-----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, RAoCC8iFlYYxz8RiY3YaU7XhWc+YHAnF5wutbzEyI56n786vrCg6Af65Mbh+P++L lga1uimHEkRvQL3ouwKdjA== /in/edgar/work/20000814/0000912057-00-036844/0000912057-00-036844.txt : 20000921 0000912057-00-036844.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-036844 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICALOGIC/MEDSCAPE INC CENTRAL INDEX KEY: 0000923899 STANDARD INDUSTRIAL CLASSIFICATION: [7374 ] IRS NUMBER: 930890696 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28285 FILM NUMBER: 695884 BUSINESS ADDRESS: STREET 1: 20500 NW EVERGREEN PARKWAY STREET 2: STE 400 CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036456442 MAIL ADDRESS: STREET 1: 20500 NW EVERGREEN PARKWAY CITY: HILLSBORO STATE: OR ZIP: 97124 FORMER COMPANY: FORMER CONFORMED NAME: MEDICALOGIC INC DATE OF NAME CHANGE: 19990818 10-Q 1 a10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________ COMMISSION FILE NUMBER: 000-28285 ---------------------------------- MEDICALOGIC/MEDSCAPE, INC. (Exact name of registrant as specified in its charter) OREGON 93-0890696 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 20500 NW EVERGREEN PARKWAY, HILLSBORO, OREGON 97124 (Address of principal executive offices) (503) 531-7000 (Registrant's telephone number, including area code) Check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / As of August 7, 2000 there were 55,242,770 shares of the Registrant's Common Stock outstanding. 1 MEDICALOGIC/MEDSCAPE, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2000 INDEX PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements: Number Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II OTHER INFORMATION Item 1. Legal Proceedings 18 ITEM 2. Changes in Securities and Use of Proceeds 19 ITEM 3. Default Upon Senior Securities 19 ITEM 4. Submission of Matters to a Vote of Securities Holders 20 ITEM 5. Other Information 20 ITEM 6. Exhibits and Reports on Form 8-K 20 Signatures 22 Index to Exhibits 23
2 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 2000 1999 ---------- ---------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 38,899 $ 110,320 Short-term investments 61,675 28,536 Accounts receivable, net 17,371 6,473 Prepaid expenses and other current assets 14,475 4,515 ---------- ---------- Total current assets 132,420 149,844 Investments 11,470 -- Property and equipment, net 34,734 13,087 Goodwill and intangible assets, net 960,113 4,988 Prepaid advertising and other assets 53,677 435 --------- ---------- Total assets $1,192,414 $ 168,354 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,076 $ 5,638 Accrued and other liabilities 25,892 2,639 Deferred revenue 8,843 3,269 Long-term liabilities, current portion 12,375 2,432 ---------- ---------- Total current liabilities 59,186 13,978 Long-term liabilities, net of current portion 10,541 2,233 Deferred revenue, long-term 1,627 1,627 Other long-term liabilities 801 676 ---------- ---------- Total liabilities 72,155 18,514 ---------- ---------- Shareholders' equity: Common stock, no par value; 150,000,000 shares authorized; 55,091,549 and 32,364,391 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively $1,255,487 $ 229,724 Warrants 32,818 -- Common stock notes receivable, net ( 7,887) (11,788) Deferred stock compensation (3,037) (4,570) Accumulated deficit (157,122) (63,526) ---------- ---------- Total shareholders' equity 1,120,259 149,840 ---------- ---------- Total liabilities and shareholders' equity $1,192,414 $ 168,354 ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3 MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------ ------------------------ 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenues: Licenses, service and support $ 2,156 $ 4,088 $ 7,512 $ 7,085 Sponsorship and advertising 6,055 -- 6,055 -- Subscriptions and eCommerce 2,678 -- 2,930 -- ----------- ----------- ----------- ----------- Total revenues 10,889 4,088 16,497 7,085 ----------- ----------- ----------- ----------- Operating expenses: Cost of operations 8,692 1,748 13,164 3,277 Sales and marketing 15,518 2,907 24,177 5,262 Research and development 4,318 2,696 8,077 4,883 General and administrative 5,957 958 9,262 1,215 Depreciation and amortization 43,331 322 45,285 628 Restructuring charges 13,906 -- 13,906 -- ----------- ----------- ----------- ----------- Total operating expenses 91,722 8,631 113,871 15,265 ----------- ----------- ----------- ----------- Operating loss (80,833) (4,543) (97,374) (8,180) Other income, net 1,963 206 3,778 417 ----------- ----------- ----------- ----------- Net loss $ (78,870) $ (4,337) $ (93,596) $ (7,763) =========== =========== =========== =========== Net loss per share: basic and diluted $ (1.85) $ (0.54) $ (2.53) $ (1.02) =========== =========== =========== =========== Weighted average shares: basic and diluted 42,715 7,994 37,059 7,641 =========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 4 MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED June 30, ------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net loss $ (93,596) $ (7,763) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 45,285 628 Deferred stock compensation and other non-cash charges 3,660 2,223 Non-cash restructuring charges 8,892 -- Changes in assets and liabilities, net of balances acquired: Accounts receivable (1,733) 3,877 Prepaid expenses and other assets 2,298 (614) Accounts payable 1,985 733 Accrued liabilities 4,474 (1,082) Deferred revenue 116 (363) ----------- ----------- Net cash used in operating activities (28,619) (2,361) ----------- ----------- Cash flows from investing activities: Purchases of fixed assets (12,111) (5,066) Payments related to business combinations, net of cash acquired (16,795) (3,152) Purchases of short-term investments, net (13,660) (24,095) ----------- ----------- Net cash used in investing activities (42,566) (32,313) ----------- ----------- Cash flows from financing activities: Net proceeds from issuance of preferred stock -- 34,300 Net proceeds from issuance of common stock 605 612 Proceeds from issuance of notes payable -- 5,390 Principal payments under capital lease obligations and notes payable (841) (286) ----------- ----------- Net cash provided by (used in) financing activities (236) 40,016 ----------- ----------- Net increase (decrease) in cash and cash equivalents (71,421) 5,342 Cash and cash equivalents, beginning of period 110,320 4,718 ----------- ----------- Cash and cash equivalents, end of period $ 38,899 $ 10,060 =========== =========== Supplemental summary of non-cash investing and financing activities: Fair value at conversion of the outstanding common stock, options and warrants in conjunction with the business combinations with Medscape, Inc. and Total eMed, Inc. (Note 2). $1,058,492 $ -- Common stock issued for purchase of a business -- 3,300 Accretion of preferred stock redemption preference -- 49
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 5 MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS MedicaLogic/Medscape, Inc. and its subsidiaries ("MedicaLogic/Medscape" or the "Company") focus on the timely delivery of clinical data and up-to-date knowledge to healthcare professionals and consumers, saving both time and money, and improving the healthcare experience. The Company integrates the broad reach of its authoritative web sites, www.medscape.com and cbs.healthwatch.com, with the depth of its clinical applications for online medical records. These online medical records are the digital hub for Internet and wireless connection of healthcare professionals, consumers, and other healthcare stakeholders. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated statements of operations and cash flows include the results of operations and cash flows of MedicaLogic/Medscape, Inc. and its wholly owned subsidiaries for the three months and six months ended June 30, 2000 and 1999. For subsidiaries acquired during those periods, the related results of operations and cash flows are included from the date of acquisition or merger forward. The unaudited condensed consolidated balance sheets include the accounts of the Company as of June 30, 2000 and 1999. The unaudited condensed financial statements have been prepared by the Company's management and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months and six months ended June 30, 2000 are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ended December 31, 2000. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted under the Securities and Exchange Commission's rules and regulations. The unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with MedicaLogic, Inc.'s, Medscape, Inc.'s, and Total eMed, Inc.'s audited consolidated financial statements and notes thereto for the year ended December 31, 1999 included in the Company's Registration Statement on Form S-4/A and the Annual Reports of Medicalogic, Inc. and Medscape, Inc. on Form 10-K for the year ended December 31, 1999 filed with the Securities and Exchange Commission. RECLASSIFICATIONS Certain reclassifications have been made to prior year amounts to conform to current year presentations. GOODWILL AND INTANGIBLE ASSETS Goodwill, which represents costs in excess of net tangible and intangible assets of businesses acquired, and intangible assets primarily result from acquisitions accounted for under the purchase method as described in Note 2. Amortization of goodwill and intangible assets is provided on the straight-line basis over the estimated useful lives of the assets; three to four years for goodwill, 18 months to five years for intangible assets. Intangible assets consist primarily of acquired technology, customer lists and trademarks. In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," management reviews long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. As a result of this review and the corporate restructuring described in Note 3, the Company recorded a provision in the amount of $860 during the three months ended June 30, 2000 to write down intangible assets associated with the workforces acquired in the business combinations described in Note 2. 6 (2) MERGER AND ACQUISITIONS Medscape, Inc. In May 2000, the Company completed its merger with Medscape, Inc. ("Medscape") a Delaware corporation, for approximately 14,932,000 shares of the Company's common stock and assumption of approximately 2,545,000 options and warrants in a merger transaction valued at approximately $724.2 million. The merger with Medscape was accounted for using the purchase method of accounting with the purchase price allocated to assets acquired and liabilities assumed based on their fair values. The purchase price was comprised of Company common stock issued amounting to approximately $637.1 million valued at $42.6688 per share, option and warrant rights converted into option and warrant rights of the Company valued at approximately $82.3 million, and professional fees amounting to approximately $4.7 million. The value of option rights converted at the merger date was determined in accordance with the fair value method under FAS 123 using the following weighted-average assumptions: exercise price $12.38, volatility of 100%, expected life of 3 years, interest rate of 6.5%; and no dividends. The value of warrant rights converted at the merger date was determined using the Black-Scholes method with the following assumptions: exercise price $30.96, volatility of 100%, expected life of 6 years, interest rate of 6.5%; and no dividends. Professional fees include banking fees, legal fees, accounting fees, and fees for other related professional services. The purchase price over the fair value of net tangible and intangible assets of Medscape (goodwill), which amounted to approximately $597.2 million, will be amortized over three years. The results of operations and cash flows of Medscape have been included in the Company's condensed consolidated financial statements from the date of acquisition forward. Total eMed, Inc. In May 2000, the Company completed its acquisition of Total eMed, Inc. ("Total eMed") a Delaware corporation, for approximately 7,450,000 shares of the Company's common stock and assumption of approximately 550,000 options in a transaction valued at approximately $343.8 million. The acquisition of Total eMed was accounted for using the purchase method of accounting with the purchase price allocated to assets acquired and liabilities assumed based on their fair values. The purchase price was comprised of Company common stock issued amounting to approximately $317.9 million valued at $42.6688 per share, option rights converted into option rights of Company common stock valued at approximately $21.2 million, and professional fees amounting to approximately $4.7 million. The value of option rights converted at the acquisition date was determined in accordance with the fair value method under FAS 123 using the following weighted-average assumptions: exercise price $6.45, volatility of 100%, expected life of 3 years, interest rate of 6.5%; and no dividends. Professional fees include banking fees, legal fees, accounting fees, and fees for other related professional services. The purchase price over the fair value of net tangible and intangible assets of Total eMed (goodwill), which amounted to approximately $326.8 million, will be amortized over four years. The results of operations and cash flows of Total eMed have been included in the Company's condensed consolidated financial statements from the date of acquisition forward. Other Investments In April 2000, the Company purchased all of the outstanding capital stock of AnywhereMD.com, Inc., a California corporation, for approximately $7.8 million in cash, professional fees and assumed liabilities. The acquisition was accounted for using the purchase method and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their fair values on the acquisition date. The total goodwill recorded in connection with the purchase was approximately $7.7 million and is being amortized over 3 years. In June 2000, the Company acquired an interest in Lifechart.com, Inc. for approximately $8.3 million in cash representing an approximate 10% ownership in connection with establishing a joint development, sales and marketing agreement. The investment was accounted for using the cost method. Pro Forma Financial Information 7 The following unaudited pro forma financial information combines the results of operations of the Company, Medscape and Total eMed assuming the respective merger and acquisition were consummated at the beginning of the periods presented. The other investments referred to above were not material and are not included in the pro forma results below. The pro forma results are not necessarily indicative of what would have occurred if the merger and acquisition had been in effect for the periods presented. In addition, they are not intended to be a projection of future results and do not reflect any synergies that might be achieved from combined operations.
