10-K

QuickLinks -- Click here to rapidly navigate through this document

File Number: 000-28285

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

/x/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 (State or other jurisdiction of incorporation or organization)	93-0890696 (I.R.S. Employer Identification No.)
20500 NW EVERGREEN PARKWAY, HILLSBORO, OREGON (Address of principal executive offices)	97124 (Zip Code)

Registrant's telephone number, including area code: (503) 531-7000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share

   Indicate by check mark 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 preceding 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 / /

   Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

   The aggregate market value of the registrant's common stock held by nonaffiliates as of February 27, 2001 was approximately $131,517,000.

   The number of shares outstanding of the registrant's common stock as of February 27, 2001 was 56,203,054.

DOCUMENTS INCORPORATED BY REFERENCE

   Portions of MedicaLogic/Medscape, Inc.'s Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K. The Definitive Proxy Statement will be filed within 120 days of December 31, 2000, the year end date of the fiscal year covered by this Annual Report on Form 10-K.

MedicaLogic/Medscape, Inc.

Annual Report on Form 10-K

Table of Contents

		Page
Part I
Item 1.	Business	3
Item 2.	Properties	17
Item 3.	Legal Proceedings	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 4A.	Executive Officers of the Registrant	18
Part II.
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	21
Item 6.	Selected Financial Data	22
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operation	22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 8.	Financial Statements and Supplementary Data	41
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	71
Part III.
Item 10.	Directors and Executive Officers of the Registrant	72
Item 11.	Executive Compensation	72
Item 12.	Security Ownership of Certain Beneficial Owners and Management	72
Item 13.	Certain Relationships and Related Transactions	72
Part IV.
Item 14.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	73
	Signatures	76

2

PART I

ITEM 1. BUSINESS

General

    MedicaLogic/Medscape, Inc. d.b.a. Medscape (together with its subsidiaries "Medscape" or the "Company") is a leading provider of digital health record systems and information to the healthcare industry. Medscape develops digital health record applications that are designed to improve healthcare through the timely delivery of clinical data and information to healthcare professionals and consumers. The Company also provides online health information including medical news, articles, and conference coverage through its Internet portals, Medscape.com and CBSHealthWatch.com. Medscape's products and services are designed to enhance and improve the quality, cost, efficiency, safety and outcome of healthcare.

    The Company engages in and derives substantially all of its revenues from three operating segments, Digital Health Record (DHR) applications, Internet Portals and Transcription Services.

    Medscape's DHR applications replace or augment the paper medical record, provide decision support and facilitate the flow of clinical information necessary for patient care, potentially increasing both efficiency and safety. As of December 31, 2000, Medscape DHR systems housed digital records for more than 17.2 million patients. The DHR application derives revenues from software licenses, monthly service subscriptions and support and consulting fees. Major customers include academic medical centers such as Baylor College of Medicine, integrated healthcare delivery networks such as Providence Health System in Portland, Oregon, and the NASA space shuttle program and the International Space Station program.

    Medscape's Internet portals include Medscape.com and CBSHealthWatch.com. Through Medscape.com, the Company provides up-to-date medical news, articles, and conference coverage as well as accredited continuing professional education programs. As of December 31, 2000, more than 560,000 physicians and 1.6 million allied healthcare professionals worldwide had registered at Medscape.com, and during the year 2000 more than 100,000 hours of accredited continuing professional education were delivered via the site. Through CBSHealthWatch.com, the Company provides health information tailored to the healthcare consumer's perspective. CBSHealthWatch.com is the exclusive Internet healthcare site integrated into CBS News programming and is promoted on certain Viacom, Inc. media properties, including CBS. The Internet portal line of business derives revenue from advertising and sponsorship.

    Medscape's transcription services is a Web-based medical transcription system that digitizes and transports voice across dedicated circuits and the Internet, and connects physicians with their medical records stored in Medscape's clinical database. The transcription services derives revenues from monthly subscription service fees. Selected financial information relating to the Company's operating segments is contained in Note 10 of the Notes to Consolidated Financial Statements.

    The Company is developing a new integrated offering called Digital Healthcare Partnerships that will combine a number of the Company's products and services, and also create reports and data produced from Medscape's DHR products and Internet portals. These reports will provide only aggregated, de-identified statistical information about substantial populations in order to protect the privacy of individuals' health information. Digital Healthcare Partnerships will focus on the education of physicians and patients about new treatments, on improved safety and appropriateness of prescribing, on recruitment of patients for clinical research trials, or on other matters. The Company recently announced its first two Digital Healthcare Partnerships with GlaxoSmithKline, the world's largest pharmaceutical company, and with General Motors Corporation, the nation's largest private purchaser of healthcare services.

3

    The Company's strategy is to provide a wide array of products and services that can be embraced by healthcare professionals and consumers at various levels of technical sophistication, and to encourage users who have experienced the benefits of Medscape's Internet portals to progressively adopt the Company's increasingly comprehensive clinical applications in manageable steps of complexity and functionality. The rapid post-launch adoption of the Company's Medscape Mobile product is a recent example of this strategy in practice. Another aspect of the Company's strategy is to integrate the information contained in and allow communication between its various products. For example, AboutMyHealth, a Web-based offering for consumers, allows patients to view their physician-created DHR online as well as to communicate with their doctor's office to request prescription refills, make appointments or ask questions. As another example, in certain portions of the Company's DHR applications, the user can, with a single click, jump from a patient's diagnosis or medication directly to current Medscape.com news and articles on that specific topic.

    The Company was incorporated in Oregon in May 1985 as MedicaLogic, Inc. The Company's name was changed to MedicaLogic/Medscape, Inc. in May 2000. Since September 2000, the Company has done business under the trade name Medscape. The Company expanded its products and services in 2000 as a result of its strategic merger with Medscape, Inc. ("Medscape, Inc."), and the acquisitions of Total eMed, Inc. ("Total eMed") and AnywhereMD.com, Inc. ("AnywhereMD.com"). These strategic mergers and acquisitions added the following assets, respectively: leading Internet healthcare portals, Web-based transcription capability for the creation of digital health records, and wireless prescribing technology for the Palm O/S^TM platform

PRODUCTS AND SERVICES

DIGITAL HEALTH RECORD APPLICATIONS

    The primary target markets for the Company's DHR applications consist of healthcare providers and healthcare consumers. The Company's DHR applications include the Medscape Charts suite, Logician by Medscape, Medscape Mobile for healthcare providers and AboutMyHealth for healthcare consumers.

Medscape Charts Suite

    The Medscape Charts suite is comprised of low-cost, Web-enabled applications that work within existing paper-based clinical workflows to help manage costs and potentially improve the quality and efficiency of healthcare services. The Medscape Charts suite includes:

Medscape Encounter

    Medscape Encounter (formerly "Logician Internet") is a Web-enabled application that eliminates additional effort for the physician to create Health Care Finance Administration (HCFA) compliant chart notes of patient encounters as well as automatically maintaining a summary of key patient data to aid clinical decision making. Medscape Encounter enables physicians to:

•

Document patient encounters quickly and efficiently.



•

Store encrypted charts in Medscape's data center and access them from any computer with a Web browser.



•

Verify compliance with HCFA documentation guidelines for the level of service billed, improving coding accuracy to assist caregivers in receiving correct reimbursement for work provided to patients.



•

Create and share legible, consistent chart notes to streamline communications with staff and other physicians.

4

•

Document encounters and access patient-specific information at the point of care in the exam room, without requiring a continuous Internet connection.



•

Print a legible paper prescription.



•

Provide patients with access to their current chart summary via Medscape's AboutMyHealth.com portal.



•

Use audit-tracking features, record accesses and changes to all patient charts in support of HIPAA requirements.

Medscape Chart Room

    Medscape Chart Room provides storage of patient charts utilizing technologies that are supportive of HIPAA regulations. The Chart Room allows physicians and authorized staff access to key clinical data from any Web browser, subject to correct user authentication. Compared to a paper-based system, this improves the availability of data to support clinical decision-making and has the potential to reduce medical errors.

    The Web-hosted chart room is a key aspect of Medscape Charts. With Medscape Encounter, charts and chart notes are created on the physician's computer and then can be printed for use in paper charts. At the physician's convenience, he or she then connects to the Internet to store the encrypted chart notes in a central database at Medscape's data center. To keep the information safe during transmission and in storage, Medscape uses technology similar to that used by banks and financial institutions to secure online financial transactions. This state-of-the-art technology provides strong levels of security during communications between the user's computer and the data center at Medscape. The data is backed up regularly to minimize the risk of loss in case of a computer system failure. Once stored, charts are accessible from any connection to the Internet with the authorized member name and password.

Medscape Practice Profiles

    Medscape Practice Profiles is a series of tools for providing interactive analysis on a particular patient population to better understand care trends, analyze adherence to nationally approved care guidelines, and access authoritative content and medical literature relating to the problems being treated or medications being used. Practice Profiles provides a collection of automated, interactive reports to help improve patient management.

    With Practice Profiles physicians can:

•

Analyze patient populations by disease, medication, service level and demographics.



•

Respond to clinical alerts and drug recalls.



•

Evaluate practice productivity.



•

Link to Web resources on medications, diseases and treatment guidelines.

    Practice Profiles enables physicians to assess their own clinical practices and has the potential to improve the overall quality and efficiency of the healthcare provided.

    Currently, Medscape is developing future releases for applications within the Medscape Charts suite including electronic submission of laboratory orders and receipt of results, electronic receipt, signature, and filing of transcription and external documents, and facilitation of the private exchange of messages, documentation, and patient data among a team of healthcare providers in support of an episode of patient care.

5

Logician by Medscape

    Logician by Medscape is a client-server based electronic medical record application for healthcare practices. This application has the potential to allow healthcare practices to gain efficiencies in clinical care and practice improvement through automated workflows and online access to all clinical information. It is available under both perpetual license and subscription models, and may be deployed as a locally hosted application or under an application service provider (ASP) model. Due to the need for a significant investment in computer infrastructure and office re-engineering, adoption of Logician by Medscape has been largely focused among integrated healthcare delivery systems and large group practices having an existing Information Systems infrastructure.

    From 1990 to 1995, the Company developed first-generation DHR applications for the PC-DOS environment. In 1996, the Company released Logician by Medscape for the Windows client-server environment and subsequently delivered several major upgrade releases including version 5.4, released in 2000, that incorporates enhancements related to clinical content, security data import/export, encounter form editing and Web accessibility. The Company's current customers for this class of products include Baylor College of Medicine, Memorial-Hermann Hospital System, MeritCare Health System, the NASA Space Shuttle program and the International Space Station Program, Providence Health System, Riverside Health System, Texas Children's Hospital, Wake Forest University, Baptist Medical Center and more than 50 others.

    Logician by Medscape provides the following benefits:

•

Clinical decision support, including preventive care reminders, drug interaction, allergy checking and formulary management.



•

Improved ability to measure and manage patient populations using query, reporting and intervention tools.



•

Creation of required documentation using technologies that may help avoid cost and quality problems with traditional documentation methods.



•

Ability to verify compliance with Health Care Financing Administration documentation guidelines for the level of service billed.



•

Strong user community that shares downloadable customized clinical content and best of practices with all Logician by Medscape users.



•

Optional, integrated ability for providers and patients to communicate via private messaging.



•

Implementation, training, and support services to help customers get the most from their investment.

    Medscape continues to develop and deploy ambulatory electronic medical record applications and enhancements for group practices and integrated delivery networks. The Company believes the availability of an ASP model will encourage further adoption of Logician by Medscape by enabling healthcare organizations to reduce up front costs and ease reliance on their internal IT resources.

    Looking forward, Medscape is currently developing Logician by Medscape 5.5. A key objective for this release is to enhance connectivity between Logician by Medscape and Medscape Charts by supporting the exchange of patient records between enterprises and referring physicians. Medscape plans to also make changes to assist physicians with adhering to the new HIPAA regulations designed to further protect patient privacy and confidentiality. It is Medscape's expectation that these efforts will significantly benefit both current and new Logician by Medscape customers, further driving adoption of Medscape's DHR applications.

6

Logician ASP by Medscape

    In 2000, Medscape began offering an ASP model of Logician by Medscape to help physicians to:

•

Reduce their required initial investment in infrastructure.



•

Lower IT effort and resource requirements.



•

Minimize the need for managing and maintaining technology resources.



•

Achieve more predictable and controllable IS costs.



•

Focus on their core competencies in healthcare.

    Logician ASP by Medscape incorporates all the features of Logician by Medscape while reducing the initial capital for the necessary, but costly, server-side computer systems and associated network support staff.

Medscape Mobile Suite

    Medscape introduced a suite of software applications known as Medscape Mobile for handheld (PDA) devices in September 2000. Medscape Mobile is a suite of applications designed for the Palm™ operating system. These applications give physicians access to patient-specific information and to relevant information for clinical decision-making on an industry leading platform. Medscape Mobile is already in use by over 43,000 physicians. In its initial phase, Medscape Mobile offers exclusive access to the Tarascon ePharmacopoeia™, the electronic version of Tarascon's market-leading portable drug reference, the Pocket Pharmacopoeia®. It also offers the Medscape Reader for Palm-based access to Medscape.com articles and conference coverage and a Medical Calculator that includes over 50 dosing and clinical formulas.

    Future enhancements to Medscape Mobile are expected to include a prescription writer with integral formulary management and drug interaction reference material, and a solution that enables charge capture for physicians when they are away from their office location.

AboutMyHealth.com

    Medscape released AboutMyHealth.com, the first-physician-patient communications tool powered by Medscape's DHR on December 5, 2000 in order to serve the needs of healthcare consumers concerned about their health, or the healthcare of their dependents. Upon mutual consent, AboutMyHealth.com allows patients and their physicians to share information about the patient's personal health and ongoing disease management by using information captured during office examinations or other physician/patient encounters. Patients can electronically contact their physician's office with requests to schedule appointments and refill medications through an encrypted Internet connection. Patients can also communicate with their clinic or physician both during and outside of regular office hours through AboutMyHealth.com's online messaging service. Unlike traditional email connections, AboutMyHealth.com includes authentication technology for both patients and physicians to protect confidentiality. Physicians can communicate with patients privately, provide patients with a summary view of their digital health record, provide contextual links to authoritative health information, news and educational materials through CBSHealthWatch.com. Patients can also use AboutMyHealth.com to store personal and family health information for ongoing health management or future reference.

INTERNET PORTALS

Medscape.com

    Medscape.com is designed primarily for physicians and other healthcare providers. In December 2000, Medscape was recognized for its achievement and excellence at the 2000 eHealthcare

7

World Awards Ceremony in New York. Medscape.com earned the Gold Awards for Best Healthcare Search Engine and Best Healthcare Portal. The site was also listed in Forbes magazine's "Top Ten" healthcare Web sites in February 2001. Through Medscape.com, users can access various subjects, based on their practice or needs from the latest medical news, to medical conference coverage, financial information, and medical texts. In addition, physicians can:

•

Download applications including those in the Medscape Mobile suite.



•

Access their personal chart room to review patients' digital health records.



•

Earn Continuing Medical Education (CME) credits.



•

Join online community activities.



•

Develop their own practice Web sites hosted by Medscape.com.

    Medscape.com offers specialists, primary care physicians, and other health professionals a robust and integrated multi-specialty medical information and education tool. Medscape.com is built around practice-oriented content. Each specialty site pools, filters, and delivers pertinent, regularly updated content from tens of thousands of medical journal articles, expert-authored state-of-the-art surveys in disease management, conference coverage from major medical meetings, and more. All of Medscape.com's articles are Web-enhanced and cross linked for online browsing and smart information retrieval. All of the content can also be easily downloaded and printed for reading offline. Some of Medscape.com's key features include:

•

Conference Coverage—The Company's faculty of "thought leaders" summarize key data and presentations from major medical meetings, showing what is changing the practice of medicine and altering the physician's understanding of disease process.



•

The Internet's first peer-reviewed primary-care medical journal, Medscape General Medicine.



•

One of the Web's largest collections of free, full-text, peer-reviewed clinical medicine articles. Medscape.com's articles are enhanced with:



•

Medscape's Clinical Discussion Forum



•

Smart "hyper-keyword" searches



•

Navigable article outline



•

"Zoomable" graphics



•

Annotated links to Internet resources





•

Clinical Management Modules—state-of-the-art surveys of disease management authored by leading experts that also include CME credits.



•

Integrated Searching—Search Medscape.com's 12 medical databases with a single search entry.



•

Unrestricted free access to MEDLINE and AIDSLINE.



•

Medscape DrugInfo, a search tool co-developed by Medscape, First DataBank, and the American Society of Health-System Pharmacists.



•

Daily professional medical news within each users' specialty.



•

Original self-assessment features.



•

Hundreds of hours of free CME credit.



•

Free subscription to various e-newsletters including Medscape's MedPulse®, a weekly email newsletter that highlights what's new on Medscape.com within each registered user's specialty.

8

    In addition to clinical information resources, Medscape.com offers a suite of professional and practice tools, including:

•

Physician Web Sites—which allows physicians to create office Web sites on Medscape.com.



•

Web Based eMail—for physicians who need to access their email from multiple locations.



•

Money & Medicine—designed to help physicians improve their practice management skills. Also allows users to build a portfolio of medical or other stocks.

    Based on the number of credits awarded in 2000, the Company believes that Medscape.com is one of the world's largest providers of online continuing medical education (CME) programs for healthcare professionals. The site offers a selection of free, regularly updated continuing education activities for physicians, registered nurses, pharmacists and other health professionals. The majority of CME activities have been planned and implemented in accordance with the Essential Areas and Policies of the Accreditation Council for Continuing Medical Education (ACCME), and have been produced in collaboration with ACCME-accredited CME providers. Medscape.com recently began providing instant CME (iCME™) Certificates. Selected Medscape.com CME activities offer instant, printable CME certificates online. In addition, there is now an Instant CME Tracker function. Activities tagged for iCME are automatically entered into the CME Tracker as they are completed for credit, and the certificates are available to be printed as needed from the Medscape.com site.

CBSHealthWatch.com

    In September 1999, Medscape launched its first consumer Web site, CBSHealthWatch.com. CBSHealthWatch.com is designed to help families and individuals make better-informed healthcare decisions and to simplify management of their healthcare needs. The site provides personalized, authoritative medical content written for the consumer, access to professional content on Medscape.com and interactive personal health management tools, such as health diaries. On August 3, 1999, Medscape entered into a strategic relationship with CBS Corporation, (subsequently acquired by Viacom, Inc.) under which CBSHealthWatch.com is the exclusive Internet healthcare site integrated into CBS News programming and is promoted on CBS as well as certain other Viacom media properties. In December 2000, CBSHealthWatch.com was recognized for its achievement and excellence at the 2000 eHealthcare World Awards Ceremony held in New York. CBSHealthWatch.com by Medscape received the Bronze award for Best Healthcare Portal and during February 2001 was also named one of the Top 100 Internet sites by PC Magazine.

TRANSCRIPTION SERVICES

    Medscape Transcription Services is designed to allow physicians to document patient encounters and produce a DHR without manual entry of information into a computer, which allows access to and analysis of information that was previously unavailable due to the inefficiency of storing, in paper format, millions of individual health records.

    Physicians' use of handheld, wireless or phone devices to dictate patient encounters is consistent with their current practice, thus, the adoption of Medscape Transcription Services does not require a change in behavior. The dictation and selected demographic data is downloaded to the Medscape Transcription national data center in Nashville, Tennessee through the use of a virtual private network (VPN). Once the voice and demographic information is compiled, the work is routed via the Internet to home-based medical transcriptionists (MTs) located across the country who are employed and trained by Medscape. After the patient encounter is transcribed, the physician or other healthcare provider can view, edit and electronically sign the record over the Internet in a protected environment with a standard Web browser. The final electronic document can then be e-mailed, faxed or printed onsite, or any combination of these formats, depending on the established workflow patterns of the

9

clinic and physicians. Medscape Transcription Services provides the ability to maintain both digital and paper health records depending on the system used by the physician's practice.

DIGITAL HEALTHCARE PARTNERSHIPS AND OTHER PRODUCTS

    The Company is currently developing Digital Healthcare Partnerships which combine a number of the Company's products and services, and may also be augmented with reports and data produced from its DHR products and Internet portals. Potential Digital Healthcare Partnerships include the following:

Self-insured Employers and Payers—strategies to help customers improve the quality of care, reduce avoidable errors and enhance patient compliance using Medscape's various DHR applications

Clinical research organizations—recruitment of patients for studies through automated screening and notification; Medscape's DHR applications enable physicians to identify patients who are candidates for clinical trials and track their progress through the trial.

Epidemiologic Research—Healthcare organizations, large employers, pharmaceutical companies and government agencies are target markets for aggregated and de-identified data reports about the health of designated populations for epidemiologic research, planning and management.

Pharmaceutical research—adverse event tracking may be enhanced by making use of electronically available data on the use and outcomes of drug therapies.

Educational initiatives—targeted education of consumers and physicians for healthcare-related products or services especially around specific disease states or conditions, tying together Medscape's Internet portals and its DHR applications.

    The Company is also developing applications to provide the ability to conduct clinical transactions from its DHR applications, including the following:

Pharmacy—delivery of new and refill prescription orders from physicians and patients to pharmacies and pharmacy benefit managers.

Laboratory—delivery of orders and return of results to physicians and delivery of physician's interpretation of results to patients.

CUSTOMER SERVICE AND SUPPORT

    Medscape believes effective customer service is essential to attracting and retaining physician usage of the Company's electronic healthcare applications and consumer usage of the Company's Internet-based services. Medscape understands the demands of the healthcare community for person-to-person responsiveness. Medscape provides a wide range of customer support services through a staff of customer service personnel, multiple call centers and an e-mail help desk. The Company also offers Web-based support services that are available outside of normal business hours and are frequently updated to improve existing information and to support new services. The Company's ongoing telephone support is accessible by a toll-free telephone number and is available from either 5 a.m. to 6 p.m. Pacific time, Monday through Friday or, for an additional charge, outside of normal business hours. The Company's operators screen all requests for telephone support and direct the call to the appropriate customer service personnel. Technical support personnel are responsible for consulting with the Company's strategic partners about technical support issues and for resolving technical problems encountered by users, strategic partners or other parties. Medscape also employs technical support personnel who work closely with the Company's direct sales force, distribution partners and customers. Medscape provides its customers with the ability to purchase maintenance for the Company's applications and services, which includes technical support and upgrades. Medscape service and support professionals also provide training programs for the Company's customers.

10

    In addition, the Company provides enterprise planning, site evaluation, work-flow preparation, interface development and installation and training of physicians and their staff in connection with the implementation of Medscape's Logician digital health record application. Enterprise and site evaluations allow Medscape to understand how best to implement the Company's Logician by Medscape application within the physician's enterprise and office work flow environment. The objective of the implementation process is to maximize the benefits of digital health records to the physician's enterprise and practice.

SALES AND MARKETING

    Medscape markets its products and services to an increasingly diversified network of physicians, pharmaceutical companies, large private healthcare consumers, and integrated healthcare delivery networks and healthcare consumers. In 1998, VHA, Inc. accounted for approximately 20% of total revenues. During 1999, Baylor College of Medicine accounted for approximately 16% of total revenues, and Texas Children's Hospital accounted for approximately 13% of total revenues. Due primarily to the expansion and diversification of the Company's customer base, no single customer comprised more than 10% of total revenues during 2000. The Company's current customers also include General Motors Corporation, one of the nation's largest private consumers of healthcare services and GlaxoSmithKline, one of the world's largest pharmaceutical companies. Other major customers include academic medical centers such as Baylor College of Medicine, integrated healthcare delivery networks such as Providence Health System in Portland, Oregon, and the NASA space shuttle program and the International Space Station program.

    The Company's sales and marketing programs are organized around the Company's main customer segments: pharmaceutical companies, integrated healthcare delivery systems, physicians in private practice, self-insured employers and personal healthcare consumers. The Company's products and services are distributed by a nationwide direct sales force, a complementary inside sales team, a select number of strategic distribution partners and directly through the Internet. Medscape also partners with national consulting firms and systems integrators to deliver complete information technology solutions for large system customers.

    Pharmaceutical Companies.  Medscape sells advertising and sponsorships, market research and other services to pharmaceutical companies. Medscape's Internet capabilities and informational resources offer advantages over traditional mail surveys and focus groups in terms of speed and cost savings.

    Private Healthcare Consumers.  Medscape recently began selling to private healthcare consumers. Medscape's technologies may help its partners to achieve improvement in the quality of patient care by reducing medical errors and may lead to reducing healthcare costs.

    Integrated Healthcare Delivery Systems.  Medscape approaches the integrated healthcare delivery system market primarily through direct sales and distribution partners. Medscape believes the Company's access to premier reference accounts plays an important role in the Company's sales process.

    Physicians in Private Practice.  Medscape promotes the Company's products and services to physicians in private practice with programs designed to take advantage of the value of peer-to-peer relationships in the physician community. In contrast to the national image-building campaign required for sales to large health systems, Medscape is building the Company's individual physician sales and marketing campaign around activities that will increase adoption of Medscape Charts. Sales will be offered primarily through online subscription capabilities supported by an inside telephone sales team.

    Personal Healthcare Consumers.  Medscape believes marketing programs for personal healthcare consumers are likely to be more successful when they are supported by the existing relationship

11

between the physician or local health system and their patients. Medscape believes the Company's launch of AboutMyHealth.com will contribute to that relationship and related marketing efforts.

    Medscape's sales, marketing and business development resources are located at the Company's facilities in Oregon, New York, and Tennessee, while the Company's account representatives are deployed throughout the United States.

STRATEGIC RELATIONSHIPS

    Medscape forms strategic alliances where the relationship affords Medscape an opportunity to advance and accelerate the development of new markets, to develop new products and services, and to enhance existing products and services. The objectives and goals for a strategic alliance can also include technology exchange and joint sales and marketing. Certain of our strategic alliances are listed below:

    General Motors Corporation.  General Motors Corporation (GM), the world's largest vehicle manufacturer, designs, builds and markets cars and trucks worldwide. GM is also the United States' largest private purchaser of healthcare. In January 2001, GM and Medscape entered into an e-business healthcare alliance. In accordance with the agreement, GM will sponsor the use of certain of Medscape's computer-based technologies to facilitate improvement in the quality of patient care by reducing medical errors while lowering healthcare costs for GM. Under the alliance, GM and Medscape will cooperate on a three-year program to encourage U.S. physicians to use hand-held computer devices which use applications from the Medscape Mobile suite of products for prescriptions and to adopt Medscape's digital health record application Medscape Logician ASP. As part of the strategic alliance, GM received warrants for 5 million shares of Medscape common stock. GM and Medscape will also share in the cost savings realized by GM primarily from physician usage of Medscape Mobile applications.

    Viacom, Inc.  Viacom, Inc. is a leader in the creation, promotion, and distribution of entertainment, news, sports, and music. In July 1999, the Company and CBS Corporation, which subsequently merged with Viacom, Inc., entered into an agreement under which the Company will receive approximately $150 million in advertising and promotion in the United States over a seven-year period. Medscape also was granted a license to the "CBS" trademark and "Eye" design and selected health-related news content. As part of this strategic relationship, Medscape provides some healthcare-related content to CBS radio and television news broadcasts as well as certain other Viacom media properties. Additionally, CBSHealthWatch.com is the exclusive healthcare Internet site integrated into CBS News programming.

    VHA, Inc.  A nationwide network of more than 1,750 leading community-owned healthcare organizations and their physicians, the VHA network comprises approximately 24% of U.S. community hospitals, with over 175,000 physicians. Logician by Medscape is a core application of VHA's Physician Linkage strategy, developed by VHA Information Services to provide physician practices with electronic access to patient information and clinical decision-support tools.

COMPETITION

Digital Health Record and Transcription Competitors

    High growth, intense competition, and technological change characterize the market for electronic healthcare information services and e-commerce. Medscape faces competition from many companies with significantly greater financial resources, well-established brand names and large installed customer bases. Medscape expects significant competition from:

    Traditional Healthcare Information System Vendors.  These vendors, including Cerner Corporation, Epic Systems Corporation, IDX Corporation, McKesson/HBOC, Medic, a division of Misys PLC, Shared Medical Systems Corporation, CyBear, Inc., Eclipsys Corp., QuadraMed Corp, and

12

MedPlus, Inc. focus on providing information systems to large healthcare enterprises and physician practice groups. They have large installed bases of customers and generally offer solutions to a broad range of customer problems.

    Vendors with PDA-based Solutions.  The rapid adoption of PDA handheld devices (notably using the Palm operating system or the Pocket PC platforms) has given credence to a new generation of vendors providing applications that run on those platforms. While many of the proposed business models remain unproven, the high relative penetration of handheld devices suggests that any vendor who achieves success in this market has the opportunity to achieve a significant foothold. Potential competitors in this category include AllScripts, ePocrates, ePhysician, iScribe, Parkstone, and others.

