder approval automatically shall be granted subject to such approval. If there is no such approval by the shareholders of Greenberg News Networks, this Plan shall not go into effect and the grant of any Options under this Plan shall be null and void. SECTION 5. ADMINISTRATION This Plan shall be administered by the Board. The Board, acting in its absolute discretion, shall exercise such powers and take such action as expressly called for under this Plan and, further, the Board shall have the power to interpret this Plan, and the respective Option Agreements entered into under this Plan, and to take such other action in the administration and operation of this Plan as the Board deems equitable under the circumstances, which action shall be final and binding on Greenberg News Networks, on each affected Key Employee and Director and on each other person directly or indirectly affected by such action. SECTION 6. ELIGIBILITY Key Employees and Directors shall be eligible for the grant of NQOs under this Plan. Only Key Employees who are current employees of Greenberg News Networks or a Parent or Subsidiary shall be eligible for the grant of ISOs under this Plan. 5 9 SECTION 7. GRANT OF OPTIONS 7.1. Grant. The Board acting in its absolute discretion shall grant Options to Key Employees and Directors under this Plan from time to time to purchase shares of Stock and, further, shall have the right to grant new Options in exchange for the cancellation of outstanding Options that have a higher or lower Option Price. Each grant of an Option shall be evidenced by an Option Agreement, and each Option Agreement shall (a) specify whether the Option is an ISO or NQO, and (b) incorporate such other terms and conditions as the Board acting in its absolute discretion deems consistent with the terms of this Plan, including (without limitation) a limitation on the number of shares subject to the Option which first become exercisable during any particular period. To the extent the Board grants an Option that Greenberg News Networks intends to constitute an incentive stock option under Section 422 of the Code but such Option fails to satisfy the requirements under Section 422 of the Code, such Option shall be treated as a NQO. If the Board grants an ISO and a NQO to an eligible Key Employee on the same date, the right of the Key Employee to exercise the ISO shall not be conditioned on his or her failure to exercise the NQO. 7.2. $100,000 Limit. The aggregate Fair Market Value of the shares of Stock subject to ISOs and other incentive stock option (that satisfy the requirements under Section 422 of the Code) granted to an eligible Key Employee under this Plan and under any other stock option plan adopted by Greenberg News Networks, a Parent or a Subsidiary that first become exercisable in any calendar year shall not exceed $100,000. Such Fair Market Value figure shall be determined by the 6 10 Board on the date the ISO or other incentive stock option is granted. The Board shall interpret and administer the limitation set forth in this Section 7.2 in accordance with Section 422(d) of the Code, and the Board shall treat this Section 7.2 as in effect only for those periods for which Section 422(d) of the Code is in effect. SECTION 8. OPTION PRICE The Option Price for each share of Stock subject to an ISO shall be set by the Board at the time the Option is granted, but such price shall not be set at less than the Fair Market Value of a share of Stock on the date the ISO is granted or, if the ISO is granted to an eligible Key Employee who is a Ten Percent Shareholder, the Option Price for each share of Stock subject to such ISO shall be no less than 110% of the Fair Market Value of a share of Stock on the date the ISO is granted. The Option Price of a NQO may be less than the Fair Market Value of a share of Stock on the date the NQO is granted but shall under no circumstances be less than adequate consideration (as determined by the Board) for such a share. The Option Price shall be payable in full upon the exercise of any Option, and an Option Agreement at the discretion of the Board may provide for the payment of the Option Price either in cash or in Stock held by the Key Employee or Director or in any combination of cash and such Stock. If an Option Agreement allows the payment of the Option Price in whole or in part in Stock, such payment shall be made in Stock acceptable to the Board which the Key Employee or Director has held for at least 6 months. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock as of the date the properly endorsed certificate for such Stock is delivered to the Board. 7 11 SECTION 9. EXERCISE PERIOD Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Agreement, but no Option Agreement shall make an Option exercisable on or after the earlier of (a) the fate that is the fifth anniversary of the date the Option is granted, if the Option is an ISO and the eligible Key Employee is a Ten Percent Shareholder on the date the Option is granted, or (b) the date that is the tenth anniversary of the date the Option is granted, if the Option is a NQO of if the Option is an ISO and is granted to an Eligible Key Employee who is not a Ten Percent Shareholder on the date the Option is granted. An Option Agreement may provide for the exercise of an Option after the employment of a Key Employee or the service of a Director has terminated for any reason whatsoever, including death or disability; provided, however, to the extent an ISO remains or becomes exercisable on or after the last day of the 3 consecutive month period that immediately follows the last day of a Key Employee's continuous period of employment by Greenberg News Network, a Parent or a Subsidiary (other than as a result of death or disability), the Option after such date no longer will qualify for any special income tax benefits under Section 422 of the Code. 8 12 SECTION 10. NONTRANSFERABILITY No Option granted under this Plan shall be transferable by a Key Employee or Director other than by will or by the laws of descent and distribution, and such Option shall be exercisable during the lifetime of a Key Employee or Director only by such Key Employee or Director. The person or persons to whom an Option is transferred by will or by the laws of descent and distribution thereafter shall be treated as the Key Employee or Director under this Plan. SECTION 11. SECURITIES REGISTRATION AND RESTRICTIONS 11.1. Investment Representation. Each Option Agreement shall provide that, if so requested by Greenberg News Networks, the Key Employee or Director shall make a written representation to Greenberg News Networks that he or she will not sell or offer for sale any of such Stock unless a registration statement shall be in effect with respect to such Stock under the 1933 Act and any applicable state securities law or he or she shall have furnished to Greenberg News Networks an opinion in form and substance satisfactory to Greenberg News Networks of legal counsel satisfactory to Greenberg News Networks that such registration is not required. Certificates representing the Stock transferred upon the exercise of an Option may, at the discretion of Greenberg News Networks, bear a legend to the effect that the Key Employee or Director agrees to hold such Stock for investment and not with a view to resale or distribution to the public and that such Stock has not been registered under the 1933 Act or any applicable state securities law and that such Stock cannot be sold or offered for sale in the absence of an effective registration statement as to such 9 13 Stock under the 1933 Act and any applicable state securities law or an opinion in form and substance satisfactory to Greenberg News Networks of legal counsel satisfactory to Greenberg News Networks that such registration is not required. 