SIX MONTHS ENDED JUNE 30, ------------------------ 2000 1999 ----------- ----------- Revenues $ 26,788 $ 13,574 Net loss $ (281,960) $ (178,730) Net loss per share: basic and diluted $ (5.23) $ (5.95)
The above pro forma net loss amounts for the six months ended June 30, 2000 and 1999 have been adjusted to include the amortization of goodwill and other intangibles related to the Medscape merger and Total eMed acquisition for each period. (3)RESTRUCTURING CHARGES Restructuring charges relate to the consolidation of duplicate functions and activities primarily as a result of the merger and acquisition described in Note 2. These actions resulted in a reduction of approximately 10% of the Company's workforce, a reduction in total facilities, and impairment of certain assets. Restructuring charges are primarily comprised of costs associated with severance packages, cancellation of lease agreements, and impairments of abandoned technologies and property and equipment. These charges amounted to approximately $13.9 million for the three months and six months ended June 30, 2000. At June 30, 2000, approximately $3.6 million relating to these programs was included in current liabilities. As of June 30, 2000, the following amounts were recorded:
THREE MONTHS ENDED June 30, 2000 ------------------------------- Accrual at Accruals Write-offs/Payments June 30, 2000 -------- -------------------- --------------- Employee severance and related expenses $ 8,319 $ 5,283 $ 3,036 Impairment of technology and intangible assets 3,108 3,108 -- Abandonment and impairment of of facilities and property and equipment 2,479 1,934 545 -------- -------------------- --------------- $ 13,906 $ 10,325 $ 3,581 ======== ==================== ===============
The above provisions and related restructuring reserves are estimates based on the Company's current knowledge. Adjustments to the restructuring provisions may be necessary in the future based on further developments regarding restructuring related costs. (4) BALANCE SHEET COMPONENTS Prepaid Advertising 8 As a result of the Company's merger with Medscape (Note 2), the Company acquired, among other intangible assets, certain assets related to Medscape's agreements with CBS Corporation ("CBS") which commenced on September 3, 1999. These assets primarily consist of prepaid advertising with a discounted, tax effected fair value of approximately $64.8 million, based on an independent appraisal, and are included in prepaid advertising and other assets net of the current portion expected to be recognized during the next year. Over the remainder of the seven-year term of the Advertising and Promotion Agreement, CBS will arrange for the placement of the remaining balance of advertising and promotion in the United States for the Company's consumer and professional web sites and other products and services. At June 30, 2000, the Company is entitled to receive approximately $127 million of additional advertising and promotion from CBS under this agreement. Pursuant to the Trademark and Content Agreement, CBS granted the Company a license to use the "CBS" trademark and "Eye" design and to access health related news content for a seven-year period. Under the agreement CBS retains significant control over the use and presentation of the CBS health content and CBS trademarks. The approximately $64.8 million related to the advertising services to be provided by CBS will be expensed as used over the life of the agreement. Included in sales and marketing during the three months and six months ended June 30, 2000 was approximately $1.5 million of expense related to the utilization of advertising and promotion services under these agreements. WARRANTS As a result of the Company's merger with Medscape in May 2000 (Note 2), outstanding warrants to purchase shares of Medscape common stock were converted to warrants to purchase 0.323 shares of the Company's common stock. At June 30, 2000, 905,794 warrants to purchase Company common stock were exercisable at $30.96 per share. The warrants were issued in connection with an agreement with America Online, Inc., under which AOL has agreed to promote the Company's co-branded web sites, through contextual links and banners, on the following AOL properties: AOL, AOL.com, CompuServe Service, Netscape Netcenter and Digital City. (5) INCOME STATEMENT COMPONENTS DEFERRED STOCK COMPENSATION The Company recognized deferred stock compensation expense as follows:
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, ------------------- --------------------- 2000 1999 2000 1999 -------- --------- -------- -------- Cost of operations $ 87 $ -- $ 183 $ -- Sales and marketing 97 -- 311 -- Research and development 118 -- 182 -- General and administrative 60 -- 129 -- -------- --------- --------- -------- Total deferred stock compensation $ 362 $ -- $ 805 $ -- ======== ========= ========= ========
Deferred stock compensation represents the difference between the purchase or exercise price of certain restricted stock and stock option grants and the deemed fair value of the Company's common stock at the date of grant. The deferred stock compensation balance at June 30, 2000 was $3.0 million and is being amortized over the three year vesting period. Amortization expense is estimated to total $1.4 million in 2000, $1.2 million in 2001 and $0.4 million in 2002. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS. Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Moreover, from time to time the Company and its management may issue and make forward-looking statements. These forward-looking statements include, among others, those statements using terminology such as "may", "will", "expects", "plans", "estimates", "anticipates", "potential", "believes", "intends" or the negative thereof or other comparable terminology regarding beliefs, plans, expectations, or intentions regarding the future. Forward-looking statements include statements regarding the rate of growth and acceptance of MedicaLogic/Medscape's Internet and wireless products and services, new products, web sites and services, expected revenues from advertising, sponsored programs, sponsored content, eCommerce, transcription services, license and subscription fees and the relative mix between revenue sources, the level of research and development, sales and marketing, administrative and other operating costs, additional investment in staff and infrastructure and additional capital needs. MedicaLogic/Medscape wishes to caution the reader that these forward-looking statements involve risks and uncertainties and the factors below, as well as the factors detailed below under "Factors That May Affect Future Results of Operations", the factors detailed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results of Operations" and the factors described under "Risk Factors" in our Registration Statement on Form S-4 filed with the Securities and Exchange Commission, may cause MedicaLogic/Medscape's results to differ materially from those stated in the forward-looking statements. These factors include: (i) our business will be harmed if we do not achieve broad acceptance of our products and services by physicians, patients, medical care providers and other healthcare stakeholders; (ii) our Internet-based business model is new and unproven and may not be successfully implemented; (iii) our business will be harmed if Medscape's and Total eMed's operations and products are not successfully integrated with MedicaLogic/Medscape's operations and products; (iv) our failure to successfully introduce new products and services or to enhance our current products and services will adversely affect our business; (v) our failure to establish and maintain strategic relationships will adversely affect our business; and (vi) we are experiencing rapid growth and our failure to manage our growth effectively will harm our business and operations. The following discussions also should be read in conjunction with MedicaLogic, Inc.'s, Medscape, Inc.'s, and Total eMed, Inc.'s audited consolidated financial statements and notes thereto for the year ended December 31, 1999 included in the Company's Registration Statement on Form S-4/A and the Annual Reports of Medicalogic, Inc. and Medscape, Inc. on Form 10-K for the year ended December 31, 1999 filed with the Securities and Exchange Commission. OVERVIEW The business of MedicaLogic/Medscape, Inc. ("we", "our" or "the Company") is to deliver "health information that matters" to health professionals and consumers, with the goal of saving time and money, and improving the healthcare experience. We provide health information ranging from journalistic content including medical news, articles, and conference summaries, to highly specific data such as individual digital medical records. The Company combines this information to facilitate improved decision making by physicians and patients at the point of care. The Company provides to healthcare providers and consumers an array of offerings that range from the simplest to adopt - browsing a website or downloading pages to a handheld or wireless device - to the deepest applications, including a comprehensive, paperless, digital medical record system. The Company's strategy is to engage as many end users as possible with its broad reaching services, then to move customers toward deeper applications, in manageable steps of complexity and functionality. The web-based transcription offering is an example of how the Company is providing such steps that minimize the behavioral change required of physicians while moving them toward the fully digital medical record. We have been developing, marketing and supporting electronic medical records for over a decade with products in daily use by physicians throughout the United States. While most healthcare information systems have primarily supported financial and administrative functions, we have focused on the challenge of providing clinical solutions for physicians, patients and medical care providers. Our technology uses both the Internet and wireless technology to link medical care providers and consumers to physicians using our many offerings. The Company is a leading provider of electronic medical record software in 10 the healthcare industry. We also provide physicians with Internet based transcription services, via voice capture by either telephone or handheld devices, returning finished notes through the Internet. In addition, we provide web-based healthcare information that assists both physicians and patients, services to facilitate connectivity, transactions, information and communications between physicians, patients and medical care providers. The Company recently completed its merger with Medscape, Inc. and its acquisition of Total eMed, described below, and changed its name from MedicaLogic, Inc. to MedicaLogic/Medscape, Inc. In our efforts to combine and integrate these companies, we took significant steps to properly size the business and focus our efforts on key success factors. This led to the consolidation of duplicate functions and activities and resulted in a reduction of approximately 10% of the Company's workforce, a reduction in total facilities, and impairment of certain assets. The estimated cost savings to be realized from this reorganization is estimated to be greater than $20 million on an annual basis. The Company expects full implementation of the workforce reductions within 90 days, with the realization of cost benefits in the second half of 2000. STRATEGIC ACQUISITIONS During May 2000, the Company acquired all the outstanding capital stock of Medscape, Inc. ("Medscape") and Total eMed, Inc. ("Total eMed") in transactions accounted for using the purchase method. The Company issued approximately 14,932,000 and 7,450,000 shares of the Company's common stock in the transactions with Medscape and Total eMed, respectively. The total purchase price, including acquisition related charges and the estimated fair value of converted warrants and options, was approximately $1,068 million, and resulted in a total of approximately $924 million of goodwill. The results of operations and cash flows of all acquisitions during the period have been included in the Company's condensed consolidated financial statements from the respective dates of acquisition forward. OTHER INVESTMENTS In April 2000, the Company purchased all of the outstanding capital stock of AnywhereMD.com, Inc. for approximately $7.8 million in cash, professional fees and assumed liabilities. The acquisition was accounted for using the purchase method and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their fair values on the acquisition date. The total goodwill recorded in connection with the purchase was approximately $7.7 million and is being amortized over 3 years. In June 2000, the Company acquired an interest in Lifechart.com, Inc. for approximately $8.3 million in cash representing an approximate 10% ownership in connection with establishing a joint development, sales and marketing agreement. The investment was accounted for using the cost method. RESULTS OF OPERATIONS The following table sets forth the Company's revenues, operating expenses, other income and expense, and net loss as a percentage of total revenues for the three and six months ended June 30, 2000 and 1999.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ----------------- 2000 1999 2000 1999 -------- -------- -------- ------- Revenues: Licenses, service and support 19.8% 100.0% 45.5% 100.0% Sponsorship and advertising 55.6 -- 36.7 -- Subscriptions and eCommerce 24.6 -- 17.8 -- -------- -------- -------- ------- Total revenues 100.0 100.0 100.0 100.0 -------- -------- -------- ------- Operating expenses: Cost of operations 79.8 42.8 79.8 46.3 Sales and marketing 142.5 71.1 146.6 74.3 Research and development 39.7 65.9 49.0 68.9 General and administrative 54.7 23.4 56.1 17.1 Depreciation and amortization 397.9 7.9 274.5 8.9 Restructuring charges 127.7 -- 84.3 -- -------- -------- -------- ------- Total operating expenses 842.3 211.1 690.3 215.5 -------- -------- -------- ------- Operating loss (742.3) (111.1) (590.3) (115.5) 11 Total other income, net 18.0 5.0 22.9 5.9 -------- --------- -------- ------- Net loss (724.3)% (106.1)% (567.4)% (109.6)% ======== ========= ======== =======
KEY METRICS Adoption of the Company's offerings continues to grow as demonstrated by an increase in clinician users of online health record applications to 19,600, compared with 12,000 at the end of the previous quarter, a 63% increase in three months. Of this total, 10,700 were using the Company's Internet and handheld (wireless) products, and 30% of these users were paying subscribers. The total number of patient records in all of the Company's systems approached 13.4 million on June 30, 2000, compared with 9.2 million on March 31, 2000, an increase of 46% for the three months ended June 30, 2000. Similar continued growth was evident in the metrics for the medscape.com professional site as registered physician users exceeded 440,000, an increase of 90,000, or 26%, for the three months ended June 30, 2000. Nonphysician clinician users reached 1.2 million, growing by 200,000, or 20%. Total consumer growth exceeded 6%, or 50,000, for the quarter, as consumer membership reached 850,000. THREE MONTHS ENDED JUNE 30, 2000 The Company incurred a net loss of approximately $78.9 million and $4.3 million for the three months ended June 30, 2000 and 1999, respectively. This net loss increased primarily from the amortization of approximately $40.6 million of goodwill and intangible assets and subsequent restructuring charges of approximately $13.9 million related to the merger with Medscape and the acquisition of Total eMed. As of June 30, 2000, MedicaLogic/Medscape had an accumulated deficit of approximately $157.1 million. The Company expects the third quarter net loss to increase primarily due to the inclusion of non-cash amortization expense for the full quarter, increasing from approximately $40.6 million to approximately $83.2 million, and the inclusion of a full quarter of operating results from companies acquired during the second quarter. REVENUES The Company generates revenues from three sources: licenses, service and support; sponsorship and advertising; and subscriptions and eCommerce. Licenses, service and support includes fees charged for product license and related installation services and support contracts primarily related to digital medical record applications. Sponsorship and advertising is comprised of fees and revenue from other healthcare entities, primarily pharmaceutical companies, who wish to reach the Company's customers as they access and utilize our online continuing professional education and detailed content offerings. Subscriptions and eCommerce includes monthly subscription fees for digital medical record applications, our Internet based and wireless technologies, transcription services, and electronic commerce. Total revenues increased to approximately $10.9 million from approximately $4.1 million for the three months ended June 30, 2000 and 1999, respectively. Of this increase, approximately $8.7 million relates to increased revenue from new product offerings and acquired businesses. This increase was partially offset by a decrease of approximately $1.9 million in revenue from licenses, service and support revenues as expected as the Company moved to subscription and application service provider (ASP) models for more of its product offerings. Sponsorship and advertising revenue increased to approximately $6.1 million and was a new revenue source for the Company during the quarter. This revenue is derived from a variety of sources including advertising, sponsorship of online medical conferences, and certain continuing professional education activities. Sponsorship and advertising revenue is expected to continue to be a significant source of revenue for the Company but will be subject to seasonal variations during the summer months. Subscription and eCommerce revenues