    Other Healthcare Information System Consolidators or Disintermediators.  The availability of Web-based consolidators and the transition of the healthcare supply chain economics to the Internet have paved the way for other vendors to play the role of either strongly complementary partners or formidable competitors. These could include any of the service suppliers seeking to maintain control of the supply chain such as the national labs (LabCorp, Quest), the Pharmacy Benefit Management companies (Merck-Medco, ExpressScripts, AdvancePCS), business consolidators such as WebMD, Medem, or Healthvision or major players in the supply chain network such as NDC, Envoy, or others. The Company also expects significant competition from transcription service vendors including MedQuist, EdiX, HealthScribe, Lernout & Hauspie (L&H) and Capital MT.

    Also, Internet healthcare companies are focusing on a wide variety of areas including automating financial, administrative and clinical transactions, such as WebMD and Iscribe; attracting physicians and other health professionals with clinical content, tools and medical education, such as Mediconsult, Healthgate, theheart.org and Healthstream; targeting the consumer health area, including drkoop.com, iVillage and HealthCentral for content as well as online pharmacies such as Drugstore.com, Inc.

    Each of these companies can be expected to compete with the Company within segments of the evolving Internet healthcare market. Major Internet companies, including those not currently specializing in the healthcare industry, may also enter the Company's markets. Certain of these companies may have longer operating histories, larger customer bases, substantially greater financial, technical, sales and marketing resources and greater name recognition than Medscape does and the Company may not be able to compete successfully against these companies.

Internet Portal Competitors

    The Company faces competition both in attracting visitor traffic and in generating revenue across all its business lines. Medscape competes with numerous companies and organizations for the attention of medical professionals and consumers including traditional off-line media such as print journals, conferences, continuing medical education programs and symposia. Medscape also faces significant competition from online information resources. There are many healthcare-related Web sites available on the Internet. Also, several large consumer sites offer specialized healthcare channels as part of their general services. In addition, there are many companies that provide non-Internet based marketing and advertising services to the healthcare industry. These competitors include advertising agencies, consulting firms, marketing and communications companies and contract sales and marketing organizations.

    Some of the Company's current and potential competitors may have competitive advantages compared to Medscape, including:

•

Greater resources to devote to the development, promotion and sale of their services.



•

Greater financial, technical and marketing resources.



•

Greater brand recognition.

13

•

Larger customer and user bases.

    The Company believes that the principal competitive factors in attracting and retaining members are the depth, breadth and timeliness of services and brand recognition. Other important factors in attracting and retaining members include ease of use, quality of service and cost. Medscape believes that the principal competitive factors that will continue to attract advertisers and sponsors to Medscape.com and its consumer sites include price, the number of medical professionals and consumers who use Medscape's Web sites, the demographics of its member base and the creative implementation of advertisement placements.

    Competition is likely to increase as new companies enter the market and current competitors expand their services. There can be no assurance that Medscape will be able to compete successfully against current and future competitors or that the competitive pressures Medscape faces will not seriously harm its business.

TECHNOLOGY

Digital Health Record Applications

    The Company's DHR applications use a fault tolerant configuration of Web, application and database server computers interconnected through redundant, high speed network components at Medscape's third-party data center. The data center incorporates various technologies to protect the transmission of sensitive and confidential patient medical record data over the Internet. These include authentication, data encryption techniques, network firewalls, personnel policies, controlled physical access to the data centers and security audits of those sites. The Company's services are linked to systems that provide data protection through techniques such as replication. Medscape requires on-site backup power systems in the data center and intends to install similar facilities in any of the Company's back-up data centers. These safeguards are designed to provide a reliable and protected environment for the storage and exchange of confidential patient and customer data. Although Medscape believes the Company's facilities are resistant to systems failure and sabotage, Medscape is in the process of further developing and implementing disaster recovery and contingency operation plans.

    The Company's Logician by Medscape product line runs on Oracle Corporation's database products. Medscape licenses these databases from Oracle under an Oracle alliance agreement. As an alliance member, Medscape has been given the right to sublicense the database software to the Company's customers.

Internet Portals

    Medscape's Internet portals are supported by reliable and expandable system platforms. Using a combination of proprietary online solutions and commercially available licensed technologies, the Company has deployed systems for online content dissemination, site analysis, and web and email based member support.

    The Company has developed a database management and online publication system to index, retrieve and display information. This system allows for rapid searching, viewing and distribution of content including text, photos, graphics and other images. The Company's hardware and software systems are based on a distributed processing model that allows applications to be distributed among multiple parallel servers. The Company's hardware servers, storage systems, Internet connections and networks are designed to allow its online systems to operate 24 hours a day and seven days a week.

    The Company maintains offsite redundant systems and facilities and has outsourced its Web-hosting operations to a third party facility, Exodus Communications. The Company undertook this outsourcing to help provide faster and more reliable connections to the Internet and enhanced reliability and expandability.

14

Transcription Services

    The Company's transcription and voice capture applications use a fault tolerant configuration of Web, application and database servers interconnected through redundant, high speed network components at Medscape's data center in Nashville. The data center incorporates various technologies to protect the transmission of highly sensitive and confidential patient medical record data over the Internet. These include authentication, network firewalls, personnel policies, controlled physical access to the data center and security audits. All mission critical servers and their data are protected via both hardware and software backup. Medscape has installed onsite backup power systems in the data center. These safeguards are designed to provide a reliable and protected environment for the storage and exchange of confidential patient and customer data. Although Medscape believes its facilities are resistant to systems failure and sabotage, the Company is in the process of further developing and implementing disaster recovery and contingency operation plans.

DEVELOPMENT AND ENGINEERING

    Medscape believes the Company's future success will depend on its ability to continue to maintain and enhance the Company's Internet portals, DHR software applications and other services. Medscape has developed applications and services in-house and through acquisitions. Medscape intends to continue to work closely with other strategic partners in certain developmental efforts.

    Medscape has several significant projects currently in development. These include the continued enhancement of Logician by Medscape and Medscape Charts product lines, its Internet portals Medscape.com, CBSHealthWatch.com, and AboutMyHealth.com., and the introduction of new product lines such as those within the Medscape Mobile suite. All of these product lines require the development of interfaces with a variety of strategic clinical information partners.

    Rapid technological developments and evolving industry standards characterize the emerging market for Internet-based business models, digital health records and associated transaction processing. The emerging nature of this market and its rapid evolution will require that Medscape continually improve the performance, features and reliability of its products and services in response to competing offerings.

    Medscape seeks to use when possible the most effective and innovative technologies. The success of new product and service introductions is dependent on several factors, including: proper definition of new applications or services; appropriate staffing of expertise on the particular assignment; timely completion and introduction of new products and services; and differentiation of new products and services from those of Medscape's competitors.

GOVERNMENT REGULATION AND HEALTHCARE REFORM

    The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement practices and operation of healthcare organizations. Proposals to reform the U.S. healthcare system have been and will continue to be considered by the U.S. Congress. These programs may contain proposals to increase or decrease government involvement in healthcare or change the operating environment for the Company's potential customers. Healthcare organizations may react to these proposals and the uncertainty surrounding these proposals by curtailing or deferring investments, including those for the Company's products and services. On the other hand, changes in the regulatory environment have in the past increased and may continue to increase the needs of healthcare organizations for cost-effective information management, which may enhance the marketability of the Company's applications and services. Medscape cannot predict with any certainty what impact, if any, these proposals or healthcare reforms might have on the Company's business, financial condition and results of operations.

15

    A final rule promulgated pursuant to the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") in December 2000 regulates the use and disclosure of individually identifiable information in any form, whether written, oral or electronic, by health plans, providers and clearinghouses. Under certain circumstances, HIPAA requires patient consent from health plans, health care providers, and clearing houses prior to the disclosure of protected identifiable health information. HIPAA also establishes rules about individuals' rights to access or amend their own or someone else's medical information, and to receive written notice of information practices, including uses of such information by health plans, providers and clearinghouses. Such organizations, as well as the associates they do business with, will need to establish procedures and systems that will help achieve this and to accommodate individuals' requests. HIPAA and various state laws, in relation to the concern about patient record confidentiality, require holders of medical records to implement security and other necessary measures, which may prove to be expensive and restrict health care providers from utilizing our products for the transmission of medical records. Final HIPAA regulations on the topic of security for health information are expected in the near future.

    Because of its relationships with organizations covered by the HIPAA privacy regulations, Medscape will need to provide contractual assurances to those organizations that Medscape's products and services are consistent with applicable requirements of the regulations. Although the regulations themselves will not become effective until early 2003, the Company is already receiving inquiries from customers about HIPAA compliance. Medscape's Digital Health Record products already contain many features that can assist customers in achieving HIPAA compliance. The Company intends for all its products and services to meet applicable HIPAA requirements by the time those regulations become effective.

    The United States Food and Drug Administration is responsible for assuring the safety and effectiveness of medical devices under the federal Food, Drug and Cosmetic Act. Computer applications and software are considered medical devices and subject to regulation by the FDA when they are indicated, labeled or intended to be used in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease, or are intended to affect the structure or function of the body. The Company does not believe that any of our current applications or services are subject to FDA jurisdiction or regulation; however, the Company plans to expand its application and service offerings into the areas that may subject the Company to FDA regulation. Any compliance with FDA regulations could prove to be time consuming, burdensome and expensive, which could have a material adverse effect on the Company's ability to introduce new applications or services in a timely manner.

    The confidentiality of patient records and the circumstances under which records may be released for inclusion in Medscape's databases are subject to state and federal laws. These laws require holders of medical records to implement security measures that may require substantial expenditures by the Company or materially restrict the ability of healthcare providers to submit information from patient records using Medscape's applications.

    In addition to existing state and federal laws and the HIPAA regulations, the United States or any state may adopt legislation to attempt to protect the privacy of medical records or healthcare information. Any legislation addressing these issues could affect the way in which Medscape is allowed to conduct business, especially those aspects that involve the collection or use of personal information, and could have a material adverse effect on the Company's business, financial condition and results of operations. Moreover, it may take years to determine the extent to which existing laws governing issues such as property ownership, libel, negligence and personal privacy are applicable to the Internet.

    Outside the United States, regulations concerning the Internet, privacy and transborder data flows are considerably more developed than regulations in the U.S. Medscape has developed some applications and services to be used on a worldwide basis and, consequently, may be required to comply with international regulations concerning the Internet and e-commerce, as well as with U.S.

16

regulations. Medscape is not certain of the immediate effect these regulations will have on the Company's business. These regulations also may have an adverse effect on Medscape's ability to compete internationally.

    The tax treatment of the Internet and e-commerce is currently unsettled. A number of proposals have been made at the federal, state and local level and by some foreign governments that could impose taxes on the sale of goods and services and some other Internet activities. A recently passed law places a temporary moratorium on specific types of taxation on e-commerce. Medscape cannot predict the effect of current attempts at taxing or regulating commerce over the Internet. Any legislation that substantially impairs the growth of e-commerce could have a material adverse effect on the Company's business, financial condition and results of operations.

INTELLECTUAL PROPERTY RIGHTS

    Medscape protects its intellectual property rights through a combination of license agreements, trademark, service mark, trade secret and copyright law, and contractual restrictions. The Company has been issued a number of trademarks and service marks by U.S. and foreign governmental authorities. The Company has applied for the registration of other trademarks, service marks, and patents in the U.S. and internationally. Medscape also holds a number of domain names and has applications for numerous domain names pending. Medscape seeks to protect its source code for its software, documentation and other written materials under trade secret and copyright laws. Medscape licenses its software under signed license agreements, which impose restrictions on the licensee's ability to utilize the software. The Company also enters into confidentiality agreements with employees, consultants, and other third parties and generally seeks to control access to and distribution of technology, documentation and other proprietary information.

    Medscape intends to remain dedicated to industry standards and to take steps to protect proprietary rights. Despite Medscape's efforts, there can be no assurance that intellectual property and other proprietary rights will be free from infringement by third parties. In addition, the global nature of the Internet makes it impossible to control the ultimate destination of services, and effective copyright and trademark protection may be unenforceable or limited in foreign countries.

EMPLOYEES

    As of December 31, 2000, Medscape employed approximately 1,030 persons, of whom there were approximately 430 in sales, general, and administrative services, 400 in medical transcription, and 200 in technical development and support. None of the Company's employees is a member of a labor union or is covered by a collective bargaining agreement and the Company has never experienced a work stoppage. The Company believes it has good relations with its employees.

Item 2. Properties

    The Company's principal corporate offices are located at sites in Hillsboro, Oregon and New York, New York. The Company's main headquarters are in Hillsboro, Oregon totaling approximately 121,000 square feet of space under leases that expire in December 2007. During October 2000, the Company's New York corporate office was relocated to a facility consisting of approximately 83,000 square feet under two separate leasing agreements. Both agreements are in effect through January 2005 with (5) year renewal options. The Company also leases space for offices in Houston, Texas and Atascadero, California.

    Additionally, the Company leases space for its transcription services in Franklin, TN totaling approximately 26,000 square feet of space under a lease that expires in April 2005. For the transcription services, Medscape also leases a data center located in Nashville, TN totaling 13,729 square feet of space under a lease that expires in August 2003. In addition, Medscape leases space for a regional training center in Minot, North Dakota and a regional office in Altamont, New York.

17

    The Company owns substantially all of the equipment used in its facilities, except a few items held under a capital lease arrangement. The Company believes that its existing properties are in good condition and suitable for the conduct of its business. The Company believes its facilities are adequate for its current operations and that additional leased space can be obtained if needed.

Item 3. 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, Inc. 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 Mr. 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 Network Health Services interfered in any way with the plaintiff's economic relationships and it intends to defend itself vigorously should the case proceed to trial.

    Medscape is not currently subject to any other material legal proceedings.

Item 4. Submissions of Matters to a Vote of Securities Holders

    No matters were submitted to a vote of security holders during the fourth quarter of Medscape's 2000 fiscal year.

Item 4A. Executive Officers of the Registrant

Name	Age	Position
Mark K. Leavitt	50	Chairman
David C. Moffenbeier	49	Chief Executive Officer and President
Kevin D. Hutchinson	37	Chief Operating Officer
Donald A. Bloodworth	44	Executive Vice President and Chief Financial Officer
Mark E. Boulding	40	General Counsel and Executive Vice President, Government and Regulatory Affairs, Secretary
George D. Lundberg	67	Executive Vice President, Editor in Chief
Arthur N. Leibowitz	53	Executive Vice President, Digital Health Strategy and Business Development
Kelly Gill	46	Executive Vice President, Transcription Services
Thomas M. Watson	51	Executive Vice President, Application Sales

    Mark K. Leavitt, MD, PhD has been Chairman of the Board of the Company since 1985. Dr. Leavitt founded MedicaLogic in 1985 and served as the Chief Executive Officer from 1985 until May 2000. From 1992 to 1996 he served as a faculty member for St. Vincent Internal Medicine Family Practice and concurrently served as Medical Director and Regional Information Systems Director for

18

Sisters of Providence Health Care System from 1992 to 1994. From 1982 to 1992, Dr. Leavitt operated a private practice of internal medicine. From December 1997 to June 1998, he served on the Board of Directors of Physician Partners, Inc.

    David C. Moffenbeier became President and Chief Executive Officer in May 2000. From 1994 until May 2000, he served as Chief Operating Officer of the Company. Mr. Moffenbeier has been a Director of the Company since 1994. From 1993 to 1994, Mr. Moffenbeier served as Chairman of the Board of Directors of Summit Design Inc., a supplier of software tools for integrated circuits. Previously, Mr. Moffenbeier co-founded Mentor Graphics Corp., a manufacturer of hardware and software for electronic design automation, where he served as a Director from 1981 to 1993 and as its Chief Financial Officer from 1981 to 1984, its Vice President of International Sales from 1985 to 1988 and its Vice President of Worldwide Sales from 1989 to 1993. He currently serves on the Board of Directors of Providence Good Health Plan, a health care management organization.

    Kevin D. Hutchinson became the Chief Operating Officer in September 2000. Prior to joining the Company, he served as the Vice President of Business Operations of VHA, Inc. from January 2000 to September 2000 and as a participating member of the Senior Management Executive Committee. Mr. Hutchinson held various other positions with VHA, Inc. from October 1995 to September 2000. Prior to October 1995, he held various positions in sales and sales management with International Business Machines Corporation and with Oracle Corporation.

    Donald A. Bloodworth became the Chief Financial Officer in December 2000. Prior to joining the Company, Mr. Bloodworth served as Chief Financial Officer for GST Telecommunications from March 2000 to December 2000. From September 1999 to March 2000, he was the Vice President and Corporate Controller of 3Com Corporation. From October 1997 until September 1999, he was the Vice President of Business Systems Integration for PacifiCorp. From April 1997 until September 1997, Mr. Bloodworth was the Corporate Controller for AirTouch Communications. Prior to April of 1997, Mr. Bloodworth served for thirteen years in various finance capacities at PacifiCorp, including Corporate Controller.

    Mark Boulding became the General Counsel and Executive Vice President of Government and Regulatory Affairs when Medscape, Inc. merged with the Company in May 2000. Prior to the merger, Mr. Boulding served as the General Counsel and Vice President of Regulatory Affairs of Medscape, Inc. from June 1999 to May 2000. Prior to joining Medscape, Mr. Boulding was a lawyer in private practice in Washington D.C. from 1991 to June 1999. Mr. Boulding is a co-founder and sits on the Board of Directors of the Internet Healthcare Coalition. He also participates as Medscape's representative on the Board of Directors of the Health Internet Ethics ("Hi-Ethics") self-regulatory association.

    George D. Lundberg, MD became the Executive Vice President and Editor in Chief when Medscape, Inc. merged with the Company in May 2000. Prior to the merger, he served as Editor in Chief of Medscape, Inc. from February 1999 to May 2000. Dr. Lundberg became a Director of the Company in August 2000. Prior to joining the Company, he served as Editor of the Journal of the American Medical Association and also served as the Editor in Chief of Scientific Information and Multimedia, a publication of the American Medical Association, for seventeen years.

    Arthur N. Leibowitz, MD became the Executive Vice President, Digital Health Strategy and Business Development and a Director in December 2000. Prior to joining the Company, he served as the Chief Medical Officer for Aetna U.S. Healthcare from 1992 to December 2000 and held various other positions from 1987 to 1992. Prior to 1987, Dr. Leibowitz was in private practice.

    Kelly Gill became the Executive Vice President, Transcription Services in May 2000 when Total eMed, Inc. was acquired by the Company. He has served as the Chief Operating Officer of Total eMed, Inc. since August 1999. Prior to joining Total eMed, Inc., he served as the President and Chief

19

Executive Officer of Healthcare Innovations, Inc. from August 1997 to July 1999. From March 1995 to August 1997 he served as the President of American Rehability Services, Inc.

    Thomas M. Watson became the Executive Vice President, Application Sales in May 2000. Prior to May 2000, he served as Senior Vice President, Worldwide Sales and Professional Services of the Company since March 1999 and from 1997 to March 1999, Mr. Watson served as Vice President, Sales. Prior to joining the Company, Mr. Watson served as Vice President of Sales at PHAMIS Inc. from 1989 to 1997. Prior to 1989, he held senior sales and management positions at McDonnell Douglas Health Systems, Shared Medical Systems, and Mercy Catholic Medical Center.

20

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

    The Company's common stock has traded on the Nasdaq National Market under the symbol "MDLI" since December 10, 1999. Prior to that date, there was no public market for the Company's common stock and, therefore, no quoted market prices for the Company's common stock are available for the periods prior to December 10, 1999.

    As of December 31, 2000, Medscape had 55,657,348 shares of common stock outstanding held by approximately 452 shareholders of record. Because many of such shares are held by brokers and other institutions on behalf of stockholders, the Company is unable to estimate the total number of stockholders represented by these record holders.

    The following table sets forth the high and low sales prices reported on the Nasdaq National Market for the Company's common stock for the periods indicated:

	Quarter Ended	Low		High
1999	December 31, 1999 (commencing December 10, 1999)	$	18.25	$	29.63
2000	March 31, 2000		13.13		54.00
	June 30, 2000		5.94		19.81
	September 30, 2000		3.50		9.25
	December 31, 2000		1.50		4.97

    The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to invest cash generated from operations, if any, to support the development of its business and does not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Company's Board of Directors after taking into account various factors, including the Company's financial condition, operating results and current and anticipated cash needs.

    In June 2000, Medscape issued 5,707 shares of Common Stock to Baylor College of Medicine pursuant to an agreement described in the Company's prospectus dated December 9, 1999 that provides for the issuance of shares of Common Stock to Baylor upon certain purchases of Logician licenses from the Company. The shares were issued to Baylor as a result of purchases of Logician licenses by institutions in Houston, Texas totaling approximately $90,000. The estimated value of the shares at the time of issuance was approximately $7.88 a share. The shares of Common Stock were offered and sold by Medscape in accordance with the exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated under the Securities Act of 1933.

Changes in Securities and Use of Proceeds

    On May 11, 2000 the Company 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 the Company 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

21

$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, Inc., options held primarily by Medscape, Inc.'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 the Company, net of underwriting discounts, commissions and other expenses, were approximately $104.3 million. Through December 31, 2000, net proceeds from the initial public offering of approximately $16.8 million were used to complete mergers and acquisitions, approximately $80.0 million were used for general operating expense for the year ended December 31, 2000 and a net balance of approximately $9.9 million was invested in short-term investments at December 31, 2000.

Item 6. Selected Financial Data

    This summary should be read together with the consolidated financial statements, notes to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this annual report on Form 10-K. Historical results of operations are not necessarily indicative of future results.

	Years Ended December 31,
	2000			1999			1998			1997			1996
	(in thousands, except per share data)
Selected Financial Data:
Revenues	$	48,155		$	19,717		$	16,160		$	12,807		$	9,664
Net loss		(321,471	)		(27,987	)		(7,232	)		(10,819	)		(10,364	)
Basic and diluted net loss per share		(6.96	)		(3.07	)		(1.06	)		(1.64	)		(1.64	)
Total assets		966,397			168,354			24,308			22,072			26,074
Long-term obligations, net of current portion		4,591			2,233			679			278			977
Convertible redeemable preferred stock subscribed or issued		15,800			—			49,782			42,791			35,867
Total shareholders' equity (deficit)		895,727			149,840			(32,439	)		(26,093	)		(15,317	)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS.

    Except for historical information, this report contains, including the following discussions, 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. 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.

22

Forward-looking statements include statements regarding the rate of growth and acceptance of 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. Medscape wishes to caution the reader that these forward-looking statements involve risks and uncertainties and the factors described under "Risk Factors" may cause Medscape's results to differ materially from those stated in the forward-looking statements. The following discussions also should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2000 included herein.

OVERVIEW

    Medscape was founded in 1985 as MedicaLogic, Inc., and until 2000 was solely focused on the development, marketing and support of digital health record systems. The Company expanded its products and services during 2000 as a result of its merger with Medscape, Inc., and the acquisitions of Total eMed, Inc. and AnywhereMD, Inc. These transactions added the following assets, respectively: leading Internet healthcare portals, Web-based transcription capability for the creation of digital health records, and wireless prescribing technology for the Palm O/S^TM platform. Since September 2000, the Company has done business under the name Medscape.

    Medscape is a leading provider of digital health record systems for the healthcare industry. The DHR replaces or augments the paper medical record, provides decision support, and facilitates the flow of clinical information necessary for patient care, potentially increasing both efficiency and safety. As of December 31, 2000, Medscape DHR systems housed digital records for more than 17.2 million patients. The DHR line of business derives revenues from software licenses, monthly service subscriptions, and support and consulting fees. Major customers include academic medical centers such as Baylor College of Medicine, integrated healthcare delivery networks such as Providence Health System in Portland, Oregon, and the NASA space shuttle program and the International Space Station program.

    The Company's award-winning Internet portals are Medscape.com for physicians and other healthcare professionals, and CBSHealthWatch.com for consumers. Through Medscape.com, the Company provides medical news, articles, and conference coverage as well as accredited continuing professional education programs. As of December 31, 2000, more than 560,000 physicians and 1.6 million allied healthcare professionals worldwide had registered at Medscape.com, and during the year 2000 more than 100,000 hours of accredited continuing professional education were delivered via the site. Through CBSHealthWatch.com, the Company provides health information tailored to the healthcare consumer's perspective. CBSHealthWatch.com is the exclusive Internet healthcare site integrated into CBS News programming and is promoted on certain Viacom media properties, including CBS. The Internet portal line of business derives revenue from advertising and sponsorship. Major customers include leading pharmaceutical manufacturing companies such as GlaxoSmithKline, Merck, Pfizer, and Warner-Lambert.

    The Company's newly emerging line of business is the Digital Healthcare Partnership. These partnerships combine a number of the Company's products and services, and may also be augmented with reports and data produced from its DHR products and Internet portals. To protect the privacy of individual, identifiable health information, these reports provide only aggregated, statistical information about substantial populations. Digital Healthcare Partnerships can focus on the education of physicians and patients about new treatments, on improved safety and appropriateness of prescribing, on recruitment of patients for clinical research trials, or on other matters. The Company's first two Digital Healthcare Partnerships have recently been announced with GlaxoSmithKline, the world's largest

23

pharmaceutical company, and with General Motors Corporation, the nation's largest private purchaser of healthcare services.

MERGER, ACQUISITIONS AND OTHER INVESTMENT

    The Company completed its merger with Medscape, Inc. and its acquisition of Total eMed, Inc. during May 2000 by acquiring all the outstanding capital stock of Medscape, Inc. and Total eMed, Inc. in transactions accounted for using the purchase method of accounting for acquisitions. The Company issued approximately 14,932,000 and 7,450,000 shares, respectively, of the Company's common stock in the transactions. The total purchase price, including acquisition expenses and the estimated fair value of converted warrants and options, was approximately $1,068 million, and resulted in goodwill of approximately $924 million, which is being amortized over approximately 3 to 4 years.

    The Company has integrated both Medscape, Inc.'s and Total eMed, Inc.'s products into its suite of offerings, including the DHR, creating one of the most comprehensive offerings of healthcare information solutions anywhere. Accordingly, the Company embarked on a plan to properly size the business and focus our attention and efforts on key success factors. This led to the consolidation of duplicate functions and activities, resulting in a reduction of the Company's workforce, a reduction in total facilities, and the impairment of certain assets. Medscape expects full implementation of the workforce reductions during the first quarter of 2001, with the realization of the cost benefits throughout 2001.

    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 of accounting for acquisitions and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their fair values at the acquisition date. Goodwill recorded in connection with the purchase was approximately $7.7 million and is being amortized over 3 years.

    The results of operations and cash flows of all acquisitions during the period have been included in the Company's consolidated financial statements from the respective date of acquisition forward.

    Since the date of the merger and acquisitions, there has been a substantial decline in the market value of these types of companies. While operating results of these entities are consistent with original projections, the changed market conditions could result in an impairment of goodwill and other long lived assets if they are disposed of near-term. Competition, worsening economic conditions or other factors could also contribute to an impairment of these assets if undiscounted cash flows do not continue to improve.

    During June 2000, the Company acquired an approximate 10% interest in Lifechart.com, Inc. for approximately $8.3 million in cash. The investment is accounted for using the cost method. The Company also entered into a joint development, sales and marketing agreement with Lifechart.com. In December 2000, the Company recorded a loss on its investment in Lifechart.com of approximately $8.3 million to reduce the carrying amount of the investment to its estimated fair value at December 31, 2000.

RECENT DEVELOPMENTS

    In January 2001, the Company announced an e-business healthcare alliance with General Motors Corporation ("GM") whereby GM and Medscape will cooperate on a three-year program to encourage U.S. physicians to use hand-held computer devices for prescribing drugs and accessing DHRs. GM will sponsor Medscape's distribution of hand-held Palm OS devices pre-installed with Medscape's prescription software, Medscape Mobile, to a limited number of physicians who treat GM enrollees across the country. The devices will have the ability to prompt doctors to consider medically equivalent,

24

lower cost and/or generic drug alternatives, and allow for easier compliance with health plan formulary requirements. They will also include drug reference tools containing drug-drug interaction data. As part of the strategic alliance, GM will receive warrants for 5 million shares of the Company's common stock, and GM and Medscape will share in any savings from prescription drug claims realized directly from usage of Medscape Mobile.

    In January 2001, Medscape closed a $17.8 million capital financing arrangement of which $15.8 million was received prior to December 31, 2000 and has been recorded as convertible redeemable preferred stock subscribed. The financing involves the issuance of 5,933,332 shares of convertible preferred stock at $3 per share, with associated warrants to purchase 4,537,254 shares of common stock at an exercise price of $.01 per share. The preferred stock carries a cumulative annual dividend of $0.27 per share, is convertible into common stock on a share for share basis at the option of the investors or automatically if certain conditions are met, is redeemable under certain circumstances, is entitled to appoint a director to the Company's board of directors, and contains approval rights over certain corporate actions. As a result of the closing of the financing, Soros Fund Management LLC and its affiliates own approximately 13.6% of the Company's issued and outstanding common stock (on an as if converted basis). Entities affiliated with Soros have been involved in previous rounds of financing for Medscape prior to the Company's initial public offering in December 1999.

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 years ended December 31, 2000, 1999 and 1998.