11.2. Registration or Qualification of Shares. If the Board, in its sole discretion, determines that registration or qualification of shares is necessary or desirable, Greenberg News Networks shall, at its expense, take such action as may be required to effect any such registration or qualification. However, the Board is under no obligation to effect any such registration or qualification. SECTION 12. LIFE OF PLAN No Option shall be granted under this Plan on or after the earlier of (a) the tenth anniversary of the effective date of this Plan (as determined under Section 4 of this Plan), in which event this Plan shall continue in effect thereafter until all outstanding Options have been exercised in full or no longer are exercisable, or (b) the date on which all of the Stock reserved under Section 3 of this Plan has (as a result of the exercise of Options) been issued or no longer is available for use under this Plan, in which event this Plan also shall terminate on such date. 10 14 SECTION 13. ADJUSTMENT The number, kind or class (or any combination thereof) of shares of Stock reserved under Section 3 of this Plan and the number, kind or class (or any combination thereof) of shares of Stock subject to Options granted under this Plan and the Option Price of such Options shall be adjusted by the Board in an equitable manner to reflect any change in the capitalization of Greenberg News Networks, including, but not limited to, such changes as stock dividends or stock splits. Furthermore, the Board shall have the right to adjust (in a manner which satisfies the requirements of Section 424(a) of the Code) the number, kind or class (or any combination thereof) of shares of Stock reserved under Section 3 of this Plan and the number, kind or class (or any combination thereof) of shares subject to Options granted under this Plan and the Option Price of such Options in the event of any corporate transaction described in Section 424(a) of the Code, which provides for the substitution or assumption of such Options in order to take into account on an equitable basis the effect of such transaction. If any adjustment under this Section 13 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under this Plan and the number subject to any Options granted under this Plan shall be the next lower number of shares of Stock, rounding all fractions downward. An adjustment made under this Section 13 by the Board shall be conclusive and binding on all affected persons and, further, shall not constitute an increase in "the number of shares reserved under Section 3" within the meaning of Section 15(a) of this Plan. 11 15 SECTION 14. CHANGE IN CONTROL If there is a Change in Control, Greenberg News Networks shall notify each Key Employee or Director who has an Option outstanding and each such Key Employee or Director shall then have the right, for a 90 day period following such notice, to exercise in full any Option previously granted to him or her that is then outstanding (notwithstanding that such Option may not otherwise have fully vested under the terms of the applicable Option Agreement). After such 90 day period, each then outstanding Option, at the direction and discretion of the Board, may be canceled unilaterally by Greenberg News Networks. SECTION 15. AMENDMENT OR TERMINATION This Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, no such amendment shall be made absent the proper approval of the shareholders of Greenberg News Networks (a) to increase the number of shares reserved under Section 3 of this Plan, (b) to change the class of employees eligible for Options under Section 6 of this Plan, or (c) to comply with applicable provisions of the Code, state law or NASD or exchange listing rules, which require such shareholder approval. The Board also may suspend the granting of Options under this Plan at any time and may terminate this Plan at any time; provided, however, the Board shall not have the right unilaterally to modify, amend or cancel any Option granted before such suspension or termination unless (i) the Key Employee or Director 12 16 consents in writing to such modification, amendment or cancellation or (ii) there is a dissolution or liquidation of Greenberg News Networks or a transaction described in Section 13 or Section 14 of this Plan. SECTION 16. MISCELLANEOUS 16.1. No Shareholder Rights. No Key Employee or Director shall have any rights as a shareholder of Greenberg News Networks as a result of the grant of an Option to him or to her under this Plan or his or her exercise of such Option pending the actual delivery of Stock subject of such Option to such Key Employee or Director. 16.2. Employment. The grant of an Option to a Key Employee or Director under this Plan shall not constitute a contract of employment or a right to continue to serve on the Board and shall not confer on a Key Employee or Director any rights upon his or her termination of employment or services as a Director in addition to those rights, if any, expressly set forth in the Option Agreement that evidences his or her Option. 16.3. Shareholder Agreement. Greenberg News Networks shall have the right to require a Key Employee or Director to enter into such employment, shareholder, buy-sell, right of first refusal or other agreement or agreements that Greenberg News Networks deems appropriate under the circumstances as a condition to the grant or to the exercise of any Option. 16.4. Withholding. Each Option grant shall be made subject to the condition that the Key Employee or Director consents to whatever action the Board directs to satisfy the federal and state tax withholding requirements, if any, that the Board in its discretion deems applicable to the exercise of such Option. The Board also shall have the right to provide, in an Option Agreement, 13 17 that a Key Employee or Director may elect to satisfy federal and state tax withholding requirements through a reduction in the number of shares of Stock actually transferred to him or to her under this Plan. 16.5. Construction. This Plan shall be construed under the laws of the State of Delaware. The headings in this Plan are for convenience of reference purposes only. IN WITNESS WHEREOF, Greenberg News Networks, Inc. has caused its duly authorized officer to execute this Plan this 20th day of January, 1998 to evidence its adoption of this Plan. GREENBERG NEWS NETWORKS, INC. By: /s/ ALAN GREENBERG ------------------------------- Alan Greenberg President 14 EX-10.7 10 MEDE AMERICA STOCK OPTION & RESTRICTED STOCK PLAN 1 EXHIBIT 10.7 MEDE AMERICA CORPORATION AND ITS SUBSIDIARIES STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN Section 1. Purpose. The purpose of the MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan (the "Plan") is to promote the interests of MedE America Corporation, a Delaware corporation (the "Company"), and any Subsidiary thereof and the interests of the Company's stockholders by providing an opportunity to selected employees, officers and directors of the Company or any Subsidiary thereof as of the date of the adoption of the Plan or at any time thereafter to purchase Common Stock of the Company. By encouraging such stock ownership, the Company seeks to attract, retain and motivate such employees and other persons and to encourage such employees and other persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by the granting of "non-qualified stock options" and/or "incentive stock options" to acquire the Common Stock of the Company and/or by the granting of rights to purchase the Common Stock of the Company on a "restricted stock" basis. Under the Plan, the Committee shall have the authority (in its sole discretion) to grant "incentive stock options" within the meaning of Section 422(b) of the Code, "non-qualified stock options" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto, or "restricted stock" awards. Section 2. Definitions. For purposes of the Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context: 2.1. "Award" shall mean an award of the right to purchase Common Stock granted under the provisions of Section 7 of the Plan. 2.2. "Board of Directors" shall mean the Board of Directors of the Company. 2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.4. "Committee" shall mean the committee of the Board of Directors referred to in Section 5 hereof; provided, that if no such committee is appointed by the Board of Directors, the Board of Directors shall have all of the authority and obligations of the Committee under the Plan. 2 2.5. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. 2.6. "Employee" shall mean (i) with respect to an ISO, any person, including, without limitation, an officer or director of the Company, who, at the time an ISO is granted to such person hereunder, is employed on a full-time basis by the Company or any Parent or Subsidiary of the Company, and (ii) with respect to a Non-Qualified Option and/or an Award, any person employed by, or performing services for, the Company or any Parent or Subsidiary of the Company, including, without limitation, directors and officers. 2.7. "ISO" shall mean an Option granted to a Participant pursuant to the Plan that constitutes and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. 2.8. "Non-Qualified Option" shall mean an Option granted to a Participant pursuant to the Plan that is intended to be, and qualifies as, a "non-qualified stock option" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto and that shall not constitute or be treated as an ISO. 2.9. "Option" shall mean any ISO or Non-Qualified Option granted to an Employee pursuant to the Plan. 2.10. "Participant" shall mean any Employee to whom an Award and/or an Option is granted under the Plan. 2.11. "Parent" of the Company shall have the meaning set forth in Section 424(e) of the Code. 2.12. "Subsidiary" of the Company shall have the meaning set forth in Section 424(f) of the Code. Section 3. Eligibility. Awards and/or Options may be granted to any Employee. The Committee shall have the sole authority to select the persons to whom Awards and/or Options are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified option, an ISO or an Award or any combination thereof. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. Section 4. Common Stock Subject to the Plan. 4.1. Number of Shares. The total number of shares of Common Stock for which options and/or Awards may be granted under 2 3 the Plan shall not exceed in the aggregate Two Million Five Hundred Thousand (2,500,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). 4.2. Reissuance. The shares of Common Stock that may be subject to options and/or Awards granted under the Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Committee may determine. In the event that any outstanding option expires or is terminated for any reason, the shares allocable to the unexercised portion of such option may again be subject to an Option and/or Award granted under the Plan. If any shares of Common Stock issued or sold pursuant to an Award or the exercise of an Option shall have been repurchased by the Company, then such shares may again be subject to an Option and/or Award granted under the Plan. 4.3. Special ISO Limitations. (a) The aggregate fair market value (determined as of the date an ISO is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all incentive stock option plans of the Company or any Parent or Subsidiary of the Company) shall not exceed $100,000. (b) No ISO shall be granted to an Employee who, at the time the ISO is granted, owns (actually or constructively under the provisions of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, unless (i) the option price is at least 110% of the fair market value (determined as of the time the ISO is granted) of the shares of Common Stock subject to the ISO and (ii) the ISO by its terms is not exercisable more than five years from the date it is granted. 4.4. Limitations Not Applicable to Non-Qualified Options or Awards. Notwithstanding any other provision of the Plan, the provisions of Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any Non-Qualified Option or Award granted under the Plan. Section 5. Administration of the Plan. 5.1. Administration. The Plan shall be administered by a committee of the Board of Directors (the "Committee") established by the Board of Directors and consisting of no less than three persons. All members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended 3 4 (the "Exchange Act"). The Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. 5.2. Grant of Options/Awards. (a) Options. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Options hereunder; (ii) to designate whether any Option to be granted hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of Common Stock that may be subject to each Option; (iv) to determine the time and the conditions subject to which Options may be exercised in whole or in part; (v) to determine the amount (not less than the par value per share) and the form of the consideration that may be used to purchase shares of Common Stock upon exercise of any Option (including, without limitation, the circumstances under which issued and outstanding shares of Common Stock owned by a Participant may be used by the Participant to exercise an Option); (vi) to impose restrictions and/or conditions with respect to shares of Common Stock acquired upon exercise of an Option; (vii) to determine the circumstances under which shares of Common Stock acquired upon exercise of any Option may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which shares acquired upon exercise of an Option may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired upon exercise of an Option may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to establish a vesting provision for any Option relating to the time when (or the circumstances under which) the Option may be exercised by a Participant, including, without limitation, vesting provisions that may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (x) to accelerate the time when outstanding Options may be exercised, provided, however, that any ISOs shall be deemed "accelerated" within the meaning of Section 424(h) of the Code; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Option not inconsistent with the provisions of the Plan. Notwithstanding anything in the Plan to the contrary, in no event shall any Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Option is granted to such director or officer. (b) Awards. The Committee shall have the sole authority and discretion under the Plan (i) to select the 4 5 Employees who are to be granted Awards hereunder; (ii) to determine the amount to be paid by a Participant to acquire shares of Common Stock pursuant to an Award, which amount may be equal to, more than, or less than 100% of the fair market value of such shares on the date the Award is granted (but in no event less than the par value of such shares); (iii) to determine the time or times and the conditions subject to which Awards may be made; (iv) to determine the time or times and the conditions subject to which the shares of Common Stock subject to an Award are to become vested and no longer subject to repurchase by the Company; (v) to establish transfer restrictions and the terms and conditions on which any such transfer restrictions with respect to shares of Common Stock acquired pursuant to an Award shall lapse; (vi) to establish vesting provisions with respect to any shares of Common Stock subject to an Award, including, without limitation, vesting provisions which may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (vii) to determine the circumstances under which shares of Common Stock acquired pursuant to an Award may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which any shares of Common Stock acquired pursuant to an Award may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired pursuant to an Award may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to determine the form of consideration that may be used to purchase shares of Common Stock pursuant to an Award (including, without limitation, the circumstances under which issued and outstanding shares of Common Stock owned by a Participant may be used by the Participant to purchase the Common Stock subject to an Award); (x) to accelerate the time at which any or all restrictions imposed with respect to any shares of Common Stock subject to an Award will lapse; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Award not inconsistent with the provisions of the Plan. 5.3. Interpretation. The Committee shall be authorized to interpret the Plan and may, from time to time, adopt such rules and regulations, not inconsistent with the provisions of the Plan, as it may deem advisable to carry out the purposes of the Plan. 5.4. Finality. The interpretation and construction by the Committee of any provision of the Plan, any Option and/or Award granted hereunder or any agreement evidencing any such Option and/or Award shall be final and conclusive upon all parties. 5 6 5.5. Expenses, Etc. All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Committee shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Option and/or Award granted hereunder. Section 6. Terms and Conditions of Options. 6.1. ISOs. The terms and conditions of each ISO granted under the Plan shall be specified by the Committee and shall be set forth in an ISO agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each ISO shall be such that each ISO issued hereunder shall constitute and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. The terms and conditions of any ISO granted hereunder need not be identical to those of any other ISO granted hereunder. The terms and conditions of each ISO shall include the following: (a) The option price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an Employee referred to in Section 4.3(b) hereof) of the fair market value of the shares of Common Stock subject to the ISO on the date the ISO is granted. For purposes of the Plan, the fair market value per share of Common Stock as of any day shall mean the average of the closing prices of sales of shares of Common Stock on all national securities exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on any day the Common Stock shall not be quoted in the NASDAQ system, the average of the high and low bid and asked prices on such day in the over-the-counter market as reported by National Quotation Bureau Incorporated, or any similar successor organization. If at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ system or the over-the-counter market, the fair market value of the shares of Common Stock subject to an Option on the date the ISO is granted shall be the fair market value thereof determined in good faith by the Board of Directors. 