increased to approximately $2.7 million. The Company began recognizing subscription revenue in the first quarter of 2000. The Company expects total subscription and eCommerce revenues will continue to grow as we focus on alternative pricing programs for our wireless, transcription, and digital medical record applications and also due to the inclusion of revenues from acquired companies for entire periods. OPERATING EXPENSES 12 COST OF OPERATIONS. Cost of operations is comprised of our data centers, certain licensing and editorial development costs, and cost of transcriptionists. Cost of operations as a percentage of revenues was approximately 80% and 43% for the three months ended June 30, 2000 and 1999, respectively. Cost of operations increased to approximately $8.7 million from $1.7 million for the three months ended June 30, 2000 and 1999, respectively, primarily due to additional data center sites, capacity, and the addition of editorial costs for sponsorship and advertising activities from companies acquired during the period. During the next quarter, we expect these costs to be nearly 50% higher as it will include the full quarter of operating expenses from acquired companies coupled with anticipated revenue growth. SALES AND MARKETING. Sales and marketing expense represented approximately 143% and 71% of total revenues for the three months ended June 30, 2000 and 1999, respectively. Sales and marketing increased to approximately $15.5 million from $2.9 million for the three months ended June 30, 2000 and 1999, respectively, and included non-cash costs related primarily to the CBS advertising and promotion agreement of approximately $1.5 million. The increase in sales and marketing resulted primarily from the addition of costs from companies acquired during the quarter, and increased expenditures due to the expansion of the Company's products and services. During the next quarter, we expect these costs to increase by approximately 30% as it will include the full quarter of operations of acquired companies coupled with increased sales expenditures due to anticipated revenue growth. RESEARCH AND DEVELOPMENT. Research and development costs represented approximately 40% and 66% of total revenues for the three months ended June 30, 2000 and 1999, respectively. The decrease of research and development as a percentage of revenue is primarily related to the greater growth in revenue from acquired companies. Research and development increased to approximately $4.3 million from $2.7 million for the three months ended June 30, 2000 and 1999, respectively, primarily due to the addition of development staff for the development of our internet and wireless offerings. In addition, during the third quarter we expect to incur nonrecurring charges of approximately $0.6 million, primarily related to transitioning certain development efforts to new engineering teams, bringing third quarter development costs to approximately $6.0 million. GENERAL AND ADMINISTRATIVE. General and administrative costs represented approximately 55% and 23% of total revenues for the three months ended June 30, 2000 and 1999, respectively. General and administrative costs increased to approximately $6.0 million from $1.0 million for the three months ended June 30, 2000 and 1999, respectively. The increase resulted from the addition of administrative personnel, contractors and professional services to support the growth of the Company's business, added costs related to being a public company, and the additional costs from acquired companies. Due to the restructuring efforts undertaken recently, these costs are expected to decline by up to 10% in the third quarter. DEPRECIATION AND AMORTIZATION. Depreciation and amortization represented approximately 398% and 8% of total revenues for the three months ended June 30, 2000 and 1999, respectively. Depreciation and amortization increased to $43.3 million from $0.3 million for the three months ended June 30, 2000 and 1999, respectively. The increases resulted almost entirely from the Company's merger and acquisitions during the quarter, which resulted in increased amortization of approximately $40.2 million. Depreciation and amortization is expected to be approximately $90 million in future quarters due primarily to the inclusion of the full quarter of amortization of intangible assets. OTHER INCOME. Other income increased to approximately $2.0 million from $0.2 million for the three months ended June 30, 2000 and 1999, respectively. The increase in other income is primarily attributable to an increase in interest earned on cash and cash equivalents and short-term investments resulting from the issuance of stock in the Company's initial public offering. The Company expects other income to decrease in future quarters as the proceeds from the initial public offering are used primarily to finance its operations and support its growth. SIX MONTHS ENDED JUNE 30, 2000 AND 1999 The Company incurred a net loss of approximately $93.6 million and $7.8 million for the six months ended June 30, 2000 and 1999, respectively. This net loss increased primarily from the amortization of approximately $40.9 million of goodwill and intangible assets and subsequent restructuring charges of approximately $13.9 million related to the merger with Medscape and the acquisition of Total eMed. As of June 30, 2000, MedicaLogic/Medscape had an accumulated deficit of approximately $157.1 million. MedicaLogic/Medscape expects that it will continue to see increasing net losses as the Company completes its first full quarter of operations as a combined company due to the increased amortization of goodwill 13 and intangible assets acquired in the merger with Medscape and the acquisition of Total eMed. REVENUES Total revenues increased to approximately $16.5 million from approximately $7.1 million for the six months ended June 30, 2000 and 1999, respectively. Of this increase, approximately $9.0 million relates to increased revenue from new product offerings and acquired businesses. This increase was partially offset by a decrease of approximately $0.4 million in revenue from licenses, service and support revenues as expected as the Company moved to subscription and ASP models for more of its product offerings. Sponsorship and advertising revenue increased to approximately $6.1 million and was a new revenue source for the Company during the quarter. This revenue is derived from a variety of sources including advertising, sponsorship of online medical conferences, and certain continuing professional education activities. Sponsorship and advertising revenue is expected to continue to be a significant source of revenue for the Company but will be subject to seasonal variations in the summer months. Subscription and eCommerce revenues increased to approximately $2.9 million. The Company began recognizing subscription revenue in the first quarter of 2000. The Company expects total subscription and eCommerce revenues to continue to grow as we focus on alternative pricing programs for our wireless, transcription, and digital medical record applications and also due to the inclusion of revenues from acquired companies for entire periods. EXPENSES COST OF OPERATIONS. Cost of operations is comprised of our data centers, certain licensing and editorial development costs, and cost of transcriptionists. Cost of operations as a percentage of revenues was approximately 80% and 46% for the six months ended June 30, 2000 and 1999, respectively. Cost of operations increased to approximately $13.2 million from $3.3 million for the six months ended June 30, 2000 and 1999, respectively, primarily due to additional data center sites, capacity, and the addition of editorial costs for sponsorship and advertising activities from companies acquired during the period. During the remainder of the year, we expect these costs to be substantially higher as it will include the full period of operating expenses from acquired companies coupled with anticipated revenue growth. SALES AND MARKETING. Sales and marketing expense represented approximately 147% and 74% of total revenues for the six months ended June 30, 2000 and 1999, respectively. Sales and marketing increased to approximately $24.2 million from $5.3 million for the six months ended June 30, 2000 and 1999, respectively, and included non-cash costs related primarily to the CBS advertising and promotion agreement of approximately $1.5 million. The increase in sales and marketing resulted primarily from the addition of costs from companies acquired during the quarter, and increased expenditures due to the expansion of the Company's products and services. During the next period, we expect these costs to be substantially higher as it will include the full period of operations of acquired companies coupled with increased sales expenditures due to anticipated revenue growth. RESEARCH AND DEVELOPMENT. Research and development costs represented approximately 49% and 69% of total revenues for the six months ended June 30, 2000 and 1999, respectively. The decrease of research and development as a percentage of revenue is primarily related to the greater growth in revenue from acquired companies. Research and development increased to approximately $8.1 million from $4.9 million for the six months ended June 30, 2000 and 1999, respectively, primarily due to the addition of development staff for the development of our internet and wireless offerings. In addition, during the third quarter we expect to incur nonrecurring charges of approximately $0.6 million, primarily related to transitioning certain development efforts to new engineering teams. GENERAL AND ADMINISTRATIVE. General and administrative costs represented approximately 56% and 17% of total revenues for the six months ended June 30, 2000 and 1999, respectively. General and administrative costs increased to approximately $9.3 million from $1.2 million for the six months ended June 30, 2000 and 1999, respectively. The increase resulted from the addition of administrative personnel, contractors and professional service to support the growth of the Company's business, added costs related to being a public company, and the additional costs from acquired companies. Due to the restructuring efforts undertaken recently, general and administrative costs are expected to decline by up to 10% in the third quarter. DEPRECIATION AND AMORTIZATION. Depreciation and amortization represented approximately 275% and 9% of total revenues for the six months ended June 30, 2000 and 1999, 14 respectively. Depreciation and amortization increased to $45.3 million from $0.6 million for the six months ended June 30, 2000 and 1999, respectively. The increases resulted almost entirely from the Company's merger and acquisitions in May 2000. Depreciation and amortization is expected to be approximately $90 million in future quarters or approximately $180 million during the remainder of the year due primarily to the inclusion of the full period's amortization. OTHER INCOME. Other income increased to approximately $3.8 million from $0.4 million for the six months ended June 30, 2000 and 1999, respectively. The increase in other income is primarily attributable to an increase in interest earned on cash and cash equivalents and short-term investments resulting from the issuance of stock in the Company's initial public offering. The Company expects other income to decrease in future quarters as the proceeds from the initial public offering are used primarily to finance its operations and support its growth. LIQUIDITY AND CAPITAL RESOURCES The following table presents net loss before non-cash and restructuring charges:
3 Months Ended 6 Months Ended June 30, June 30, ------------------- ------------------- 2000 1999 2000 1999 -------- ------- -------- ------- Net loss $(78,870) $(4,337) $(93,596) $(7,763) Restructuring charges 13,906 -- 13,906 -- -------- ------- -------- ------- Net loss before restructuring charges (64,964) (4,337) (79,690) (7,763) Depreciation and amortization 43,331 322 45,285 628 -------- ------- -------- ------- Net loss before restructuring, depreciation and amortization charges (21,633) (4,015) (34,405) (7,135) Other non-cash charges 2,814 2,039 3,660 2,223 -------- ------- -------- ------- Net loss before non-cash and restructuring charges $(18,819) $(1,976) $(30,745) $(4,912) ========= ======== ======== =======
Net loss before non-cash and restructuring charges, as calculated above, consists of net loss before restructuring charges, depreciation and amortization, and other non-cash charges. The Company's management believes net loss before non-cash and restructuring charges to be an important indicator of the operational strength and performance for the Company, including the ability to provide cash flows to fund operations and other expenditures as required. This indicator, however, should not be considered an alternative to operating or net income (loss) as an indicator of the performance of the Company, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. This definition of net loss before non-cash and restructuring charges may not be comparable to similarly titled measures reported by other companies. As of June 30, 2000, the Company had cash and cash equivalents of approximately $38.9 million and short term investments of approximately $61.7 million, down a total of approximately $38.3 million from the December 31, 1999 balances of approximately $110.3 million and $28.5 million respectively. In December, 1999, the Company completed its initial public offering and issued 6,785,000 shares of its common stock. The net proceeds from the issuance of the common stock in the initial public offering were approximately $104.3 million. In addition, in May 1999, the Company closed a round of private funding raising approximately $34.8 million. The Company's operating activities resulted in net cash outflows of approximately $28.6 million and $2.4 million for the six months ended June 30, 2000 and 1999, respectively. Net loss before non-cash and restructuring charges, as calculated above, increased approximately $25.8 million primarily from the inclusion of operating expenses of acquired companies and increased expenditures due to the expansion of the Company's product and service offerings for the six months ended June 30, 2000. Cash outflows were partially 15 offset for the six months ended June 30, 2000 by an increase in accounts payable and accrued liabilities and a decrease in prepaid expenses and other assets, net of assets acquired in mergers and acquisitions during the period. Investing activities resulted in net cash outflows of approximately $42.6 million and $32.3 million for the six months ended June 30, 2000 and 1999, respectively. Cash outflows for the six months ended June 30, 2000 resulted primarily from purchases of fixed assets of approximately $12.1 million and payments for business combinations, net of cash acquired of approximately $16.8 million. Cash outflows for the six months ended June 30, 1999 resulted from net investments of approximately $24.1 million in short-term investments, $5.1 million related to the purchase of fixed assets and $3.2 million for the acquisition of PrimaCis. The Company currently anticipates that it will continue to experience growth in its operating expenses as it expands the penetration of its products and services, increasing operating, sales and marketing costs, expands research and development efforts, and improves operational infrastructure. These operating expenses will consume a material amount of the Company's cash resources. The Company believes that savings to be realized from the reorganization coupled with expected revenue growth in future quarters will allow the Company to achieve positive cash flows during the second half of 2001. Our ability to execute on this portion of our business plan depends on numerous factors including our ability to achieve the planned revenue growth from our existing and new offerings, to realize the anticipated operating efficiencies from the recent restructuring, and to efficiently manage and control our operating expenditure rates. Depending upon the market opportunity, the Company may, from time to time, seek additional funds to support potential merger and acquisition activities or for other purposes through public or private equity financing or from other sources. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board, ("FASB") issued Statement of Financial Accounting Standards, or SFAS, No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. In June 1999, the FASB issued Statement No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133. Statement No. 137 defers the effective date of Statement No. 133 for one year. Statement No. 133 is now effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. Because we currently hold no derivative financial instruments and do not currently engage in hedging activities, adoption of SFAS No. 133 is not expected to have a material impact on our financial condition or results of operations. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of the Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company believes that its current revenue principles comply with SAB 101. In January 2000, the Emerging Issues Task Force ("EITF") of the FASB reached consensus on Issue 99-17 "Accounting for Advertising Barter Transactions" barter transactions which involve nonmonetary exchanges of advertising. It requires that an entity recognize revenue and expenses from advertising barter transactions at the fair value of the advertising surrendered only when an entity has a historical practice of receiving cash for similar transactions. The Company does not believe that the adoption of EITF 99-17 will have a material impact on its financial condition or results of operations. In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25, (FIN 44). FIN 44 applies prospectively to new awards, exchanges of awards in a business combination, modifications to outstanding awards, and changes in grantee status that occur on or after July 1, 2000, except for the provisions related to repricings and the definition of an employee, which apply to awards issued after December 15, 1998. The provisions related to modifications to fixed stock options awards to add a reload feature are effective for awards modified after January 12, 2000. We do not expect that this statement will have a significant impact on our financial condition or results of operations. In March 2000, the EITF of the FASB reached consensus on Issue 00-2 "Accounting for Website development Costs" ("EITF 00-2"). EITF 00-2 establishes how an entity should account for costs incurred to develop a website. It requires that an entity capitalize costs during the web application and infrastructure and graphics development stages of 16 development. The consensus is effective for all costs incurred beginning after June 30, 2000, although earlier adoption is encouraged. The Company is currently evaluating the adoption of EITF 00-2 and its potential impact on its financial condition or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE SENSITIVITY The primary objective of MedicaLogic/Medscape's investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. In general, money market funds are not subject to market risk because the interest paid on such funds fluctuates with the prevailing interest rate. In addition, we invest in relatively short-term securities. Some of the securities that we have invested in may be subject to market risk. This means that a change in the prevailing interest rates may cause the principal amount of the investment to fluctuate. Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our investment portfolio and on the increase or decrease in the amount of any interest expense we must pay with respect to outstanding debt instruments. The risk associated with fluctuating interest expense is limited, however, to those debt instruments and credit facilities which are tied to market rates. We do not plan to use derivative financial instruments in our investment portfolio. We plan to ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and investment risk. We plan to mitigate default risk by investing in low-risk securities. At June 30, 2000, we had an investment portfolio of money market funds, commercial securities and U.S. Government securities, including those classified as cash and cash equivalents and short-term investments, of approximately $100.6 million. We had notes payable outstanding of approximately $2.6 million at June 30, 2000. If market interest rates were to increase immediately and uniformly by 10% from levels as of June 30, 2000, the decline of the fair market value of the fixed income portfolio and loans outstanding would not be material. EXCHANGE RATE SENSITIVITY Currently all of the Company's sales and most of our expenses are denominated in U.S. dollars and as a result we have experienced no significant foreign exchange gains or losses to date. While we are conducting some transactions in foreign currencies during 2000, we do not anticipate that foreign exchange gains or losses will be significant. We have not engaged in foreign currency hedging activities to date. 17 PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 20, 1999, Medquist MRC, Inc. filed a suit in the District Court for the Northern District of Ohio, Medquist MRC, Inc. v. John H. Dayani and Network Health Services, Inc., against Network Health Services, Inc., predecessor to Total eMed. In November of 1999, venue in the case was transferred to the United States District Court for the Middle District of Tennessee. The plaintiff filed an amended complaint on June 1, 2000 that alleges breach of fiduciary duty of loyalty, misappropriation of trade secrets, tortious interference with contract, and unjust enrichment. Specifically, Medquist MRC alleges that Dayani, who served on the Medquist MRC board of directors both prior to and after founding Network Health Services, misappropriated certain trade secrets from Medquist MRC and used those trade secrets to develop Network Health Service's business concepts and customer base. The complaint also alleges that Network Health Services committed other actionable offenses as described above. A scheduling order has been entered in this case setting it for trial in November 2001. The case is presently in the discovery phase. The Company does not believe that it interfered in any way with the plaintiff's economic relationships and it intends to defend itself vigorously. We are not currently subject to any other material legal proceedings. However, we could be subject to intellectual property infringement claims as the number of our competitors grows or the functionality of our products and services overlaps with competing products. We could incur substantial costs and diversion of management resources defending any infringement claims. In addition, a party making a claim against us could secure a judgement awarding substantial damages, as well as injunctive or other equitable relief that could effectively block our ability to provide products or services. Licenses for intellectual property of third parties that might be required for our products or services may not be available on commercially reasonable terms, or at all. We provide data for use by physicians, consumers and other healthcare stakeholders. We may obtain this obtain this information from our physician customers, strategic partners, other third parties or from the aggregation of patient health records. We obtain individual consent for our use of this data where we believe it is required by applicable law or regulation. Claims for injuries related to the use of this data may be made in the future, and we may not be able to insure adequately against these claims. A claim brought against us that is uninsured or under-insured could lead to material damages against us. 18 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On May 11, 2000 we issued approximately 7,450,000 shares of our common stock as consideration for the acquisition of Total eMed, Inc., valued at approximately $317.9 million. In addition to the issuance of the Company's common stock, the consideration included (i) approximately $4.7 million in cash paid for professional fees; (ii) the substitution of stock options to purchase approximately 550,000 shares of the Company's common stock in replacement of the Total eMed options held primarily by Total eMed's employees, who joined the Company after the closing of the acquisition, valued at approximately $21.2 million. On May 19, 2000 we issued approximately 14,932,000 shares of our common stock as consideration for the merger with Medscape, Inc., valued at approximately $637.1 million. In addition to the issuance of the Company's common stock, the consideration included (i) approximately $4.7 million in cash paid for professional fees; (ii) the substitution of stock options and warrants to purchase approximately 2,545,000 shares of our common stock valued at approximately $82.3 million in replacement of the Medscape options held primarily by Medscape's employees, who joined the Company after the closing of the merger, and warrants held primarily by America Online, Inc. The Company's registration statement (No. 333-87825) on Form S-1 for the initial public offering was declared effective by the Securities and Exchange Commission on December 9, 1999. In the initial public offering, which closed on December 15, 1999, the Company registered and issued 5,900,000 shares of Common Stock. In addition, the Company registered and issued 885,000 shares upon exercise of an overallotment option granted to the underwriters which closed on December 20, 1999. The managing underwriters for the initial public offering were Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston Robertson Stephens Inc., U.S. Bancorp Piper Jaffray Inc. and DLJDIRECT Inc. The initial public offering price was $17 per share, or an aggregate of approximately $115.3 million, including the overallotment option. Underwriter discounts and commissions totaled approximately $8.1. The Company paid an estimated total of approximately $3.0 million for other expenses in connection with the initial public offering. Proceeds to MedicaLogic/Medscape, net of underwriting discounts, commissions and other expenses, were approximately $104.3 million. As of June 30, 2000, of the net proceeds from the initial public offering of approximately $16.8 million were used to complete mergers and acquisitions, approximately $28.6 million were used for general operating expense and approximately $13.7 million was invested in short-term investments. ITEM 3. DEFAULT UPON SENIOR SECURITIES None 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS The Company held its annual meeting of shareholders on May 9,2000. At such meeting the following actions were voted upon: 1. Approval of the amendment to the Company's 1999 Stock Incentive Plan to increase the total number of shares of Company common stock reserved for issuance under such plan from 2,000,000 to 8,000,000 shares: FOR AGAINST ABSTAIN 17,231,997 2,370,837 213,678 2. Approval of the amendment of the Company's 1999 Employee Stock Purchase Plan to increase the total number of shares of Company common stock reserved for issuance under such plan from 1,000,000 to 2,500,000 shares: FOR AGAINST ABSTAIN 17,762,549 2,046,170 7,793 3. Election of Directors: Class I Class II Class III Bruce M. Fried Esther Dyson Fredric G. Reynolds C. Martin Harris Richard D. Rehm Mark K. Leavitt Paul T. Sheils FOR ALL NOMINEES WITHHOLD AUTHORITY 21,825,283 71,547 The Company held a special meeting on May 10, 2000, in connection with our merger with Medscape, Inc. and our acquisition of Total eMed, Inc. The meeting was adjourned on May 10, 2000 and continued on May 15, 2000. We submitted the following matters to a vote of our shareholders through a proxy solicitation: 1. Approval of the issuance of common stock of MedicaLogic under the Agreement of Reorganization and Merger, dated as of February 21, 2000, among MedicaLogic, Inc., Medscape and Moneypenny Merger Corp.: FOR AGAINST ABSTAIN 21,053,065 193,708 1,031,845 2. Approval of the issuance of common stock of MedicaLogic under the terms of the Agreement of Reorganization and Merger, dated as of February 21, 2000, among MedicaLogic, Inc., Total eMed, Inc. and AQ Merger Corp.: FOR AGAINST ABSTAIN 18,713,769 123,251 1,039,265 3. Approval of an amendment to MedicaLogic's 1999 restated articles of incorporation to change its corporate name to "MedicaLogic/Medscape, Inc." subject to approval of the MedicaLogic/Medscape merger: FOR AGAINST ABSTAIN 21,015,477 259,529 1,003,612 ITEM 5. OTHER INFORMATION Paul T. Sheils resigned as an officer and member of the Board of Directors of the Company on June 30, 2000. On August 3, 2000, the Board of Directors of the Company nominated and approved George D. Lundberg, M.D. to succeed Mr. Sheils as a member of the Board of Directors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 20 The exhibits listed in the accompanying Index to Exhibit on page 23 are filed as part of this report. (b) Reports on Form 8-K: The Company filed a report on Form 8-K, dated April 4, 2000, with respect to a suit filed on April 4, 2000 by MedQuist Transcriptions, LTD. in the Delaware Court of Chancery, MEDQUIST TRANSCRIPTIONS, LTD. v. JOHN H. DAYANI, TOTAL EMED, INC. and MEDICALOGIC, INC., against Dr. John H. Dayani, Total eMed, Inc. and MedicaLogic, Inc. The Company filed a report on Form 8-K, dated May 11, 2000, announcing the completion of the merger with Medscape under the terms of the Agreement of Reorganization and Merger dated February 21, 2000, and the completion of the acquisition of Total eMed under the terms of the Agreement of Reorganization and merger dated February 21, 2000, and that on May 19, 2000, the Company changed its name to "MedicaLogic/Medscape, Inc." 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hillsboro, State of Oregon, on August 14, 2000. MEDICALOGIC/MEDSCAPE, INC. By /s/ FRANK J. SPINA ------------------------------------ Frank J. Spina Executive Vice President and Chief Financial Officer PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER 22 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1(1) Agreement of Reorganization and Merger dated as of February 21, 2000 among MedicaLogic, Inc., Medscape, Inc. and Moneypenny Merger Corp. 2.2(1) Agreement of Reorganization and Merger dated as of February 21, 2000 among MedicaLogic, Inc., Total eMed, Inc. and AQ Merger Corp. 3.1.1(2) Articles of Amendment to the 1999 Restated Articles of Incorporation dated May 19, 2000. 3.2.1(2) Restated Bylaws, as amended on May 19, 2000. 4.2.1 Specimen of common stock certificate. 10.4.1 1999 Stock Incentive Plan, as amended on May 9, 2000. 10.12 2000 Amended and Restated Investor Rights Agreement. 27.1 Financial data schedule (EDGAR only) (1) Previously filed and incorporated herein by reference to the Company's registration statement on Form S-4, filed on April 4,2000 (Registration No. 333-32390). (2) Previously filed and incorporated herein by reference to the Company's Current Report on Form 8-K, dated May 11, 2000 (Registration No. 333-28285).
23 EX-4.2-1 2 ex-4_21.txt EX-4.2.1 MEDICALOGIC/MEDSCAPE, INC. COMMON STOCK NUMBER - ----------------------------------- - ----------------------------------- THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY OR RIDGEFIELD PARK, NJ COMMON STOCK SHARES - ----------------------------------- - ----------------------------------- SEE REVERSE FOR CERTAIN DEFINITIONS AND A STATEMENT AS TO THE RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS ON SHARES INCORPORATED UNDER THE LAWS OF THE STATE OF OREGON CUSIP 584642 10 2 THIS CERTIFIES THAT SPECIMEN IS THE OWNER OF FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE, OF MEDICALOGIC/MEDSCAPE, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: David C. Moffenbeier CHIEF EXECUTIVE OFFICER AND SECRETARY Mark K. Leavitt, M.D. CHAIRMAN SEAL COUNTERSIGNED AND REGISTERED: CHASEMELLON SHAREHOLDER SERVICES, LLC. TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE EX-10.4-1 3 ex-10_41.txt EX-10.4.1 MEDICALOGIC, INC. 1999 STOCK INCENTIVE PLAN 1. PURPOSE. The purpose of this 1999 Stock Incentive Plan (the "Plan") is to enable MedicaLogic, Inc. (the "Company") to attract and retain experienced and able directors, officers, employees and other key contributors and to provide an additional incentive to these individuals to exert their best efforts for the Company and its shareholders. 2. ADMINISTRATION. The Plan shall be administered by the board of directors of the Company (the "Board of Directors"), which shall determine and designate from time to time the persons to whom grants and awards shall be made and the amounts, terms and conditions of those grants and awards. Subject to the provisions of the Plan, the Board of Directors may from time to time adopt or amend rules and regulations relating to administration of the Plan, and the interpretation and construction of the provisions of the Plan and any stock bonus, stock purchase and option agreements under the Plan by the Board of Directors shall be final and conclusive. Whenever the operation of the Plan requires that the fair market value of the Company's common stock ("Stock") be determined, the fair market value shall be determined by, or in a manner approved by, the Board of Directors. If the Stock is not publicly traded, the Board of Directors may consider any valuation methods it deems appropriate and may, but is not required to, obtain one or more independent appraisals of the Company. If the Stock is publicly traded, the fair market value of Stock shall be the closing price of the Stock as reported in THE WALL STREET JOURNAL on the last trading day preceding the date an award is granted or exercised, as applicable, or such other reported value of the Stock as shall be specified by the Board of Directors. 3. ELIGIBILITY. Grants and awards may be made under the Plan to directors, officers, and employees of the Company or any parent or subsidiary of the Company, and other key individuals such as consultants to the Company who the Board of Directors believes have made or will make an essential contribution to the Company; provided, however, that only employees of the Company shall be eligible to receive Incentive Stock Options under the Plan. 4. SHARES SUBJECT TO THE PLAN. Except as provided in Section 9, the total number of shares of Stock that may be issued (i) upon exercise of all options and stock appreciation rights granted under the Plan, (ii) as bonuses under the Plan and (iii) pursuant to sales under the Plan, shall not exceed in the aggregate 8,000,000 shares. If any option under the Plan or stock appreciation right granted without a related option expires or is cancelled or terminated and is unexercised in whole or in part, the shares allocable to the unexercised portion shall again become available for awards under the Plan, except that shares that are issued on exercise of a stock appreciation right that were allocable to an option, or portion thereof, surrendered in connection with exercise of the stock appreciation right shall not again become available for awards under the Plan. If Stock sold or awarded as a bonus under the Plan is forfeited to the Company or repurchased by the Company pursuant to applicable restrictions, the number of shares forfeited or repurchased shall again be available under the Plan. Stock issued under the Plan may be subject to such restrictions on transfer, repurchase rights, or other restrictions as are determined by the Board of Directors. The certificates representing such Stock shall bear such legends as are determined by the Board of Directors. 5. LIMITATION ON NUMBER OF SHARES. No employee may be granted stock options or stock appreciation rights under the Plan for more than an aggregate of 200,000 shares of Stock in connection with the hiring of the employee or 500,000 shares in any calendar year thereafter. 