		Years Ended December 31,
		2000		1999		1998
Revenues:
	Application licenses and support services	43.8	%	100.0	%	100.0	%
	Sponsorship and advertising	42.5		—		—
	Transcription services	13.7		—		—
	Total revenues	100.0	%	100.0	%	100.0	%
Operating expenses:
	Cost of operations	77.1		38.7		39.1
	Marketing and sales	110.6		101.1		45.6
	Research and development	38.7		61.6		46.7
	General and administrative	41.7		25.4		6.7
	Depreciation and amortization	458.0		20.7		9.5
	Restructuring and other charges	53.6		—		—
	Total operating expenses	779.7		247.5		147.6
	Operating loss	(679.7	)	(147.5	)	(47.6	)
Other income, net		12.1		5.6		2.9
	Net loss	(667.6	)%	(141.9	)%	(44.7	)%

25

KEY METRICS

    The following table highlights the key metrics the Company uses to measure adoption of its products and services (in thousands).

		December 31,
		2000	1999		1998
Registered Digital Health Record (DHR) application users:
	Logician by Medscape	11	8		5
	Medscape Mobile	43	—		—
	Other Internet-based and hand-held products	15	—		—
Total registered DHR application users		69	8		5
Total Digital Health Records		17,200	8,100		5,800
Registered Internet portal users:
	Physicians	560	280	(1)	39	(1)
	Allied health professionals	1,600	860	(1)	72	(1)
	Consumers	1,100	630	(1)	42	(1)
Total registered Internet portal users		3,260	1,700	(1)	153	(1)

(1)

Registered Internet portal users for the years ended December 31, 1999 and 1998 presented above are those of Medscape, Inc. which merged with MedicaLogic, Inc. during 2000 as described in Mergers, Acquisitions and Other Investments above.

    Clinician users of Logician by Medscape, the Company's most advanced DHR application, increased approximately 37.5% and 60.0% during each of the years ended December 31, 2000 and 1999, respectively, due to the continued adoption of Medscape's DHR applications. Medscape Mobile was launched on September 21, 2000 and at December 31, 2000, the Company had approximately 43,000 physician and other healthcare professional users of Medscape Mobile. Clinician users of the Company's other Internet-based and handheld products, including Web-based transcription and other clinical documentation applications, totaled approximately 15,000 at December 31, 2000.

    The total number of DHRs in the Company's systems at December 31, 2000, 1999, and 1998 increased approximately 112.3% and 39.7% during each of the years ended December 31, 2000 and 1999, respectively.

    Total registered users of Medscape's Internet portals was approximately 3.3 million as of December 31, 2000 and was comprised of approximately 560,000 registered physician, 1.6 million registered allied healthcare professional and 1.1 registered consumer users.

26

Years Ended December 31, 2000, 1999 and 1998

Revenues

    The following table presents total revenues of the Company for each of the three years ended December 31, 2000, 1999 and 1998 (in thousands, except percentages).

		Years ended December 31,
		2000				1999				1998
Revenues:
	Application license and support service	$	21,104	43.8	%	$	19,717	100.0	%	$	16,160	100.0	%
	Sponsorship and advertising		20,483	42.5			—	—			—	—
	Transcription service		6,568	13.7			—	—			—	—
Total revenues		$	48,155	100.0	%	$	19,717	100.0	%	$	16,160	100.0	%

Application License and Support Service Revenues

    Application license and support service revenues consist of revenues from license fees charged for the use of Medscape's server-based, Internet and wireless DHR applications, including subscription based license fees, and related service and support fees.

    DHR application fees include software license sales of primarily Logician by Medscape, the Company's server-based application, and revenues from Medscape's wireless and hand-held applications, which include Medscape Mobile. Service and support fees are comprised of installation services and support contracts for DHR applications. Subscription fees consist of recurring charges primarily from users of Medscape's Internet-based, wireless and Logician ASP products.

    For the year ended December 31, 2000, total application license and support service revenues increased from $19.7 million to $21.1 million, or approximately 7.1% over the year ended December 31, 1999. This increase resulted primarily from the introduction of new product offerings and businesses acquired during 2000, offset in part by an expected decrease in software license revenue as the Company moved to ASP and subscription-based models for certain product offerings.

    During the fourth quarter of 2000, the Company amended its agreement with a customer that allowed Medscape to use this customer as a reference site in exchange for shares of the Company's common stock. Under the terms of the agreement, the issuance of Medscape's common stock is contingent upon sales by the Company of additional licenses to the customer or to third parties in the customer's geographic area. The amendment reduced the customer's eligibility to receive common stock by 50% and extended the agreement through December 31, 2004. The amendment resulted in the recognition of approximately $800,000 that had been included in non-current deferred revenue. As of December 31, 2000, the remaining balance in long-term deferred revenue was approximately $814,000.

    For the year ended December 31, 1999, total application license and support service revenues increased from $16.2 million to $19.7 million, or approximately 21.6%, over the year ended December 31, 1998. This increase resulted primarily from an increase in the average selling price of the Company's licensed products, as well as revenues from companies acquired during 1999. This increase was offset in part by an expected decrease in software license revenue as the Company moved to subscription-based models for certain product offerings.

Sponsorship and Advertising

    Sponsorship and advertising revenues consist of revenues, primarily from pharmaceutical companies, which sponsor certain activity and purchase advertising services on Medscape's Internet portals including:

•

banner advertising, which is based on a specified number of impressions delivered.

27

•

sponsorship activities from the development of client-sponsored content, including modules on specific disease topics.



•

editorial coverage of medical conferences, including continuing medical education activities.

    For the year ended December 31, 2000, sponsorship and advertising revenues were approximately $20.5 million, and were a new source of revenue for the Company resulting primarily from the merger with Medscape, Inc. completed in May 2000.

Transcription Service Revenues

    Transcription service revenues consist of subscription fees charged for the provision of Medscape Transcription services provided to physicians and other outpatient healthcare delivery systems.

    For the year ended December 31, 2000, transcription service revenues were approximately $6.6 million, and were a new source of revenue for Medscape resulting primarily from the acquisition of Total eMed, Inc. during May 2000. Transcription service revenues are expected to increase at a slower growth rate compared to the Company's other revenue sources primarily due to the Company's intention to reduce the cash requirements for this line of business and as the Company continues to increase operating efficiencies throughout 2001.

Operating Expenses

    The following table and related discussion highlights the operating expenses of the Company for the years ended December 31, 2000, 1999, and 1998 (in thousands, except percentages).

		Years ended December 31,
		2000				1999				1998
Total revenues		$	48,155	100.0	%	$	19,717	100.0	%	$	16,160	100.0	%
Operating expenses:
	Cost of operations		37,135	77.1			7,638	38.7			6,319	39.1
	Sales and marketing		53,268	110.6			19,924	101.1			7,374	45.6
	Research and development		18,643	38.7			12,152	61.6			7,551	46.7
	General and administrative		20,082	41.7			5,010	25.4			1,077	6.7
	Depreciation and amortization		220,528	458.0			4,077	20.7			1,537	9.5
	Restructuring and other charges		25,815	53.6			—	—			—	—
Total operating expenses		$	375,471	779.7	%	$	48,801	247.5	%	$	23,858	147.6	%

Cost of Operations

    Cost of operations includes costs associated with building, maintaining, and upgrading the Company's DHR applications and data centers, certain licensing, editorial and content development costs, and cost of transcriptionists.

    For the year ended December 31, 2000, cost of operations increased from $7.6 million to $37.1 million, or approximately 388.2% over the year ended December 31, 1999, and increased as a percentage of total revenues from 38.7% to approximately 77.1%. The increase in cost of operations was primarily attributable to additional expenses for companies acquired during the year. As the Company continues to experience increases in DHR application adoption, Medscape expects costs of operations to increase in connection with anticipated increases in revenues. Additionally, the Company anticipates that its editorial and content expenses will increase with the quantity and quality of content available on Medscape online media properties and increased usage of these properties.

28

    For the year ended December 31, 1999, cost of operations increased from $6.3 million to $7.6 million, or approximately 20.6%, over the year ended December 31, 1998, and increased as a percentage of total revenue from 39.1% to 38.7%. The increase in costs of operations was principally the result of additional personnel costs required to support the installation and maintenance of DHR applications.

Sales and Marketing

    Sales and marketing expenses include costs to acquire and retain registered users of the Company's products, the operating expenses associated with ongoing sales and marketing efforts throughout the Company, and other general marketing costs to support the Company's multiple products and services.

    For the year ended December 31, 2000, sales and marketing expenses increased from $19.9 million to $53.3 million, or approximately 167.8% over the year ended December 31, 1999, and increased slightly as a percentage of total revenues from 101.1% to approximately 110.6%. The increase in sales and marketing expenses for the year ended December 31, 2000 was primarily due to the addition of costs from companies acquired during 2000, and increases in advertising and promotion costs associated with the Company's brand-building strategy, including the re-naming of the Company to Medscape.

    For the year ended December 31, 1999, sales and marketing expenses increased from $7.4 million to $19.9 million, or approximately 168.9% over the year ended 1998, and increased as a percentage of total revenues from 45.6% to 101.1%. Sales and marketing expenses for the year ended December 31, 1999 increased primarily from costs related to additional direct and indirect workforce requirement to promote and launch new products and an increase in trade shows appearances and public relations and advertising efforts in support of these product launches.

Research and Development

    Research and development costs consist primarily of expenses incurred for new application development, software application upgrades, and for enhancements to and maintenance of the Company's media offerings.

    For the year ended December 31, 2000, research and development expenses increased from approximately $12.2 million to $18.6 million, a 52.5% increase over the year ended December 31, 1999. The increase in research and development costs was primarily due to the inclusion of related costs from companies acquired during 2000, as well as an increase in the number of technical employees required to support additional growth of the Company's products and services.

    For the year ended December 31, 1999, research and development expenses increased from $7.6 million to $12.2 million, or approximately 60.5% over the year ended December 31, 1998. The increases in research and development expense for the year ended 1999 resulted primarily from additional development staff and contractors required to develop new products and product upgrades, and related equipment and facilities costs totaling approximately $4.9 million.

General and Administrative

    General and administrative expenses consist primarily of costs related to the finance, administrative, and legal functions necessary to support the Company's strategic initiatives.

    For the year ended December 31, 2000, general and administrative expenses increased from $5.0 million to $20.1 million, or approximately 302.0% over the year ended December 31, 1999. The increase in general and administrative costs primarily resulted from the addition of expenses from companies acquired during 2000, as well as increases in fees for professional accounting, finance, and legal services associated with compliance with public reporting requirements.

29

    For the year ended December 31, 1999, general and administrative expenses increased from $1.1 million to $5.0 million, or approximately 354.5% over the year ended December 31, 1998. The increase in general and administrative costs for the year ended December 31, 1999 resulted from the addition of administrative personnel and the use of contractors to support the growth of the Company's business and certain other expenses from companies acquired during 1999.

Depreciation and Amortization

    Depreciation and amortization expense increased to $220.5 million for the year ended December 31, 2000 compared to $4.1 million for the year ended December 31, 1999 and $1.5 million for the year ended December 31, 1998. The increase during 2000 resulted primarily of goodwill amortization from the acquisition and merger of Total eMed, Inc. and Medscape, Inc., respectively, completed in May 2000. The increase in 1999 resulted from the amortization of goodwill from the acquisition of PrimaCis Health Information Technology, Inc.

Restructuring and Other Charges

    During the year ended December 31, 2000, the Company's management approved certain restructuring plans intended to realign Medscape's organization in accordance with its major product lines, reduce infrastructure and overhead costs, and eliminate duplicative functions. Restructuring and related charges of approximately $17.5 million were expensed during the year. These charges were composed of accrued restructuring costs including employee separation costs, facility closure costs, impairments of certain assets, and certain contract cancellation expenses. The Company expects to substantially complete the initiatives contemplated in its restructuring plans during the first quarter of 2001. Medscape believes that, upon conclusion of its restructuring initiatives, its cost structure will be significantly reduced. However, there can be no assurance that such cost reductions can be sustained or that the estimated costs of such actions will not change.

    In accordance with the Company's policy to periodically review its long-lived assets for potential impairments, Medscape recorded an $8.3 million charge during the fourth quarter of 2000 resulting from the write-down to fair value of its investment in Lifechart.com, Inc.

Other Income

    For the year ended December 31, 2000, other income increased from $1.1 million to $5.8 million, approximately 427.3% over the year ended December 31, 1999 primarily from the increase in investment income from cash equivalents and short-term investments generated from the initial public offering. Other income increased from $0.5 million in 1998 to $1.1 million in 1999. The increase from 1998 to 1999 in other income is primarily attributable to an increase in interest earned on cash and cash equivalents and short-term investments from issuance of preferred stock and the Company's initial public offering.

Provision for Income Taxes

    As a result of net operating losses in 2000 and prior years, the Company made no provision or benefit for federal or state income taxes. As of December 31, 2000, the Company had net operating loss carryforwards for tax reporting purposes of approximately $281.8 million and research and experimentation credits of approximately $2.5 million which expire through 2020. Approximately $114.4 million of the net operating loss carryforwards are subject to an annual utilization limitation due to ownership changes in prior years.

30

Liquidity and Capital Resources

    The following table calculates the net operating loss before depreciation, amortization, restructuring and other charges (in thousands):

		Years Ended December 31,
		2000			1999			1998
Operating loss		$	(327,316	)	$	(29,084	)	$	(7,698	)
Depreciation and amortization			220,528			4,077			1,537
Restructuring and other charges			25,815			—			—
	Operating loss before depreciation, amortization, restructuring and other charges	$	(80,973	)	$	(25,007	)	$	(6,161	)

    As of December 31, 2000, the Company's cash and cash equivalents balance totaled $43.5 million and short-term investments totaled $9.9 million, a decrease in total of $85.4 million from the December 31, 1999 balances of $110.3 million and a $28.5 million, respectively.

    The Company's operating activities resulted in net cash outflows of $78.0 million, $12.7 million, and $6.8 million for the years ended December 31, 2000, 1999 and 1998. Cash outflows in 2000, 1999 and 1998 resulted from the Company's expenditures in sales and marketing of $53.3 million, $19.9 million and $7.4 million, and research and development of $18.6 million, $12.2 million and $7.6 million, respectively, which contributed to operating losses of $327.3 million, $29.1 million and $7.7 million, respectively. Also contributing to cash outflows in 2000 were decreases in accounts payable of $6.8 million, resulting from the consolidation of accounting functions during 2000. These costs were partially offset by increases in prepaid assets of $2.0 million for purchases of prepaid maintenance contracts, prepaid insurance and prepaid royalties, and an increase of $1.0 million in deferred revenue due to the Company's increasing base of DHR application licenses.

    Investing activities resulted in net cash inflows of $0.5 million for the year ended December 31, 2000 and net cash outflows of $36.6 million and $1.2 million for the years ended December 31, 1999 and 1998, respectively. Cash outflows in 2000 resulted from fixed asset purchases, comprised of computer hardware and software as well as leasehold improvements related to leased facilities, of approximately $20.8 million and payments related to business acquisitions of approximately $16.8 million. These costs were offset by proceeds from short-term investments of $38.2 million. Cash outflows in 1999 resulted from net purchases of investments of $21.9 million in short-term instruments, $12.5 million related to the purchase of fixed assets and $2.1 million for the acquisition of PrimaCis Health Information Technology, Inc. Cash outflows in 1998 resulted from $1.3 million related to purchases of fixed assets.

    Financing activities provided cash of $10.6 million, $154.9 million and $7.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. Cash flows in 2000 resulted primarily from the preferred stock subscription received in the amount of $15.8 million and the issuance of $2.6 million of common stock, offset by payments of long-term liabilities of $7.8 million. Cash flows in 1999 resulted primarily from the Company's initial public offering of $105.2 million, and the issuance of preferred stock in the amount of $47.8 million, offset by payments of $1.9 million for obligations under capital lease agreements and notes payable. Cash flows in 1998 resulted primarily from the issuance of preferred stock of $6.8 million. During the year ended December 31, 2000, the Company reached agreements to extend the due dates of certain cash payments previously required to have been made by the Company during the year. In January 2001, Medscape received from America Online, Inc. (AOL) a notice of breach due to the fact that the Company has not made its January 2001 payment to AOL of approximately $3 million. The Company and AOL are in negotiations with respect to this payment and the future of their financial relationship.

31

    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 $105.2 million. In addition, the Company closed a round of private funding in May 1999, raising approximately $34.8 million.

    Medscape currently anticipates that it will continue to experience modest growth in its operating expenses as it enters new markets for its products and services, increases marketing activities, increases research and development spending, develops new distribution channels, expands its infrastructure, and improves its operational and financial systems. These operating expenses will consume a significant amount of the Company's cash resources. Management believes that the Company's current cash balances, its net proceeds from financing activities during 2000 and its anticipated revenue growth will be sufficient to meet its anticipated cash needs for working capital and capital expenditures throughout 2001. However, any projections of future cash needs and cash flows are subject to substantial uncertainty. If current cash and cash that may be generated from future operations are insufficient to satisfy the liquidity requirements, the Company may seek additional funds through public or private equity financing or from other sources, including the sale of certain of the Company's assets. However, there is no certainty that Medscape may be able to obtain adequate or favorable financing and any financing the Company obtains may dilute the ownership interest of its shareholders prior to the financing. In addition, the Company may, from time to time, consider the acquisition of or investment in complementary businesses, products, services and technologies, which might impact its liquidity requirements or cause the Company to issue additional equity or debt securities.

Recent Accounting Pronouncements

    In June 1998, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. Statement No. 133, as amended, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. Because Medscape currently holds no derivative financial instruments and does not currently engage in hedging activities, adoption of SFAS No. 133 is expected to have no material impact on the Company's financial condition or results of operations.

Factors That May Affect Future Results of Operations

If we do not achieve or maintain broad acceptance of our products and services by medical professionals, patients and other healthcare providers, our business will be harmed.

    Our business model depends on our ability both to sell our products and services to medical professionals and other healthcare providers and to generate usage by a large number of medical professionals and consumers. Failure to achieve broad acceptance of our products and services by physicians and other healthcare providers would severely limit our ability to implement our business model.

    Likewise, failure to achieve or maintain market acceptance of our web sites would result in a loss of revenue. Market acceptance of our web sites depends upon continued growth in the use of the Internet generally and, in particular, as a source of healthcare information services for medical professionals and consumers.

    Achieving market acceptance for our products and services will require substantial marketing efforts and the expenditure of significant financial and other resources. Use of our products and services requires medical professionals to integrate our products and services into their office work flow and to adopt different behavior patterns and new methods of conducting business and exchanging information. Medical professionals may not choose to use our products and services.

32

We have a history of net operating losses and may not be profitable in the future.

    Failure to achieve or maintain positive cash flows from operations could materially and adversely affect the market price of our common stock. We have incurred significant losses since we began doing business. As of December 31, 2000, we accumulated losses of approximately $385 million. We may not achieve favorable operating results or profitability in the foreseeable future.

To remain competitive, we may need additional financing, which may not be available on satisfactory terms or at all.

    We expect our existing cash will be sufficient for us to meet our working capital and capital expenditure requirements for at least the next 12 months. We may, however, need additional financing sooner if we:

•

fail to achieve our projected revenue levels;



•

expand faster than planned;



•

develop services or products ahead of schedule;



•

incur expenses in excess of our expectations;



•

need to respond to competition; or



•

decide to acquire complementary products, businesses or technologies.

    If we raise additional funds through the sale of equity or convertible debt securities, the percentage ownership of existing shareholders will be reduced. In addition, these transactions may dilute the value of our common stock. We may issue securities with rights, preferences and privileges senior to our common stock. We may not be able to raise additional funds on terms satisfactory to us or at all.

Our business will suffer if we fail to successfully integrate any acquired technologies and companies in the future.

    Integrating any newly acquired organizations and technologies in the future could be expensive, time consuming and may strain our resources. Future acquisitions could divert management's attention from other business concerns and expose us to unforeseen liabilities or risks associated with entering new markets. We may also lose our current customers if any acquired companies have relationships with competitors of our customers. Consequently, we may not be successful in integrating acquired businesses or technologies and may not achieve anticipated revenue and cost benefits. Also, these acquisitions may not result in sufficient revenues or earnings to justify our investment in, or expenses related to, these acquisitions, and synergies may not develop. Our industry is consolidating and we expect that we will face intensified competition for acquisitions, especially from larger, better-funded organizations. If we fail to execute our acquisition strategy successfully for any reason, our business will suffer significantly.

We have depended, and will depend, on the healthcare industry for a significant portion of our revenues.

    Our revenues could seriously decrease if there were adverse developments in the healthcare industry. Our near-term and long-term prospects depend upon selling our services to both pharmaceutical companies and healthcare providers such as IDNs, hospitals, clinics, and physician practices. Accordingly, our success is highly dependent on the sales and marketing expenditures of pharmaceutical companies, the technology expenditures of healthcare providers, and our ability to

33

attract these expenditures. Some of the adverse developments in the healthcare industry that could affect our revenues would be:

•

a reduction in sales and marketing expenditures of pharmaceutical companies;



•

a reduction in technology expenditures of healthcare providers;



•

public or private market initiatives or reforms designed to regulate the manner in which pharmaceutical companies promote their products;



•

regulatory or legislative developments that discourage or prohibit pharmaceutical companies' promotional activities or technology expenditures by providers;



•

a decrease in the number of new drugs being developed; or



•

the adoption of legislative and regulatory proposals that would adversely affect our customers.

Our failure to successfully introduce new products and services in a timely manner could adversely affect our integrated business model and revenues.

    Any failure by us to introduce or enhance planned products or to introduce these products on schedule could make it difficult for us to implement our integrated products and services. Moreover, even if Medscape were able to release a new or enhanced product or service when expected, initial releases of software often contain errors or defects. For example, past releases of Medscape Logician have contained errors and defects that required us to provide corrections and other upgrades. Developing, integrating, enhancing and customizing such products and services could be expensive and time consuming.

If we fail to establish and maintain strategic relationships, we may be unable to sustain or grow our business.

    We depend upon certain strategic relationships to extend the reach of our products and services to a larger number of participants in the healthcare industry, and to develop and deploy new products and generate additional revenue. If we lose any of our existing strategic relationships or fail to establish additional strategic relationships, or if our strategic relationships fail to provide anticipated benefits, we may not be able to sustain or grow our business. We have limited experience in establishing and maintaining strategic relationships with healthcare, Internet, and self insured industry participants. Entering into strategic relationships is complicated by the following factors:

•

current or future strategic partners may decide to compete with us in some or all of our markets;



•

key participants in the healthcare industry may refuse to establish strategic relationships with us if we have entered into relationships with their competitors; and



•

potential strategic partners may be reluctant to work with us until our products and services have obtained widespread market acceptance.

Intense competition may lead to reduced sales of our products and services and impede our ability to achieve a significant market share.

    The industries in which we compete are intensely competitive and subject to fragmentation, high growth and rapid technological change. We face significant competition from traditional healthcare information system vendors and Internet healthcare companies as they expand their product offerings. We also currently compete, or potentially compete, with many providers of web content, information services and products, as well as traditional media and promotional efforts, for audience attention and advertising and sponsorship expenditures. Many of these companies have significantly greater financial resources than we have, as well as well-established brand names and large installed customer bases. We may be unable to compete successfully against these organizations or establish significant market share.

34

Our failure to manage growth effectively could have a significant negative impact on our business operations.

    We will need to continue to expand our operations rapidly if we successfully achieve broad market acceptance of our products and services. Difficulties in managing any future growth could have a significant negative impact on our business operations, increase our costs and make it more difficult for us to achieve profitability. We may not be able to project the rate or timing of increases in the use of our products and services accurately or to expand and upgrade our systems and infrastructure to accommodate these increases. Our future results of operations will depend on the ability of our officers and various employees to manage changing business conditions and to implement and improve our technical, administrative, financial control and reporting systems in response to our anticipated rapid growth.

If we are unable to protect our intellectual property rights, our competitive position may be adversely affected.

    Our ability to compete depends upon our proprietary systems and technology. The steps we currently take to protect our intellectual property rights may prove to be inadequate, time consuming and expensive. Misappropriation of our intellectual property may make us less competitive and require us to engage in expensive litigation to enforce or protect our intellectual property rights or to defend against claims of invalidity.

    We could be subject to intellectual property infringement claims as the number of our competitors grows and 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.

Our systems may experience failures which could cause our revenues to decline.

    Any significant interruption in our operations would cause our revenues to decline. We have experienced periodic system interruptions in the past, which may occur again. Any significant interruptions in our services or an increase in response time could result in a loss of potential or existing users and members, strategic partners or advertisers and sponsors and, if sustained or repeated, could reduce the attractiveness of our web sites to these parties in the future. Our insurance policies have coverage limits that may not be adequate to compensate us for any material losses that may occur due to disruptions in our service.

    Our Web sites may be required to accommodate a high volume of traffic and deliver frequently updated information. Users may experience slower response times or system failures due to increased traffic on these web sites or for a variety of other reasons. We depend on content providers to provide information and data feeds on a timely basis. These web sites could experience disruptions or interruptions in service due to the failure or delay in the transmission or receipt of this information.

Online security breaches could harm our business.

    Our security measures may not prevent security breaches. Substantial or ongoing security breaches on our system or other Internet-based systems could reduce user confidence in our web sites and other Internet-based products and services, leading to reduced usage and lower revenues. The secure transmission of confidential information over the Internet is essential in maintaining confidence in our web sites and will be increasingly important as we expand our consumer-oriented and Internet-based offerings. Consumers generally are concerned with security and privacy on the Internet and any

35

publicized security problems could inhibit the growth of the Internet and, therefore, our products and services. We will need to incur significant expense to protect and remedy against security breaches.

    A party that is able to circumvent our security systems could steal proprietary information or cause interruptions in our operations. Employees who handle proprietary information may also misappropriate that information. Security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. Our insurance policies have coverage limits that may not be adequate to reimburse us for losses caused by security breaches. We also face risks associated with security breaches affecting third parties conducting business over the Internet.

Our stock price may be volatile.

    Our common stock is traded on the Nasdaq National Market, which has experienced and is likely to continue to experience significant price and volume fluctuations. These market fluctuations could adversely affect the market price of our common stock without regard to our operating performance.

Risks Related to the Healthcare Industry and the Internet

Federal and state legislation and regulation affecting the healthcare industry could severely restrict our ability to operate our business.

    We are subject to federal and state legislation and regulation affecting the healthcare industry. Existing and new laws and regulations applicable to the healthcare industry could have a material adverse effect on our ability to operate our business. The federal and state governments extensively regulate the confidentiality and release of patient and medical records. It may be expensive to implement security or other measures designed to comply with new legislation. Moreover, we may be restricted or prevented from delivering patient records or health information electronically.

    A federal law commonly known as the Medicare/Medicaid anti-kickback law, and several similar state laws, prohibit payments that are intended to induce physicians or others to acquire, arrange for or recommend the acquisition of healthcare products or services. Another federal law, commonly known as the Stark law, prohibits physicians from referring Medicare and Medicaid patients for designated health services to entities with which they have a financial relationship, unless that relationship qualifies for an explicit exception to the referral ban. The application and interpretation of these laws are complex and difficult to predict and could constrain our financial, marketing, and strategic relationships or our ability to obtain pharmaceutical or other corporate sponsorship for our products.

The Internet is subject to many legal uncertainties and potential government regulations that may decrease demand for our services, increase our cost of doing business or otherwise have a material adverse effect on our financial results or prospects.

    Any new law or regulation pertaining to the Internet, or the application or interpretation of existing laws, could decrease demand for our services, increase our cost of doing business or otherwise have a material adverse effect on our financial results and prospects.

    Laws and regulations may be adopted in the future that address Internet-related issues, including online content, user privacy, pricing and quality of products and services. For example, although it was held unconstitutional in part, the Communications Decency Act of 1996 prohibited the transmission over the Internet of various types of information and content. In addition, several telecommunications carriers are seeking to have telecommunications over the Internet regulated by the Federal Communications Commission in the same manner as other telecommunications services. Because the growing popularity and use of the Internet has burdened the existing telecommunications infrastructure in many areas, local exchange carriers have petitioned the FCC to regulate Internet service providers in a manner similar to long distance telephone carriers and to impose access fees on the Internet service providers.

36

    The United States or foreign nations may adopt legislation aimed at protecting Internet users' privacy. This legislation could increase our cost of doing business and negatively affect our financial results. For example, the Federal Trade Commission began enforcing requirements under the Children's Online Privacy Protection Act in April 2000. The act applies to the online collection of personal information from children under 13, and imposes significant compliance burdens and potential penalties on operators of web sites that collect covered information. Moreover, it may take years to determine the extent to which existing laws governing issues like property ownership, libel, negligence and personal privacy are applicable to the Internet. Currently, U.S. privacy law consists of disparate state and federal statutes regulating specific industries that collect personal data. Most of them predate and therefore do not specifically address online activities. However, European nations are now implementing a European Union Data Privacy Directive regulating the transmission and storage of personal information and data. In addition, a number of comprehensive legislative and regulatory privacy proposals are now under consideration by federal, state and local governments in the United States. In some cases, such as the European Directive, these comprehensive privacy proposals include special rules that provide added protections for sensitive information, including information about health and medical conditions.

State and Federal laws that protect individual health information may limit our plans to collect, use and disclose that information.

    If we fail to comply with current or future laws or regulations governing the collection, dissemination, use and confidentiality of patient health information, this failure could have a material adverse effect on our business, operating results and financial condition.