6 7 (b) ISOs, by their terms, shall not be transferable otherwise than by will or the laws of descent and distribution, and, during a Participant's lifetime, an ISO shall be exercisable only by the Participant. (c) The Committee shall fix the term of all ISOs granted pursuant to the Plan (including, without limitation, the date on which such ISO shall expire and terminate); provided, however, that such term shall in no event exceed ten years from the date on which such ISO is granted (or, in the case of an ISO granted to an Employee referred to in Section 4.3(b) hereof, such term shall in no event exceed five years from the date on which such ISO is granted). Each ISO shall be exercisable in such amount or amounts, under such conditions and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion; provided, however, that in no event shall any ISO granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such ISO is granted to such director or officer. (d) To the extent that the Company or any Parent or Subsidiary of the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant as a result of any "disqualifying disposition" of any shares of Common Stock acquired upon exercise of an ISO granted hereunder, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors, in its sole discretion. (e) In the sole discretion of the Committee the terms and conditions of any ISO may (but need not) include any of the following provisions: (i) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one month after the date on which the Participant ceased to be so employed, and only to the extent 7 8 that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (ii) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one year after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (iii) In the event a Participant shall die while in the employ of the Company or a Parent or Subsidiary of the Company (or within a period of one month after ceasing to be an Employee for any reason other than his "disability" (within the meaning of Section 22(e)(3) of the Code) or within a period of one year after ceasing to be an Employee by reason of such "disability"), the unexercised portion of any ISO held by such Participant at the time of his death may only be exercised within one year after the date of such Participant's death, and only to the extent that the Participant could have otherwise exercised such ISO at the time of his death. In such event, such ISO may be exercised by the executor or administrator of the Participant's estate or by any person or persons who shall have acquired the ISO directly from the Participant by bequest or inheritance. 6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written option agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each Non-Qualified Option will be such (and each Non-Qualified option Agreement shall expressly so state) that each Non-Qualified Option issued hereunder shall not constitute nor be treated as an "incentive stock option" as defined in Section 422(b) of the Code, but will be a "non-qualified stock option" for Federal, state and local income tax purposes. The terms and conditions of any Non-Qualified Option granted hereunder need not be identical to those of any other Non-Qualified Option granted hereunder. The terms and conditions of each Non-Qualified Option Agreement shall include the following: (a) The option (exercise) price shall be fixed by the Committee and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the 8 9 Non-Qualified Option on the date such Non-Qualified Option is granted. (b) The Committee shall fix the term of all Non-Qualified options granted pursuant to the Plan (including, without limitation, the date on which such Non-Qualified Option shall expire and terminate). Such term may be more than ten years from the date on which such Non-Qualified Option is granted. Each Non-Qualified Option shall be exercisable in such amount or amounts, under such conditions (including, without limitation, provisions governing the rights to exercise such Non-Qualified Option), and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion; provided, however, that in no event shall any Non-Qualified Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Non-Qualified Option is granted to such director or officer. (c) Non-Qualified Options shall not be transferable otherwise than by will or the laws of descent and distribution, and during a Participant's lifetime a Non-Qualified Option shall be exercisable only by the Participant. (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant in respect of a Non-Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of a Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors, in its sole discretion. 7. Terms and Conditions of Awards. The terms and conditions of each Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Participant and the Company, in such form as the Committee shall approve. The terms and provisions of any Award granted hereunder need not be identical to those of any other Award granted hereunder. 9 10 The terms and conditions of each Award shall include the following: (a) The amount to be paid by a Participant to acquire the shares of Common Stock pursuant to an Award shall be fixed by the Committee and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Award on the date the Award is granted (but in no event less than the par value of such shares). (b) Each Award shall contain such vesting provisions, such transfer restrictions and such other restrictions and conditions as the Committee, in its sole discretion, may determine, including, without limitation, the circumstances under which the Company shall have the right and option to repurchase shares of Common Stock acquired pursuant to an Award. (c) Stock certificates representing Common Stock acquired pursuant to an Award shall bear a legend referring to any restrictions imposed on such Stock and such other matters as the Committee may determine. (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of an Award granted hereunder, in respect of any shares acquired pursuant to an Award, or in respect of the vesting of any such shares of Common Stock, then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld, or if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Committee, in its sole discretion. Section 8. Adjustments. (a) In the event that, after the adoption of the Plan by the Board of Directors, the outstanding shares of the Company's Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another entity through reorganization, merger or consolidation, recapitalization, reclassification, stock split, split-up, combination or exchange of shares or declaration of any dividends payable in Common Stock, the Board of Directors shall appropriately adjust (i) the number of shares of Common Stock (and the option price per share) subject to the 10 11 unexercised portion of any outstanding Option (to the nearest possible full share); provided, however, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISOs, (ii) the number of shares of Common Stock to be acquired pursuant to an Award which have not become vested, and (iii) the number of shares of Common Stock for which Options and/or Awards may be granted under the Plan, as set forth in Section 4.1 hereof, and such adjustments shall be effective and binding for all purposes of the Plan. (b) If any capital reorganization or reclassification of the capital stock of the Company or any consolidation or merger of the Company with another entity, or the sale of all or substantially all its assets to another entity, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, subject to Section 8(c) below, each holder of an Option shall thereafter have the right to purchase, upon the exercise of the Option in accordance with the terms and conditions specified in the option agreement governing such Option and in lieu of the shares of Common Stock immediately theretofore receivable upon the exercise of such Option, such shares of stock, securities or assets (including, without limitation, cash) as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore so receivable had such reorganization, reclassification, consolidation, merger or sale not taken place. (c) Notwithstanding Section 8(b) hereof (but only if expressly provided in any option agreement), in the event of (i) any offer to holders of the Company's Common Stock generally relating to the acquisition of all or substantially all of their shares, including, without limitation, through purchase, merger or otherwise, or (ii) any proposed transaction generally relating to the acquisition of substantially all of the assets or business of the Company (herein sometimes referred to as an "Acquisition"), the Board of Directors may, in its sole discretion, cancel any outstanding options (provided, however, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISO's) and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board of Directors acting in good faith) equal to the product of (A) the number of shares of Common Stock (the "Option Shares") that, as of the date of the consummation of such Acquisition, the holder of such Option had become entitled to purchase (and had not purchased) multiplied by (B) the amount, if any, by which (1) the formula or fixed price per share paid to holders of shares of Common Stock pursuant to such Acquisition exceeds (2) the option price applicable to such Option Shares. 