6. EFFECTIVE DATE AND DURATION OF PLAN. 6.1 EFFECTIVE DATE. The Plan shall become effective when adopted by the Board of Directors (the "Effective Date"). The Plan shall not be considered as adopted by the Board of Directors until the Plan is approved by a majority vote of the shareholders of the Company entitled to vote thereon at a duly held shareholders' meeting at which a quorum is present or by any other method that satisfies applicable state law requirements regarding approval of actions requiring shareholder voting. Subject to this limitation, options and stock appreciation rights may be granted and Stock may be awarded as bonuses or sold under the Plan at any time after the Effective Date and before termination of the Plan. 6.2 DURATION OF THE PLAN. The Plan shall continue until, in the aggregate, options and stock appreciation rights have been granted and exercised and Stock has been awarded as bonuses or sold and the restrictions on any such Stock have lapsed with respect to all shares subject to the Plan under Section 4 (subject to any adjustments under Section 10), provided, however, that unless sooner terminated by the Board of Directors, the Plan shall terminate on, and no option or stock appreciation right or bonus right shall be granted and no Stock shall be awarded as a bonus or sold under the Plan on or after, the tenth anniversary of the date the plan was adopted by the Board of Directors or approved by the shareholders in accordance with Section 6.1, whichever occurs earlier. The Board of Directors may suspend or terminate the Plan at any time except with respect to options, stock appreciation rights and bonus rights, and Stock subject to restrictions then outstanding under the Plan. Termination shall not affect any right of the Company to repurchase shares or the forfeitability of shares issued under the Plan. 7. GRANTS, AWARDS AND SALES. 7.1 TYPE OF SECURITY. The Board of Directors may, from time to time, take the following actions, separately or in combination, under the Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); (ii) grant options other than Incentive Stock Options (hereinafter "Non-Statutory Stock Options"); (iii) grant stock appreciation rights or bonus rights; (iv) award bonuses of Stock; and (v) sell Stock subject to restrictions. The Board of Directors shall specify the action taken with respect to each person granted, awarded, or sold any option or Stock under the Plan and shall specifically designate each option granted under the Plan as an Incentive Stock Option or a Non-Statutory Stock Option. 7.2 GENERAL RULES RELATING TO OPTIONS. 7.2.1 TIME OF EXERCISE. Except as provided in Section 8, options granted under the Plan may be exercised over the period stated in each option in amounts and at times prescribed by the Board of Directors and stated in the option, provided that options shall not be exercised for fractional shares and provided further that the right to exercise shall be at least 20% per year over five years from the date the option is granted, subject to the provisions of Section 9. If the optionee does not exercise an option in any period with respect to the full number of shares to which the optionee is entitled in that period, the optionee's rights shall be cumulative and the optionee may purchase those shares in any subsequent period during the term of the option. 7.2.2 PURCHASE OF SHARES. Shares may be purchased or acquired pursuant to an option granted under the Plan only on receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of shares the optionee desires to purchase and the date on which the optionee desires to complete the transaction, which may not be more than 30 days after receipt of the notice, and, unless in the opinion of counsel for the Company such a representation is not required to comply with the Securities Act of 1933, as amended, containing a representation that the optionee intends to acquire the shares for investment and not with a view to distribution. On or before the date specified for completion of the purchase, the optionee must have paid the Company the full purchase price in cash, including cash that may be the proceeds of a loan from the Company, in shares of Stock previously acquired by the optionee valued at fair market value, or in any combination of cash and shares of Stock. No shares shall be issued until full payment therefor has been made. Each optionee who has exercised an option shall, on notification of the amount due, if any, and prior to or concurrently with delivery of the certificates representing the shares for which the option was exercised, pay to the Company amounts necessary to satisfy any applicable federal, state, and local withholding tax requirements. If additional withholding becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the employee fails to pay the amount demanded, the Company shall have the right to withhold that amount from other amounts payable by the Company to the optionee, including salary, subject to applicable law. 7.3 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be subject to the following additional terms and conditions: 7.3.1 LIMITATION ON AMOUNT OF GRANTS. No employee may be granted Incentive Stock Options under the Plan such that the aggregate fair market value, on the date of grant, of the Stock with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year, under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of the Company or any parent or subsidiary of the Company, exceeds $100,000. 7.3.2 EXERCISE PRICE. The exercise price per share under each option granted under the Plan shall be determined by the Board of Directors, but the exercise price with respect to an Incentive Stock Option shall be not less than 100 percent of the fair market value of the shares covered by the option on the date the option is granted. 7.3.3 DURATION OF OPTIONS. Subject to Sections 7.3.4 and 8, each option granted under the Plan shall continue in effect for the period fixed by the Board of Directors, except that no Incentive Stock Option shall be exercisable after the expiration of 10 years from the date it is granted. 7.3.4 LIMITATIONS ON GRANTS TO 10 PERCENT SHAREHOLDERS. An Incentive Stock Option may be granted under the Plan to an employee who owns (within the meaning of Section 424(d) of the Code) more than 10 percent of the total combined voting power of all classes of stock of the Company, or of any parent or subsidiary of the Company, only if the exercise price is at least 110 percent of the fair market value of the Stock subject to the option on the date it is granted, and the option by its terms is not exercisable after the expiration of five years from the date it is granted. 7.4 NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options shall be subject to the following additional terms and conditions: 7.4.1 EXERCISE PRICE. The exercise price per share under each option granted under the Plan shall be determined by the Board of Directors, but the exercise price shall be not less than 85 percent of the fair market value of the shares covered by the option on the date the option is granted. 7.4.2 DURATION OF OPTIONS. Non-Statutory Stock Options granted under the Plan shall continue in effect for the period fixed by the Board of Directors, not to exceed 10 years. 7.5 STOCK BONUSES. Stock awarded as a bonus shall be subject to the terms, conditions, and restrictions determined by the Board of Directors at the time the Stock is awarded as a bonus. The Board of Directors may require the recipient to sign an agreement as a condition of the award, but may not require the recipient to pay any money consideration except as provided in this Section 7.5. The agreement may contain such terms, conditions, representations, and warranties as the Board of Directors may require. The Company may require any recipient of a Stock bonus to pay to the Company amounts necessary to satisfy any applicable federal, state, or local tax withholding requirements prior to delivery of certificates. If additional withholding becomes required beyond any amount deposited before delivery of the certificates, the employee shall pay such amount to the Company on demand. If the employee fails to pay the amount demanded, the Company shall have the right to withhold that amount from other amounts payable by the Company to the employee, including salary, subject to applicable law. 7.6 RESTRICTED STOCK. The Board of Directors may issue shares of Stock under the Plan for such consideration (including promissory notes and services) as determined by the Board of Directors in accordance with the law and with such restrictions concerning transferability, repurchase by the Company, or forfeiture as determined by the Board of Directors. All shares of Stock issued pursuant to this Section 7.6 shall be subject to a purchase agreement, which shall be executed by the Company and the prospective recipient of the Stock prior to the delivery of certificates representing such shares to the recipient. The purchase agreement shall contain such terms and conditions and representations and warranties as the Board of Directors shall require. Each employee to whom shares of stock are issued pursuant to this paragraph 7.6 shall, on notification of the amount due, if any, and before or concurrently with delivery of the certificates representing the shares, pay to the Company amounts necessary to satisfy any applicable federal, state, and local withholding tax requirements. If additional withholding becomes required beyond any amount deposited before delivery of the certificates, the employee shall pay such amount to the Company on demand. If the employee fails to pay the amount demanded, the Company shall have the right to withhold that amount from other amounts payable by the Company to the employee, including salary, subject to applicable law. 7.7 STOCK APPRECIATION RIGHTS. 7.7.1 DESCRIPTION. Each stock appreciation right shall entitle the holder, on exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one share of Stock over its fair market value on the date of grant (or, in the case of a stock appreciation right granted in connection with an option, the exercise price per share under the option to which the stock appreciation right relates) (the "Spread"), multiplied by the number of shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. If the stock appreciation right is granted in conjunction with an incentive stock option, the stock appreciation right may be for no more than 100 percent of the Spread multiplied by the number of shares covered by the option or portion thereof that is surrendered. 7.7.2 EXERCISE. A stock appreciation right shall be exercisable only at the time or times established by the Board of Directors. If a stock appreciation right is granted in connection with an option, then it shall be exercisable only to the extent and on the same conditions that the related option is exercisable. Upon exercise of a stock appreciation right, any option or portion thereof to which the stock appreciation right relates must be surrendered unexercised. If the stock appreciation right is issued in conjunction with an incentive stock option, the stock appreciation right may be exercised with respect to the shares of stock covered by the incentive stock option only if the Spread with respect to those shares is a positive number. 7.7.3 PAYMENT. Payment by the Company upon exercise of a stock appreciation right may be made in shares of Stock valued at fair market value, or in cash, or partly in Stock and partly in cash, as determined by the Board of Directors. No fractional shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash may be paid in an amount equal to the value of the fraction or, in the discretion of the Board of Directors, the number of shares may be rounded to the next whole share. 7.7.4 WITHHOLDING. If payment by the Company of the stock appreciation right is in cash, or partly in cash, the Company shall have the right to withhold the amount of cash necessary to satisfy any applicable federal, state or local withholding tax requirements. If payment by the Company of the stock appreciation right is solely in shares of Stock or if the amount of the payment in cash is insufficient to satisfy the withholding requirements, the employee shall, on notification of the amount due, and before or concurrently with delivery of the certificates representing the shares, pay to the Company the amounts necessary to satisfy the withholding requirements. If additional withholding becomes required beyond any amount deposited before delivery of the certificates, the employee shall pay such amount to the Company on demand. If the employee fails to pay the amount demanded, the Company shall have the right to withhold that amount from other amounts payable by the Company to the employee, including salary, subject to applicable law. 7.7.5 ADJUSTMENT. In the event of any adjustment pursuant to Section 10 in the number of shares of Stock subject to an option granted under the Plan, any stock appreciation right granted hereunder in connection with such option shall be proportionately adjusted. 7.8 CASH BONUS RIGHTS. 7.8.1 GRANT. The Board of Directors may grant bonus rights under the Plan in connection with (i) an option or stock appreciation right granted or previously granted, (ii) Stock awarded, or previously awarded, as a bonus, and (iii) Stock sold, or previously sold, under the Plan. Bonus rights will be subject to rules, terms, and conditions as the Board of Directors may prescribe. 7.8.2 BONUS RIGHTS IN CONNECTION WITH OPTIONS AND STOCK APPRECIATION RIGHTS. A bonus right granted in connection with an option will entitle an optionee to a cash bonus when the related option is exercised (or is surrendered in connection with exercise of a stock appreciation right related to the option) in whole or in part. A bonus right granted in connection with a stock appreciation right will entitle the holder to a cash bonus when the stock appreciation right is exercised. Upon exercise of an option, the amount of the bonus shall be determined by multiplying the excess of the total fair market value of the shares to be acquired upon the exercise over the total exercise price for the shares by the applicable bonus percentage. Upon exercise of a stock appreciation right, the bonus shall be determined by multiplying the total fair market value of the shares or cash received pursuant to the exercise of the stock appreciation right by the applicable bonus percentage. The bonus percentage applicable to a bonus right shall be determined from time to time by the Board of Directors but shall in no event exceed 100 percent. 7.8.3 BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A bonus right granted in connection with Stock awarded as a bonus will entitle the person awarded such Stock to a cash bonus either at the time the Stock is awarded or at such time as restrictions, if any, to which the Stock is subject lapse. If Stock awarded is subject to restrictions and is repurchased by the Company or forfeited by the holder, the bonus right granted in connection with such Stock shall terminate and may not be exercised. The amount of any cash bonus to be awarded and the time such cash bonus is to be paid shall be determined from time to time by the Board of Directors. 7.8.4 BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASE. A bonus right granted in connection with Stock purchased hereunder (excluding Stock purchased pursuant to an option) shall terminate and may not be exercised in the event the Stock is repurchased by the Company or forfeited by the holder pursuant to restrictions applicable to the Stock. The amount of any cash bonus to be awarded and the time such cash bonus is to be paid shall be determined from time to time by the Board of Directors. 7.8.5 WITHHOLDING. The Company shall have the right to withhold from the bonus the amount of cash necessary to satisfy any applicable federal, state and local withholding tax requirements. If the amount of the payment in cash is insufficient to satisfy the withholding requirements, the employee shall, on notification of the amount due, and before or concurrently with delivery of any stock certificates, pay to the Company the amounts necessary to satisfy the withholding requirements. If additional withholding becomes required beyond any amount deposited before delivery of the certificates, the employee shall pay such amount to the Company on demand. If the employee fails to pay the amount demanded, the Company shall have the right to withhold that amount from other amounts payable by the Company to the employee, including salary, subject to applicable law. 8. NONTRANSFERABILITY. Each option, stock appreciation right, or cash bonus right granted under the Plan by its terms shall be nonassignable and nontransferable by the holder except by will or by the laws of descent and distribution of the state or country of the holder's domicile at the time of death, and each option, stock appreciation right, or cash bonus right by its terms shall be exercisable during the holder's lifetime only by the holder. 9. TERMINATION OF EMPLOYMENT. 