    Consumers sometimes enter private health information about themselves or their family members when using our services. Physicians or other health care professionals who use our products will directly enter health information about their patients, including information that constitutes a medical record under applicable law, that we will store on our computer systems. Also, our systems record use patterns when consumers access our databases that may reveal health-related information or other private information about the user. Numerous federal and state laws and regulations, the common law, and contractual obligations govern collection, dissemination, use and confidentiality of patient-identifiable health information, including:

•

state privacy and confidentiality laws;



•

our contracts with customers and partners;



•

state laws regulating health care professionals, such as physicians, pharmacists and nurse practitioners;



•

Medicare and Medicaid laws;



•

the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and related rules promulgated by the Health Care Financing Administration; and



•

Health Care Financing Administration standards for Internet transmission of health data.

    HIPAA will have a direct impact upon certain aspects of our business. Adhering to HIPAA could result in significant costs, as well as result in the delay or abandonment of certain products or services, which could negatively affect our business. Because we intend to market some of our services as meeting these regulatory requirements, our success will also depend on other healthcare participants adhering to these regulations. In addition, the laws of other countries also govern the use of and disclosure of health information. Any failure by us or our personnel or partners to comply with any of these legal and other requirements could result in material liability. Although we have systems in place for safeguarding patient health information from unauthorized disclosure, these systems may not

37

preclude successful claims against us for violation of applicable law or other requirements. Other third-party sites or links that consumers access through our web sites also may not maintain systems to safeguard this health information, or may circumvent systems we put in place to protect the information from disclosure. In some cases, we may place our content on computers that are under the physical control of others, which may increase the risk of an inappropriate disclosure of health information. For example, we currently contract out the hosting of some of our Web sites to third parties. In addition, future laws or changes in current laws may necessitate costly adaptations to our systems.

    We intend to develop medical information systems and market research services that we will use to collect, analyze and report de-identified aggregate medical data, medical research, outcomes and financial data pertaining to items such as prescribing patterns and usage habits. Some states have enacted legislation regulating the aggregation of health information and the manipulation, use and ownership of that aggregated data, even when this data does not reveal the patient's identity. Because this area of the law is rapidly changing, our collection, analysis and reporting of aggregate healthcare data maintained in our database may not at all times and in all respects comply with laws or regulations governing the ownership, collection and use of this data. Future laws or changes in current laws governing the ownership, collection and use of aggregate healthcare data may necessitate costly adaptations to our systems or limit our ability to use this data.

FDA and FTC regulations on advertising and promotional activities may be burdensome and negatively affect our ability to provide some applications or services, which could lead to higher than anticipated costs or lower than anticipated revenues.

    Complying with Food and Drug Administration and Federal Trade Commission regulations may be time consuming, burdensome and expensive and could negatively affect our ability to continue providing some applications or services, or to introduce new applications or services in a timely manner. This may result in higher than anticipated costs or lower than anticipated revenues. In addition, because part of our business involves direct-to-consumer advertising of prescription drugs, any increase in FDA or FTC regulation of these advertisements or the enforcement of these regulations or policies could make it more difficult for us to provide existing or future applications or services to our audience or obtain the necessary corporate sponsorship to do so.

    Any current or future regulatory requirements that the FDA or the FTC impose on us or our advertisers and sponsors could harm us by:

•

making it harder to persuade pharmaceutical, biotechnology and medical device companies to advertise or promote their products on our web sites, or to sponsor programs that we offer to healthcare professionals and the public;



•

restricting our ability to continue to provide some of our services or content, or to introduce new services or content in a timely manner;



•

damaging our relationships with pharmaceutical, biotechnology and medical device companies, particularly if programs we recommend or endorse result in FDA or FTC enforcement action directed against us or these companies; or



•

making it more expensive and time-consuming to comply with new requirements.

    As a consequence of these harms, we might lose advertising or sponsorship revenue, spend significant amounts of our limited resources on regulatory experts in the area of FDA or FTC compliance, or receive adverse publicity that negatively affects share value. In addition to existing FDA and FTC regulation of advertising and promotion by pharmaceutical, biotechnology and medical device companies, our business faces a potential risk of increased FDA and FTC regulation of these activities in an online context.

38

Changes in existing FDA regulatory requirements or policies, or our failure to comply with current or future requirements or adoption of new requirements could increase our cost of doing business and cause our revenues to decline.

    We face potential FDA regulation of software that we develop for use on our web sites or in our clinical applications. Some computer applications and software are considered medical devices and are subject to regulation by the FDA. If FDA regulations were applicable to any of our products and services, complying with those regulations would be time consuming, burdensome and expensive and could delay or prevent introduction of new products or services.

    While the FDA's policies regarding the regulation of software are evolving, based on the FDA's informal policy statements regarding the scope of its regulation of stand-alone software, we do not believe that our current products or services are subject to FDA regulation as medical devices because they do not meet the statutory definition of a device. However, the FDA may take the view that some of our current or future applications or services do in fact meet the definition of a medical device and, therefore, are subject to regulation, or the FDA may change its policies or regulations with respect to regulation of software or Internet technologies. Also, we may expand our product and service offerings into areas that subject us to FDA regulation. If the FDA finds that our software is subject to regulation as a medical device, the applicable regulatory controls could include both pre-market and post-market requirements and the FDA might require us:

•

to obtain premarket clearance or approval of the medical device software from the FDA, which might include the conduct of supporting clinical trials or other studies;



•

to register ourselves as a medical device manufacturer and to list our devices with the FDA;



•

to create our software in compliance with the FDA design and manufacturing standards;



•

to permit the FDA to inspect our facilities and records; and



•

to make periodic reports to the FDA.

    We do not have any experience in preparing the required documentation for FDA clearance or approval of a medical device, including the conduct of supporting clinical trials or other studies, or complying with other FDA regulations that would apply both before and after clearance or approval.

39

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    The Company's exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income Medscape can earn on the Company's investment portfolio and on the increase or decrease in the amount of any interest expense Medscape must pay with respect to outstanding debt instruments. The risk associated with fluctuating interest expense is limited, however, to the exposure related to those debt instruments and credit facilities that are tied to market rates. The Company does not plan to use derivative financial instruments in its investment portfolio. The Company plans to ensure the safety and preservation of its invested principal funds by limiting default risk, market risk and investment risk. The Company plans to mitigate default risk by investing in low-risk securities. At December 31, 2000, the Company had an investment portfolio of money market funds, commercial securities and U.S. Government securities, including those classified as short-term investments, of approximately $9.9 million with an average interest rate of 6.4%. Medscape had outstanding notes payable and capital equipment leases of $2.5 million at December 31, 2000 carrying an average interest rate of approximately 11.6%. If market interest rates were to increase immediately and uniformly by 10% from levels as of December 31, 2000, the decline of the fair market value of the fixed income portfolio and loans outstanding would not be material.

40

Item 8. Financial Statements and Supplementary Data

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
MedicaLogic/Medscape, Inc.:

    We have audited the accompanying consolidated balance sheets of MedicaLogic/Medscape, Inc. and subsidiaries as of December 31, 2000 and 1999 and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the MedicaLogic/Medscape, Inc.'s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MedicaLogic/Medscape, Inc. and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

Portland, Oregon
February 26, 2001

41

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

				December 31,
				2000			1999
ASSETS
Current assets:
	Cash and cash equivalents			$	43,543		$	110,320
	Short-term investments				9,857			28,536
	Accounts receivable, net				16,039			6,473
	Prepaid expenses and other current assets				14,305			4,515
		Total current assets			83,744			149,844
Property and equipment, net					34,172			13,087
Goodwill and intangibles, net					793,588			4,988
Prepaid advertising and other assets, net					54,893			435
		Total assets		$	966,397		$	168,354
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	3,290		$	5,638
	Accrued and other liabilities				23,452			2,639
	Deferred revenue				10,548			3,269
	Long term liabilities, current portion				12,131			2,432
		Total current liabilities			49,421			13,978
Long term liabilities, net of current portion					4,591			2,233
Long term deferred revenue, net of current portion					814			1,627
Other long term liabilities					44			676
		Total liabilities			54,870			18,514
Convertible redeemable preferred stock subscribed					15,800			—
Commitments and contingencies
Shareholders' equity:
	Preferred stock, 50,000,000 authorized, no par value, no shares issued and outstanding at December 31, 2000 and 1999				—			—
	Common stock, no par value; authorized 100,000,000 shares; issued and outstanding 55,657,348 and 32,364,391 shares at December 31, 2000 and 1999				1,255,375			229,724
	Common stock notes receivable, net				(6,728	)		(11,788	)
	Warrants				32,818			—
	Deferred stock compensation				(741	)		(4,570	)
	Accumulated deficit				(384,997	)		(63,526	)
		Total shareholders' equity			895,727			149,840
			Total liabilities and shareholders' equity	$	966,397		$	168,354

See accompanying notes to consolidated financial statements.

42

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

			Years Ended December 31,
			2000			1999			1998
Revenues:
	Application licenses and support services		$	21,104		$	19,717		$	16,160
	Sponsorship and advertising			20,483			—			—
	Transcription services			6,568			—			—
		Total revenues		48,155			19,717			16,160
Operating expenses:
	Cost of operations			37,135			7,638			6,319
	Marketing and sales			53,268			19,924			7,374
	Research and development			18,643			12,152			7,551
	General and administrative			20,082			5,010			1,077
	Depreciation and amortization			220,528			4,077			1,537
	Restructuring and other charges			25,815			—			—
		Total operating expenses		375,471			48,801			23,858
Operating loss				(327,316	)		(29,084	)		(7,698	)
	Other income, net			5,845			1,097			466
Net loss			$	(321,471	)	$	(27,987	)	$	(7,232	)
Net loss per share:
	basic and diluted		$	(6.96	)	$	(3.07	)	$	(1.06	)
Weighted average shares:
	basic and diluted			46,186,367			9,107,613			6,807,091

See accompanying notes to consolidated financial statements.

43

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

(in thousands, except share data)

	Common Stock
						Common Stock Notes Receivable					Deferred Compensation			Accumulated Deficit			Total Shareholders' Equity (Deficit)
	Shares		Amount						Warrants
Balance at December 31, 1997	6,654,280		$	3,202		$	(988	)	$	—	$	—		$	(28,307	)	$	(26,093	)
Issuance of common stock for acquisition	13,750			55			—			—		—			—			55
Issuance of common stock for cash	175,000			700			—			—		—			—			700
Issuance of restricted common stock in exchange for promissory notes	250,000			1,000			(1,000	)		—		—			—			—
Non-cash stock compensation	—			110			—			—		—			—			110
Options exercised	34,526			72			—			—		—			—			72
Interest accrued on common stock notes receivable	—			—			(51	)		—		—			—			(51	)
Net loss	—			—			—			—		—			(7,232	)		(7,232	)
Balance at December 31, 1998	7,127,556			5,139			(2,039	)		—		—			(35,539	)		(32,439	)
Issuance of common stock for acquisition	750,000			3,300			—			—		—			—			3,300
Conversion of redeemable preferred stock to common stock	15,950,747			97,874			—			—		—			—			97,874
Issuance of restricted common stock in exchange for promissory notes	1,247,500			9,229			(9,229	)		—		—			—			—
Issuance of common stock in exchange for services	65,750			1,314			(195	)		—		(194	)		—			925
Issuance of common stock for commission	172,763			1,987			—			—		—			—			1,987
Warrants exercised	22,500			13			—			—		—			—			13
Options exercised	242,575			869			—			—		—			—			869
Stock compensation expense	—			986			—			—		—			—			986
Interest accrued on common stock notes receivable	—			—			(325	)		—		—			—			(325	)
Deferred compensation related to stock options	—			4,746			—			—		(4,746	)		—			—
Amortization of deferred compensation related to stock options	—			—			—			—		370			—			370
Issuance of common stock, net of offering costs	6,785,000			104,267			—			—		—			—			104,267
Net loss	—			—			—			—		—			(27,987	)		(27,987	)
Balance at December 31, 1999	32,364,391			229,724			(11,788	)		—		(4,570	)		(63,526	)		149,840
Issuance of common stock for acquisition	22,382,039			1,025,775			—			32,818		—			—			1,058,593
Issuance of common stock for employee stock purchase plan	212,156			1,026			—			—		—			—			1,026
Other repurchases	(35,536	)		(46	)		—			—		—			—			(46	)
Options exercised	734,298			1,648			—			—		—			—			1,648
Deferred compensation related to stock options forfeited	—			(2,752	)		—			—		2,752			—			—
Amortization of deferred compensation related to stock options	—			—			—			—		1,077			—			1,077
Increase common stock notes receivable reserve	—			—			5,060			—		—			—			5,060
Net loss	—			—			—			—		—			(321,471	)		(321,471	)
Balance at December 31, 2000	55,657,348		$	1,255,375		$	(6,728	)	$	32,818	$	(741	)	$	(384,997	)	$	895,727

See accompanying notes to consolidated financial statements.

44

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

				Years Ended December 31,
				2000			1999			1998
Cash flows from operating activities:
	Net loss			$	(321,471	)	$	(27,987	)	$	(7,232	)
	Adjustments to reconcile net loss to net cash used by operating activities:
		Depreciation and amortization			220,528			4,077			1,537
		Deferred stock compensation and other non-cash charges			25,192			5,399			1,010
	Changes in assets and liabilities, net of balances acquired:
		Accounts receivable			(401	)		3,106			(3,177	)
		Prepaid expenses and other assets			1,950			(3,822	)		(239	)
		Accounts payable			(6,800	)		4,123			(110	)
		Accrued liabilities			2,035			259			99
		Deferred revenue			1,008			2,195			1,305
			Net cash used in operating activities		(77,959	)		(12,650	)		(6,807	)
Cash flows from investing activities:
	Maturities (purchases) of short-term investments, net of investments acquired				38,158			(21,983	)		86
	Payments related to business acquisitions, net of cash acquired				(16,795	)		(2,117	)		(12	)
	Purchases of property and equipment				(20,817	)		(12,507	)		(1,274	)
			Net cash provided by (used in) investing activities		546			(36,607	)		(1,200	)
Cash flows from financing activities:
	Net proceeds from preferred stock subscription/issuance				15,800			47,758			6,794
	Net proceeds from issuance of common stock				2,628			105,229			772
	Proceeds from (payments of) long-term liabilities, net				(7,792	)		1,872			235
		Net cash provided by financing activities			10,636			154,859			7,801
		Net increase (decrease) in cash and cash equivalents			(66,777	)		105,602			(206	)
Cash and cash equivalents, beginning of period					110,320			4,718			4,924
Cash and cash equivalents at end of period				$	43,543		$	110,320		$	4,718
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)				$	1,058,593		$	—		$	—
Issuance of common stock in exchange for note receivable					—			9,424			1,000
Issuance of common stock for purchase of a business					—			3,300			55
Assets acquired or exchanged under capital leases					—			1,371			62

See accompanying notes to consolidated financial statements.

45

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(1) Description of Business and Summary of Significant Accounting Policies

(a) Description of Business

    MedicaLogic/Medscape, Inc. d.b.a. Medscape (together with its subsidiaries "Medscape" or the "Company") is a leading provider of digital health record systems and information to the healthcare industry. Medscape develops digital health record applications that are designed to improve healthcare through the timely delivery of clinical data and information to healthcare professionals and consumers. The Company also provides online health information including medical news, articles, and conference coverage through its Internet portals, Medscape.com and CBSHealthWatch.com. Medscape's products and services are designed to enhance and improve the quality, cost, efficiency, safety and outcome of healthcare.

    The Company was incorporated in Oregon in May 1985 as MedicaLogic, Inc. The Company's name was changed to MedicaLogic/Medscape, Inc. in May 2000. Since September 2000, the Company has done business under the trade name Medscape. The Company expanded its products and services in 2000 as a result of its strategic merger with Medscape, Inc. ("Medscape, Inc."), and the acquisitions of Total eMed, Inc. ("Total eMed") and AnywhereMD.com, Inc. ("AnywhereMD.com"). These strategic mergers and acquisitions added the following assets, respectively: leading Internet healthcare portals, Web-based transcription capability for the creation of digital health records, and wireless prescribing technology for the Palm O/S^TM platform.

(b) Principles of Consolidation

    The accompanying consolidated financial statements include the accounts of MedicaLogic/Medscape, Inc. and its subsidiaries. All significant intercompany transactions and balances have been eliminated. Operations of businesses acquired and accounted for as purchases are consolidated from the date of acquisition or merger forward.

(c) Use of Estimates

    Accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amount of assets, liabilities and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

(d) Cash and Cash Equivalents

    The Company considers all highly liquid debt instruments purchased with a remaining maturity of three months or less to be cash equivalents. At December 31, 2000, cash equivalents consisted of commercial paper and a certificate of deposit.

(e) Short-Term Investments

    Short-term investments include various corporate debt instruments and have been classified as available-for-sale securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. At December 31, 2000 short-term investments consisted entirely of commercial paper and are carried at amortized cost, which

46

approximates market. Contractual maturities of these investments ranged from approximately 100 to 120 days.

(f) Concentrations of Credit Risk and Other Factors That Could Affect Future Results

    The Company invests its cash, and cash equivalents and short-term investments with financial institutions with high credit standing and, by policy, limits the amounts invested with any one institution, type of security and issuer.

    The Company sells its products to customers, ranging from individual doctors, small to large medical groups, and medical institutions. The Company performs ongoing credit evaluations of its customers' financial condition and limits the amount of credit extended as deemed appropriate, but generally requires no collateral. The Company maintains reserves for estimated credit losses and, to date, such losses have been within management's expectations.

    A substantial portion of the Company's revenue is generated from the pharmaceutical industry. Accordingly, Medscape's near-term and long-term prospects depend upon the Company's ability to attract the sales and marketing expenditures of these companies. The pharmaceutical industry is a highly competitive and closely regulated business. The Company's financial condition, results of operations and liquidity could be materially affected if adverse conditions in the industry developed, such as a reduction in sales and marketing expenditures, a decrease in the number of new drugs being developed, the passage of public or private market initiatives or reforms designed to regulate the manner in which pharmaceutical companies promote their products, or the adoption of current legislative and regulatory proposals to control drug costs for Medicare and Medicaid patients.

    The market for the Company's products is characterized by rapidly changing technology, evolving industry and regulatory standards and changing customer needs. The Company believes that its future success will depend, in part, upon its ability to enhance its current products and develop new products and services on a timely and cost-effective basis, and to respond to changing customers needs, new regulations and technological developments. An inability of the Company to generate demand for its product, whether as a result of competition, technological change, economic, regulatory or other factors, could have a material adverse result on the Company's financial condition, results of operations and liquidity.

    The Company's future results could also be affected if economic conditions worsen in the U.S. A downturn in the economy could have an adverse impact on demand for Medscape's products and services, and could also contribute to the impairment of the Company's investment and financing portfolios.

(g) Property and Equipment

    Property and equipment are recorded at cost. Property and equipment under capital leases are recorded at the lower of the present value of minimum lease payments at the beginning of the lease term or fair value of the leased assets at the inception of the lease. Repairs and maintenance costs are expensed as incurred.

47

    Depreciation on furniture, equipment and leasehold improvements is calculated on a straight-line basis over the estimated useful lives of the assets, five years for furniture and two to five years for equipment. Property and equipment held under capital leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Amortization of leasehold improvements is recognized over the shorter of the life of the improvement or the remaining life of the lease using the straight-line method.

(h) Goodwill

    Goodwill represents the excess of the aggregate purchase price over the fair value of the tangible and intangible assets acquired in various acquisitions. Goodwill is amortized on a straight-line basis, over periods ranging from two to four years.

    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 the Company's long-lived assets, goodwill and intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate, to the carrying amount including associated intangible assets of the operation. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

(i) Software Development Costs

    Software development costs are accounted for in accordance with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed. Under this standard, capitalization of software development costs generally begins upon the establishment of technological feasibility, subject to net realizable value considerations. To date, the period between achieving technological feasibility and the general availability of the software has been short; therefore, software development costs qualifying for capitalization have been immaterial. Through December 31, 2000, the Company has not capitalized any software development costs and charged all costs to research and development expense.

    Internal use software development costs are accounted for in accordance with AICPA Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Costs incurred in the preliminary project stage are expensed as incurred and costs incurred in the application development stage, which meet the capitalization criteria, are capitalized and amortized on a straight-line basis over the estimated useful life of the asset, generally five years.

(j) Revenue Recognition

    Beginning January 1, 1998, the Company adopted SOP 97-2, as amended by SOP 98-4 and SOP 98-9. The Company's revenue policy before December 31, 1997 was in compliance with the preceding authoritative guidance provided by SOP 91-1, Software Revenue Recognition.

48

    SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on vendor specific objective evidence ("VSOE") of the relative fair values of each element in the arrangement. The Company has established sufficient VSOE to ascribe a value to consulting services and post-contract customer support based on the price charged when these elements are sold separately. Accordingly, license revenue is recorded under the residual method. Under the residual method, revenue is recognized as follows:

(1)

The total fair value of undelivered elements, as indicated by VSOE, is deferred and subsequently recognized according to the requirements of SOP 97-2.



(2)

The difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements.

    Digital Health Record (DHR) revenue consists primarily of revenue from Web-based and client server applications related support services, eCommerce and data. Medscape recognizes DHR revenue from application license fees generally when a signed agreement has been obtained, the delivery of the product has occurred, the fee is fixed and determinable and collectibility of the license fee is probable. Term based licenses from Logician by Medscape and Medscape Encounter (formerly Logician Internet) products are recognized on a subscription basis. Subscription revenue, which is billed in advance, is recognized over the period earned, generally monthly. Support services consist of fees for maintenance and customer support services and consulting, training and integration fees which are recognized at the time the related services are performed. Fees for maintenance and customer support service, conveying the right to obtain upgrades, when and if available, are generally paid in advance and revenue is recognized ratably over the term of the agreement.

    Internet portal revenue is derived from sources including advertising, sponsorship of online journals, medical conferences, market research and eCommerce. Revenues from advertising are recognized in the period in which the advertisement is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Revenue from sponsored programs, such as medical conferences, are recognized when the conference summary is published on the Company's Web site. Revenues from sponsored content, such as clinical modules, is recognized on a percentage of completion basis. Revenues from market research are recognized upon completion of the project.

    Transcription service revenues consist of subscription fees charged for the provision of Medscape Transcription services provided to physicians and other outpatient healthcare delivery systems. Revenues from transcription services are recognized in the period in which the services are performed and when collection of the resulting receivable is probable.

(k) Income Taxes

    The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences

49

are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to the amount more likely than not to be realized.

(l) Stock-Based Employee Compensation

    The Company accounts for its employee stock option plan in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Accordingly, compensation expense related to employee stock options is recorded only if, on the date of the grant, the fair value of the underlying stock exceeds the exercise price. The Company adopted the disclosure-only requirements of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, which allows entities to continue to apply the provisions of APB Opinion No. 25 for transactions with employees and provide pro forma net income and pro forma earnings per share disclosures for employee stock grants as if the fair-value based method of accounting had been applied to these transactions.

    The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force (EITF) 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

(m) Advertising

    The Company expenses costs of advertising when the costs are incurred. Advertising expense was approximately $5,889, $1,473 and $896 for the years ended December 31, 2000, 1999 and 1998.

(n) Net Loss Per Share

    In accordance with SFAS No. 128, Earnings Per Share, the Company has reported both basic and diluted net income per common share for each period presented. Basic income per share is computed on the basis of the weighted-average number of common shares outstanding for the year. Diluted income per share is computed on the basis of the weighted-average number of common shares plus dilutive potential common shares outstanding. Dilutive potential common shares are calculated under the treasury stock method. Securities that could potentially dilute basic income per share consist of outstanding stock options and warrants. As the Company had a net loss attributable to common shareholders in each of the periods presented, basic and diluted net loss per share are the same. The following potential common shares have been excluded from the computation of diluted net loss per share for all periods presented because the effect would have been anti-dilutive:

	Years Ended December 31,
	2000	1999	1998
Shares issuable under stock options and warrants	9,713,909	2,069,303	1,129,724
Shares of restricted stock subject to repurchase	250,976	1,211,328	75,945

50

    As further discussed in Note 14 Subsequent Events, during January 2001, the Company issued warrants for 5 million shares of Medscape common stock, approximately 5.9 million shares of convertible redeemable preferred stock with warrants for approximately 4.5 million shares of Medscape common stock, and warrants for 300,000 shares of Medscape common stock.

(o) Comprehensive Income

    The Company has adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in consolidated financial statements. The Statement requires only additional disclosures in the financial statements; it does not affect the Company's financial position or results of operations. The Company has no material components of other comprehensive loss.

(p) Fair Value of Financial Instruments

    The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments. The carrying amounts of capital leases and notes payable approximate fair value as the stated interest rates reflect current market rates. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument when available. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(q) Reclassifications

    Certain reclassifications have been made to the prior year consolidated financial statements and notes to the consolidated financial statements to conform to the current year presentation.

(2) Merger, Acquisitions and Other Investment

Medscape, Inc.

    In May 2000, the Company completed its merger with Medscape, Inc. ("Medscape, Inc.") a Delaware corporation, issuing approximately 14,932,000 shares of the Company's common stock and assuming approximately 2,545,000 options and warrants in a merger transaction valued at approximately $724.2 million.

    The merger with Medscape, Inc. 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 SFAS No. 123 using the following weighted-average assumptions: exercise price of $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

51

Black-Scholes method with the following assumptions: exercise price of $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 excess of purchase price over the fair value of net tangible and intangible assets of Medscape, Inc. (goodwill), which amounted to approximately $597.2 million, will be amortized over three years. The results of operations and cash flows of Medscape, Inc. 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, issuing approximately 7,450,000 shares of the Company's common stock and assuming 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 SFAS No. 123 using the following weighted-average assumptions: exercise price of $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 Acquisitions

    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. The purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on 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 January 1999, the Company acquired PrimaCis Health Information Technology, Inc., a Delaware corporation (PrimaCis). PrimaCis was subsequently renamed MedicaLogic of Texas, Inc. This acquisition was accounted for as a purchase and the results of operations for the acquired Company are included only from the date of acquisition forward. The total purchase price, including acquisition costs, was approximately $6.5 million and consisted of $2.1 million in cash, the assumption of

52

$1.1 million in liabilities and the issuance of 750,000 shares of common stock at an estimated fair value of $4.40 per share.

    In connection with the acquisition of PrimaCis, the Company entered into a separate agreement with a customer of PrimaCis under which the Company received a purchase order for 1,500 licenses. The Company delivered 500 licenses to this customer on March 31, 1999 and delivered 1,000 licenses to this customer on June 17, 1999 under a standard license agreement. An element of this agreement represents a discount on future sales. Therefore, approximately $1.9 million of the license revenue representing this element was deferred. Revenue from this element is being recognized as sales are completed in accordance with the terms of the separate agreement discussed below or, if earlier, on the expiration of the agreement. In addition, the Company is performing training and implementation services on a time and materials basis to the customer.

    As part of a separate agreement, as amended in December 2000, if the customer or any third party in the Houston, Texas area purchases additional licenses from the Company, the Company is obligated to issue shares of common stock to this customer having a then fair market value of 25% of the price of the subsequent licenses, up to $6 million of stock. This agreement expires on December 31, 2004. The Company issued 5,707 and 172,763 shares of common stock in connection with sales to third parties in the Houston, Texas area and recorded commission expense of $45 and $1,987 during the years ended December 31, 2000 and 1999, respectively.

    On January 5, 1998, the Company paid $12 in cash and issued 13,750 shares of common stock valued at $4.00 per share to acquire intangible assets of Health Outcome Technologies, Inc. This acquisition was accounted for as a purchase and results of operations for the acquired company are included only from the date of acquisition forward. In connection with this acquisition, the Company recorded goodwill of $67, which is being amortized over two years.

Other Investments

    In June 2000, the Company acquired an approximate 10% interest in Lifechart.com, Inc. for approximately $8.3 million in cash. The investment is accounted for using the cost method. The Company also entered into a joint development, sales and marketing agreement with Lifechart.com. The Company recorded a loss on its investment in Lifechart.com of approximately $8.3 million to reduce the carrying amount of the investment to its estimated fair value at December 31, 2000.

PRO FORMA FINANCIAL INFORMATION

    The following unaudited pro forma financial information combines the results of operations of the Company, Medscape, Inc. and Total eMed assuming the respective merger and acquisition were consummated at the beginning of the periods presented. The other investment referred to above was not significant and is 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

53

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.

	Years Ended December 31,
	2000			1999
Revenues	$	58,446		$	36,354
Net loss		(518,698	)		(403,142	)
Net loss per share—basic and diluted	$	(9.55	)	$	(11.52	)

    The above pro forma net loss amounts for the years ended December 31, 2000 and 1999 have been adjusted to include the amortization of goodwill and other intangibles related to the Medscape, Inc. merger and Total eMed acquisition for each period.