11 12 Section 9. Effect of the Plan on Employment Relationship. Neither the Plan nor any Option and/or Award granted hereunder to a Participant shall be construed as conferring upon such Participant any right to continue in the employ of (or otherwise provide services to) the Company or any Subsidiary or Parent thereof, or limit in any respect the right of the Company or any Subsidiary or Parent thereof to terminate such Participant's employment or other relationship with the Company or any Subsidiary or Parent, as the case may be, at any time. Section 10. Amendment of the Plan. The Board of Directors may amend the Plan from time to time as it deems desirable; provided, however, that, without the approval of the holders of a majority of the outstanding capital stock of the Company entitled to vote thereon or consent thereto, the Board of Directors may not amend the Plan (i) to increase (except for increases due to adjustments in accordance with Section 8 hereof) the aggregate number of shares of Common Stock for which options and/or Awards may be granted hereunder, (ii) to decrease the minimum exercise price specified by the Plan in respect of ISOs or (iii) to change the class of Employees eligible to receive ISOs under the Plan. Section 11. Termination of the Plan. The Board of Directors may terminate the Plan at any time. Unless the Plan shall theretofore have been terminated by the Board of Directors, the Plan shall terminate ten years after the date of its initial adoption by the Board of Directors. No Option and/or Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under any Option and/or Award theretofore granted under the Plan. Section 12. Effective Date of the Plan. The Plan shall be effective as of March 22, 1995, the date on which the Plan was adopted by the Board of Directors of the Company. * * * * * 12 EX-10.8 11 MEDE AMERICA 1998 STOCK OPTION & RESTRICTED PLAN 1 EXHIBIT 10.8 MEDE AMERICA CORPORATION AND ITS SUBSIDIARIES 1998 STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN Section 1. Purpose. The purpose of the MEDE AMERICA Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan (the "Plan") is to promote the interests of MEDE AMERICA Corporation, a Delaware corporation (the "Company"), and any Subsidiary thereof and the interests of the Company's stockholders by providing an opportunity to selected Employees, Consultants and Non-Employee Directors of the Company to purchase Common Stock of the Company, thereby enhancing the Company's ability to attract, retain, motivate and encourage such persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by awards of Non-Qualified Stock Options, Incentive Stock Options, Restricted Stock and/or Unrestricted Stock. Section 2. Definitions. For purposes of the Plan, the following terms used herein have the following meanings, unless a different meaning is clearly required by the context: 2.1. "Administrator" means the Board of Directors or any Committees that shall be administering the Plan in accordance with Section 4 hereof. 2.2. "Annual Option" means a Non-Qualified Stock Option granted to a Non-Employee Director on the next business day following each annual meeting of stockholders at which such Non-Employee Director is elected as a Director, other than the annual meeting of stockholders at which such Non-Employee Director is initially elected a Director. 2.3. "Applicable Laws" means the legal requirements relating to the administration of stock option plans under state corporate laws, federal and state securities laws and the Code. 2.4. "Award" means any award of an Option or Stock under the Plan. 2.5. "Board of Directors" means the Board of Directors of the Company. 2.6. "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.7. "Committee" means any committee appointed by the Board of Directors in accordance with Section 4 of the Plan. 2 2.8. "Common Stock" means the Common Stock, $.01 par value, of the Company. 2.9. "Consultant" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary of the Company to render services and who is compensated for such services; provided that the term "Consultant" shall not include Directors who are paid only a director's fee by the Company or who are not compensated by the Company for their services as Directors. 2.10. "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Administrator, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. 2.11. "Director Option" means an Initial Option or an Annual Option. 2.12. "Director" means any member of the Board of Directors. 2.13. "Employee" means any person, including without limitation, an officer of the Company, who, is employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director's fee by the Company shall constitute "employment" by the Company. 2.14. "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the last market trading day prior to the day of determination, as reported in the Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the average between the high bid and low 2 3 asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in the Wall Street Journal or such other source as the Administrator deems reliable; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. 2.15. "Incentive Stock Option" means an Option granted to a Participant pursuant to Section 6 (including Section 6.7 thereof) which is intended to meet the requirements of Section 422 of the Code or any successor provision. 2.16. "Initial Option" means a Non-Qualified Stock Option granted pursuant to Section 6.8 to a Non-Employee Director on the first business day following his or her initial election to the Board of Directors. 2.17. "Non-Employee Director" means an Director who is not an employee of the Company or any Parent, Subsidiary or affiliate of the Company. 2.18. "Non-Qualified Stock Option" means an Option granted to a Participant pursuant to Section 6 that is not intended to be an Incentive Stock Option. 2.19. "Option" means any Incentive Stock Option or Non-Qualified Stock Option. 2.20. "Parent" of the Company shall have the meaning set forth in Section 424(e) of the Code. 2.21. "Participant" means any Employee, Consultant or Non-Employee Director to whom an Award is granted under the Plan. 2.22. "Restricted Period" means the period of time selected by the Administrator during which shares subject to an Award of Restricted Stock may be repurchased by or forfeited to the Company. 2.23. "Reporting Person" means a Participant that is subject to Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") . 2.24. "Restricted Stock" means shares of Common Stock awarded to a Participant under Section 7. 3 4 2.25. "Stock" means shares of Restricted Stock or Unrestricted Stock. 2.26. "Subsidiary" of the Company shall have the meaning set forth in Section 424(f) of the Code. 2.27. "Unrestricted Stock" means shares of Common Stock awarded to a Participant under Section 7 free of any restrictions under the Plan. Section 3. Common Stock Subject to the Plan. 3.1. Number of Shares. The total number of shares of Common Stock for which Awards may be granted under the Plan shall not exceed in the aggregate 1,500,000 shares of Common Stock (subject to adjustment as provided in Section 3.3 hereof). The Company, during the term of this Plan, will at all times reserve and keep available such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan. 3.2. Reissuance. The shares of Common Stock that may be subject to Awards under the Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Administrator may determine. In the event that any outstanding Option expires, is terminated, forfeited or becomes unexercisable for any reason without having been exercised in full, the shares allocable to the unexercised portion of such Option may again be subject to an Award under the Plan, subject, in the case of Incentive Stock Options, to any limitation required by the Code. If any shares of Common Stock issued or sold pursuant to a Stock award or the exercise of an Option shall have been repurchased by the Company, then such shares shall not again be available for future grant or award under the Plan. 3.3. Stock Dividends, Etc. In the event that the Administrator, in its sole discretion, determines that any stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or other similar transaction