9.1 RETIREMENT OR GENERAL TERMINATION. If an employee's employment by the Company or any parent or subsidiary of the Company is terminated by retirement or for any reason other than in the circumstances specified in Section 9.2 below, any option, stock appreciation right or cash bonus right held by the employee may be exercised at any time prior to its expiration date or the expiration of three months after the date of the termination, whichever is the shorter period, but only if and to the extent the employee was entitled to exercise the option, stock appreciation right or cash bonus right on the date of termination. Transfer of an employee by the Company or any parent or subsidiary of the Company to the Company or any parent or subsidiary of the Company shall not be considered a termination for purposes of the Plan. 9.2 DEATH OR DISABILITY. If an employee's employment by the Company or any parent or subsidiary of the Company is terminated because of death or physical disability (within the meaning of Section 22(e)(3) of the Code), any option, stock appreciation right or cash bonus right held by the employee may be exercised at any time prior to its expiration date or the expiration of one year after the date of termination, whichever is the shorter period, for the greater of (a) the number of remaining shares for which the employee was entitled to exercise the option, stock appreciation right or cash bonus right on the date of termination or (b) the number of remaining shares for which the employee would have been entitled to exercise the option, stock appreciation right or cash bonus right if such option or right had been 50 percent exercisable on the date of termination. If an employee's employment is terminated by death, any option, stock appreciation right or cash bonus right held by the employee shall be exercisable only by the person or persons to whom the employee's rights under the option, stock appreciation right or cash bonus right pass by the employee's will or by the laws of descent and distribution of the state or country of the employee's domicile at the time of death. 9.3 TERMINATION OF UNEXERCISED RIGHTS. To the extent an option, stock appreciation right or cash bonus right held by any deceased employee or by any employee whose employment is terminated is not exercised within the limited periods provided above, all further rights to exercise the option, stock appreciation right or cash bonus right shall terminate at the expiration of such periods. 9.4 TERMINATION OF NON-EMPLOYEES. With respect to options, stock appreciation rights and cash bonus rights granted to persons who are not employees of the Company, the Board of Directors may establish provisions relating to the termination of those persons' status with the Company. 9.5 REPURCHASE OF OPTIONS. The Board of Directors may establish provisions relating to the repurchase of any shares acquired upon the exercise of options, in the event of termination of employment or termination of service of non-employees for any reason other than in circumstances specified in Section 9.2. The repurchase price may be stated in each option as prescribed by the Board of Directors, provided that such repurchase price shall not be an amount less than (i) the fair market value at the time of purchase, or (ii) the original purchase price, whichever is less, and further provided that the right to repurchase lapses with respect to at least 20% of the number of shares per year over five years from the date the option is granted, and the repurchase right is exercised within 90 days after termination of employment or service. 10. CHANGES IN CAPITAL STRUCTURE. If the outstanding shares of Stock are increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of any reorganization, merger, consolidation, plan of exchange, recapitalization, reclassification, stock split, combination of shares, or dividend payable in shares, appropriate adjustment shall be made by the Board of Directors in the number and kind of shares for the purchase of which options or stock appreciation rights may be granted and for which Stock may be awarded as bonuses or sold subject to restrictions under the Plan. In addition, the Board of Directors shall make appropriate adjustments in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, and the number and kind of shares covered by outstanding stock appreciation rights. Adjustments in outstanding options shall be made without change in the total price applicable to the unexercised portion of any option and with a corresponding adjustment in the exercise price per share; provided, however, that with respect to Incentive Stock Options, (i) the excess of the aggregate fair market value of the shares subject to the option immediately after the adjustment over the aggregate exercise price of those shares shall not be more than the excess of the aggregate fair market value of the shares subject to the option immediately before the adjustment over the aggregate exercise price of those shares, (ii) the adjusted option shall not give the optionee additional benefits that the optionee did not have before the adjustment, and (iii) on a share-by-share comparison, the ratio of the exercise price to the fair market value of the shares subject to the option immediately after the adjustment shall be no more favorable to the optionee than the ratio of the exercise price to the fair market value of the shares subject to the option immediately before the adjustment. Adjustments in outstanding stock appreciation rights shall be made without change in their total value. Any such adjustment made by the Board of Directors shall be conclusive. In the event of dissolution or liquidation of the Company or a merger, consolidation, or plan of exchange affecting the Company, in lieu of making adjustments as provided for above in this Section 10, the Board of Directors may, in its sole discretion, provide a 30-day period prior to such event during which optionees shall have the right to exercise options or stock appreciation rights. 11. CORPORATE MERGERS, ACQUISITIONS, ETC. The Board of Directors may also grant options and stock appreciation rights having terms and provisions which vary from those specified in this Plan provided that any options and stock appreciation rights granted pursuant to this section are granted in substitution for, or in connection with assumption of, existing options and stock appreciation rights granted by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a subsidiary is a party. 12. AMENDMENT OF PLAN. The Board of Directors may at any time and from time to time modify or amend the Plan in such respects as it deems advisable because of changes in the law while the Plan is in effect or for any other reason. After the Plan has been approved by the shareholders and except as provided in Section 10, however, no change in an option or stock appreciation right already granted to any person shall be made without the written consent of such person. Furthermore, unless approved at an annual meeting or a special meeting by the shareholders of the Company entitled to vote thereon, no amendment or change shall be made in the Plan (a) increasing the total number of shares that may be issued under the Plan, or (b) changing the class of persons eligible to receive options under the Plan. 13. APPROVALS. The Company's obligations under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission in connection with the granting of any option or the issuance or sale of any shares under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver shares of Stock under the Plan if the Company is advised by its legal counsel that such issuance or delivery would violate applicable state or federal laws. 14. EMPLOYMENT RIGHTS. Nothing in the Plan or any grant pursuant to the Plan shall confer on any employee any right to be continued in the employment of the Company or any parent or subsidiary of the Company or shall interfere in any way with the right of the Company or any parent or subsidiary of the Company by whom such employee is employed to terminate such employee's employment at any time, with or without cause. 15. RIGHTS AS A SHAREHOLDER. A holder of an option or a stock appreciation right, a recipient of Stock awarded as a bonus, or a purchaser of Stock shall have no rights as a shareholder with respect to any shares covered by any option, stock appreciation right, bonus award, or stock purchase agreement until the date of issue of a stock certificate to him or her for such shares. Except as otherwise provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 16. INFORMATION. Financial statements of the Company will be provided annually to each optionee under the Plan. Effective Date: September 2, 1999 Amended: May 9, 2000 EX-10.12 4 ex-10_12.txt EX-10.12 2000 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT THIS 2000 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as of the 19th day of May 2000, by and between MedicaLogic, Inc., an Oregon corporation (the "Company"), and the shareholders of the Company listed on the signature pages hereof. RECITALS A. As of May 28, 1999, the Company entered into a 1999 Amended and Restated Investor Rights Agreement with certain investors (as amended and supplemented, the "1999 MedicaLogic Agreement") that, among other things, provided certain registration rights to holders of capital stock of the Company. B. As of August 4, 1999, Medscape, Inc., a Delaware corporation ("Medscape"), entered into an Amended and Restated Stockholders Agreement with certain of its stockholders (as amended and supplemented, the "1999 Medscape Agreement") that, among other things, provided certain registration rights to holders of Medscape capital stock. C. As of August 3, 1999, Medscape entered into a Registration Rights Agreement (the "CBS Agreement") with CBS Corporation ("CBS") that provided certain registration rights to CBS with respect to Medscape common stock owned by CBS. D. As of August 25, 1999 and September 8, 1999, the 1999 Medscape Agreement was amended, among other things, to provide certain registration rights to America Online, Inc. ("AOL") with respect to Medscape common stock underlying warrants issued to AOL by Medscape. E. As of February 21, 2000, the Company, Medscape and Moneypenny Merger Corp., a Delaware corporation, entered into an Agreement of Reorganization and Merger (the "Merger Agreement") under which Medscape will become a wholly owned subsidiary of the Company (the "Merger") and the Company's name will be changed to MedicaLogic/Medscape, Inc. F. In Section 1.9 of the Merger Agreement, the Company and Medscape agreed that any registration rights existing as of the date of the Merger Agreement with respect to Medscape common stock would, as of the effective date of the Merger, be converted into the same rights with respect to Company common stock received in exchange therefor pursuant to the Merger, and that they would execute such documents and take such further actions as may be necessary or desirable to effectuate the provisions of Section 1.9. G. Section 3.7 of the 1999 MedicaLogic Agreement provides that the 1999 MedicaLogic Agreement may be amended only with the written consent of the Company and the holders of more than fifty percent (50%) of each of the Series A, Series C, Series E, Series F and Series J Preferred Stock of the Company (including the common stock of the Company issued upon conversion thereof) then outstanding. H. All shares of the Company's Preferred Stock have been converted into shares of common stock of the Company, and the undersigned include the Company and the holders of more than fifty percent (50%) of the Company's common stock issued upon conversion of each of the respective series of the Company's Preferred Stock. I. The undersigned also include CBS, AOL and the holders of (1) a majority of the Medscape common stock issued upon conversion of the former Series C Stock of Medscape, including the Vested Shares (as defined in the 1999 Medscape Agreement) held by Dr. Jeffrey L. Drezner; (2) at least sixty-six and two-thirds percent (66 2/3%) of the Medscape common stock issued upon conversion of the former Series D Preferred Stock of Medscape; (3) at least sixty-six and two-thirds percent (66 2/3%) of the Medscape common stock issued upon conversion of the former Series E Preferred Stock of Medscape; and (4) a majority of the Medscape common stock issued in exchange for the former Class A Common Stock of Medscape (other than those shares issued in respect of the former Series C Stock of Medscape). AGREEMENT In consideration of the mutual promises and covenants set forth herein, the parties hereto agree to amend and restate the 1999 MedicaLogic Agreement (a) to give effect to Section 1.9 of the Merger Agreement, (b) to eliminate provisions thereof that are no longer applicable and (c) to further provide as follows: 1. REGISTRATION RIGHTS. The Company covenants and agrees as follows: 1.1 DEFINITIONS. For purposes of this Section 1: (a) The term "Act" means the Securities Act of 1933, as amended. (b) The term "Common Stock" means the common stock of the Company. (c) The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof. (e) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended. (f) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act and the declaration or ordering of effectiveness of such registration statement or document. (g) The term "Registrable Securities" means (i) the Common Stock of the Company issued upon conversion of the Company's Series A Preferred Stock, Series A-1 Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series F-1 Preferred Stock, Series J Preferred Stock, and Series J-1 Preferred Stock as listed on Signature Page A hereto; (ii) the Common Stock of the Company purchased pursuant to the Common Stock Purchase Agreement by and among the Company, Mark A. Leavitt, Richard Samco, Sequoia Capital Growth Fund, Sequoia Technology Partners III, New Enterprise Associates VI, Limited Partnership and Stanford University, dated August 3, 1994, as listed on Signature Page B hereto; (iii) the Common Stock of the Company issued in the Merger upon conversion of the Existing Registrable Securities and Investor Registrable Securities (as those terms are defined in the 1999 Medscape Agreement); (iv) the Common Stock of the Company issued upon exercise of the Medscape warrants issued to AOL (the "Warrant Shares"); and (v) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i), (ii), (iii) or (iv) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which such person's rights under this Section 1 are not assigned or assignable and any Registrable Securities sold to the public or sold pursuant to Rule 144 promulgated under the Act. (h) The number of shares of "Registrable Securities then outstanding" shall be the aggregate number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (i) The term "SEC" shall mean the Securities and Exchange Commission. 1.2 REQUEST FOR REGISTRATION. (a) If (i) the Company shall receive, at any time after December 31, 1999, a written request from (A) Holders of at least fifteen percent (15%) of the Registrable Securities then outstanding referred to in clauses (i) and (ii) of subsection 1.1(g) or (B) Holders of at least thirty percent (30%) of the Registrable Securities then outstanding held by the former holders of the Company's Series J Preferred Stock (a "Series J Investor") that the Company file a registration statement under the Act covering the registration of the Registrable Securities then outstanding, or (ii) the Company shall receive a written request from (W) Holders of at least fifty percent (50%) of the Registrable Securities then outstanding held by the former holders of Investor Registrable Securities (excluding Holders described in clause (X), (Y) or (Z) hereof) as listed on Signature Page C hereto, (X) any Holder who purchased more than 650,000 shares of the Series D Preferred Stock of Medscape as listed on Signature Page D hereto (a "Series D Holder"), (Y) any Holder who purchased more than 260,000 shares of the Series E Preferred Stock of Medscape as listed on Signature Page E hereto (a "Series E Holder"), or (Z) any Holder of Warrant Shares, that the Company file a registration statement on Form S-1 (or similar successor forms) under the Act covering the registration of Registrable Securities issued in exchange for Investor Registrable Securities, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of subsection 1.2(b), use its reasonable best efforts to effect as soon as practicable, and in any event within one hundred twenty (120) days of the receipt of such request, the registration under the Act of all Registrable Securities that the Holders request to be registered within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.5, provided that the Registrable Securities requested by the Holders to be registered pursuant to such request must have an anticipated aggregate public offering price of not less than $5,000,000. (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Initiating Holders and shall be reasonably acceptable to the Company, provided that such underwriter shall be of nationally recognized standing and shall agree to firmly underwrite such offering. In such event, the right of any Holder to include Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provisions of this Section 1.2, if the underwriter, with respect to a registration requested under subsection 1.2(a)(i), advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then such Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including such Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting; and provided, further, that Registrable Securities held by Holders referred to in subsection 1.2(a)(ii) shall be entirely excluded from the underwriting before any Registrable Securities held by Holders referred to in subsection 1.2(a)(i) are excluded. In a registration pursuant to subsection 1.2(a)(i), if Registrable Securities held by a Series J Investor are excluded from the registration pursuant to the previous sentence as a result of election of Holders other than Series J Investors to participate in the registration, then that registration will not be deemed to be a registration requested by the Series J Investors for the purposes of Section 1.2(d)(i). (c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, (i) any registration pursuant to subsection 1.2(a)(i): (A) After the Company has effected three (3) registrations pursuant to subsection 1.2(a)(i), two (2) of which may only be initiated by Series J Investors under subsection 1.2(a)(i)(B), and such registrations have been declared or ordered effective; or (B) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date sixty (60) days after the effective date of, a registration subject to Section 1.3 hereof, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (ii) any registration pursuant to subsection 1.2(a)(ii): (A) After the Company has effected seven (7) registrations pursuant to subsection 1.2(a)(ii), two (2) of which may only be initiated by a Series D Holder, one (1) of which may only be initiated by a Series E Holder, two (2) of which may only be initiated by a Holder of Warrant Shares, and two (2) of which may only be initiated by Holders who are not Series D Holders, Series E Holders or Holders of Warrant Shares; or (B) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a registration subject to Section 1.3 hereof, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (C) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 1.12 hereof. 