(3) Assets

(a) Accounts Receivable

    Accounts receivable are shown net of allowance for doubtful accounts of $2,008 and $529 at December 31, 2000 and 1999, respectively. The following table presents a roll forward of the allowance for doubtful accounts for the indicated periods:

	December 31,
	2000			1999			1998
Balance at beginning of period	$	529		$	1,360		$	852
Provision		2,736			505			756
Charge offs		(1,257	)		(284	)		(248	)
Recoveries		—			(1,052	)		—
Balance at end of period	$	2,008		$	529		$	1,360

(b) Property and Equipment

    Property and equipment, including equipment under capital leases, consist of the following:

	December 31,
	2000			1999
Furniture and equipment	$	41,013		$	16,576
Leasehold improvements		8,409			1,519
Software development costs		5,141			—
		54,563			18,095
Less accumulated depreciation and amortization		(20,391	)		(5,008	)
	$	34,172		$	13,087

54

    Depreciation and amortization expense totaled approximately $15,953, $2,516 and $1,503 for the years ended December 31, 2000, 1999 and 1998, respectively.

(c) Goodwill and Intangible Assets

    Goodwill and intangible assets consist of the following:

		December 31,
		2000		1999
Goodwill		$	938,103	$	6,470
Intangible assets			66,300		—
			1,004,403		6,470
Less accumulated amortization			210,815		1,482
	Goodwill and intangible assets, net	$	793,588	$	4,988

    Amortization expense totaled approximately $204,575, $1,561 and $34 at December 31, 2000, 1999 and 1998, respectively.

(d) Prepaid Advertising

    As a result of the Company's merger with Medscape, Inc. (Note 2), the Company acquired, among other intangible assets, certain assets related to Medscape, Inc.'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 December 31, 2000, the Company is entitled to receive approximately $121.1 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.

    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 year ended December 31, 2000 was approximately $4.5 million, of expense related to the utilization of advertising and promotion services under those agreements.

55

(4) Liabilities

(a) Leases

    The Company leases its facilities under non-cancelable operating lease agreements.

    Future minimum lease payments under non-cancelable operating leases are as follows for each of the years ending December 31:

2001	$	2,025
2002		2,150
2003		2,275
2004		2,300
2005		1,900
Thereafter		3,500
Total minimum lease payments	$	14,150

    Lease expense totaled approximately $5,549, $1,591 and $1,073, for the years ended December 31, 2000, 1999 and 1998, respectively.

    In May 1999, the Company entered into a ten year operating lease agreement for office space which was subsequently terminated in 2000. In connection with this lease, the Company granted options to the lessor to purchase up to 25,000 shares of common stock, at a price of $6.50 per share. The lessor is required to exercise the option within three years of the effective date of the Company's initial public offering.

    The fair value of the options to be issued to the lessor was determined by applying the Black-Scholes option pricing model using the commitment date of the lease for performance of the lessor as the measurement date. The per share weighted average fair market value was $4.79 on the date of grant, using the following weighted average assumptions: risk-free interest rate of 5.75%, zero expected dividend yield, a three year expected life, and volatility index of 100%. The fair value of $120 is being amortized over the lease period.

56

(b) Long-term liabilities

    Long-term liabilities consists of the following:

	December 31,
	2000		1999
Notes payable, monthly principal and interest payments of $4; interest at 11% per year; final payment due December 31, 2008; uncollaterized	$	278	$	66
Notes payable under term facility, monthly principal and interest payments of $54; interest at two-year Treasury constant maturities plus 5% per year, ranging from 9.45% to 10.43% at December 31, 2000; maturing between September 2000 and January 2002; collateralized by equipment purchased		1,271		3,006
Note payable under term facility, quarterly principal and interest payments of $38; interest at 7.96% per year; final payment due April 2001; collateralized by equipment purchased		178		307
Capital equipment leases, payable in monthly installments of $50; including interest ranging from 6% to 17% per year; due through August 2001; collateralized by equipment purchased		719		1,286
Contract payable, net of discount of $800, payments due approximately quarterly through May 2002		14,276		—
		16,722		4,665
Long-term liabilities current portion		12,131		2,432
Long-term liabilities net of current portion	$	4,591	$	2,233

    In January 2001, Medscape received from the holder of the contract payable a notice of breach due to the fact that the Company is delinquent on its 2001 payment to the holder of approximately $3 million. The Company and AOL are in negotiations with respect to this payment and the future of their relationship.

    The Company leases office furniture and equipment under long-term capital leases, which expire throughout the next year. At December 31, 2000 and 1999, the net book value of leased furniture and equipment included in property and equipment was approximately $1,072 and $1,368, respectively.

    Future maturities of notes payable for each of the years ending December 31 are as follows:

2001		$	12,131
2002			4,373
2003			75
2004			31
2005			34
Thereafter			78
	Total	$	16,722

57

(5) Shareholders' Equity

(a) Stock Incentive Plan

    In February 1993, the Company adopted a stock incentive plan that allowed for the issuance of 2,247,192 shares of common stock. Under the 1996 stock incentive plan, adopted in December 1996, together with the 1993 stock incentive plan, 500,000 shares of common stock were reserved for issuance. The Company's 1996 plan was amended in 1998 and 1999 to reserve an additional 350,000 and 1,900,000 shares of common stock for issuance, respectively, bringing the total under both plans to 4,997,192. In September 1999, the Company adopted the 1999 stock incentive plan, which authorized the issuance of 2,000,000 shares. An additional 3,507,967 shares reserved for issuance were assumed upon merger and acquisition during 2000. The 1999 plan was amended in May 2000 to reserve an additional 6,000,000 shares, bringing the total shares under all plans to 16,505,159 at December 31, 2000. Under the terms of the plans, the board of directors is authorized to grant incentive stock options, non-statutory stock options and to sell restricted stock to employees or others providing services or benefits to the Company. The plans also allow granting of stock bonuses, stock appreciation rights, and other forms of stock based incentives. The 1999 plan provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986 for the granting to employees and consultants of nonstatutory stock options and for the issuance of stock bonuses, restricted stock and stock appreciation rights. Unless terminated earlier, the 1999 plan will terminate automatically in September 2009.

    The stock incentive plans are administered by the Company's board of directors. The board of directors has the power to determine the terms of the options or rights granted, including the exercise price, the number of shares subject to each option or right, the character of the grant, the exercisability of the grant and the form of consideration payable upon exercise of options. The board of directors may delegate administration of the stock incentive plans to a committee.

    In March 1998, Medscape extended the term of all outstanding options from five years to ten years, which constituted a new measurement date. The fair value of the stock as determined by the board of directors on the date the change was effective was $4.00 per share. 121,025 of these options had exercise prices ranging from $1.60 to $2.00 per share and were fully vested. For these outstanding options, Medscape recorded a compensation charge of $110 in connection with this change in option terms. The compensation expense was calculated by taking the difference between the original grant price and the fair value on the new measurement date.

    To qualify as incentive stock options (ISOs), the exercise price must not be less than the fair market value of the common stock at the date of the grant or, in the case of incentive stock options issued to holders of more than 10% of the outstanding common stock, 110% of the fair market value. The maximum term of incentive stock options is 10 years, or five years in the case of holders of more than 10% of the Company's outstanding common stock. For incentive stock options exerciseable for the first time by an employee, the aggregate fair market value of the common stock on the date of the grant may not exceed $100,000 during any calendar year.

    Options granted under the stock incentive plans are generally nontransferable and, unless otherwise determined by the board of directors, must be exercised during the period of the option holder's employment or service with the Company or within 90 days of termination of employment or service.

58

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(5) Shareholders' Equity (Continued)

    The stock incentive plans provide that if the Company merges with or into another corporation, or the Company sells substantially all of the Company's assets, each outstanding option will be assumed by the successor corporation.

    The per share weighted average fair market value, as determined by applying the Black-Scholes option pricing model to stock options granted under the plans during 2000, 1999 and 1998 was $6.22, $5.02 and $3.44, respectively, on the date of grant, with the following weighted average assumptions:

	Years Ended December 31,
	2000		1999		1998
Risk-free interest rate	5.10	%	5.875	%	6.0	%
Expected dividend yield	0	%	0	%	0	%
Years of expected life	7		7		7
Expected volatility	100	%	100	%	100	%

    Medscape continues to apply APB Opinion No. 25 in accounting for the plans and compensation cost is generally not recognized for its stock options in the financial statements. The effect on the Company's net loss, had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123 is as follows:

	Years Ended December 31,
	2000			1999			1998
Pro forma net loss	$	(326,279	)	$	(30,895	)	$	(8,342	)
Pro forma net loss per share		(7.06	)		(3.39	)		(1.21	)

59

    Transactions involving the plans are summarized as follows:

		Number of Shares		Weighted Average Exercise Price
Options outstanding, December 31, 1997		974,015		$	3.68
	Granted	480,493			4.10
	Exercised	(34,526	)		2.10
	Forfeited	(206,576	)		3.98
Options outstanding, December 31, 1998		1,213,406			3.80
	Granted	2,363,950			8.18
	Exercised	(242,575	)		3.61
	Forfeited	(80,905	)		4.51
Options outstanding, December 31, 1999		3,253,876			6.98
	Granted	6,718,761			7.35
	Assumed in merger and acquisition	2,189,770			11.15
	Exercised	(734,298	)		2.24
	Forfeited	(2,469,200	)		9.18
Options outstanding, December 31, 2000		8,958,909			7.65

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number of Outstanding at December 31, 2000	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2000	Weighted Average Exercise Price
$0.03 - 2.31	944,265	9.22	$	1.96	239,908	$	0.99
3.10 - 4.40	1,011,877	7.36		3.98	758,802		4.03
5.13 - 5.45	460,800	9.52		5.16	64,561		5.38
5.94 - 5.94	3,897,947	9.45		5.94	705,921		5.94
6.43 - 8.06	953,430	8.47		6.71	568,920		6.61
9.50 - 13.00	898,420	8.53		10.87	404,423		10.60
13.38 - 30.19	448,070	9.11		21.93	160,500		23.45
30.96 - 30.96	202,622	8.69		30.96	102,743		30.96
33.86 - 33.86	123,791	9.13		33.86	—		—
36.76 - 36.76	17,687	9.11		36.76	1,818		36.76
$0.03 - 36.76	8,958,909	8.96		7.65	3,007,596		7.61

    At December 31, 2000, 7,546,249 shares were available for grant.

    The Company has deferred stock compensation of $741 at December 31, 2000. Deferred stock compensation is primarily based on the difference between the deemed fair market value of common stock and the exercise price of the option or stock on the grant date. Deferred compensation is being amortized over the vesting period of the options, which is generally three years. The Company

60

recognized expenses of $1,077 in the twelve-month period ended December 31, 2000 related to these grants.

(b)  Stock Warrants

    As a result of the Company's merger with Medscape, Inc. in May 2000, outstanding warrants to purchase shares of Medscape, Inc. common stock were converted to warrants to purchase 0.323 shares of the Company's common stock. At December 31, 2000, warrants to purchase 727,911 shares of the Company's common stock were exercisable at $30.96 per share. The warrants were issued in connection with an agreement with America Online, Inc. ("AOL"), under which AOL has agreed to promote the Company's co-branded Websites, through contextual links and banners, on the following AOL properties: AOL, AOL.com, CompuServe Service, Netscape Netcenter and Digital City. The agreement also requires cash payments of $33 million to be paid to AOL, of which, the Company has paid approximately $18 million through December 31, 2000. Approximately $3.7 million is included in long-term liabilities and the remaining $11.3 million is included in the current portion of long-term liabilities at December 31, 2000. The remaining payments are due through May 2002.

(c)  Restricted Stock Purchase Agreements

    As of the end of December 1999, the Company had sold 2,175,750 shares of common stock at prices ranging from $4.00 to $13.00 to senior management of the Company. These shares were sold under agreements, which allow the Company, at its option, to repurchase these shares at the original sale price. Under the repurchase agreements associated with 1,958,250 of these shares, the shares subject to repurchase are reduced in equal increments over 36 months from the original vesting dates which range from February 28, 1996 to December 6, 2002. At December 31, 1999 and 2000, there were approximately 1,211,328 and 250,976 shares, respectively, outstanding that were eligible for repurchase. The Company holds promissory notes totaling approximately $6,728 of principal and interest, net of allowance at December 31, 2000, from current and former senior management in consideration for the restricted stock discussed above. The notes accrue interest at 6% per year and are payable in full 10 years from the date of the loan. In connection with these stock issuances, the Company recorded compensation expense of $0 and $986 for the years ended December 31, 2000 and 1999, respectively.

(d)  Shares Issued for Services

    In August 2000, the Company granted 41,500 stock options valued at $181 in exchange for consulting services provided by third parties. The stock options were valued using the Black-Scholes option pricing model. The per share weighted average fair market value was $5.13 on the date of grant, with the following weighted average assumptions: risk-free interest rate of 6%, expected dividend yield of 0%, a 7-year term and an expected volatility index of 100%.

(e)  Employee Stock Purchase Plan

    The Company's board of directors has adopted and the shareholders have approved an employee stock purchase plan (ESPP), for the benefit of its employees. A total of 2,500,000 shares are reserved for issuance under the ESPP.

61

    Except as described below, all full-time employees of the Company and its designated subsidiaries are eligible to participate in the ESPP. Any employee who would, after a purchase of shares in an offering under the plan, own or be considered to own five percent or more of the voting power or value of all classes of stock of the Company, or any parent or subsidiary of the Company, is ineligible to participate in an offering under the ESPP.

    Except for the first offering period, offering periods are two years long and are divided into four six-month purchase periods. The first offering period began on the effective date of the initial public offering and runs for approximately two years, divided into four purchase periods. On the first day of each offering period, the offering date, each participating employee is automatically granted an option to purchase shares of the Company's common stock. That option will be automatically exercised on the last day of each purchase period during the offering. The last day of a purchase period is known as a purchase date. No employee may purchase more than 10,000 shares in each offering period or accrue the right to purchase shares at a rate that exceeds $25 of fair market value, as determined on the offering date, for each calendar year that the option is outstanding. Each eligible employee may elect to participate in the ESPP by filing a subscription and payroll deduction authorization. Shares may be purchased under the ESPP only through payroll deductions of not more than 15 percent of an employee's gross base salary plus commissions. On each purchase date the Company will apply the amounts withheld to purchase shares for the employee. The purchase price will be the lesser of 85 percent of the fair market value of the Company's common stock on the offering date or on the purchase date.

    The ESPP is administered by the Company's board of directors. The board of directors may adopt rules and regulations for the operation of the ESPP, adopt forms for use in connection with the ESPP, decide any question of interpretation of the ESPP or rights arising under the ESPP and generally supervise the administration of the ESPP. The Company pays all expenses of the ESPP other than commissions on sales of shares for employees' accounts by the custodian.

    An independent custodian maintains the records under the ESPP. Shares purchased by employees under the ESPP are delivered to and held by the custodian on behalf of the employees. By appropriate instructions from an employee, all or part of the shares may be sold or transferred into the employee's own name and delivered to the employee.

    The board of directors may amend the ESPP, except that increases in the number of reserved shares, other than adjustments authorized by the ESPP, or decreases in the purchase price of shares offered under the ESPP, require shareholder approval. The board of directors may terminate the ESPP at any time.

    During 2000, the Company issued 212,156 shares of common stock valued at $1,026 under the employee stock purchase plan.

62

(6)  Other Income

    Other income consists of the following:

	Years Ended December 31,
	2000			1999			1998
Interest expense	$	(482	)	$	(292	)	$	(187	)
Interest income		6,292			1,876			707
Other, net		35			(487	)		(54	)
Total other income	$	5,845		$	1,097		$	466

(7)  Income Taxes

    The Company incurred a loss for both financial reporting and tax return purposes for the years ended December 31, 2000, 1999 and 1998. As such, there was no current or deferred tax provision for these periods.

    The actual income tax expense differs from the expected tax expense, which is computed by applying the U.S. federal corporate income tax rate of 34% to net loss before income taxes, as follows:

		Years Ended December 31,
		2000		1999		1998
Computed expected income tax benefit		(34.0	)%	(34.0	)%	(34.0	)%
Increase (reduction) in income tax expense (benefit) resulting from:
	State income tax benefit	(1.5	)	(4.1	)	(4.3	)
	Increase in valuation allowance	13.9		37.8		44.7
	Research and development credits	(0.1	)	(2.2	)	(8.3	)
	Goodwill	21.7		—		—
	Other	—		2.5		1.9
	Income tax expense	—	%	—	%	—	%

63

    The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

		Years Ended December 31,
		2000			1999
Deferred tax assets:
	Deferred revenue	$	315		$	—
	Intangibles		3,492			—
	Furniture and equipment due to differences in depreciation		1,555			—
	Net operating loss and research and experimentation credit carryforwards		110,576			24,588
	Allowance for doubtful accounts and other accruals		1,239			690
	Other carryforwards		32			—
	Gross deferred tax assets		117,209			25,278
	Less valuation allowance		(117,209	)		(25,084	)
	Net deferred tax assets		—			194
Deferred tax liabilities:
	Change in method of accounting		—			(54	)
	Other		—			(140	)
	Net deferred tax liabilities		—			(194	)
	Net deferred tax assets and liabilities	$	—		$	—

    Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. The valuation allowance for deferred tax assets as of December 31, 2000 was approximately $117,209. The net change in the total valuation allowance for the years ending December 31, 2000, 1999 and 1998 was an increase of approximately $92,125, $10,525 and $3,153 respectively.

    Included in the valuation allowance at December 31, 2000 is $47,059 for deferred tax assets for which subsequently recognized tax benefits, if any, will be allocated to reduce goodwill of acquired enterprises.

    At December 31, 2000, the Company has available federal and state net operating loss carryforwards for tax purposes of approximately $281,789 and research and experimentation credits of approximately $2,512, which expire through 2020. Approximately $114,391 of the net operating losses are subject to annual utilization limitation due to ownership changes in prior years.

(8)  Restructuring Charges

    Primarily as a result of the merger and acquisition described in Note 2, the Company adopted certain restructuring plans during the year ended December 31, 2000. The restructuring plans resulted in charges related to the consolidation of duplicate functions and activities. These actions resulted in a

64

reduction of approximately 28% 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 totaled approximately $17,506 million for the year ended December 31, 2000. At December 31, 2000, approximately $1.8 million relating to these programs was included in current liabilities.

    As of December 31, 2000, the following amounts were recorded:

	Employee severance and related expenses		Impairments of technology and intangible assets		Abandonment and impairment of facilities, property and equipment		Total
2000 restructuring charges	$	11,287	$	3,108	$	3,111	$	17,506
Write-offs/payments		9,542		3,108		3,111		15,761
Restructuring accrual balance at December 31, 2000	$	1,745	$	—	$	—	$	1,745

    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.

(9)  Commitments and Contingencies

    In September 1999, Medscape entered into a license agreement with L&H Applications USA, Inc. L&H has granted to the Company a non-exclusive, non-transferable license to incorporate L&H's product into the Company's Logician family of products. The Company may be required to make additional minimum payments in accordance with this agreement of up to $1,075 during 2001.

    In February 1999, the Company entered into an agreement to issue common stock to a customer at the fair market value up to $6,000, in consideration for allowing the Company to use this customer as a reference site. Issuance of stock is contingent upon sales of additional licenses to the customer or to third parties in the customer's geographic area. Since the date of inception, the Company has issued 178,470 shares of common stock with an estimated fair value of $9.45 per share to this customer through December 31, 2000. The Company has recorded the expense associated with this grant as a component of marketing and sales expense. The stock agreement expires December 31, 2004.

    The Company is involved in various claims and legal actions in the normal course of business. The most significant of these are described below. In the opinion of management, the ultimate disposition of outstanding claims and legal actions will not have a material effect on the Company's consolidated financial position, results of operations or liquidity.

65

    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, Inc. 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 should the case proceed to trial.

    The Financial Accounting Standards Board (FASB) has issued an Exposure Draft ("Draft"), Business Combinations and Intangible Assets-Accounting for Goodwill, that proposes significant changes to the current accounting for goodwill and intangible assets. If adopted in its current form, the Company's financial results may be impacted in the future. Currently, the Draft would require companies to discontinue the current practice of amortizing goodwill over its useful life and instead require companies to perform impairment tests when certain events or circumstances indicate the fair value of goodwill may be less than the carrying amount.

(10)  Segment Information

    During the fourth quarter of 2000, Medscape's operations and corresponding organizational structures were organized into three strategic business unit groups that offer products and services tailored for particular market segments. In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company is required to describe its reportable segments and provide data that is consistent with the data made available to the Company's management to allocate resources and assess performance. Information for prior periods has been reclassified to conform to the current year presentation.

    Medscape's reported segments consist of Digital Health Record (DHR) applications (application licenses and support services), Internet portals (sponsorship and advertising), and transcription services (transcription services). The DHR applications segment develops and markets DHR applications for physicians, healthcare professionals, and patients by using advanced technologies to link healthcare professionals and consumers to physicians. Internet Portals provide healthcare professionals and consumers with timely, relevant, and authoritative professional and consumer healthcare information available through the Company's branded media properties, including Medscape.com and CBSHealthWatch.com. Medscape Transcription provides transcription services for physicians in the outpatient market and provides premium web-based medical transcription services to physicians by utilizing digital voice capture, dedicated circuits, and the Internet to connect physicians and professional medical transcriptionists through a national data center.

66

    The Company measures the performance of its operating segments based on segment operating income, which includes sales and marketing expenses, research and development costs, and other overhead charges directly attributable to the operating segment. Certain expenses that are managed outside of the operating segments are excluded from segment operating income. These consist primarily of corporate charges, including other income and expense items, unallocated shared expenses, taxes, and restructuring and merger charges. Gains and losses associated with the sale of business assets are also excluded from segment operating income. Asset information by operating segment is not reported since Medscape does not identify assets by segment. The accounting policies of the segments are the same as those used in the preparation of Medscape's consolidated financial statements.

    The Company does not have material revenues or assets outside the United States. During 2000, no single customer accounted for more than 10% of total revenues. During 1999, one customer accounted for approximately 16% of the Company's total revenues, and another customer accounted for approximately 13%. During 1998, one customer accounted for approximately 20% of total revenues.

		Years Ended December 31,
		2000			1999			1998
Digital Health Record application
	Revenue	$	21,104		$	19,717		$	16,160
	Operating loss		(22,768	)		(29,084	)		(7,698	)
Internet portal
	Revenue		20,483			—			—
	Operating loss		(9,628	)		—			—
Transcription service
	Revenue		6,568			—			—
	Operating loss		(7,827	)		—			—
Consolidated and other
	Revenue		—			—			—
	Operating loss		(40,750	)		—			—
Consolidated segment totals
	Revenue		48,155			19,717			16,160
	Operating loss	$	(80,973	)	$	(29,084	)	$	(7,698	)

67

    The following table reconciles consolidated segment operating loss to the Company's consolidated net loss.

	Years Ended December 31,
	2000			1999			1998
Consolidated segment operating loss	$	(80,973	)	$	(29,084	)	$	(7,698	)
Corporate and other unallocated shared income		5,845			1,097			466
Depreciation and amortization		(220,528	)		—			—
Restructuring and other charges		(25,815	)		—			—
Net loss	$	(321,471	)	$	(27,987	)	$	(7,232	)

(11)  401(k) Plan

    The Company and its subsidiaries sponsor several 401(k) deferred savings plans, covering substantially all employees. Employees generally become eligible to participate in the plan upon employment. Employees may contribute up to 15% of their pay to the plan, subject to the limitation of $10.5 by the Internal Revenue Code. All employee contributions vest immediately. Medscape has not made any matching contributions, but does pay administrative costs for the plan. These costs were not significant for any period presented.

(12)  Related Party Transactions

    The Company has accepted promissory notes totaling $6,728 of principal and interest amount, net of the allowance, at December 31, 2000 from its officers and certain other employees in consideration for restricted stock issued. These notes accrue interest at 6% per year and are payable in full 10 years from the date of the underlying loan.

    The Company also loaned an officer approximately $104 to help pay for relocation expenses, under an unsecured promissory note, which bears interest at 6% per year. The note is payable in full on the earlier to occur of the sale of his residence located in Portland, Oregon, the termination of his employment, or July 1, 2001. The note is prepayable in full without penalty and was paid in full plus accrued interest during 2000.

68

(13)  Quarterly Financial Information (unaudited)

			March 31, 2000			June 30, 2000			September 30, 2000			December 31, 2000			March 31, 1999			June 30, 1999			September 30, 1999			December 31, 1999
Revenues:
	Application licenses and support services		$	5,608		$	3,486		$	5,674		$	6,336		$	2,997		$	4,088		$	6,017		$	6,615
	Sponsorship and advertising			—			6,055			6,429			7,999			—			—			—			—
	Transcription services			—			1,348			2,397			2,823			—			—			—			—
		Total revenues:		5,608			10,889			14,500			17,158			2,997			4,088			6,017			6,615
Operating expenses				22,149			91,722			126,955			134,930			6,634			8,631			13,344			20,192
Net loss				(14,726	)		(78,870	)		(111,058	)		(116,817	)		(3,426	)		(4,337	)		(6,802	)		(13,088	)
Net loss per share				(0.45	)		(1.85	)		(2.02	)		(2.12	)		(0.48	)		(0.54	)		(0.85	)		(0.96	)

(14)  Subsequent Events (unaudited)

(a) General Motors Corporation

    General Motors Corporation (GM), the world's largest vehicle manufacturer, designs, builds and markets cars and trucks worldwide. GM is also the United States' largest private purchaser of healthcare. In January 2001, GM and Medscape entered into an e-business healthcare alliance. Under the alliance, GM and Medscape will cooperate on a three-year program to encourage U.S. physicians to use hand-held computer devices which use applications from the Medscape Mobile suite of products for prescriptions and to adopt Medscape's DHR application Medscape Logician ASP. As part of the strategic alliance, GM received warrants for 5 million shares of Medscape common stock. GM and Medscape will also share in any cost savings realized by GM primarily from physician usage of Medscape Mobile applications.

(b) Convertible Redeemable Preferred Stock Subscribed

    The Company issued approximately 5.9 million shares of Series 1 convertible redeemable preferred stock pursuant to a financing round that closed on January 4, 2001. As of December 31, 2000, $15.8 million had been received, in advance of the closing, and is presented in the financial statements as preferred stock subscribed. The Company received an additional $2 million in January and, at closing, paid approximately $1 million and issued warrants for 300,000 shares of Medscape common stock in fees associated with the financing. The terms for the Series 1 preferred stock are summarized below.

Dividends

    Preferred shareholders are entitled to receive dividends when and if declared by the Company's board of directors at an annual rate of $0.27 per share. The right to receive dividends on preferred stock is cumulative and shall compound annually. Dividends are deemed to accrue on a daily basis, commencing on the date the Series 1 preferred stock is first issued. No dividends may be declared or paid on common stock until all declared dividends on preferred stock have been paid. As of December 31, 2000 no dividends had been declared or paid.

69

Liquidation Preferences

    Upon dissolution, liquidation or winding up of the affairs of the Company, either voluntarily or involuntarily, the preferred shareholders receive preference in liquidation over the common shareholders of the Company. The liquidation value for each outstanding share is $3 per share, adjusted for any accrued and unpaid stock dividends.

Redemption

    The preferred stock is subject to mandatory redemption features under the following circumstances (a) a change in control or (b) a trigger event. A trigger event is defined as the Company failing to obtain the shareholder approval contemplated by the Preferred Stock and Warrant Purchase Agreement. In the occurrence of either event, each holder shall have the right to require the Corporation to purchase all or a portion of such preferred stock, for which funds are legally available for redemption. The per share redemption price for each series of preferred stock is equal to its per share liquidation value, adjusted for any accrued and unpaid stock dividends.

Voting

    The holder of each share of each series of preferred stock is entitled to the number of votes the holder would be entitled to if the shares of preferred stock were converted to common stock.

Conversion

    Each share of preferred stock is voluntarily convertible into common stock at any time after the date of issuance at a rate that equals the original issue price divided by the conversion price at the time in effect, subject to adjustments specified in the purchase agreements. Each share of the Series 1 preferred stock shall be automatically converted into the number of shares of common stock obtained by dividing the per share price by the conversion price, subject to adjustments in accordance with the anti-dilution provisions thereof, upon the earlier of: (i) the date, which shall be no sooner than January 4, 2002, on which the last sale price of the common stock on NASDAQ has been at least five times the conversion price for 30 consecutive trading days, with a minimum average trading volume per day of 2% of the number of issued and outstanding shares of common stock not held by affiliates of the Company and (ii) immediately prior to the closing of a merger, sale of all or substantially all of the Company's assets, or combination in which the Company's common shareholders receive cash or marketable securities with an aggregate value per share of at least five times the conversion price.

Warrants

    In addition to the shares of Series 1 preferred stock, the preferred shareholders were granted warrants for the purchase of approximately 4.5 million shares of the Company's common stock. The warrants have an exercise price of $0.01 per share, and are exercisable at the option of the holder for five years. The fair value of the warrants issued was determined by applying the Black-Scholes option pricing model using the commitment date for performance as the measurement date. The warrants and

70

the warrant shares will not be transferable separately from the Series 1 preferred stock prior to the first anniversary of the closing of the proposed transaction.

Board Representation

    The majority of the holders of the Series 1 Preferred Stock shall have the right to elect one member of the Company's board of directors.

Item 9. Changes in and Disagreements with Accountants on Accounting Financial Disclosure

    None

71

PART III

Item 10. Directors and Executive Officers of the Registrant

    Information required in this section regarding Directors of the Company are herein incorporated by reference to the Company's definitive proxy statement to be filed within 120 days of the Company's year end with the Securities and Exchange Commission. See also the information with respect to Executive Officers of the Company under Item 4A of Part I hereof, which information is incorporated herein by reference.