affects the Common Stock such that an adjustment is required in order to preserve or prevent enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Administrator, subject, in the case of Incentive Stock Options, to any limitation required under the Code, may equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards and (iii) the award, exercise or conversion price with respect to any of the foregoing, and if considered appropriate, the Administrator may 4 5 cause the number of shares subject to any Award always to be a whole number. The Administrator may make Awards under the Plan in substitution for stock and stock based awards held by employees of another corporation who concurrently become employees of the Company as a result of a merger or consolidation of the employing company with the Company or a Parent or Subsidiary of the Company or the acquisition by the Company or a Parent or Subsidiary of the Company of property or stock of the employing corporation. The substitute Awards shall be granted on such terms and conditions as the Administrator deems appropriate under the circumstances. Section 4. Administration of the Plan. 4.1. Procedure. (a) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Participants. (b) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee consisting of two or more Non-Employee Directors. (c) Rule 16b-3. To the extent that the Administrator determines it to be desirable to qualify transactions hereunder as exempt under Rule 16b-3 of the Exchange Act, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. (d) Other Administration. Other than as provided above, the Plan shall be administered by (i) the Board of Directors or (ii) a Committee, which committee shall be constituted to satisfy Applicable Laws. 4.2. Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific powers delegated by the Board of Directors to such Committee, the Administrator shall have the authority, in its discretion: (a) to determine the Fair Market Value of the Common Stock, in accordance with Section 2.14 of the Plan; 5 6 (b) to select the Employees and Consultants to whom Awards may be granted hereunder; (c) to determine whether and to what extent awards of Options and Stock, or any combination thereof, are granted hereunder; (d) to determine the number of shares of Common Stock to be covered by each Award made hereunder; (e) to determine the amount (not less than par value per share) and the form of the consideration that may be used to purchase shares of Common Stock pursuant to any Stock award or upon exercise of any Option (including, without limitation, the circumstances under which issued and outstanding shares of Common Stock owned by a Participant may be used by the Participant to exercise an Option); (f) to approve forms of agreements for use under the Plan; (g) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, including without limitation, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting, acceleration or waiver of forfeiture restrictions and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (h) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted; (i) to construe and interpret the terms of the Plan: (j) to prescribe, amend and rescind rules and regulations relating to the Plan; (k) to modify or amend the terms of any Award; (1) to accelerate vesting periods with respect to outstanding Options and the end of Restricted Periods with respect to Stock Awards; provided, however, that any Incentive Stock Options may only be "accelerated" in accordance with Section 424(h) of the Code; 6 7 (m) to authorize any person to execute on behalf of the Company any instrument required to effect any Award granted by the Administrator; and (n) to exercise all other powers granted to the Administrator under the Plan and make all other determinations deemed necessary or advisable for administering the Plan. 4.3. Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Options or Stock awarded under the Plan. 4.4. Expenses, Etc. All expenses and liabilities incurred by the Administrator in the administration of the Plan shall be borne by the Company. The Administrator may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Administrator shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Award granted thereunder. Section 5. Eligibility. Awards may be granted to any Employee, Consultant or Non-Employee Director. The Administrator shall have the sole authority to select the Employees and Consultants to whom discretionary Awards are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified Stock option, an Incentive Stock Option, Restricted Stock or Unrestricted Stock, or any combination thereof. Non-Employee Directors shall only be eligible to receive grants of Non-Qualified Stock Options pursuant to Section 6.8 of the Plan. No person other than an Employee, Consultant or Non-Employee Director shall have any right to participate in the Plan. Any person selected by the Administrator for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. The maximum number of shares of Common Stock which may be the subject of Awards granted to any one employee under the Plan during any calendar year shall be 300,000 shares. For this purpose, the grant of a new Award in substitution for outstanding Awards shall be deemed to constitute a new grant, separate from the original grant that is to be canceled. Incentive Stock Options may be granted only to persons eligible to receive Incentive Stock Options under the Code. Section 6. Options. 7 8 6.1. Subject to the provisions of the Plan, the Administrator may award Incentive Stock Options and Non-Qualified Stock Options, and determine the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The terms and conditions of Incentive Stock Options shall be subject to and comply with Section 422 of the Code, or any successor provision, and any regulations thereunder. 6.2. Exercise Price. The Administrator shall establish the exercise price of each Option at the time such Option is awarded. Such price shall not be less than 85% of the Fair Market Value of the Common Stock on the date of grant; provided that (i) in the case of an Incentive Stock Option, the exercise price shall not be less than 100% of the Fair Market Value of the Common Stock at the time of grant and (ii) in the case of a Non-Qualified Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the exercise price shall not be less than 100% of the Fair Market Value at the time of grant. 6.3. Vesting. Each Option shall be exercisable at such times and subject to such terms and conditions as the Administrator may specify in the applicable Option agreement or thereafter. The Administrator may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. 6.4. Payment. Options granted under the Plan may provide for the payment of the exercise price by delivery of cash or check in an amount equal to the exercise price of such Options or, to the extent permitted by the Administrator at or after the award of the Option, by (a) delivery of shares of Common Stock owned by the optionee, valued at their Fair Market Value on the date of such option exercise, (b) delivery of a promissory note of the optionee to the Company on terms determined by the Administrator, (c) delivery of an irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price or delivery of irrevocable instructions to a broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price, (d) payment of such other lawful consideration as the Administrator may determine or (e) any combination of the foregoing. In the event an optionee pays some or all of the exercise price of an Option by delivery of shares of Common Stock pursuant to clause(a) above, the Administrator may provide for the automatic award of an Option for up to the number of shares so delivered. 8 9 6.5. Transferability. Each Option granted under the Plan shall provide that neither it nor any interest therein may be transferred, assigned, pledged or hypothecated, by the optionee or by operation of law otherwise than by will, the laws of descent and distribution or a "qualified domestic relations order" (as defined in the Code), and shall be exercised during the lifetime of the optionee only by the optionee or a transferee pursuant to such a "qualified domestic relations order". No Option or interest therein may be or be made subject to execution, attachment or similar process. 6.6. Cancellation and New Grant of Options. The Board of Directors shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, (i) the cancellation of any or all outstanding options under the Plan and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of Common Stock and having an option exercise price per share which may be lower or higher than the exercise price per share of the canceled Options or (ii) the amendment of the terms of any and all outstanding Options under the Plan to provide an option exercise price per share which is higher or lower than the then current exercise price per share of such outstanding Options. 