1.3 COMPANY REGISTRATION. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Company shall, at such time, promptly, but at least thirty (30) days prior to filing such registration statement, give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after receipt of such notice by the Holder in accordance with Section 3.5, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its diligent efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred eighty (180) days; provided, however, that (i) such 180-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 180-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Act, permits an offering on a continuous or delayed basis; and provided further that applicable rules under the Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (I) includes any prospectus required by Section 10(a)(3) of the Act or (II) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (I) and (II) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Act. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. (i) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. 1.5 FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2 (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing, qualification, printers' and accounting fees, fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders) shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit the applicable demand registration right pursuant to Section 1.2; provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2. 1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing, qualification, printers' and accounting fees, fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders) but excluding underwriting discounts and commissions relating to Registrable Securities. 1.8 UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Holders of a majority of the Registrable Securities that indicated they would like to be included in the underwriting, the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions as shall mutually be agreed to by such selling shareholders) but in no event shall (i) the amount of securities of the selling Holders included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, or (ii) notwithstanding (i) above, Section 1.2 governs the exclusion of shares being sold by a shareholder exercising a demand registration right granted thereunder. For purposes of the preceding parenthetical concerning apportionment, for any selling shareholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and shareholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling shareholder," and any pro-rata reduction with respect to such "selling shareholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling shareholder," as defined in this sentence. 1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law, or any rule or regulation promulgated under the Act, and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person or any such underwriter or Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, however, that in no event shall any indemnity under this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. (d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, (i) no Holder shall be required to contribute any amount in excess of the public offering price of all Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Act, and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.12 FORM S-3 REGISTRATION. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.12: (1) if Form S-3 is not available for offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000; (3) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 150 days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; (4) if the Company has, within the six (6) month period preceding the date of such request, already effected one registration on Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. The Company shall bear and pay all expenses incurred in connection with a registration requested pursuant to Section 1.12, including (without limitation) all registration, filing, qualification, printer's and accounting fees, fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holder or Holders hereunder, if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holder or Holders) but excluding underwriting discounts and commissions relating to Registrable Securities; provided, however, that the Company shall not be obligated to pay registration expenses under this paragraph if the Company has already effected two registrations on Form S-3 pursuant to this Section 1.12. Registrations effected pursuant to this Section 1.12 shall not be counted as registrations effected pursuant to Section 1.2 or 1.3. 1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities, provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee acquires from the Holder more than 100,000 shares; (c) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.15 below; and (d) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. 1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in subsection 1.2(a) or within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 1.2. If the Company grants registration rights to holders of any security of the Company which are more favorable to such holders than the registration rights granted hereunder, then such more favorable registration rights shall also be deemed to be granted to the Holders of Registrable Securities hereunder, and the Company covenants and agrees to take any and all steps necessary to modify the terms of this Agreement to so provide. 1.15 [DELETED] 1.16 TERMINATION OF REGISTRATION RIGHTS. (a) No Holder shall be entitled to exercise any right provided for in this Section 1 after December 10, 2009. (b) In addition, the right of any Holder to request registration or inclusion in any registration pursuant to Section 1 shall terminate on such date that all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any 90-day period; provided, however, that the provisions of this Section 1.16(b) shall not apply to any Holder who owns at least one percent (1%) of the Company's outstanding stock. 2. COVENANTS OF THE COMPANY. [Deleted] 3. MISCELLANEOUS. 3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 3.2 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California. 3.3 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 3.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.5 NOTICES. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid or upon delivery to a recognized courier service and addressed to the party to be notified at the address indicated for such party on the signature pages hereof, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. 3.6 EXPENSES. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than fifty percent (50%) of the Registrable Securities then outstanding, except as follows: (a) any amendment or waiver affecting only the rights of holders of Registrable Securities described in subsection 1.1(g)(i) shall require only the consent of the Company and the holders of more than fifty percent (50%) of such Registrable Securities, except that any amendment or waiver affecting the rights of Series J Investors shall require the consent of the holders of more than fifty percent (50%) of the Registrable Securities held by the Series J Investors; (b) any amendment or waiver affecting only the rights of holders of Registrable Securities held by former Holders of Investor Registrable Securities, excluding Series D Holders and Series E Holders, shall require only the consent of the Company and the holders of more than sixty-six and two-thirds percent (66 2/3%) of such Registrable Securities; (c) any amendment or waiver affecting only the rights of holders of Registrable Securities who were Series D Holders shall require only the consent of the Company and the holders of more than sixty-six and two-thirds percent (66 2/3%) of such Registrable Securities; and (d) any amendment or waiver affecting only the rights of holders of Registrable Securities who were Series E Holders shall require only the consent of the Company and the holders of more than fifty percent (50%) of such Registrable Securities. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of such Registrable Securities and the Company. 3.8 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 3.9 AGGREGATION OF STOCK. All shares of Registrable Securities (including the Common Stock issuable upon conversion thereof), as applicable, held or acquired by a Holder shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 3.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and supersedes the 1999 MedicaLogic Agreement, the 1999 Medscape Agreement and the CBS Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: MEDICALOGIC, INC. By: Printed Name: Mark Leavitt, M.D. Title: CEO SHAREHOLDERS: See Attached Signature Pages
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS Number Signature Address for Notices of Shares --------- ------------------- --------- GLYNN VENTURES III, L.P. Glynn Ventures III, L.P. 294,445 3000 Sand Hill Road Building 4, Suite 235 By:______________________________ Menlo Park, CA 94025 Its:_____________________________ Attn: John Glynn, Jr. Printed Name:____________________ SEQUOIA CAPITAL GROWTH FUND Sequoia Capital Growth Fund 1,446,614 c/o Sequoia Capital 3000 Sand Hill Road By:______________________________ Building 4, Suite 280 Its:_____________________________ Menlo Park, CA 94025 Printed Name:____________________ Attn: Mark A. Stevens SEQUOIA TECHNOLOGY PARTNERS Sequoia Technology Partners III 92,338 III c/o Sequoia Capital 3000 Sand Hill Road By:______________________________ Building 4, Suite 280 Its:_____________________________ Menlo Park, CA 94025 Printed Name:____________________ Attn: Mark A. Stevens NEW ENTERPRISE ASSOCIATES VI, New Enterprise Associates VI, 1,980,584 LP LP c/o New Enterprises Associates 2490 Sand Hill Road By:______________________________ Menlo Park, CA 94025 Its:_____________________________ Attn: Ronald Kase Printed Name:____________________ _________________________________ Charles M. Linehan 9,540 CHARLES M. LINEHAN c/o New Enterprise Associates 2490 Sand Hill Road Menlo Park, CA 94025
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) OMEGA VENTURES II, L.P. Omega Ventures II, L.P. 625,434 c/o Crosslink Capital Inc. 555 California Street, #2350 By:______________________________ San Francisco, CA 94104 Its:_____________________________ Attn: Michael Stark Printed Name:____________________ OMEGA VENTURES II CAYMAN, Omega Ventures II Cayman, 158,044 L.P. L.P. c/o Crosslink Capital Inc. 555 California Street, #2350 By:______________________________ San Francisco, CA 94104 Its:_____________________________ Attn: Michael Stark Printed Name:____________________ CROSSOVER FUND II, L.P. Crossover Fund II, L.P. 298,111 c/o Crosslink Capital Inc. 555 California Street, #2350 By:______________________________ San Francisco, CA 94104 Its:_____________________________ Attn: Michael Stark Printed Name:____________________ CROSSOVER FUND IIA, L.P. Crossover Fund IIA, L.P. 42,727 c/o Crosslink Capital Inc. 555 California Street, #2350 By:______________________________ San Francisco, CA 94104 Its:_____________________________ Attn: Michael Stark Printed Name:____________________ BAYVIEW INVESTORS, LTD. Bayview Investors, Ltd. 110,499 c/o Robertson Stevens & Co. 555 California Street, #2600 By:______________________________ San Francisco, CA 94104 Its:_____________________________ Attn: Michael Stark Printed Name:____________________
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) AMERINDO TECHNOLOGY GROWTH Amerindo Technology Growth 66,667 FUND II Fund II c/o Amerindo Investment Advisors By:______________________________ 399 Park Ave., 22nd Floor Its:_____________________________ New York, NY 10022 Printed Name:____________________ Attn: Gary A. Tanaka FRANKLIN CAPITAL ASSOCIATES Franklin Capital Associates III, 686,563 III, L.P. L.P. c/o Coleman Swenson Hoffman Booth By:______________________________ 237 Second Avenue South Its:_____________________________ Franklin, TN 37064-2649 Printed Name:____________________ Attn: W. David Swenson FURMAN SELZ SBIC L.P. Furman Selz SBIC L.P. 461,041 55 East 52nd St., 37th Floor New York, NY 10055-0002 By:______________________________ Attn: Brian P. Friedman Its:_____________________________ Printed Name:____________________ SEQUOIA CAPITAL VI Sequoia Capital VI 400,914 c/o Sequoia Capital 3000 Sand Hill Road By:______________________________ Building 4, Suite 280 Its:_____________________________ Menlo Park, CA 94025 Printed Name:____________________ Attn: Mark A. Stevens SEQUOIA TECHNOLOGY PARTNERS Sequoia Technology 22,028 VI Partners VI c/o Sequoia Capital 3000 Sand Hill Road By:______________________________ Building 4, Suite 280 Its:_____________________________ Menlo Park, CA 94025 Printed Name:____________________ Attn: Mark A. Stevens
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) SEQUOIA 1995 Sequoia 1995 17,624 c/o Sequoia Capital 3000 Sand Hill Road By:______________________________ Building 4, Suite 280 Its:_____________________________ Menlo Park, CA 94025 Printed Name:____________________ Attn: Mark A. Stevens _________________________________ Tom Hodapp 14,445 TOM HODAPP 254 Glen Drive Sausalito, CA 94965 _________________________________ Michael Boxer 11,806 MICHAEL BOXER 19272 Sierra Inez Road Irvine, CA 92612 _________________________________ Paul Felton 13,056 PAUL FELTON 36 Los Altos Orinda, CA 94563 _________________________________ Cathy Klema 11,806 CATHY KLEMA 300 Central Park West New York, NY 10024 _________________________________ Leopold Swergold 14,306 LEOPOLD SWERGOLD c/o Ing Furman Selz 230 Park Avenue New York, NY 10169 _________________________________ Paul Ellwood, M.D 3,834 PAUL ELLWOOD, M.D. P.O. Box 165 Bondurant, WY 82922 _________________________________ William Slattery 2,223 WILLIAM SLATTERY 399 Park Avenue, 22nd Floor New York, NY 10022 _________________________________ Sarah Gordon-Wild 2,222 SARAH GORDON-WILD c/o Loan Pine Capital 2 Greenwich Plaza Greenwich, CT 06830
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) _________________________________ Thomas H. Cato 2,222 THOMAS H. CATO 15 Inveraray Nashville, TN 37215 _________________________________ Dr. Hugh Y. Rienhoff, Jr. 1,111 DR. HUGH Y. RIENHOFF, JR. c/o Kiva Genetics 2375 Garcia Avenue Mountain View, CA 94043 VHA, INC. VHA, Inc. 739,651 Attn: Jeff Hayes 220 E. Las Colinas Blvd. By:______________________________ Irving, Texas 75039 Its:_____________________________ Printed Name:____________________ 21ST CENTURY COMMUNICATIONS 21st Century Communications 215,240 PARTNERS, L.P. Partners LP Attn: Seth Lieber c/o Geocapital LLC By:______________________________ 767 Fifth Avenue, 45th Floor Its:_____________________________ New York, NY 10153-4590 Printed Name:____________________ 21ST CENTURY COMMUNICATIONS 21st Century Communications 73,240 T-E PARTNERS, L.P. T-E Partners LP c/o Geocapital LLC 767 Fifth Avenue, 45th Floor By:______________________________ New York, NY 10153-4590 Its:_____________________________ Attn: Seth Lieber Printed Name:____________________
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) 21ST CENTURY COMMUNICATIONS 21st Century Communications 28,980 FOREIGN PARTNERS, L.P. Foreign Partners c/o Geocapital LLC 767 Fifth Avenue, 45th Floor By:______________________________ New York, NY 10153-4590 Its:_____________________________ Attn: Seth Lieber Printed Name:____________________ BOSTON SAFE DEPOSIT & TRUST Boston Safe Deposit & Trust 119,048 CO., TRUSTEE FOR US WEST Co. Tr FBO US West PENSION TRUST c/o Boston Safe Deposit & Trust 135 Santilli Highway Everett, MA 02149 By:______________________________ Attn: Melissa Kennedy Its:_____________________________ Printed Name:____________________ BOSTON SAFE DEPOSIT & TRUST Boston Safe Deposit & Trust 357,143 CO., TRUSTEE FOR US WEST Co. TR FBO US West BENEFIT ASSURANCE c/o Boston Safe Deposit & Trust 135 Santilli Highway Everett, MA 02149 By:______________________________ Attn: Melissa Kennedy Its:_____________________________ Printed Name:____________________ PILGRIM, BAXTER HYBRID Pilgrim Baxter Hybrid Partners 317,461 PARTNERS I, L.P. I, LP 825 Duportail Road Wayne, PA 19087 By:______________________________ Attn: Samuel H. Baker Its:_____________________________ Printed Name:____________________
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) CLAYTON ASSOCIATES, L.L.C. Clayton Associates, L.L.C. 15,874 310 25th Avenue N Suite 109 Nashville, TN 37203 By:______________________________ Its:_____________________________ Printed Name:____________________ DMG TECHNOLOGY VENTURES DMG Technology Ventures LLC 55,556 LLC c/o Deutsche Bank Securities Inc Attn: Ed Ryan 1290 Avenue of the Americas By:______________________________ New York, NY 10020 Its:_____________________________ Printed Name:____________________ DMG TECHNOLOGY PARTNERS DMG Technology Partners 23,810 c/o Credit Suisse First Boston 2400 Hanover Street By:______________________________ Palo Alto, CA 94304-1113 Its:_____________________________ Attn: Frank Quattrone Printed Name:____________________ CONTINENTAL CASUALTY Continental Casualty Company 2,000,000 COMPANY CNA Plaza 40 South Chicago, IL 60685 Attn: David Wroe By:______________________________ Its:_____________________________ Printed Name:____________________ QUANTUM INDUSTRIAL PARTNERS Quantum Industrial Partners 1,568,421 LDC LDC c/o Soros Private Equity Partners By:______________________________ 888 Seventh Avenue Its:_____________________________ New York, NY 10106 Printed Name:____________________ Attn: Neal Moszkowski