Item 11. Executive Compensation

    Information required in this section regarding executive compensation, are herein incorporated by reference to the Company's definitive proxy statement to be filed within 120 days of the Company's year end with the Securities and Exchange Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management

    Information required in this section regarding security ownership of certain beneficial owners and management are herein incorporated by reference to the Company's definitive proxy statement to be filed within 120 days of the Company's year end with the Securities and Exchange Commission.

Item 13. Certain Relationships and Related Transactions

    Information required in this section regarding certain relationships and related transactions are herein incorporated by reference to the Company's definitive proxy statement to be filed within 120 days of the Company's year end with the Securities and Exchange Commission.

72

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) Financial Statements

    The following is the index to the consolidated financial statements:

MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

		Page
MedicaLogic/Medscape, Inc.—Consolidated Financial Statements:
	Independent Auditors' Report	41
	Consolidated Balance Sheets	42
	Consolidated Statements of Operations	43
	Consolidated Statements of Shareholders' Equity	44
	Consolidated Statements of Cash Flows	45
	Notes to Consolidated Financial Statements	46

(a)(2) Financial Statement Schedule.

    Schedules have been omitted because the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required.

(a)(3) Exhibits

(a)
2.1(4)	Agreement of Reorganization and Merger dated as of February 21, 2000 among Medicalogic, Inc., Medscape, Inc., and Moneypenney Merger Corp.
2.2(4)	Agreement of Reorganization and Merger dated as of February 21, 2000 among Medicalogic, Inc., Total eMed Inc., and AQ Merger Corp.
3.1(7)	1999 Restated Articles of Incorporation.
3.1.1(6)	Articles of Amendment to the 1999 Restated Articles of Incorporation.
3.1.2(8)	Articles of Amendment to the 1999 Restated Articles of Incorporation
3.2(6)	Restated Bylaws.
10.1(8)	2001 Third Amended and Restated Investor Rights Agreement.
10.2(1)*	1993 Stock Incentive Plan.
10.3(1)*	1996 Stock Incentive Plan, as amended.
10.4(1)*	1999 Stock Incentive Plan.
10.5(3)*	Amendment to 1999 Stock Incentive Plan.
10.6(1)*	Form of Incentive Stock Option Agreement.
10.7(1)	Form of Restricted Stock Purchase Agreement (Performance).
10.8(1)	Form of Restricted Stock Purchase Agreement.
10.9(2)	Form of Warrant, dated March 5, 1999, entitling Credit Suisse First Boston Corporation to purchase up to 14,667.5 shares of Registrant's common stock.
10.10(2)	Warrant, dated September 3, 1999, entitling America Online, Inc. to purchase 1,352,158 shares of Registrant's Class A common stock.
10.11(2)	Performance Warrant, dated September 3, 1999, entitling America Online, Inc. to purchase 1,352,158 shares of Registrant's Class A common stock.

73

10.12(5)	Form of Warrant, dated February 15, 2000, entitling Lazard Freres & Co. LLC to purchase 100,000 shares of Registrant's Common Stock.
10.13(8)	Stock Purchase Agreement, dated April 17, 2000, between Medicalogic, Inc. and AnywhereMD.com, Bryan Hixson, and Harold Hartsell.
10.14(8)	Preferred Stock and Warrant Purchase Agreement, dated December 22, 2000, between Medicalogic/Medscape Inc., Quantum Industrial Partners LDC, SFM Domestic Investments LLC, and certain other Investors.
10.14.1(8)	Amendment to Preferred Stock and Warrant Purchase Agreement, dated December 22, 2000.
10.15(8)	Form of Warrants, dated January 4, 2001, issued to Quantum Industrial Partners LDC, SFM Domestic Investments LLC, and certain other Investors in connection with the Preferred Stock and Warrant Purchase Agreement.
10.16(8)	Form of Warrant, dated January 24, 2001, entitling General Motors Corporation to purchase 5,000,000 shares of Company's common stock.
10.17(2)	Common Stock Purchase Agreement between Medscape, Inc. and CBS Corporation, dated as of July 4, 1999.
10.18(2)	Form of Stockholders Agreement between Medscape, Inc. and CBS Corporation, dated July of 1999.
10.19(2)	Form of Advertising and Promotion Agreement between Medscape, Inc. and CBS Corporation, dated July of 1999.
10.20(2)	Form of Joinder Agreement among certain Medscape, Inc. shareholders, dated July of 1999, in connection with the Stockholders Agreement dated July of 1999.
10.21(2)	Form of Trademark and Content Agreement between Medscape, Inc. and CBS Corporation, dated July of 1999.
10.22(2)	Form of Subscription Agreement with CBS Corporation.
10.23(1)	Agreement to Issue Shares of common stock between Medicalogic, Inc. and Baylor College of Medicine, dated as of February 16, 1999.
10.23.1(8)	Amendment, dated December 27, 2000, to the Agreement to Issue Shares of common stock.
10.24(1)	Industrial Business Park Lease between Medicalogic, Inc. and Evergreen Corporate Center LLC dated January 15, 1997, as amended July 15, 1999.
10.24.1(8)	Amendment, dated November 24, 1999, to the Industrial Business Park Lease between Medicalogic, Inc. and Evergreen Corporate Center LLC.
10.25(8)	Agreement of Lease between Total eMed, Inc. and Highwoods/Tennessee Holdings, LP, dated November 22, 1999.
10.26(2)	Agreement of Lease between Medscape, Inc. and 224 W 30 LLC, dated May 26, 1999.
10.26.1(8)	Amendment, dated April 5, 2000 to the Agreement of Lease between Medscape, Inc. and 224 W 30 LLC.
10.26.2(8)	Second Amendment, dated April 5, 2000 to the Agreement of Lease between Medscape, Inc. and 224 W 30 LLC.
10.27(1)	Oracle Alliance Agreement between Medicalogic, Inc. and Oracle Corporation, dated April 1, 1998, as amended.
10.27.1(8)+	Amendment, dated January 1, 2000, to the Oracle Alliance Agreement between Medicalogic, Inc. and Oracle Corporation.
10.28(2)*	Employment Agreement between Medscape, Inc. and George D. Lundberg, M.D., dated February 15, 1999.
10.29(2)*	Employment Agreement between Medscape, Inc. and Mark Boulding, dated June 28, 1999.

74

10.30(2)	Preferred Share Purchase Agreement among Softwatch Ltd., and Medscape, Inc.(as purchaser) and certain other purchasers, dated June 15, 1999.
10.31(2)	License and Web Site Development Agreement between Medscape, Inc. and Softwatch, Inc., dated June 15, 1999.
10.32(2)	Stock Purchase Agreement between Medscape, Inc. and National Data Corporation, dated July 7, 1999.
10.33(2)+	Form of License and Product Development Agreement between Medscape, Inc. and National Data Corporation, dated July of 1999.
10.34(2)+	Interactive Services Agreement between America Online, Inc. and Medscape, Inc., dated September 3, 1999.
10.35(2)	Side Letter between America Online, Inc. and Medscape, Inc. dated September 22, 1999 in connection with the Interactive Services Agreement.
21.1(8)	Subsidiaries of the Company.
23.1(8)	Consent of Independent Auditors.

*

Management contract or compensatory plan or agreement.

+

Confidential treatment: Portions of this document are omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Index to Footnotes:

(1)

Previously filed and incorporated herein by reference to Medicalogic, Inc.'s Registration Statement on Form S-1 of 1999 (333-87285).

(2)

Previously filed and incorporated herein by reference to Medscape, Inc.'s Registration Statement on Form S-1 of 1999 (333-77665).

(3)

Previously filed and incorporated herein by reference to the Company's Current Report on Form 10-Q, dated on June 30, 1999, and filed with the Securities and Exchange Commission on August 14, 2000.

(4)

Previously filed and incorporated herein by reference to the Company's Current Report on Form 8-K, dated February 21, 2000 and filed with the Securities and Exchange Commission on March 9, 2000.

(5)

Previously filed and incorporated herein by reference to Medscape's Current Report on Form 10-K, for the Period End of December 31, 1999, and filed with the Securities and Exchange Commission on March 13, 2000.

(6)

Previously filed and incorporated herein by reference to the Company's Current Report on Form 8-K, dated May 11, 2000 and filed with the Securities and Exchange Commission on May 25, 2000.

(7)

Previously filed and incorporated herein by reference to Medicalogic, Inc.'s Registration Statement on Form S-8, dated January 14, 2000.

(8)

Filed herewith.

(b)

Reports on Form 8-K:

    The Company filed a report on Form 8-K, dated December 22, 2000, announcing the execution of an agreement for the private placement of preferred stock and warrants.

75

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MEDICALOGIC/MEDSCAPE, INC.
Date: March 5, 2001	By:	/s/ DAVID C. MOFFENBEIER
		David C. Moffenbeier President and Chief Executive Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date: March 5, 2001	By:	/s/ DAVID C. MOFFENBEIER
		David C. Moffenbeier Director, President and Chief Executive Officer (Principal Executive Officer)
Date: March 5, 2001	By:	/s/ DONALD A. BLOODWORTH
		Donald A. Bloodworth Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)
Date: March 5, 2001	By:	/s/ MARK K. LEAVITT, M.D.
		Mark K. Leavitt, M.D. Director, Chairman of the Board
Date: March 5, 2001	By:	/s/ THOMAS A. CROSKEY
		Thomas A. Croskey Director
Date: March 5, 2001	By:	/s/ BRUCE M. FRIED
		Bruce M. Fried Director
Date: March 5, 2001	By:	/s/ C. MARTIN HARRIS, M.D.
		C. Martin Harris, M.D. Director
Date: March 5, 2001	By:	/s/ ANDREW HEYWARD
		Andrew Heyward Director

76

Date: March 5, 2001	By:	/s/ RONALD H. KASE
		Ronald H. Kase Director
Date: March 5, 2001	By:	/s/ ARTHUR N. LEIBOWITZ, M.D.
		Arthur N. Leibowitz, M.D. Director, Executive Vice President, Digital Health Strategy and Business Development
Date: March 5, 2001	By:	/s/ GEORGE D. LUNDBERG, M.D.
		George D. Lundberg, M.D. Director, Executive Vice President and Editor-in-Chief
Date: March 5, 2001	By:	/s/ NEAL MOSZKOWSKI
		Neal Moszkowski Director
Date: March 5, 2001	By:	/s/ MARK A. STEVENS
		Mark A. Stevens Director

77

Exhibit Index

2.1(4)	Agreement of Reorganization and Merger dated as of February 21, 2000 among Medicalogic, Inc., Medscape, Inc., and Moneypenney Merger Corp.
2.2(4)	Agreement of Reorganization and Merger dated as of February 21, 2000 among Medicalogic, Inc., Total eMed Inc., and AQ Merger Corp.
3.1(7)	1999 Restated Articles of Incorporation.
3.1.1(6)	Articles of Amendment to the 1999 Restated Articles of Incorporation.
3.1.2(8)	Articles of Amendment to the 1999 Restated Articles of Incorporation
3.2(6)	Restated Bylaws.
10.1(8)	2001 Third Amended and Restated Investor Rights Agreement.
10.2(1)*	1993 Stock Incentive Plan.
10.3(1)*	1996 Stock Incentive Plan, as amended.
10.4(1)*	1999 Stock Incentive Plan.
10.5(3)*	Amendment to 1999 Stock Incentive Plan.
10.6(1)*	Form of Incentive Stock Option Agreement.
10.7(1)	Form of Restricted Stock Purchase Agreement (Performance).
10.8(1)	Form of Restricted Stock Purchase Agreement.
10.9(2)	Form of Warrant, dated March 5, 1999, entitling Credit Suisse First Boston Corporation to purchase up to 14,667.5 shares of Registrant's common stock.
10.10(2)	Warrant, dated September 3, 1999, entitling America Online, Inc. to purchase 1,352,158 shares of Registrant's Class A common stock.
10.11(2)	Performance Warrant, dated September 3, 1999, entitling America Online, Inc. to purchase 1,352,158 shares of Registrant's Class A common stock.
10.12(5)	Form of Warrant, dated February 15, 2000, entitling Lazard Freres & Co. LLC to purchase 100,000 shares of Registrant's Common Stock.
10.13(8)	Stock Purchase Agreement, dated April 17, 2000, between Medicalogic, Inc. and AnywhereMD.com, Bryan Hixson, and Harold Hartsell.
10.14(8)	Preferred Stock and Warrant Purchase Agreement, dated December 22, 2000, between Medicalogic/Medscape Inc., Quantum Industrial Partners LDC, SFM Domestic Investments LLC, and certain other Investors.
10.14.1(8)	Amendment to Preferred Stock and Warrant Purchase Agreement, dated December 22, 2000.
10.15(8)	Form of Warrants, dated January 4, 2001, issued to Quantum Industrial Partners LDC, SFM Domestic Investments LLC, and certain other Investors in connection with the Preferred Stock and Warrant Purchase Agreement.
10.16(8)	Form of Warrant, dated January 24, 2001, entitling General Motors Corporation to purchase 5,000,000 shares of Company's common stock.

78

10.17(2)	Common Stock Purchase Agreement between Medscape, Inc. and CBS Corporation, dated as of July 4, 1999.
10.18(2)	Form of Stockholders Agreement between Medscape, Inc. and CBS Corporation, dated July of 1999.
10.19(2)	Form of Advertising and Promotion Agreement between Medscape, Inc. and CBS Corporation, dated July of 1999.
10.20(2)	Form of Joinder Agreement among certain Medscape, Inc. shareholders, dated July of 1999, in connection with the Stockholders Agreement dated July of 1999.
10.21(2)	Form of Trademark and Content Agreement between Medscape, Inc. and CBS Corporation, dated July of 1999.
10.22(2)	Form of Subscription Agreement with CBS Corporation.
10.23(1)	Agreement to Issue Shares of common stock between Medicalogic, Inc. and Baylor College of Medicine, dated as of February 16, 1999.
10.23.1(8)	Amendment, dated December 27, 2000, to the Agreement to Issue Shares of common stock.
10.24(1)	Industrial Business Park Lease between Medicalogic, Inc. and Evergreen Corporate Center LLC dated January 15, 1997, as amended July 15, 1999.
10.24.1(8)	Amendment, dated November 24, 1999, to the Industrial Business Park Lease between Medicalogic, Inc. and Evergreen Corporate Center LLC.
10.25(8)	Agreement of Lease between Total eMed, Inc. and Highwoods/Tennessee Holdings, LP, dated November 22, 1999.
10.26(2)	Agreement of Lease between Medscape, Inc. and 224 W 30 LLC, dated May 26, 1999.
10.26.1(8)	Amendment, dated April 5, 2000 to the Agreement of Lease between Medscape, Inc. and 224 W 30 LLC.
10.26.2(8)	Second Amendment, dated April 5, 2000 to the Agreement of Lease between Medscape, Inc. and 224 W 30 LLC.
10.27(1)	Oracle Alliance Agreement between Medicalogic, Inc. and Oracle Corporation, dated April 1, 1998, as amended.
10.27.1(8)+	Amendment, dated January 1, 2000, to the Oracle Alliance Agreement between Medicalogic, Inc. and Oracle Corporation.
10.28(2)*	Employment Agreement between Medscape, Inc. and George D. Lundberg, M.D., dated February 15, 1999.
10.29(2)*	Employment Agreement between Medscape, Inc. and Mark Boulding, dated June 28, 1999.
10.30(2)	Preferred Share Purchase Agreement among Softwatch Ltd., and Medscape, Inc. (as purchaser) and certain other purchasers, dated June 15, 1999.
10.31(2)	License and Web Site Development Agreement between Medscape, Inc. and Softwatch, Inc., dated June 15, 1999.
10.32(2)	Stock Purchase Agreement between Medscape, Inc. and National Data Corporation, dated July 7, 1999.

79

10.33(2)+	Form of License and Product Development Agreement between Medscape, Inc. and National Data Corporation, dated July of 1999.
10.34(2)+	Interactive Services Agreement between America Online, Inc. and Medscape, Inc., dated September 3, 1999.
10.35(2)	Side Letter between America Online, Inc. and Medscape, Inc. dated September 22, 1999 in connection with the Interactive Services Agreement.
21.1(8)	Subsidiaries of the Company.
23.1(8)	Consent of Independent Auditors.

*

Management contract or compensatory plan or agreement.

+

Confidential treatment: Portions of this document are omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

Index to Footnotes:

(1)

Previously filed and incorporated herein by reference to Medicalogic, Inc.'s Registration Statement on Form S-1 of 1999 (333-87285).

(2)

Previously filed and incorporated herein by reference to Medscape, Inc.'s Registration Statement on Form S-1 of 1999 (333-77665).

(3)

Previously filed and incorporated herein by reference to the Company's Current Report on Form 10-Q, dated on June 30, 1999, and filed with the Securities and Exchange Commission on August 14, 2000.

(4)

Previously filed and incorporated herein by reference to the Company's Current Report on Form 8-K, dated February 21, 2000 and filed with the Securities and Exchange Commission on March 9, 2000.

(5)

Previously filed and incorporated herein by reference to Medscape's Current Report on Form 10-K, for the Period End of December 31, 1999, and filed with the Securities and Exchange Commission on March 13, 2000.

(6)

Previously filed and incorporated herein by reference to the Company's Current Report on Form 8-K, dated May 11, 2000 and filed with the Securities and Exchange Commission on May 25, 2000.

(7)

Previously filed and incorporated herein by reference to Medicalogic, Inc.'s Registration Statement on Form S-8, dated January 14, 2000.

(8)

Filed herewith.

80

QuickLinks

MedicaLogic/Medscape, Inc. Annual Report on Form 10-K
Table of Contents
PART I
PART II
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (in thousands, except share data)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data)
PART III
PART IV
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
SIGNATURES
Exhibit Index

EX-3.1-2

Exhibit 3.1.2

ARTICLES OF AMENDMENT
TO
THE 1999 RESTATED ARTICLES OF INCORPORATION OF
MEDICALOGIC/MEDSCAPE, INC.
(f/k/a MedicaLogic, Inc.)

    1.  The name of the Corporation is MedicaLogic/Medscape, Inc.

    2.  The 1999 Restated Articles of Incorporation of the Corporation, as amended, are amended to add a new Article II.D to the end of Article II to read in its entirety as follows:

    "D.  Series 1 Preferred Stock.  This Article II.D sets forth the designation, relative rights, preferences and limitations of a new series of Preferred Stock of the Corporation as determined by the Board of Directors of the Corporation pursuant to its authority under ORS 60.134 and Article II.C. above. The shares of such series shall be designated Series 1 Convertible Redeemable Preferred Stock ("Series 1 Preferred Stock") and the number of shares constituting such series shall be 5,933,332.

    1.  Rank.  The Series 1 Preferred Stock will rank (i) junior in right of payment to all existing and future debt obligations of the Corporation upon liquidation, dissolution or winding up of the Corporation, (ii) junior in right of payment to each class or series of capital stock of the Company hereafter created, the terms of which expressly provide that such class or series of capital stock will rank senior to the Series 1 Preferred Stock as to dividends and upon liquidation, dissolution or winding up of the Corporation ("Senior Capital Stock"), (iii) pari passu in right of payment with each class of capital stock or series of Preferred Stock established hereafter by the Corporation's Board of Directors, the terms of which expressly provide that such class or series will rank on a parity with the Series 1 Preferred Stock as to dividend rights and upon liquidation, dissolution or winding up of the Corporation ("Parity Capital Stock") and (iv) senior in right of payment as to dividend rights and upon liquidation, dissolution or winding up of the Corporation as to its Common Stock and any capital stock of the Corporation hereafter created that expressly provides that it will rank junior to the Series 1 Preferred ("Junior Capital Stock").

    2.  Dividends.

    (a) If the Corporation declares or pays any dividends upon the Common Stock (whether payable in cash, securities or other property, other than shares of Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation), the Corporation shall also declare and pay to the holders of Series 1 Preferred Stock at the same time that it declares and pays such dividends to the holders of the Common Stock the dividends which would have been declared and paid with respect to the Common Stock issuable upon conversion of the Series 1 Preferred Stock had all of the outstanding Series 1 Preferred Stock been converted immediately prior to the record date for such dividend, or, if no record date is fixed, the date as of which the record holders of Common Stock entitled to such dividends are to be determined. Such dividends shall be cumulative. Declared but unpaid dividends with respect to a share of Series 1 Preferred Stock shall be mandatorily paid upon liquidation, dissolution or winding up of the Corporation or the conversion of such share to Common Stock, to the extent assets are legally available therefor. Payment of such dividends shall be, at the election of the Corporation, either in cash or in Common Stock (valued at the fair market value as determined in accordance with subsection (c) of Section 3 on the date of payment). Any amounts for which assets are not legally available shall be paid promptly as assets become legally available therefor.

    (b) The holders of the Series 1 Preferred Stock will also be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock) on the Junior Capital Stock and pari passu with dividends payable to the holders of shares of Parity Capital Stock, at the rate of $0.27 per share per annum, (as adjusted for stock splits, stock dividends, combinations or other recapitalizations of the Series 1 Preferred Stock) payable upon the occurrence of any of the events specified in Sections 3 (liquidation or deemed liquidation), 4 (certain redemption events) or 6 (conversion) hereof. Except for payments of dividends upon the occurrence of any of the events specified in Section 3 or 4 (in which case dividends shall be paid solely in cash), payment of such dividends shall be, at the election of the Corporation, in cash or in Common Stock (valued at the fair market value as determined in accordance with subsection (c) of Section 3 hereof on the date of payment). Such dividends shall be cumulative and shall compound annually and shall be computed on the basis of a 360-day year of twelve 30-day months and shall be deemed to accrue from the date the Series 1 Preferred Stock is first issued (the "Series 1 Purchase Date") on a daily basis.

    3.  Liquidation Preference.  In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, after payment in full of the outstanding debt obligations of the Corporation and the liquidation preference (and any accrued and unpaid dividends) on any Senior Capital Stock, distributions to the holders of the Series 1 Preferred Stock shall be made in the following manner:

    (a) Each holder of Series 1 Preferred Stock shall be entitled to receive, out of the assets of the Corporation available for distribution, before any distribution is made to the holders of any Junior Capital Stock, an amount ("Series 1 Preference") equal to the greater of (i) the sum of $3.00 per outstanding share of Series 1 Preferred Stock held by such holder (as such amount may be adjusted to account for stock splits, stock dividends, combinations or other recapitalizations of the Series 1 Preferred Stock, the "Series 1 Original Issue Price"), plus an amount equal to the accrued and unpaid dividends on the Series 1 Preferred Stock to the date fixed for liquidation, dissolution or winding up and (ii) the amount that such holder would be entitled to receive if it were to convert all of the shares of Series 1 Preferred Stock held by such holder into shares of Common Stock (calculated in accordance with Section 6 hereof) immediately prior to such liquidation, dissolution or winding up. After payment in full of the Series 1 Preference to which holders of Series 1 Preferred Stock are entitled, such holders will not be entitled to any further participation in any distribution of assets of the Corporation.

    (b) For purposes of this Section 3, unless otherwise agreed by holders of at least a majority of the then outstanding shares of Series 1 Preferred Stock, a merger, consolidation or sale of all or substantially all of the assets of the Corporation which will result in the Corporation's shareholders immediately prior to such transaction not holding (by virtue of such shares or securities issued solely with respect thereto) at least a majority of the voting power of the surviving, continuing or purchasing entity, shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 3.

    (c) Whenever a distribution of assets provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined mutually by the Corporation's Board of Directors and the holders of the majority of the shares of Series 1 Preferred Stock then outstanding; or, if the Board of Directors and the holders of the majority of the shares of the Series 1 Preferred Stock then outstanding shall fail to agree, at the Corporation's expense by an appraiser chosen by the Board of Directors of the Corporation and reasonably acceptable to the holders of a majority

2

of the shares of Series 1 Preferred Stock then outstanding, provided that any securities shall be valued as follows:

    (i)  Securities not subject to investment letter or other similar restrictions on free marketability covered by Section 3(c)(ii) below:

    (A) If traded on a securities exchange or through The Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the date of distribution; and

    (B) In all other cases, the value shall be the fair market value thereof, as determined mutually by the Corporation's Board of Directors and the holders of the majority of the shares of the Series 1 Preferred Stock then outstanding or, if the Board of Directors and the holders of the majority of the shares of Series 1 Preferred Stock then outstanding shall fail to agree, at the Corporation's expense by an appraiser chosen by the Board of Directors of the Corporation and reasonably acceptable to the holders of a majority of the shares of Series 1 Preferred Stock then outstanding.

    (ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Sections 3(c)(i)(A) or 3(c)(i)(B) to reflect the approximate fair market value thereof.

    (d) If, upon any liquidation, dissolution or winding up of the Corporation, the amounts payable pursuant to this Section 3 with respect to the Series 1 Preferred Stock and the Parity Capital Stock are not paid in full, the holders of the Series 1 Preferred Stock and the Parity Capital Stock will share equally and ratably in any distribution of assets of the Corporation in proportion to the full liquidation preference and all accumulated and unpaid dividends to which each such holder is entitled.

    (e) Written notice of a liquidation, dissolution or winding up of the Corporation stating a payment or payments and the place where such payment or payments shall be payable, shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier, not less than ten (10) days prior to the earliest payment date stated therein, to the holders of record of the Series 1 Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation.

    4.  Certain Redemption Events.

    A.  Change of Control

    (a) In the event of a Change of Control (as defined in subsection (g) of this Section 4), each holder of the then outstanding Series 1 Preferred Stock shall have the right to require the Corporation to purchase, from any source of funds legally available therefor, all or a portion of such holder's Series 1 Preferred Stock (the "Change of Control Offer") as of the date that is no earlier than 30 days and no more than 60 days after the Change of Control Notice Date (as defined in subsection (b) of this Section 4) (the "Change of Control Purchase Date") for a purchase price (the "Change of Control Purchase Price") equal to 100% of the Series 1 Original Issue Price together with accrued and unpaid dividends to but not including the Change of Control Purchase Date.

    (b) Within 15 days after the occurrence of a Change of Control, the Corporation shall mail to all holders of record of the Series 1 Preferred Stock a written notice of the Change of

3

Control, such date being the "Change of Control Notice Date." The notice shall include the form of Change of Control Purchase Notice (as defined in subsection (c) of this Section 4) to be completed by the holder and shall state:

    (i)  the date of such Change of Control and, briefly, the events causing such Change of Control;

    (ii) the date by which the Change of Control Purchase Notice pursuant to this Section 4 must be given;

    (iii) the Change of Control Purchase Date;

    (iv) the Change of Control Purchase Price;

    (v) the name and address of the paying agent for the Series 1 Preferred Stock appointed by the Corporation (the "Paying Agent");

    (vi) that Series 1 Preferred Stock as to which a Change of Control Purchase Notice has been given may be converted into Common Stock only to the extent that the Change of Control Purchase Notice has been withdrawn in accordance with the terms of this Section 4;

    (vii) the procedures that the holder must follow to exercise rights under this Section 4; and

    (viii) the procedures for withdrawing a Change of Control Purchase Notice, including a form of notice of withdrawal.

    (c) A holder may exercise its rights specified in subsection (a) of this Section 4 upon delivery of a written notice of the exercise of such rights (a "Change of Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the business day next preceding the Change of Control Purchase Date, stating:

    (i)  the name of the holder;

    (ii) the certificate numbers of the Series 1 Preferred Stock that the holder will deliver to be purchased;

    (iii) the number of shares of Series 1 Preferred Stock that the holder will deliver to be purchased; and

    (iv) that such Series 1 Preferred Stock shall be purchased pursuant to the terms and conditions specified in this Section 4.

The delivery of such Series 1 Preferred Stock to the Paying Agent (together with all necessary endorsements) at the office of the Paying Agent shall be a condition to the receipt by the holder of the Change of Control Purchase Price therefor; provided, however, that such Change of Control Purchase Price shall be so paid pursuant to this Section 4 only if the Series 1 Preferred Stock so delivered to the Paying Agent shall conform in all material respects to the description thereof set forth in the related Change of Control Purchase Notice and provided, further, that the Corporation shall be required to give written notice to any holder in the event the delivered stock does not conform in all material respects to the description thereof, in sufficient time, if practicable, prior to the Change of Control Purchase Date such that such holder may reasonably be expected to correct such delivery and resubmit such stock.

Notwithstanding anything herein to the contrary, any holder delivering to the Paying Agent the Change of Control Purchase Notice shall have the right to withdraw such Change of Control Purchase Notice at any time prior to the close of business on the business day

4

immediately preceding the Change of Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with subsection (e) of this Section 4.

The Corporation will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and any other securities laws and regulations to the extent those laws and regulations are applicable in connection with the purchase of the Series 1 Preferred Stock by the Corporation pursuant to this Section 4. To the extent that the provisions of any such securities laws or regulations conflict with any provisions of this Section 4, the Corporation will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.

    (d) On the Change of Control Purchase Date, the Corporation will, to the extent lawful: (i) accept for payment all shares of Series 1 Preferred Stock properly tendered; and (ii) cause the Paying Agent to deliver to any transfer agent appointed by the Corporation such shares of Series 1 Preferred Stock accepted by the Corporation for purchase.