6.7. Incentive Stock Options. Options granted under the Plan which are intended to be Incentive Stock Options shall be subject to the following additional terms and conditions: (a) All Incentive Stock Options granted under the Plan shall, at the time of grant, be specifically designated as such in the option agreement covering such Incentive Stock Options. The exercise period shall not exceed ten years from the date of grant. (b) If any Employee to whom an Incentive Stock Option is to be granted under the Plan is, at the time of the grant of such option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rule of Section 424(d) of the Code), then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (i) The purchase price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the Fair Market Value of one share of Common Stock at the time of grant; and (ii) The Option exercise period shall not exceed five years from the date of grant. 9 10 (c) For so long as the Code shall so provide, options granted to any Employee under the Plan (and any other incentive stock option plans of the Company or its Subsidiaries) which are intended to constitute Incentive Stock Options shall not constitute Incentive Stock Options to the extent that such options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate Fair Market Value (determined as of the respective date or dates of grant) of more than $100,000. (d) No Incentive Stock Option may be exercised unless, at the time of such exercise, the Participant is, and has been continuously since the date of grant of his or her option, employed by the Company, except that: (i) an Incentive Stock Option may be exercised (to the extent exercisable on the date the Participant ceased to be an Employee of the Company or a Parent or Subsidiary) within the period of three months after the date the Participant ceases to be an employee of the Company or such Parent or Subsidiary (or within such lesser period as may be specified in the applicable option agreement); provided, that the agreement with respect to such Option may designate a longer exercise period and that the exercise after such three-month period shall be treated as the exercise of a Non-Qualified Stock Option under the Plan; (ii) if the Participant dies while in the employ of the Company, or within three months after the Participant ceases to be an Employee, the Incentive Stock Option (to the extent otherwise exercisable on the date of death) may be exercised by the Participant's Designated Beneficiary within the period of one year after the date of death (or within such lesser period as may be specified in the applicable Option agreement); and (iii) if the Participant becomes disabled (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) while in the employ of the Company, the Incentive Stock Option may be exercised (to the extent otherwise exercisable on the date of death) within the period of one year after the date of such disability (or within such lesser period as may be specified in the option agreement). In the event of the Participant's death during this one-year period, the Incentive Stock Option may be exercised by the Participant's Designated Beneficiary within the period of one year from the date the Participant became disabled or within such lesser period as may be specified in the applicable option agreement. 10 11 For all purposes of the Plan and any Option granted hereunder, (i) "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Treasury Regulations under the Code (or any successor regulations) and (ii) any Option may provide that if such option shall be assumed or a new option substituted therefor in a transaction to which Section 424(a) of the Code applies, employment by such assuming or substituting corporation shall be considered for all purposes of such option to be employment by the Company. Notwithstanding the foregoing provisions, no Incentive Stock Option may be exercised after its expiration date. 6.8. Non-Employee Director Options. Director Options shall be automatic and subject to the following additional terms and conditions: (a) All Director Options shall be Non-Qualified Stock Options. (b) Each Non-Employee Director shall be granted an Initial Option to purchase 1,000 shares of Common Stock on the date of his or her initial election to the Board of Directors, and an Annual Option to purchase 1,000 shares of Common Stock on the next business day following each annual meeting of stockholders. (c) The exercise price of each Director Option will be 100% of the Fair Market Value at the time of grant. (d) Director options shall become exercisable six months after the time of grant. The exercise period shall not exceed ten years from the date of grant, provided that subject to the provisions of Section 6.8(e), no Director Option may be exercised more than 90 days after the optionee ceases to serve as a director of the Company. (e) If a Non-Employee Director dies or becomes disabled becomes disabled (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) while a director of the Company, the option may be exercised (to the extent otherwise exercisable on the date of disability or death), by such disabled director or, in the case of death, by the director's Designated Beneficiary, in each case within the period of one year after the date of disability or death (or within such lesser period as may be specified in the applicable Option agreement). Section 7. Restricted And Unrestricted Stock. 11 12 7.1. General. The Board of Directors may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their purchase price (or to require forfeiture of such shares if purchased at no cost) from the recipient in the event that conditions specified by the Administrator in the applicable Award are not satisfied prior to the end of the applicable Restricted Period or Restricted Periods established by the Administrator for such Award. Conditions for repurchase (or forfeiture) may be based on continuing employment or service or achievement of pre-established performance or other goals and objectives. 7.2. Restricted Stock. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Administrator, during the applicable Restricted Period. Shares of Restricted Stock shall be evidenced in such manner as the Board of Directors may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and, unless otherwise determined by the Board of Directors, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the Restricted Period, the Company (or such designee) shall deliver such certificates to the Participant or, if the Participant has died, to the Participant's Designated Beneficiary. 7.3. Unrestricted Stock. The Administrator may, in its sole discretion, grant (or sell at a purchase price determined by the Board of Directors, which shall not be lower than 85% of Fair Market Value on the date of sale) Unrestricted Stock to Participants. 7.4. Payment. The purchase price for each share of Restricted Stock and Unrestricted Stock shall be determined by the Administrator and may not be less than the par value of the Common Stock. Such purchase price may be paid in the form of past services or such other lawful consideration as is determined by the Board of Directors. 7.5. Certificates. Stock certificates representing Shares of Restricted Stock or Unrestricted Stock shall bear a legend referring to any restrictions imposed thereon and such other matters as the Administrator may determine. 7.6. Acceleration. The Administrator may at any time accelerate the expiration of the Restricted Period applicable to all, or any particular, outstanding shares of Restricted Stock. Section 8. General Provisions Applicable to Awards. 12 13 8.1. Applicability of Rule 16b-3. Those provisions of the Plan which make an express reference to Rule 16b-3 shall apply to the Company only at such time as the Company's Common Stock is registered under the Exchange Act, or any successor provision, and then only with respect to Reporting Persons. 8.2. Documentation. Each Award under the Plan shall be evidenced by an instrument delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Administrator considers necessary or advisable. Such instruments may be in the form of agreements to be executed by both the Company and the Participant, or certificates, letters or similar documents, acceptance of which will evidence agreement to the terms thereof and of this Plan. 8.3. Administrator Discretion. Each type of Award may be made alone, in addition to or in relation to any other type of Award. The terms of each type of Award need not be identical, and the Administrator need not treat Participants uniformly. 