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) SFM DOMESTIC INVESTMENT LLC SFM Domestic Investment LLC 1,568,421 c/o Soros Private Equity Partners By:______________________________ 888 Seventh Avenue Its:_____________________________ New York, NY 10106 Printed Name:____________________ Attn: Neal Moszkowski SEQUOIA CAPITAL FRANCHISE Sequoia Capital Franchise 78,948 PARTNERS Partners c/o Sequoia Capital 3000 Sand Hill Road #4-280 By:______________________________ Menlo Park, CA 94025 Its:_____________________________ Attn: Mark Stevens Printed Name:____________________ SEQUOIA CAPITAL FRANCHISE Sequoia Capital Franchise Fund 447,369 FUND c/o Sequoia Capital 3000 Sand Hill Road, #4-280 Menlo Park, CA 94025 By:______________________________ Attn: Mark Stevens Its:_____________________________ Printed Name:____________________ COLEMAN SWENSON HOFFMAN Coleman Swenson 210,527 BOOTH IV LP Hoffman Booth IV LP c/o Coleman Swenson Hoffman Booth By:______________________________ Attn: W. David Swenson Its:_____________________________ 237 Second Avenue South Printed Name:____________________ Franklin, TN 37064-2649 DELL USA LP Dell USA LP 1,052,632 Attn: Thomas H. Welch Jr. One Dell Way By:______________________________ Round Rock, TX 78682-2244 Its:_____________________________ Printed Name:____________________
SIGNATURE PAGE A FOR MEDICALOGIC PREFERRED STOCK INVESTORS (Cont'd) GARY J. SHEMANO Gary J. Shemano 43,948 c/o The Shemano Group 601 California Street, Suite 1850 By:______________________________ San Francisco, CA 94108 Its:_____________________________ Printed Name:____________________ MART BAILEY Mart Bailey 39,211 c/o The Shemano Group 601 California Street, Suite 1850 By:______________________________ San Francisco, CA 94108 Its:_____________________________ Printed Name:____________________ MICHAEL JACKS Michael Jacks 21,053 c/o The Shemano Group 601 California Street, Suite 1850 By:______________________________ San Francisco, CA 94108 Its:_____________________________ Printed Name:____________________ WHEATLEY PARTNERS II LP Wheatley Partners II LP 158,731 Attn: Seth Lieber 80 Cutler Mill Road, Suite 311 By:______________________________ Great Rock, NY 11021 Its:_____________________________ Printed Name:____________________
SIGNATURE PAGE B FOR MEDICALOGIC COMMON STOCK INVESTORS NUMBER SIGNATURE ADDRESS FOR NOTICES OF SHARES --------- ------------------- --------- _________________________________ 8288 SW Mapleridge Drive MARK A. LEAVITT Portland, OR 97225 _________________________________ 5822 SW Sheridan Ct 970,305 RICHARD SAMCO Portland, OR 97221 SEQUOIA CAPITAL GROWTH FUND Sequoia Capital Growth Fund 280,131 c/o Sequoia Capital 3000 Sand Hill Road, #4-280 By:______________________________ Menlo Park, CA 94025 Its:_____________________________ Attn: Mark Stevens Printed Name:____________________ SEQUOIA TECHNOLOGY PARTNERS Sequoia Technology Partners III 17,881 III c/o Sequoia Capital 3000 Sand Hill, #4-280 Menlo Park, CA 94025 By:______________________________ Attn: Mark Stevens Its:_____________________________ Printed Name:____________________ NEW ENTERPRISE ASSOCIATES IV, New Enterprise Associates IV, 373,012 LP LP c/o New Enterprises Associates 2490 Sand Hill Road By:______________________________ Menlo Park, CA 94025 Its:_____________________________ Attn: Ron Kase Printed Name:____________________ STANFORD UNIVERSITY Stanford University 31,250 2770 Sand Hill Road Menlo Park, CA 94025 By:______________________________ Its:_____________________________ Printed Name:____________________
SIGNATURE PAGE C FORMER MEDSCAPE INVESTOR STOCKHOLDERS (SERIES C STOCK) Number of Signature Address for Notices Shares --------- ------------------- ------ _________________________________ Esther Dyson 29,137.5 ESTHER DYSON Edventure Holdings 104 Fifth Avenue, 20th Floor New York, NY 10011-6901 Fax: (212) 924-0240 APA EXCELSIOR IV, L.P. Alan J. Patricof 487,412.5 Patricof & Co. Ventures, Inc. By:______________________________ 445 Park Avenue Its:_____________________________ New York, NY 10022 Printed Name: Alan J. Patricof Fax: (212) 319-6155 COUTTS & CO. (CAYMAN) LTD., c/o Alan J. Patricof 86,015 APA EXCELSIOR IV/OFFSHORE, L.P. Patricof & Co. Ventures, Inc. 445 Park Avenue By:______________________________ New York, NY 10022 Its:_____________________________ Fax: (212) 319-6155 Printed Name: Alan J. Patricof PATRICOF PRIVATE INVESTMENT Alan J. Patricof 9,322.5 CLUB, L.P. Patricof & Co. Ventures, Inc. 445 Park Avenue By:______________________________ New York, NY 10022 Its:_____________________________ Fax: (212) 319-6155 Printed Name: Alan J. Patricof
SIGNATURE PAGE C FOR FORMER HOLDERS OF MEDSCAPE INVESTOR REGISTRABLE SECURITIES (EXCEPT SERIES D AND SERIES E HOLDERS) (Cont'd) CSK VENTURE CAPITAL CO., LTD., Kenji Suzuki 388,500 AS INVESTMENT MANAGER FOR CSK Corporation CSK-1(A) INVESTMENT FUND Kenchikukaikan, 7F 5-26-20 Shiba, Minato-Ku Tokyo 108-0014 JAPAN By:______________________________ Fax: 011-81-3-3457-7070 Its: Managing Director Printed Name: Kinya Nakagome CSK VENTURE CAPITAL CO., LTD., Kenji Suzuki 388,500 AS INVESTMENT MANAGER FOR CSK Corporation CSK-1(B) INVESTMENT FUND Kenchikukaikan, 7F 5-26-20 Shiba, Minato-Ku Tokyo 108-0014 JAPAN By:______________________________ Fax: 011-81-3-3457-7070 Its: Managing Director Printed Name: Kinya Nakagome CSK VENTURE CAPITAL CO., LTD., Kenji Suzuki 388,500 AS INVESTMENT MANAGER FOR CSK Corporation CSK-2 INVESTMENT FUND Kenchikukaikan, 7F 5-26-20 Shiba, Minato-Ku Tokyo 108-0014 JAPAN By:______________________________ Fax: 011-81-3-3457-7070 Its: Managing Director Printed Name: Kinya Nakagome MEDIA TECHNOLOGY VENTURES, Barry Weinman 1,548,535 L.P. Media Technology Ventures, L.P. One First Street, Suite 2 By:_______________________________ Los Altos, CA 94022 Its: Managing Member of the General Partner Fax: (650) 949-8510 Printed Name: Barry M. Weinman
SIGNATURE PAGE C FOR FORMER HOLDERS OF MEDSCAPE INVESTOR REGISTRABLE SECURITIES (EXCEPT SERIES D AND SERIES E HOLDERS) (Cont'd) MEDIA TECHNOLOGY VENTURES Barry Weinman 199,977.5 ENTREPRENEURS FUND, L.P. Media Technology Ventures, L.P. One First Street, Suite 2 By:_______________________________ Los Altos, CA 94022 Its: Managing Member of the General Partner Fax: (650) 949-8510 Printed Name: Barry M. Weinman ROBERT A. BERNHARD, WILLIAM Robert Bernhard 87,412.5 L. BERNARD, FRANK A. WEIL, AND c/o Bernhard Management LAWRENCE B. BUTTENWEISER, 6 East 43rd Street, 28th TRUSTEES U/A/ DATED 9/3/64 F/B/O Floor ROBERT A. BERNHARD FAMILY New York, NY 10017 Fax: (212) 986-8178 By:_______________________________ Its: Trustee Printed Name: Robert A. Bernhard ROBERT A. BERNHARD, WILLIAM Robert Bernhard 87,412.5 L. BERNHARD, JOHN L. LOEB, AND c/o Bernhard Management BENJAMIN J. BUTTENWEISER, 6 East 43rd Street, 28th TRUSTEES U/W/D/ DORTOTHY L. Floor BERNHARD F/B/0 ROBERT A. New York, NY 10017 BERNHARD ARTICLE 9TH Fax: (212) 986-8178 By:_______________________________ Its: Trustee Printed Name: Robert A. Bernhard SIGNATURE PAGE C FOR FORMER HOLDERS OF MEDSCAPE INVESTOR REGISTRABLE SECURITIES (EXCEPT SERIES D AND SERIES E HOLDERS) (Cont'd) WORMSER FRERES Marcel Wormser 291,375 Wormser Freres Banque D'Escompte By:_______________________________ 13 Boulevard Hausssman Its: Administrateur Wormser Freres, 75009 Paris, FRANCE Paris Fax: 011-33-1-45233752 Printed Name: Marcel Wormser CIBC OPPENHEIMER CORP. Nathan Gantcher 174,825 Managing Director CIBC Oppenheimer Corp. By:_______________________________ CIBC Oppenheimer Tower Its:_______________________________ World Financial Center Printed Name:______________________ 200 Liberty Street New York, NY 10281 __________________________________ Roger Mulvihill 8,742.5 ROGER MULVIHILL c/o Dechert, Price & Rhoads 30 Rockefeller Plaza, 23rd Floor New York, NY 10112 Fax: (212) 698-3599 __________________________________ Mary Mulvihill 20,395 MARY MULVIHILL c/o Dechert, Price & Rhoads 30 Rockefeller Plaza, 23rd Floor New York, NY 10112 Fax: (212) 698-3599 RHL VENTURES LLC Robert Lessin 145,687.5 RHL Ventures LLC 131 South Woodland Street By:_______________________________ Englewood, NJ 07631 Its:_______________________________ Printed Name:______________________ SIGNATURE PAGE C FOR FORMER HOLDERS OF MEDSCAPE INVESTOR REGISTRABLE SECURITIES (EXCEPT SERIES D AND SERIES E HOLDERS) (Cont'd) TOLEDOT INVESTMENTS, L.P. Richard Linhart 29,137.5 155 West 70th Street Penthouse 4C By:_______________________________ New York, NY 10023 Its: General Partner Printed Name: Richard Linhart __________________________________ Richard Linhart 29,137.5 RICHARD LINHART 155 West 70th Street Penthouse 4C New York, NY 10023 __________________________________ Victor Scaravilli 58,275 VICTOR SCARAVILLI c/o Mole Constructors 29100 Hall Street Solon, OH 44139-3090 Fax: (440) 248-8132 BE PARTNERS Timothy Sommerfield 58,275 BE Partners 440 So. LaSalle Street By:_______________________________ Suite 2118 Its: Partner Chicago, IL 60605 Printed Name: Timothy Sommerfield Fax: (312) 663-4435 __________________________________ Mark Braunstein 29,137.5 MARK BRAUNSTEIN, M.D. c/o Patient Care Technologies 2 Executive Park West NE Atlanta, GA 30329 Fax: (404) 235-7839 TBG INFORMATION INVESTORS, Oakleigh Thorne 1,748,252.5 L.L.C. TBG Information Investors, LLC 270 East Westminster, 2nd By:_______________________________ Floor Its: Chairman & CEO Lake Forest, IL 60045 Printed Name: Oakleigh Thorne Fax: (847) 234-4722 SIGNATURE PAGE C FOR FORMER HOLDERS OF MEDSCAPE INVESTOR REGISTRABLE SECURITIES (EXCEPT SERIES D AND SERIES E HOLDERS) (Cont'd) NUMBER OF SIGNATURE ADDRESS FOR NOTICES SHARES --------- ------------------- ------ _______________________________ Jeffrey L. Drezner, M.D., 608,478.33(3) JEFFREY L. DREZNER, M.D., PH.D. Ph.D. 10819 Pleasant Hill Potomac, MD 20854 Fax: (301) 299-1124 SIGNATURE PAGE D FORMER MEDSCAPE INVESTOR STOCKHOLDERS SERIES D PREFERRED STOCK NUMBER SIGNATURE ADDRESS FOR NOTICES OF SHARES --------- ------------------- --------- CSK VENTURE CAPITAL CO., LTD. Kenji Suzuki 71,105 AS INVESTMENT MANAGER FOR CSK Corporation CSK-1(B) INVESTMENT FUND Kenchikukaikan, 7F 5-26-20 Shiba, Minato-Ku Tokyo 108-0014 JAPAN By:_______________________________ Fax: 011-81-3-3457-7070 Its: Managing Director Printed Name: Kinya Nakagome CSK VENTURE CAPITAL CO., LTD. Kenji Suzuki 71,105 AS INVESTMENT MANAGER FOR CSK Corporation CSK-2 INVESTMENT FUND Kenchikukaikan, 7F 5-26-20 Shiba, Minato-Ku Tokyo 108-0014 JAPAN By:_______________________________ Fax: 011-81-3-3457-7070 Its: Managing Director Printed Name: Kinya Nakagome CSK VENTURE CAPITAL CO., LTD. Kenji Suzuki 71,102.5 AS INVESTMENT MANAGER FOR CSK Corporation CSK-1(A) INVESTMENT FUND Kenchikukaikan, 7F 5-26-20 Shiba, Minato-Ku Tokyo 108-0014 JAPAN By:_______________________________ Fax: 011-81-3-3457-7070 Its: Managing Director Printed Name: Kinya Nakagome HEARST COMMUNICATIONS, INC. Kenneth Bronfin 213,312.5 Hearst Communications, Inc. 959 8th Avenue, Suite 257 By:_______________________________ New York, NY 10019 Its: Senior Vice President Fax: (212) 582-7739 Printed Name: Kenneth A. Bronfin SIGNATURE PAGE D FORMER MEDSCAPE INVESTOR STOCKHOLDERS SERIES D PREFERRED STOCK (Cont'd) WORMSER FRERES Marcel Wormser 127,987.5 Wormser Freres Banque D'Escompte By:_______________________________ 13 Boulevard Hausssman Its: Administrator, Wormser Freres, Paris 75009 Paris, FRANCE Printed Name: Marcel Wormser Fax: 011-33-1-45233752 MEDIA TECHNOLOGY VENTURES, Barry Weinman 188,920 L.P. Media Technology Ventures, L.P. One First Street, Suite 2 By:_______________________________ Los Altos, CA 94022 Its: Managing Member of the General Partner Fax: (650) 949-8510 Printed Name: Barry M. Weinman MEDIA TECHNOLOGY VENTURES, Barry Weinman 24,392.5 ENTREPRENEURS FUND, L.P. Media Technology Ventures, L.P. One First Street, Suite 2 By:_______________________________ Los Altos, CA 94022 Its: Managing Member of the General Partner Fax: (650) 949-8510 Printed Name: Barry M. Weinman
SIGNATURE PAGE D FORMER MEDSCAPE INVESTOR STOCKHOLDERS SERIES D PREFERRED STOCK (Cont'd) APA EXCELSIOR IV, L.P. Alan J. Patricof 178,412.5 Patricof & Co. Ventures, Inc. By: APA EXCELSIOR IV PARTNERS, 445 Park Avenue L.P., its General Partner New York, NY 10022 Fax: (212) 319-6155 By: PATRICOF & CO. MANAGERS, INC., its General Partner By:_______________________________ Its: Chairman Printed Name: Alan J. Patricof COUTTS & CO. (CAYMAN) LTD., c/o Alan J. Patricof 31,487.5 APA EXCELSIOR IV/OFFSHORE, L.P. Patricof & Co. Ventures, Inc. 445 Park Avenue By: PATRICOF & CO. VENTURES, New York, NY 10022 INC., its Investment Advisor Fax: (212) 319-6155 By:_______________________________ Its: Chairman Printed Name: Alan J. Patricof PATRICOF PRIVATE INVESTMENT Alan J. Patricof 3,412.5 CLUB, L.P. Patricof & Co. Ventures, Inc. 445 Park Avenue By: APA EXCELSIOR IV PARTNERS, New York, NY 10022 L.P., its General Partner Fax: (212) 319-6155 By: PATRICOF & CO. MANAGERS, INC., its General Partner By:_______________________________ Its: Chairman Printed Name: Alan J. Patricof SIGNATURE PAGE D FORMER MEDSCAPE INVESTOR STOCKHOLDERS SERIES D PREFERRED STOCK (Cont'd) WESTON PRESIDIO CAPITAL II, L.P. Carlo A. von Schroeter 639,932.5 Weston Presidio Capital By: WESTON PRESIDIO CAPITAL One Federal Street, 21st Floor MANAGEMENT II, LP, its General Boston, MA 02110-2004 Partner Fax: (617) 988-2515 By:_______________________________ Its:______________________________ Printed Name:_____________________ WESTON PRESIDIO CAPITAL III, Carlo A. von Schroeter 1,015,980 L.P. Weston Presidio Capital One Federal Street, 21st Floor By: WESTON PRESIDIO CAPITAL Boston, MA 02110-2004 MANAGEMENT III, LLC, its General Fax: (617) 988-2515 Partner By:_______________________________ Its:______________________________ Printed Name:_____________________ WPC ENTREPRENEUR FUND, L.P. Carlo A. von Schroeter 50,572.5 Weston Presidio Capital By: WESTON PRESIDIO CAPITAL One Federal Street, 21st Floor MANAGEMENT III, LLC, its General Boston, MA 02110-2004 Partner Fax: (617) 988-2515 By:_______________________________ Its:______________________________ Printed Name:_____________________
SIGNATURE PAGE D FORMER MEDSCAPE INVESTOR STOCKHOLDERS SERIES D PREFERRED STOCK (Cont'd) HIGHLAND ENTREPRENEURS' Wycliffe K. Grousbeck 1,638,225 FUNDS IV, LIMITED PARTNERSHIP Highland Capital Partners Two International Place By: HIGHLAND MANAGEMENT 22nd Floor PARTNERS IV LLC, its General Partner Boston, MA 02110 Fax: (617) 531-1550 By:_______________________________ Its: Member Printed Name:_____________________ HIGHLAND ENTREPRENEUR' Wycliffe K. Grousbeck 68,260 FUNDS IV, LIMITED PARTNERSHIP Highland Capital Partners Two International Place 22nd Floor By: HIGHLAND ENTREPRENEURS' Boston, MA 02110 FUND IV LLC, its General Partner Fax: (617) 531-1550 By:_______________________________ Its: Member Printed Name:_____________________
SIGNATURE PAGE E FORMER MEDSCAPE INVESTOR STOCKHOLDERS SERIES E PREFERRED STOCK
NUMBER OF SIGNATURE ADDRESS FOR NOTICES SHARES --------- ------------------- ------ NATIONAL DATA CORPORATION Walter M. Hoff 2,193,750(1) National Data Corporation Natioanl Data Plaza By:______________________________ Atlanta, GA 30329 Its:_____________________________ Fax: (404) 728-2988 Printed Name:____________________ LAZARD FRERES & CO. LLC Stephen H. Sands 56,250(2) Managing Director Lazard Freres & Co., LLC By:______________________________ 30 Rockefeller Plaza Its:_____________________________ New York, NY 10020 Printed Name:____________________ Fax: (212) 332-8365
- -------- (1) Includes 975,000 shares of common stock into which Class A Common Stock converted on a one-for-one basis (2) Includes 25,000 shares of common stock into which Class A Common Stock converted on a one-for-one-basis SIGNATURE PAGE F FORMER MEDSCAPE EXISTING STOCKHOLDERS SERIES A PREFERRED STOCK
NUMBER OF SIGNATURE ADDRESS FOR NOTICES SHARES --------- ------------------- ------ APA EXCELSIOR FUND I Alan J. Patricof 1,970,500 Patricof & Co. Ventures, Inc. 445 Park Avenue By:_______________________________ New York, NY 10022 Its:_______________________________ Fax: (212) 319-6155 Printed Name: Alan J. Patricof CLASS A COMMON STOCKHOLDER Peter M. Frishauf 1,079,000 ________________________ Medscape, Inc. PETER M. FRISHAUF 134 West 29th Street New York, NY 10001 Fax: (212) 760-3141
SIGNATURE PAGE G FOR CBS AND AOL
NUMBER OF SIGNATURE ADDRESS FOR NOTICES SHARES --------- ------------------- ------ CBS CORPORATION Fredric G. Reynolds 13,938,368 CBS Corporation 51 West 52nd Street By:_______________________________ New York, NY 10019 Its:_______________________________ Fax: (212) 975-9191 Printed Name: Fredric G. Reynolds AMERICA ONLINE, INC. Doug S. Phillips 2,704,316 America Online, Inc. 22000 AOL Way By:_______________________________ Dulles, VA 20166 Its:_______________________________ Fax: (703) 265-2208 Printed Name:
SIGNATURE PAGE H FORMER MEDSCAPE INVESTOR STOCKHOLDER WITH RIGHTS UNDER SECTION 13 OF THE 1999 MEDSCAPE AGREEMENT
NUMBER OF SIGNATURE ADDRESS FOR NOTICES SHARES --------- ------------------- ------ _______________________________ Jeffrey L. Drezner, M.D., 608,478.33(3) JEFFREY L. DREZNER, M.D., PH.D. Ph.D. 10819 Pleasant Hill Potomac, MD 20854 Fax: (301) 299-1124
- ---------- (3) Excludes 1,216,956.66 restricted shares which have not yet vested. EX-27.1 5 ex-27_1.txt EX-27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDICALOGIC/MEDSCAPE'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 38,899 61,675 17,371 0 0 132,420 47,411 (12,677) 1,192,414 59,186 0 0 0 1,255,467 (135,228) 1,192,414 10,889 10,889 8,692 8,692 83,030 0 128 (78,870) 0 (78,870) 0 0 0 (78,870) (1.85) (1.85)
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