The Corporation will not be required to administer the Change of Control Offer upon the occurrence of a Change of Control if a third party (x) makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements described in this Section 4 and (y) purchases all shares of Series 1 Preferred Stock validly tendered and not withdrawn.

    (e) Upon receipt by the Paying Agent of the Change of Control Purchase Notice specified in subsection (c) of this Section 4, the holder of the Series 1 Preferred Stock in respect of which such Change of Control Purchase Notice was given shall (unless such Change of Control Purchase Notice is withdrawn as specified below) thereafter be entitled to receive solely the Change of Control Purchase Price with respect to such Series 1 Preferred Stock. Such Change of Control Purchase Price shall be paid to such holder promptly following the Change of Control Purchase Date with respect to such Series 1 Preferred Stock (provided the conditions in subsections (c) and (d) of this Section 4 required to be in prior to the Purchase Date have been satisfied). Series 1 Preferred Stock in respect of which a Change of Control Notice has been given by the holder thereof may not be converted into shares of Common Stock on or after the date of delivery of such Change of Control Purchase Notice unless such Change of Control Purchase Notice has first been validly withdrawn.

A Change of Control Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered by the holder to the office of the Paying Agent at any time prior to the close of business on the business day immediately preceding the Change of Control Purchase Date, specifying: (i) the name of the holder; (ii) the certificate numbers of the Series 1 Preferred Stock in respect of which such notice of withdrawal is being submitted; (iii) the number of shares of Series 1 Preferred Stock with respect to which such notice of withdrawal is being submitted; and (iv) the number of shares, if any, of such Series 1 Preferred Stock that remains subject to the original Change of Control Purchase Notice and that has been or will be delivered for purchase by the Corporation.

    (f)  On or prior to the time for payment required by subsection (e) of this Section 4, the Corporation shall deposit with the Paying Agent an amount of money sufficient to pay the aggregate Change of Control Purchase Price of all of the shares of Series 1 Preferred that are to be purchased as of such Change of Control Purchase Date.

    (g) A Change of Control shall be deemed to have occurred if any of the following occurs: (i) any "person" or "group" (as such terms are used in Section 13(d) or 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 or 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the total outstanding

5

voting stock of the Corporation (except that the person or group shall not be deemed the "beneficial owner" of shares tendered pursuant to a tender or exchange offer made by that person or group or any of their affiliates until the tendered shares are accepted for purchase or exchange) or has, directly or indirectly, the right to elect or designate a majority of the Board of Directors of the Corporation, (ii) the Corporation consolidates with, or merges with or into, another person, or sells substantially all of its assets to any person pursuant to a transaction in which the "beneficial owners" (as defined above) of the voting stock of the Corporation immediately before such transaction own, directly or indirectly, immediately after such transaction, less than a majority of the voting power of all voting stock of the surviving, continuing or purchasing entity, or (iii) individuals who on the date of the original issuance of this Series 1 Preferred Stock constituted the Board of Directors of the Corporation (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Corporation was approved by a vote of the majority of the directors of the Corporation then still in office who were either directors on the original issuance date of the Series 1 Preferred Stock or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. No inference shall be created that officers or employees of the Corporation are acting as a "person" or "group" (as such terms are used in Sections 13(d) or 14(d) of the Exchange Act) with the power to designate a majority of the members of the Board solely because such officers or employees constitute a majority of the members of the Board.

Notwithstanding the foregoing, a Change of Control will be deemed not to have occurred in connection with any transaction pursuant to which the then outstanding Common Stock is converted into or exchanged for cash and/or fully-registered marketable securities at a price per share (determined in accordance with Section 3(c)(i)) at least equal to five (5) times the Series 1 Conversion Price (as defined in Section 6 hereof) in effect immediately preceding such transaction.

    B.  Trigger Event

    (a) If the Company fails to obtain the shareholder approval contemplated by Section 4.2(b) of the Preferred Stock and Warrant Purchase Agreement dated on or about December  , 2000 between the Corporation and the original holders of the Series 1 Preferred Stock (a "Trigger Event"), each holder of the then outstanding Series 1 Preferred Stock shall have the right to require the Corporation to purchase, from any funds legally available therefor, all or a portion of such holder's Series 1 Preferred Stock (the "Trigger Event Offer") as of the date that is no earlier than 30 days and no more than 60 days after the Trigger Event Notice Date (as defined below) (the "Trigger Event Purchase Date") for a purchase price equal to 100% of the Series 1 Original Issue Price together with accrued and unpaid dividends thereon to but not including the Trigger Event Purchase Date. The Trigger Event Offer shall otherwise be conducted in accordance with the terms of Section 4.A above, mutatis mutandis.

    "Trigger Event Notice Date" shall mean the date on which the Corporation delivers notice to each holder of record of Series 1 Preferred Stock of the occurrence of a Trigger Event.

    5.  Voting Rights.

    (a) The holder of each share of Series 1 Preferred Stock shall have the right to one vote for each share of Common Stock into which such Series 1 Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders' meeting in accordance

6

with the bylaws of this Corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series 1 Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

    (b) The holders of a majority of the outstanding Series 1 Preferred Stock shall be entitled to elect one (1) Class III director of the Corporation at each election of such directors.

    6.  Conversion Rights.  The holders of the Series 1 Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):

    (a)  Right to Convert.  Each share of Series 1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the Series 1 Purchase Date and prior to the close of business on the business day immediately preceding any purchase by the Corporation of such share of Series 1 Preferred Stock pursuant to Section 4, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series 1 Original Issue Price plus all accrued and unpaid dividends thereon by the Series 1 Conversion Price applicable to such share (determined as hereafter provided) in effect on the date the certificate is surrendered for conversion. The initial Series 1 Conversion Price per share for shares of Series 1 Preferred Stock shall be the Series 1 Original Issue Price. The Series 1 Conversion Price for the Series 1 Preferred Stock shall be subject to adjustment as set forth in Section 6(d).

    (b)  Automatic Conversion.  Each share of Series 1 Preferred Stock shall automatically be converted into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series 1 Original Issue Price plus all accrued and unpaid dividends thereon by the Series 1 Conversion Price at the time in effect immediately upon the earlier of (i) the date, which shall be no sooner than one year from the date the Series 1 Preferred Stock is first issued, on which the last sale price of the Common Stock traded through The Nasdaq National Market has been at least five times the Series 1 Conversion Price in effect on such date for thirty (30) consecutive trading days, with a minimum average trading volume per day of two percent (2%) of the number of issued and outstanding shares of Common Stock not held by affiliates of the Corporation or (ii) the date immediately prior to the closing of any merger, consolidation, reorganization, or sale of all or substantially all of the Corporation's assets pursuant to which the then outstanding Common Stock is converted into or exchanged for cash and/or fully-registered marketable securities at a price per share at least equal to five times the Series 1 Conversion Price (as defined in Section 6 hereof) in effect immediately preceding such transaction.

    (c)  Mechanics of Conversion.  Before any holder of Series 1 Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series 1 Preferred Stock, and shall give written notice by mail, postage prepaid, to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series 1 Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to

7

have been made immediately prior to the close of business on the date of such surrender of the shares of Series 1 Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

    (d)  Adjustments to Series 1 Conversion Price for Certain Dilutive Issues; Splits and Combinations.  The Series 1 Conversion Price shall be subject to adjustment from time to time as follows:

    (i)  Stock Issuances.  

    (A) If the Corporation shall issue, after the Series 1 Purchase Date, any Series 1 Additional Stock (as defined below) without consideration or for a consideration per share less than $1.70 (subject to adjustment for stock splits, stock dividends, combinations or other recapitalizations of the Series 1 Preferred Stock) or the fair market value per share of such Series 1 Additional Stock (as determined in accordance with Section 3(c)) (the "Fair Market Price") in effect immediately prior to the issuance of such Series 1 Additional Stock, then, and in each such case, the Series 1 Conversion Price in effect immediately prior to each such issuance shall forthwith be adjusted as follows:

    (1) If the issuance is for less than $1.70 per share, then the Series 1 Conversion Price in effect immediately prior to each such issuance shall be adjusted to a price determined by multiplying such Series 1 Conversion Price by a fraction, the numerator of which shall be equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to Sections 6(d)(i)(E)(1) or 6(d)(i)(E)(2)) plus (b) the number of shares of Common Stock that the aggregate consideration received by this Corporation for such issuance would purchase at 56.67% of the Series 1 Conversion Price in effect immediately prior to such issuance (determined in accordance with Section 6(d)(i)(E)); and the denominator of which shall be equal to the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to Sections 6(d)(i)(E)(1) or 6(d)(i)(E)(2)) plus (y) the number of shares of such Series 1 Additional Stock.

    (2) If the issuance is for less than the Fair Market Price immediately prior to such issuance, then such Series 1 Conversion Price shall forthwith (except as otherwise provided in this Section 6(d)) be adjusted to a price determined by multiplying such Series 1 Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to Sections 6(d)(i)(E)(1) or 6(d)(i)(E)(2)) plus the number of shares of Common Stock that the aggregate consideration received by this Corporation (determined in accordance with Section 6(d)(i)(E)) for such issuance would purchase at the Fair Market Price immediately prior to such issuance; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to Sections 6(d)(i)(E)(1) or 6(d)(i)(E)(2)) plus the number of shares of such Series 1 Additional Stock.

8

    (3) If the issuance is for less than $1.70 per share and the Fair Market Price immediately prior to such issuance, then the adjustment paragraph resulting in the lower Series 1 Conversion Price shall control.

    (B) No adjustment of the Series 1 Conversion Price shall be made in an amount less than one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in Sections 6(d)(i)(E)(4) and 6(d)(i)(E)(5), no adjustment of such Series 1 Conversion Price pursuant to this Section 6(d)(i) shall have the effect of increasing the Series 1 Conversion Price above the Series 1 Conversion Price in effect immediately prior to such adjustment.

    (C) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Corporation in connection with the issuance and sale thereof.

    (D) In the case of the issuance of the Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as mutually determined by the Board of Directors and the holders of the majority of the shares of the Series 1 Preferred Stock then outstanding or, if the Board of Directors and the holders of the majority of the shares of Series 1 Preferred Stock then outstanding shall fail to agree, at the Corporation's expense by an appraiser chosen by the Board of Directors of the Corporation and reasonably acceptable to the holders of a majority of the shares of Series 1 Preferred Stock then outstanding.

    (E) In the case of the issuance (whether before, on or after the Series 1 Purchase Date) of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into, exchangeable or exercisable for Common Stock or options to purchase or rights to subscribe for such convertible, exchangeable or exercisable securities (collectively, "Other Securities"), the following provisions shall apply for all purposes of this Section 6(d)(i) and Section 6(d)(ii):

    (1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections 6(d)(i)(C) and 6(d)(i)(D)), if any, received by the Corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.

    (2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in exchange or exercise (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential

9

antidilution adjustments) for, any such convertible or exchangeable or exercisable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable or exercisable securities and subsequent conversion or exchange or exercise thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Corporation (without taking into account potential antidilution adjustments) upon the conversion, exchange or exercise of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections 6(d)(i)(C) and 6(d)(i)(D)).

    (3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable or exercisable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Series 1 Conversion Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.

    (4) Upon the expiration of any such options or rights, the termination of any such rights to convert, exchange or exercise or the expiration of any options or rights related to such convertible, exchangeable or exercisable securities, the Series 1 Conversion Price, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities.

    (5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to Sections 6(d)(i)(E)(1) and 6(d)(i)(E)(2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either Section 6(d)(ii)(E)(3) or 6(d)(i)(E)(4).

    (ii) "Series 1 Additional Stock" shall mean any shares of Common Stock or Other Securities issued (or deemed to have been issued pursuant to Section 6(d)(i)(E)) by this corporation after the Series 1 Purchase Date other than:

    (A) shares of Common Stock issued pursuant to a transaction described in Section 6(d)(iii) hereof;

    (B) shares of Common Stock or Other Securities issuable or issued to employees, consultants or directors of this corporation pursuant to a stock option plan or stock purchase plan approved by the Board of Directors of the Corporation on or prior to the Series 1 Purchase Date;

10

    (C) shares of Common Stock issued to Baylor College of Medicine or assignees in connection with the sale of software licenses by the Corporation in the Houston, Texas market through December 31, 2002;

    (D) shares of Common Stock or Other Securities issuable or issued in consideration for services rendered to the Corporation or its subsidiaries (other than shares issuable or issued pursuant to Section 6(d)(ii)(B)), in an aggregate amount not to exceed 200,000 shares per annum;

    (E) shares of Common Stock or Other Securities issuable or issued in connection with acquisitions, business combinations or strategic alliances, including corporate partnering agreements, in each case not to exceed 500,000 shares in the aggregate;

    (F) shares of Common Stock or Other Securities the issuance of which has been approved in writing by the holders of at least the majority of the then outstanding shares of Series 1 Preferred Stock;

    (G) shares of Common Stock issuable upon (i) the conversion of the Series 1 Preferred Stock, (ii) the exercise of the warrants, dated the Series 1 Purchase Date, issued to holders of Series 1 Preferred Stock, (iii) the exercise of the warrant, dated February 15, 2000, issued to Lazard Frere & Co. LLC, not to exceed 32,300 shares in the aggregate (subject to adjustment for stock dividends, splits or combinations or other recapitalizations); (iv) the exercise of the warrants, dated September 3, 1999, issued to America Online, Inc., not to exceed 727,911 shares in the aggregate (subject to adjustment for stock dividends, splits or combinations or other recapitalizations) or (v) the exercise of the warrant, dated September 14, 1999, issued to Stoel Rives LLP, not to exceed 10,000 shares (subject to adjustment for stock dividends, splits, combinations or other recapitalizations); or

    (H) shares of Common Stock issued pursuant to Sections 2.3 and 2.4 of the Stock Purchase Agreement, dated April 17, 2000, between the Corporation and the founders of AnywhereMD.com, Inc. (including pursuant to employment agreements of even date therewith between the Corporation and such founders), not to exceed 600,000 shares in the aggregate (subject to adjustment for stock dividends, splits or combinations or other recapitalizations);

    (iii) If the Corporation at any time or from time to time after the Series 1 Purchase Date fixes a record date for a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, and in each such case as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Series 1 Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series 1 Preferred Stock shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.

11

    (iv) If the number of shares of Common Stock outstanding at any time after the Series 1 Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, and in each such case following the record date of such combination, the Series 1 Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.

    (e)  Recapitalizations.  If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 6 or in Section 3), provision shall be made so that the holders of the Series 1 Preferred Stock shall be entitled to receive in exchange for the Series 1 Preferred Stock a security identical to (and not less favorable to such holders than) the Series 1 Preferred Stock. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the holders of the Series 1 Preferred Stock after the recapitalization to the end that the provisions of this Section 6 (including adjustment of the Series 1 Conversion Price then in effect and the number of shares receivable upon conversion of the Series 1 Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

    (f)  No Impairment.  This Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Series 1 Conversion Rights against impairment.

    (g)  No Fractional Shares and Certificate as to Adjustments.

    (i)  No fractional shares shall be issued upon the conversion of any share or shares of the Series 1 Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series 1 Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

    (ii) Upon the occurrence of each adjustment or readjustment of the Series 1 Conversion Price pursuant to this Section 6, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series 1 Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series 1 Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Series 1 Conversion Price at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Series 1 Preferred Stock.

    (h)  Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series 1 Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series 1 Preferred Stock; and if at any time the

12

number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series 1 Preferred Stock, in addition to such other remedies as shall be available to the holder of such Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this certificate.

    (i)  Notices.  Any notice required by the provisions of this Section 6 to be given to the holders of shares of Series 1 Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation.

    7.  Protective Provisions.  So long as 2,966,666 shares of Series 1 Preferred Stock are outstanding (subject to adjustment for stock dividends, splits or combinations or other recapitalizations), the Corporation shall not without first obtaining the approval, by vote or written consent (which consent need not be unanimous and may be obtained without a shareholders' meeting), of the holders of at least a majority of the then outstanding shares of Series 1 Preferred Stock:

    (a) authorize any voluntary liquidation under applicable bankruptcy legislation, any dissolution, liquidation or winding up of the Corporation or any deemed dissolution, liquidation or winding up within the meaning of Section 3(b);

    (b) effect or taking any action to facilitate any transaction or series of transactions resulting in the disposition of more than 50% of the voting power of the Corporation;

    (c) authorize any merger, acquisition or consolidation with any other corporation or joint venture involving consideration (determined in accordance with Section 3(c)) in excess of $5,000,000;

    (d) declare or pay any dividends or other distributions on the Corporation's capital stock (other than a dividend payable solely in shares in Common Stock or a dividend accruing pursuant to Section 2(b) hereof) or redeem, purchase or otherwise acquire any share or shares of Preferred Stock (except as provided in Section 4) or Common Stock; provided, however, that this restriction shall apply neither to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares at cost or at cost upon the occurrence of certain events, such as the termination of employment;

    (e) permit any subsidiary to issue and sell securities having a fair market value (as determined in accordance with Section 3(c)) in excess of $5,000,000;

    (f)  sell more than $5,000,000 in its assets in a single or series of related transactions or create or suffer to be imposed any lien, mortgage, security interest or other charge on or against more than $5,000,000 of assets;

    (g) incur any indebtedness for borrowed money in excess of $5,000,000 in aggregate principal amount;

    (h) redeem, purchase or otherwise acquire any indebtedness of the Corporation (unless such indebtedness is otherwise due in accordance with its terms);

    (i)  authorize any transactions with any affiliates (other than wholly-owned subsidiaries of the Corporation); or

13

    (j)  amend or repeal any provision of the Corporation's Articles of Incorporation or Restated Bylaws if such action would adversely affect the relative rights, preferences and privileges of the Series 1 Preferred Stock (including, without limitation, (A) the authorization, creation or issuance of any Senior Capital Stock or Parity Capital Stock or any obligation or security convertible into or exchangeable into, or evidencing a right to purchase, shares of any class or series of Senior Capital Stock or Parity Capital Stock, (B) the increase of the directors on the Corporation's Board of Directors to a number greater than 12, or (C) the designation and issuance after the Series 1 Purchase Date of any additional shares of Series 1 Preferred Stock).

    8.  Status of Converted Stock.  If any shares of Series 1 Preferred Stock are converted pursuant to Section 6 hereof, the shares so converted shall be canceled and shall not be issuable by the Corporation."

    3.  The amendment to the Articles was approved by the Board of Directors of the Corporation on December  , 2000. Shareholder approval was not required.

Dated: December  th, 2000.

MEDICALOGIC/MEDSCAPE, INC.
By:	Printed Name: David C. Moffenbeier, Title:

14

EX-10.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.1

2001 THIRD AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT

    THIS 2001 THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as of the      day of January 2001, by and between MedicaLogic/Medscape, 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 accordance with the Merger Agreement, as of May 19, 2000, the Company entered into a 2000 Amended and Restated Investor Rights Agreement (the "2000 Agreement") with the parties having registration rights prior to the Merger.

    G. As of January 4, 2000, the Company entered into a 2000 Second Amended and Restated Investor Rights Agreement (the "Second Restatement") in connection with the Company's sale and issuance of up to 5,933,332 shares of Series 1 Convertible Redeemable Preferred Stock, without par value (the "Series 1 Preferred Stock"), and warrants to purchase up to 4,537,254 shares of common stock, without par value (the "Series 1 Warrant Shares") in a closing pursuant to the Preferred Stock and Warrant Purchase Agreement among the Company and certain investors listed on Signature Page I dated as of December 22, 2000, as amended.

    H. The Company proposes to sell and issue to General Motors Corporation ("GM") a warrant to purchase up to 5,000,000 shares of common stock, without par value (the "GM Warrant Shares") pursuant to a Strategic Alliance Agreement (the "Alliance Agreement") between the Company and GM.

    I. As a condition to entering into the Alliance Agreement, GM has requested that the Company extend to it registration rights with respect to the GM Warrant Shares.

    J. The undersigned shareholders include the holders of more than fifty percent (50%) of the Company's common stock subject to the Second Restatement on the date hereof as required by Sections 4.7 and 1.14 of the Second Restatement.

AGREEMENT

    In consideration of the mutual promises and covenants set forth herein, the parties hereto agree to amend and restate the 2000 Agreement to eliminate parties that are no longer subject hereto and 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 "Existing Registrable Securities" means all the shares of Common Stock of Medscape, other than Investor Registrable Securities, that were owned on the date of the Merger by any Holder who was a party to the 1999 Medscape Agreement.

    (d) 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.

    (e) 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.

    (f)  The term "Investor Registrable Securities" means all the shares of Common Stock of Medscape issued upon the conversion of the shares of the Series C Preferred Stock or Series D Preferred Stock of Medscape; excluding in all cases, however, (i) any Investor Registrable Securities sold pursuant to registration under the Act or (ii) any Investor Registrable Securities sold, subsequent to Medscape's initial public offering of securities registered under the Act, pursuant to SEC Rule 144 (or similar or successor rule) promulgated under the Act.

    (g) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.

    (h) 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.

    (i)  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; (iv) the Common Stock of the Company issued upon exercise of the Medscape warrants issued to AOL (the "Warrant Shares"); (v) the Series 1 Preferred Stock; (vi) the Common Stock of the Company issued or issuable upon conversion of the Series 1 Preferred Stock; (vii) the Series 1 Warrant Shares; (viii) the GM Warrant Shares, and (ix) 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

2

as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) 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.

    (j)  The number of shares of "Registrable Securities then outstanding" shall be (x) the aggregate number of shares of Common Stock outstanding which are Registrable Securities plus (y) the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are Registrable Securities.

    (k) The term "SEC" shall mean the Securities and Exchange Commission.

    1.2  Request for Registration.

    (a) If

    (i)  the Company shall receive 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(i) 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 (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, or

    (iii) the Company shall receive a written request from Holders of at least twenty-five percent (25%) of the Registrable Securities issued or issuable upon conversion of the Series 1 Preferred Stock that the Company file a registration statement under the Act covering the Registrable Securities held by such Holders, or

    (iv) the Company shall receive a written request from the Holders of the Registrable Securities referred to in clause (viii) of subsection 1.1(i) that the Company file a registration statement under the Act covering the Registrable Securities held by such Holders,

then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders in accordance with Section 4.5 (the "Notice of Demand") 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) (or sixty (60) days if such registration under the Act is on Form S-3) 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 receipt of the Notice of Demand, 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.

3

    (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), 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 (i) 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 subsections 1.2(a)(i), 1.2(a)(iii) and 1.2(a)(iv), (ii) all Registrable Securities held by Holders referred to in subsection 1.2(a)(i) shall be entirely excluded from the underwriting before any Registrable Securities held by Holders referred to in subsections 1.2(a)(iii) and 1.2(a)(iv) are excluded, and (iii) all Registrable Securities held by Holders referred to in subsection 1.2(a)(iv) shall be entirely excluded from the underwriting before any Registrable Securities held by Holders referred to in subsection 1.2(a)(iii) are excluded. In a registration pursuant to subsection 1.2(a), 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 materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company 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,

4

    (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 ninety (90) 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 ninety (90) 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.

    (iii) any registration pursuant to subsection 1.2(a)(iii):

    (A) After the Company has effected three (3) registrations pursuant to subsection 1.2(a)(iii); 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 ninety (90) 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.

    (iv) any registration pursuant to subsection 1.2(a)(iv):

    (A) After the Company has effected three (3) registrations pursuant to subsection 1.2(a)(iv); 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 ninety (90) 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.

    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

5

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 in accordance with Section 3.5 (the "Piggy-Back Notice"). Upon the written request of each Holder given within twenty (20) days after receipt of the Piggy-Back Notice, 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.

6

    (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, and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that such counsel shall submit reasonably detailed invoices for review by the Company's General Counsel prior to payment; and provided further, 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 Initiating Holders 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

7

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, and the reasonable fees and disbursements of one counsel for the selling Holders; provided, however, that such counsel shall submit reasonably detailed invoices for review by the Company's General Counsel prior to payment; 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 and requested 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

8

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

9

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;

    (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, the Act, and the 1934 Act, 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

10

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 in accordance with Section 3.5 (the "S-3 Notice"); 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 the S-3 Notice; 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 materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company, 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 one hundred twenty (120) 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, and the reasonable fees and disbursements of one counsel for the selling Holder or Holders; provided, however, that such counsel shall submit reasonably detailed invoices for review by the Company's General Counsel prior to payment; but excluding underwriting discounts and commissions relating to Registrable Securities; and provided further, 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 after the date hereof. 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

11

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 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 without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, 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 Common Stock.

    2.  Covenants of the Company.

    2.1  Right of First Offer.  Subject to the terms and conditions specified in this Section 2.1, the Company hereby grants to each holder of at least 300,000 shares of Series 1 Preferred Stock or Common Stock issued upon the conversion of shares of Series 1 Preferred Stock (or a combination thereof) a right of first offer to purchase its Pro Rata Share (as hereinafter defined) (in whole or in part) with respect to future sales by the Company of its Shares (as hereinafter defined). For purposes of this Section 2.1, a holder's "Pro Rata Share" of Shares shall mean that number of Shares that equals the proportion that (i) the number of shares of Common Stock issuable upon conversion of the Series 1 Preferred Stock plus the Series 1 Warrant Shares plus any other shares of Common Stock, in each case, held by such holder (other than shares purchased in the open market or directly from the Company not pursuant to this Section 2.1) bears to (ii) the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all convertible or exercisable securities then outstanding).

12

    Each time the Company proposes to offer any shares of, or securities convertible into, exercisable or exchangeable for any shares of any class of its capital stock ("Shares"), the Company shall first make an offering of such Shares to each such holder of Series 1 Preferred Stock in accordance with the following provisions:

    (a) The Company shall deliver a notice by confirmed facsimile transmission, certified mail or a nationally recognized overnight courier service ("Notice") to each holder of Series 1 Preferred Stock stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and a summary of the terms, if any, upon which it proposes to offer such Shares.

    (b) By written notification received by the Company within ten (10) calendar days after receipt of the Notice, each holder of Series 1 Preferred Stock may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to its Pro Rata Share of such Shares.

    (c) If all Shares that the holders of Series 1 Preferred Stock are entitled to obtain pursuant to Section 2.1(b) are not elected to be obtained as provided in Section 2.1(b) hereof, the Company may, during the sixty (60)-day period following the expiration of the period provided in Section 2.1(b) hereof, offer the remaining unsubscribed portion of such Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the holders of Series 1 Preferred Stock in accordance herewith.

    (d) The right of first offer in this Section 2.1 shall not be applicable to (i) shares of Common Stock issued pursuant to a dividend or distribution to shareholders generally, including a split or subdivision of the outstanding shares of the Company; (ii) shares of Common Stock issuable or issued to employees, consultants or directors of this corporation pursuant to a stock option plan or stock purchase plan approved by the Board of Directors of the Corporation on or prior to the date of this Agreement; (iii) shares of Common Stock issued to Baylor College of Medicine or assignees in connection with the sale of software licenses by the Corporation in the Houston, Texas market through December 31, 2002; (iv) shares of Common Stock issuable or issued in consideration for services rendered to the Corporation or its subsidiaries (other than shares issuable or issued pursuant to (ii) above), in an aggregate amount not to exceed 200,000 shares per annum; (v) shares of Common Stock issuable or issued in connection with acquisitions, business combinations or strategic alliances, including corporate partnering agreements, not to exceed 500,000 shares in the aggregate (as adjusted for stock dividends, splits and combinations); (vi) shares of Common Stock the issuance of which has been approved in writing by the holders of at least a majority of the then outstanding shares of Series 1 Preferred Stock; (vii) shares of Common Stock issuable upon (w) the conversion of the Series 1 Preferred Stock, (x) the exercise of the Series 1 Warrants, (y) the exercise of the warrant dated February 15, 2000, issued to Lazard Freres & Co. LLC, not to exceed 32,300 shares in the aggregate (as adjusted for stock dividends, splits and combinations), or (z) the exercise of the warrants dated September 3, 1999, issued to America Online, not to exceed 727,911 shares in the aggregate (as adjusted for stock dividends, splits and combinations); (viii) the exercise of the Warrant dated September 14, 1999, issued to Stoel Rives LLP, not to exceed 10,000 shares (as adjusted for stock dividends, splits, and combinations); or (ix) shares of Common Stock issued pursuant to Sections 2.3 and 2.4 of the Stock Purchase Agreement, dated April 17, 2000, between the Company and the founders of AnywhereMD.com, Inc. (including pursuant to employment agreements of even

13

date therewith between the Company and such founders), not to exceed 600,000 shares in the aggregate (as adjusted for stock dividends, splits and combinations).

    2.2  Tax Matters.

    (a) The Company covenants that it will not become a U.S. real property holding corporation ("USRPHC") at any time while any Series 1 Purchaser owns any Registrable Securities or any securities exercisable or convertible into Registrable Securities (the "Stock").