8.4. Termination of Status. Subject to the provisions of Section 6, the Administrator shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other termination of employment or other status of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may exercise rights under such Award. 8.5. Mergers, Etc. In the event of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity (an "Acquisition"), the Board of Directors or the board of directors of any corporation assuming the obligations of the Company, may, in its discretion, take any one or more of the following actions as to outstanding Awards: (i) provide that such Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) on such terms as the Board of Directors determines to be appropriate; (ii) upon written notice to Participants, provide that all unexercised Options will terminate immediately prior to the consummation of such transaction unless exercised by the Participant within a specified period following the date of such notice; (iii) in the event of an Acquisition under the terms of which holders of the Common Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the Acquisition (the "Acquisition Price"), make or provide for a cash 13 14 payment to Participants equal to the difference between (A) the Acquisition Price times the number of shares of Common Stock subject to outstanding Options (to the extent then exercisable at prices not in excess of the Acquisition Price) and (B) the aggregate exercise price of all such outstanding options in exchange for the termination of such Options; and (iv) provide that all or any outstanding Awards shall become exercisable or realizable in full prior to the effective date of such Acquisition. 8.6. Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, to the extent that an option has not been previously exercised, it will terminate immediately prior to the consummation of such proposed action. The Board of Directors may, in the exercise of its sole discretion in such instances, declare that any Award shall terminate as of a date fixed by the Board of Directors and give each Participant the right to exercise his or her option as to all or any of the shares subject thereto, including shares as to which the Option would not otherwise be exercisable, or may accelerate the termination of the Restricted Period of any Stock Award. 8.7. Withholding. The Participant shall pay to the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Administrator's discretion, and subject to such conditions as the Administrator may establish, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. 8.8. Foreign Nationals. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Administrator considers necessary or advisable to achieve the purposes of the Plan or comply with applicable laws. 8.9. Amendment of Award. The Board of Directors may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Non-Qualified Stock Option; provided that the Participant's consent to such action shall be required unless the Board of Directors determines that the 14 15 action, taking into account any related action, would not materially and adversely affect the Participant. 8.10. Conditions on Delivery of Common Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan (i) until all conditions of the Award have been satisfied or removed; (ii) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with; (iii) if the outstanding Common Stock is at the time listed on any stock exchange or admitted for trading on an automatic quotation system, until the shares to be delivered have been listed or authorized to be listed or quoted on such exchange or quotation system upon official notice of notice of issuance; and (iv) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. Section 9. Miscellaneous 9.1. No Right To Employment or Other Status. The grant of an Award shall not be construed as giving a Participant the right to continued employment or service for the Company. The Company expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. 9.2. No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the record holder thereof. 9.3. Exclusion from Benefit Computations. No amounts payable upon exercise of Awards granted under the Plan shall be considered salary, wages or compensation to Participants for purposes of determining the amount or nature of benefits that Participants are entitled to under any insurance, retirement or other benefit plans or programs of the Company. 9.4. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel 15 16 to be necessary to the lawful issuance and sale of any shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. 9.5. Grants Exceeding Allotted Shares. If the shares of Common Stock covered by an Award exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess stock, unless such additional shareholder approval is obtained in a timely manner. 9.6. Effective Date and Term. (i) Effective Date. The Plan shall become effective on July 14, 1998, the date of its adoption by the Board of Directors, but no Incentive Stock Option granted under the Plan shall become exercisable unless and until the Plan shall have been approved by the Company's stockholders. If such stockholder approval is not obtained within twelve months after the date of the Board of Director's adoption of the Plan, no Options previously granted under the Plan shall be deemed to be Incentive Stock Options and no Incentive Stock Options shall be granted thereafter under the Plan. Amendments to the Plan not requiring stockholder approval shall become effective when adopted by the Board of Directors; amendments requiring stockholder approval shall become effective when adopted by the Board of Directors, but no Incentive Stock Option granted after the date of such amendment shall become exercisable (to the extent that such amendment to the Plan was required to enable the Company to grant such Incentive Stock Option to a particular optionee) unless and until such amendment shall have been approved by the Company's stockholders. If such stockholder approval is not obtained within twelve months of the Board of Directors' adoption of such amendment, any Incentive Stock Options granted on or after the date of such amendment shall terminate to the extent that such amendment to the Plan was required to enable the Company to grant such Option to a particular optionee. Subject to the limitations set forth in this Section 9(d), Awards may be made under the Plan at any time after the effective date and before the date fixed for termination of the Plan. (ii) Termination. The Plan shall terminate upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to Awards under the Plan, or (iii) by action of the 16 17 Board of Directors. No Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under theretofore granted under the Plan. 9.7. Amendment of Plan. The Board of Directors may amend, suspend or terminate the Plan or any portion thereof at any time; provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any applicable tax or regulatory requirement. Prior to any such approval, Awards may be made under the Plan expressly subject to such approval. 9.8. Governing Law. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of the State of Delaware. ***************************** 17 EX-23.2 12 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.2 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the WebMD, Inc. 1997 Amended and Restated 1997 Stock Incentive Plan, Director Stock Option Plan of WebMD, Inc., Direct Medical Knowledge, Inc. 1997 Stock Option/Stock Issuance Plan, Sapient Health Network, Inc. 1996 Stock Incentive Plan, Greenberg News Networks, Inc. 1997 Stock Option Plan, MedE America Corporation and its Subsidiaries Stock Option and Restricted Stock Purchase Plan, and MedE America Corporation and its Subsidiaries 1998 Stock Option and Restricted Stock Purchase Plan of our report dated February 16, 1999 with respect to the consolidated financial statements of Healtheon Corporation for the year ended December 31, 1998 included in its Annual Report on Form 10-K, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Palo Alto, California November 12, 1999 EX-23.3 13 CONSENT DELOITTE & TOUCHE LLP 1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Healtheon Corporation on Form S-8 of our report dated June 20, 1997 (September 26, 1998 as to Note 1-Net Loss per Common Share, paragraph 2 and Note 2- Acquisition of EDI Services, Inc., paragraph 4) relating to the consolidated statements of operations, convertible redeemable preferred stock and stockholders' equity (net capital deficiency), and cash flows of ActaMed Corporation and subsidiary for the year ended December 31, 1996 (these consolidated financial statements are not separately presented therein) appearing in Healtheon Corporation's Annual Report on Form 10-K, filed with the Securities and Exchange Commission. /s/ Deloitte & Touche LLP Atlanta, Georgia November 12, 1999 -----END PRIVACY-ENHANCED MESSAGE-----