    (b) In the event that a Series 1 Purchaser desires to sell or dispose of any Stock, and upon demand by such Series 1 Purchaser, the Company agrees to deliver to such Series 1 Purchaser a letter (the "Letter") which complies with Sections 1.1445-2(c)(3) and 1.897-2(h) of the Treasury Regulations during the period equal to the lesser of (i) the period beginning five years prior to the date of the Letter through the date of the Letter and (ii) the period from the date of this Agreement through the date of the Letter. The Letter shall be delivered to the Series 1 Purchaser one business day prior to the close of any sale or disposition of the Stock by the Series 1 Purchaser (the "Delivery Date"). The Letter shall be dated as of the Delivery Date and signed by a corporate officer who must verify under penalties of perjury that the statement is correct to his knowledge and belief pursuant to Section 1.897-2(h) of the Treasury Regulations.

    (c) The parties hereto agree and acknowledge that, unless in the opinion of outside counsel to the relevant party such action is necessary to comply with its obligations under the Internal Revenue Code of 1986, as amended (the "Code"), (i) no party hereto will take the position that any amount will be includable in income with respect to the Series 1 Preferred Stock under Section 305 of the Code and that no parties shall file Tax Returns (as defined in the Series 1 Agreement) to the contrary (the "Reporting Agreement") and (ii) no party hereto shall take any position inconsistent with the Reporting Agreement upon examination of any Tax Return in any refund claim, in any litigation or otherwise.

    3.  Agreement to Vote Shares.

    3.1  Voting.  Each of the undersigned shareholders agrees that at any meeting of the shareholders of the Company, however called, and in any action taken by written consent of shareholders of the Company without a meeting, the shareholder shall vote the shareholder's shares of Common Stock and/or Series 1 Preferred Stock, and shall cause any holder of record of the shareholder's shares of Common Stock or Series 1 Preferred Stock, to vote in favor of the shareholder approval contemplated by Section 4.2(b) of the Preferred Stock and Warrant Purchase Agreement dated as of December 22, 2000 between the Company and certain investors named therein.

    4.  Miscellaneous.

    4.1  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.

    4.2  Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Oregon.

    4.3  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.

14

    4.4  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.

    4.5  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. Any notice given to the Company under this Section 3.5 shall be copied via email to legal@medscapeinc.com.

    4.6  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.

    4.7  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 two-thirds (²/3) 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(i)(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 (66²/3%) 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 (66²/3%) of such Registrable Securities;

    (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;

    (e) any amendment or waiver affecting only the rights of holders of Registrable Securities described in subsections 1.1(i)(v), 1.1(i)(vi) and 1.1(i)(vii) shall require only the consent of the Company and the holders of more than sixty-six and two-thirds percent (66²/3%) of such Registrable Securities, acting as a single class; and

    (f)  any amendment or waiver affecting only the rights of holders of Registrable Securities described in subsection 1.1(i)(viii) 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.

15

    4.8  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.

    4.9  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.

    4.10  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 Second Restatement.

16

    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	COMPANY: MEDICALOGIC, INC.
	By:	Printed Name: David Moffenbeier Title: Chief Executive Officer
SHAREHOLDERS:	See Attached Signature Pages

17

QuickLinks

2001 THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
RECITALS
AGREEMENT

EX-10.13

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.13

STOCK PURCHASE AGREEMENT
BY AND AMONG
MEDICALOGIC, INC., as Buyer
and
BRYAN D. HIXSON, and
HAROLD HARTSELL, as Sellers,
and
ANYWHEREMD.COM, INC.
dated as of April 17, 2000

TABLE OF CONTENTS

			Page
1.	Definitions		1
2.	Purchase and Sale of Company Shares
	2.1	Basic Transaction	5
	2.2	Purchase Price	5
	2.3	Contingent Purchase Price	5
	2.4	Notice of Performance; Adjustments to Number of Shares	7
	2.5	The Closing	10
	2.6	Deliveries at the Closing	10
3.	Representations and Warranties of Sellers and Buyer
	3.1	Representations and Warranties of the Sellers	10
	3.2	Representations and Warranties of the Buyer	11
4.	Representations and Warranties of the Company
	4.1	Organization and Qualification	12
	4.2	Subsidiaries	13
	4.3	Capitalization	13
	4.4	Authority	14
	4.5	No Conflict	14
	4.6	Consents	14
	4.7	Company Financial Statements	15
	4.8	No Undisclosed Liabilities	15
	4.9	No Changes	15
	4.10	Taxes	16
	4.11	Restrictions on Business Activities	18
	4.12	Title to Properties; Absence of Liens and Encumbrances	19
	4.13	Governmental Authorization	19
	4.14	Intellectual Property	20
	4.15	Product Warranties; Defects; Liabilities	25
	4.16	Agreements, Contracts and Commitments	25
	4.17	Interested Party Transactions	27
	4.18	Compliance with Laws	27
	4.19	Litigation	28
	4.20	Insurance	28
	4.21	Minute Books	28
	4.22	Environmental Matters	28
	4.23	Brokers' and Finders' Fees	29
	4.24	Employee Matters and Benefit Plans	29
	4.25	Bank Accounts	34
	4.26	Indemnification Obligations	34
	4.27	Representations Complete	34
5.	Pre-Closing Covenants
	5.1	General	34
	5.2	Notices and Consents	34
	5.3	Operation of Business	35
	5.4	Access	35
	5.5	Notice of Developments	35
	5.6	Exclusivity	35
	5.7	Balance Sheet	35
	5.8	Hixson Agreement-Technology Sale Agreement; Royalty Agreements	35

i

6.	Post-Closing Covenants
	6.1	General	36
	6.2	Litigation Support	36
	6.3	Access to Records and Files	36
	6.4	Sellers' Health and Welfare Benefits	36
	6.5	Company Operating Budget and Salaries	37
	6.6	Hixson Healthcare, Inc. — Auto-DOC; Royalty Agreements	37
	6.7	Non-Compete	37
7.	Conditions to Obligation to Close
	7.1	Conditions to Obligation of the Buyer	38
	7.2	Conditions to Obligation of the Sellers	39
8.	Remedies for Breaches of This Agreement
	8.1	Survival of Representations and Warranties	40
	8.2	Indemnification Provisions for Benefit of the Buyer	40
	8.3	Indemnification Provisions for Benefit of the Sellers	41
	8.4	Matters Involving Third Parties	41
	8.5	Determination of Adverse Consequences	42
	8.6	Exclusive Remedy	42
9.	Cooperation on Tax Matters
	9.1	Pre-Closing Returns	42
	9.2	Post-Closing Returns	42
	9.3	Government Certificates	43
	9.4	Section 6043 Reports	43
10.	Termination
	10.1	Termination of Agreement	43
	10.2	Effect of Termination	43
11.	Miscellaneous
	11.1	Press Releases and Public Announcements	44
	11.2	No Third Party Beneficiaries	44
	11.3	Entire Agreement	44
	11.4	Succession and Assignment	44
	11.5	Counterparts	44
	11.6	Headings	44
	11.7	Notices	44
	11.8	Governing Law	45
	11.9	Dispute Resolution	45
	11.10	Amendments and Waivers	46
	11.11	Severability	46
	11.12	Expenses	46
	11.13	Construction	47
	11.14	Incorporation of Exhibits and Schedules	47

ii

LIST OF SCHEDULES AND EXHIBITS

Exhibits
Exhibit A	Hixson Asset Purchase Agreement
Exhibit B-1	Form of Opinion of Sellers' Counsel
Exhibit B-2	Form of Opinion of Buyers' Counsel
Exhibit C	Employment Agreement
Exhibit D	Escrow Agreement

Schedules
Schedule 3.1(b)	Non-Contravention
Schedule 3.1(d)	Company Shares
Schedule 4.1	Organization and Qualification
Schedule 4.5	No Conflict
Schedule 4.6	Consents
Schedule 4.7	Company Financial Statements
Schedule 4.8	No Undisclosed Liabilities
Schedule 4.9	No Changes
Schedule 4.9(i)	No Changes; Agreements
Schedule 4.10	Tax Returns and Audits
Schedule 4.12(a)	Title to Properties; Absence of Liens and Encumbrances; Real Property
Schedule 4.12(c)	Title to Properties; Asset Condition
Schedule 4.12(b)	Title to Properties; Absence of Liens and Encumbrances; Leased Property
Schedule 4.13	Governmental Authorizations
Schedule 4.14	Intellectual Property
Schedule 4.14(b)	Registered Intellectual Property Rights
Schedule 4.14(c)	Registered Intellectual Property Rights; Action
Schedule 4.14(d)	Valid Company Intellectual Property
Schedule 4.14(e)	Company Intellectual Property; Liens
Schedule 4.14(f)	Company Intellectual Property; Transferable
Schedule 4.14(h)	Company Intellectual Property; Third Party
Schedule 4.14(j)	Company Intellectual Property; Improvements
Schedule 4.14(l)	Company Intellectual Property; Breach of Contract
Schedule 4.14(m)	Company Intellectual Property; Obligation or Duty to Warrant
Schedule 4.14(s)	Company Intellectual Property; Conduct of the Business
Schedule 4.14(t)	Company Intellectual Property; Royalties
Schedule 4.15	Product Warranties; Defects; Liabilities
Schedule 4.16(a)	Agreements, Contracts and Commitments; Collective Bargaining
Schedule 4.16(b)	Agreements, Contracts and Commitments; Breach
Schedule 4.24(b)	Company Employee Plan and Employee Agreements
Schedule 4.24(d)	Employee Plan Compliance
Schedule 4.24(g)	No Post-Employment Obligations
Schedule 4.24(i)(i)	Effect of Transaction; Current or Future Payment
Schedule 4.24(i)(ii)	Parachute Payment
Schedule 4.24(j)	Employment Matters
Schedule 4.24(k)	Labor
Schedule 4.25	Bank Accounts

iii

STOCK PURCHASE AGREEMENT

    This Stock Purchase Agreement is entered into as of April 17, 2000, by and among MedicaLogic, Inc., an Oregon corporation (the "Buyer"), AnywhereMD.com, Inc., a California corporation (the "Company"), and Bryan Hixson and Harold Hartsell (each a "Seller," and collectively the "Sellers"). The Buyer, the Sellers and the Company are referred to collectively in this Agreement as the "Parties".

    The Sellers own all of the outstanding capital stock of the Company. This Agreement contemplates a transaction in which the Buyer will purchase from the Sellers, and the Sellers will sell to the Buyer, all of the outstanding capital stock of the Company for the consideration described herein.

    NOW, THEREFORE, in consideration of the premises and the mutual promises made in this Agreement, and in consideration of the representations, warranties and covenants contained in this Agreement, the Parties hereto agree as follows:

1. Definitions.

    "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act.

    "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses.

    "Applicable Rate" means the prime rate of interest publicly announced from time to time by U.S. Bank National Association in Portland, Oregon.

    "Attorney Records" means with respect to any Seller or the Company, all of the books, files, documents, and records of attorneys or accountants relating to their respective representations in connection with the negotiation, execution and delivery of this Agreement and the transactions contemplated by this Agreement.

    "Buyer" has the meaning set forth in the preface above.

    "Closing" has the meaning set forth in Section 2.5 below.

    "Closing Date" has the meaning set forth in Section 2.5 below.

    "Code" means the Internal Revenue Code of 1986, as amended.

    "Company" has the meaning set forth in the preface above.

    "Company Authorizations" has the meaning set forth in Section 4.13 below.

    "Company Common Stock" has the meaning set forth in Section 4.3(a) below.

    "Company Financials" has the meaning set forth in Section 4.7 below.

    "Company Intellectual Property" has the meaning set forth in Section 4.14(a)(iii) below.

    "Company Registered Intellectual Property Rights" has the meaning set forth in Section 4.14(b) below.

    "Company Share(s)" means any share of the capital stock of the Company.

    "Confidential Information" means any information concerning the businesses and affairs of the Company that is not already generally available to the public.

    "Conflict" has the meaning set forth in Section 4.5 below.

1

    "Contingent Purchase Price" has the meaning set forth in Section 2.3 below.

    "Contract" has the meaning set forth in Section 4.16 below.

    "Copyrights" has the meaning set forth in Section 4.14(a)(ii) below.

    "Current Company Balance Sheet" has the meaning set forth in Section 4.7 below.

    "Disclosure Schedule" means any one of the Disclosure Schedules referred to in Sections 3.1, 3.2 and 4 below.

    "Employment Agreement" means the Employment Agreement with each of the Sellers in the form attached as Exhibit C.

    "Environmental Claim" has the meaning set forth in Section 4.22 below.

    "Environmental, Health and Safety Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Clean Water Act and the Occupational Safety and Health Act of 1970, each as amended, together with all equivalent or comparable state laws concerning pollution or protection of the environment, or employee health and safety.

    "Environmental Laws" has the meaning set forth in Section 4.22 below.

    "Escrow Agent" means West Coast Trust Co., Inc., dba West Coast Trust in its capacity as an escrow agent under the Escrow Agreement.

    "Escrow Agreement" means the escrow agreement with respect to the Holdback, by and among the Buyer, the Sellers and the Escrow Agent, a copy of which is attached hereto as Exhibit D.

    "Funded Debt" means as applied to the Company on a consolidated basis, without duplication, (i) indebtedness for borrowed money, and (ii) obligations evidenced by notes, bonds, debentures or similar instruments.

    "Governmental Entity" has the meaning set forth in Section 4.6 below.

    "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

    "Hazardous Materials" has the meaning set forth in Section 4.22 below.

    "Hixson" means Hixson HealthCare Corporation, a California corporation.

    "Hixson Acquisition" has the meaning set forth in Section 5.8.

    "Hixson Agreement" has the meaning set forth in Section 5.8.

    "Holdback" has the meaning set forth in Section 2.2(c).

    "Indemnified Party" has the meaning set forth in Section 8.4(a) below.

    "Indemnifying Party" has the meaning set forth in Section 8.4(a) below.

    "Intellectual Property Rights" has the meaning set forth in Section 4.14(a)(ii) below.

    "Liens" has the meaning set forth in Section 4.10(b)(vii) below.

    "Maskworks" has the meaning set forth in Section 4.14(a)(ii) below.

    "Material Adverse Change" has the meaning set forth in Section 4 below.

    "Material Adverse Effect" has the meaning set forth in Section 4 below.

2

    "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

    "Party" has the meaning set forth in the preface above.

    "Patents" has the meaning set forth in Section 4.14(a)(ii) below.

    "Performance Contingencies" has the meaning set forth in Section 2.3 below.

    "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, limited liability company, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof).

    "Pro Rata Basis" means an allocation among the Sellers in proportion to their respective holdings of the Company Shares as set forth on Section 3.1(d) of the Disclosure Schedules.

    "Prohibited Transaction" has the meaning set forth in ERISA Section 406 and Code Section 4975.

    "PTO" has the meaning set forth in Section 4.14(b) below.

    "Purchase Price" has the meaning set forth in Section 2.2(a) below.

    "Registered Intellectual Property Rights" has the meaning set forth in Section 4.14(a)(iv) below.

    "Reportable Event" has the meaning set forth in ERISA Section 4043.

    "Returns" has the meaning set forth in Section 4.10(b)(i) below.

    "Securities Act" means the Securities Act of 1933, as amended.

    "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.

    "Seller(s)" has the meaning set forth in the preface above.

    "Small Business Status" has the meaning set forth in Section 4.14(c) below.

    "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors.

    "Taxes" has the meaning set forth in Section 4.10(a) below.

    "Technology" has the meaning set forth in Section 4.14(a)(i) below.

    "Technology Sale Agreement" shall mean that certain Technology Sale Agreement by and among Harold Hartsell and the Company relating to, among other things, Mr. Hartsell's sale of certain source code to Company.

    "Third Party Claim" has the meaning set forth in Section 8.4(a) below.

    "Trademarks" has the meaning set forth in Section 4.14(a)(ii) below.

2. Purchase and Sale of Company Shares.

    2.1 Basic Transaction. Upon and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers agree to sell to the Buyer, all of their Company Shares for the consideration specified below in this Section 2.

    2.2 Purchase Price.

    (a) The purchase price for the Company Shares (the "Purchase Price") shall be $7,000,000 in cash, less the Holdback, the treatment of which shall be governed by Section 2.2(c) below. Sellers shall also be eligible to receive the Contingent Purchase Price described in Section 2.3.

3

    (b) At the Closing, the Buyer shall pay the Purchase Price to the Sellers on a Pro Rata Basis by wire transfer of immediately available funds, (A) less the amount of Funded Debt as determined by the Current Company Balance Sheet (the Buyer shall pay in full each creditor of Funded Debt, subject to Section 5.7 of this Agreement), and (B) less the Holdback.

    (c) The Buyer shall withhold from the Purchase Price the amount of $700,000 (the "Holdback"), and deposit such funds into the account contemplated by the Escrow Agreement on or before the Closing Date. The escrowed funds shall be available to Buyer for indemnification claims under Section 8 in accordance with the terms of the Escrow Agreement.

    2.3 Contingent Purchase Price. After the Closing Date, the Sellers shall be eligible to receive up to 600,000 shares (which may be subject to adjustment as provided in Section 2.4(d) below) of registered Buyer common stock (the "Contingent Purchase Price") to be earned, if at all, based on the achievement of the following operational and performance targets (collectively, the "Performance Contingencies"):

    (a) 125,000 shares if the Sellers (with reasonable assistance from Buyer) successfully complete production of the prescription writing, drug information, clinical content and real-time advertising components of its Palm® OS devices application within 60 days of receiving a specifications document from Buyer. The specifications document will be sufficiently detailed to enable the Sellers to develop the features and functionality described in this section and will be supplied to the Sellers within ten (10) business days of the Closing Date. It is anticipated that the specifications document will be created with the input of the Sellers, through e-mail correspondence and face-to-face meetings.

    (b) 100,000 shares if the Sellers (with reasonable assistance from Buyer) successfully complete production of the super bill, lab results and referrals management components of its Palm® OS devices application within 90 days of receiving a specifications document from the Buyer. The specifications document will be sufficiently detailed to enable the Sellers to develop the features and functionality described in this section and will be supplied to the Sellers within a reasonable period of time after the completion of the functionality described in (a) above. It is anticipated that the specifications document will be created with the input of the Sellers, through e-mail correspondence and face-to-face meetings.

    (c) 75,000 shares if the Sellers (with reasonable assistance from Buyer) successfully complete production of the EMR-lite component of its Palm® OS devices application within 90 days of receiving a specifications document from the Buyer. The specifications document will be sufficiently detailed to enable the Sellers to develop the features and functionality described in this section and will be supplied to the Seller within a reasonable period of time after the completion of the functionality described in (b) above. It is anticipated that the specifications document will be created with the input of the Sellers, through e-mail correspondence and face-to-face meetings.

    (d) 150,000 shares if the Sellers and Buyer are successful in deploying 20,000 hand-held units (Palm® OS or Windows® CE-based) to physicians or nurse practitioners for purposes of utilizing parts or all of the functionality outlined in Section 2.3(a), (b) or (c) above.

    (e) 50,000 shares at the end of each of the first three years of their employment term under the Employment Agreements (each, an "Anniversary Date") (for a total of 150,000 shares in the aggregate) if both Sellers (or, to the limited extent set forth in the Employment Agreements, at least one Seller) has remained continuously employed by the Company, Buyer or Buyer's affiliates, for such year (each, an "Employment Year").

    (f)  The time requirements set forth in (a), (b) and (c) above shall apply only to the time it takes the Sellers to develop the application functionality described and not any additional time required for other activities undertaken by anyone not under the control and direction of the

4

Sellers which inhibits or delays development, including without limitation, testing, marketing and implementation planning prior to commercial launch, nor shall the time requirement apply to any delay that may result from the inability to integrate any functionality with the back-end/database due to the unavailability or incompleteness of such back-end/database. The functionality requirements set forth in (a), (b) and (c) above shall also be subject to reasonable technical limitations of the Palm® OS operating system and related devices. If the time commitments described above are not met due to the technical limitations of the Palm® OS operating system and related devices, the Buyer will redefine the functionality thereof so that the application will fit within such technical specifications, and the Buyer shall extend the time period for the achievement of such goal for 30 days or other reasonable extension of such time period. The Performance Contingencies set forth in (a), (b) and (c) above shall be limited to developing the hand-held client applications and interfaces only, and the Buyer shall assume responsibility for back-end/database development. So long as Buyer provides the Sellers with reasonable prior notice, Buyer reserves the right to require completion of the Performance Contingency set forth in (c) prior to completion of the Performance Contingency set forth in (b). Any such change shall not reduce the time periods allowed to the Sellers for fulfillment of such Performance Contingencies. The Parties acknowledge that the deliverables outlined in (a), (b) and (c) above are subject to change based on changing market and/or technological conditions. If such conditions change in a way that materially affects the Sellers, in Buyer's sole discretion, the Parties agree to make reasonable best efforts to redefine these deliverables accordingly for purposes of restructuring such earn-outs; provided, however, that no such restructuring of the earn-outs shall have any impact on any Contingent Purchase Price earned as a result of any Performance Contingency which (except for the commercial launch of the units) has already been fully or substantially fulfilled. Buyer shall retain final approval regarding hiring additional technical resources to achieve these targets, but agrees to the following additional technical resources: (i) 2.0 FTE (Palm® OS); and (ii) potentially 1.0 FTE (Windows® CE). The Parties also acknowledge that nothing herein shall prevent the Buyer from making changes in the corporate structure of the Company or by assigning, subject to the limits set forth in the Employment Agreements, the Sellers to work for the Buyer or Buyer's affiliates; provided that no such change shall prevent the Sellers from having an opportunity to fulfill the terms of the earn-outs and that the parties will use reasonable best efforts to restructure the earn-outs to account for such change.

    (g) Notwithstanding the time requirements set forth in (a), (b) or (c) above, such earn-outs are contingent on commercial launch of hand-held units utilizing part or all of the functionality outlined therein and shall not be paid until commercial launch has occurred. The Sellers agree to use reasonable efforts to assist in the provision of technical support, and completion of the commercial launch, of each application.

    (h) Except to the limited extent set forth in the Employment Agreements for that portion of the Contingent Purchase Price earned pursuant to section (e) above, the Contingent Purchase Price shall be paid to the Sellers on a Pro-Rata Basis.

    (i)  A Seller shall be entitled to his portion of a Contingent Purchase Price payment only if it is earned while he is still employed by the Buyer under his Employment Agreement or after the expiration of the Term (as defined in the Employment Agreement), unless his termination of employment is by the Buyer without cause or by reason of his death or Disability (as defined in the Employment Agreement).

2.4 Notice of Performance; Adjustments to Number of Shares.

    (a) When Sellers believe that one or more of the Performance Contingencies have been achieved, they will transmit a written Request for Performance Contingency Determination to Buyer. If the Buyer determines, in its reasonable judgment, that any of the Performance

5

Contingencies (other than the commercial launch of the application) have been fulfilled in a timely manner, then within 15 days from the receipt of the Request for Performance Contingency Determination, Buyer will provide the Sellers with a written confirmation relating to the fulfillment of such Performance Contingency.

    (b) Subject to the limitations in Section 2.4(c) below, Buyer will cause certificates representing the Contingent Purchase Price shares to be issued within 30 days following the Anniversary Date for any Contingent Purchase Price earned during the immediately preceding Employment Year.

    (c) Not more than 200,000 shares shall be paid as the Contingent Purchase Price in any one year Employment Year, provided, however, that shares earned in excess of 200,000 in any year shall be issued in the following Employment Year. Notwithstanding the foregoing, if the Buyer terminates the Sellers during the term of the Employment Agreements without cause, then all earned shares shall be issued within 30 days of such termination, and any shares payable through the fourth anniversary date shall be issued within 60 days following the occurrence of the last event necessary for the fulfillment of each Performance Contingency.

    (d) The number and type of securities issued in payment of the Contingent Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

    (i)  Adjustment for Stock Splits and Combinations. If the Buyer, at any time or from time to time after the date hereof, effects a subdivision of the outstanding common stock of the Buyer (the "Buyer's Common Stock"), the number of shares issued in payment of the Contingent Purchase Price in effect immediately before that subdivision shall be proportionately increased, and conversely, if the Buyer, at any time or from time to time after the date hereof, combines the outstanding shares of the Buyer's Common Stock into a smaller number of shares, the number of shares issued in payment of the Contingent Purchase Price then in effect immediately before the combination shall be proportionately decreased.

    (ii) Adjustment for Certain Dividends and Distributions. If the Buyer at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of the Buyer's Common Stock entitled to receive, without payment therefor, a dividend or other distribution payable in additional shares of the Buyer's Common Stock, then and in each such event the number of shares issued in payment of the Contingent Purchase Price then in effect shall be increased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying such the number of shares issued in payment of the Contingent Purchase Price then in effect by a fraction (i) the numerator of which shall be the total number of shares of the Buyer's Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of the Buyer's Common Stock issuable in payment of such dividend or distribution and (ii) the denominator of which is the total number of shares of the Buyer's Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date.

    (iii) Adjustments for Other Dividends and Distributions. In the event the Buyer, at any time or from time to time after the date hereof, makes, or fixes a record date for the determination of holders of the Buyer's Common Stock entitled to receive, without payment therefor, a dividend or other distribution payable in securities of the Buyer other than shares of the Buyer's Common Stock, then and in each such event provision shall be made so that the Sellers shall receive, in addition to the number of shares of the Buyer's Common Stock issued in payment of the Contingent Purchase Price, the amount of securities of the Buyer that they would have received had the number of shares of the Buyer's Common Stock issued in payment of the Contingent Purchase Price been issued in full on the date of such event and

6

had the Sellers thereafter, during the period from the date of such event to and including the exercise date, retained such securities, receivable by them as aforesaid during such period.

    (iv) Adjustment for Reclassification, Exchange and Substitution. In the event that at any time or from time to time after the date hereof, the Buyer's Common Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 2.4(d)), then and in any such event the Sellers shall have the right to receive upon the payment of the Contingent Purchase Price the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change, by a holder of the number of shares of the Buyer's Common Stock which otherwise would have been issued in payment of the Contingent Purchase Price if due and payable immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein.

    (v) Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the date hereof, there is a capital reorganization of the Buyer's Common Stock (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 2.4(d)), then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Sellers shall thereafter be entitled to receive upon the payment of the Contingent Purchase Price the number of shares of stock or other securities or property to which a holder of the number of shares of the Buyer's Common Stock otherwise deliverable upon the payment of the Contingent Purchase Price would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 2.4(d) with respect to the rights of the Sellers after the reorganization, merger, consolidation or sale to the end that the provisions of this Section 2.4(d) (including adjustment of the number of shares issued in payment of the Contingent Purchase Price) shall be applicable after that event and be as nearly equivalent as may be practicable.

    2.5 The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP, in Portland, Oregon, commencing at 9:00 a.m. local time on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated by this Agreement (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Buyer and the Sellers may mutually determine (the "Closing Date").

    2.6 Deliveries at the Closing. At the Closing, (i) the Sellers will deliver to the Buyer the various certificates, instruments and documents referred to in Section 7.1 below, (ii) the Buyer will deliver to the Sellers the various certificates, instruments and documents referred to in Section 7.2 below, (iii) the Sellers will deliver to the Buyer original stock certificates representing all of their Company Shares, endorsed in blank or accompanied by duly executed assignment documents, in form acceptable to Buyer and its counsel, and (iv) the Buyer will deliver to the Sellers the consideration specified in Section 2.2 above.

3. Representations and Warranties of Sellers and Buyer.

    3.1 Representations and Warranties of the Sellers. Each Seller severally represents and warrants to the Buyer that the statements contained in this Section 3.1 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3.1).

7

    (a) Authorization of Transaction. Each Seller has full power and authority to execute and deliver this Agreement and to perform his obligations under this Agreement. This Agreement constitutes the valid and legally binding obligation of each Seller, enforceable in accordance with its terms and conditions, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the rights of creditors, and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies. Neither Seller is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.

    (b) Noncontravention. Except as set forth on Schedule 3.1(b), neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) result in a violation by any Seller of any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any Seller is subject or (B) result in a breach or violation by any Seller of, constitute a default by any Seller under, result in the acceleration against any Seller of, create in any party the right against any Seller to accelerate, terminate, modify, or cancel any agreement, contract, lease, license, instrument, or other arrangement to which any Seller is bound or to which any assets of any Seller are subject.

    (c) Brokers' Fees. Neither Seller has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

    (d) Company Shares. The Sellers, and no other Person, hold of record and own beneficially the number of Company Shares set forth next to their names in Schedule 3.1(d), free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws), taxes, Liens, options, warrants, purchase or other rights, contracts, commitments, equities, claims, and demands. Neither Seller is a party to, or aware of, any option, warrant, purchase or other right, or other contract or commitment that could require any Seller to sell, transfer, or otherwise dispose of any capital stock of the Company (other than this Agreement). Neither Seller is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company.

    (e) Company Representations. Each of the Sellers confirms the accuracy and completeness of the Company's representations and warranties in Section 4 as if such representations and warranties were set forth in this Section 3.

    3.2 Representations and Warranties of the Buyer. The Buyer represents and warrants to the Sellers that the statements contained in this Section 3.2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3.2).

    (a) Organization of the Buyer. The Buyer is a corporation duly organized and validly existing under the laws of the State of Oregon.

    (b) Authorization of Transaction. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations under this Agreement. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms and conditions, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the rights of creditors, and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies. The Buyer is not required to give any notice to, make

8

any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, except filings under the Hart-Scott-Rodino Act, if applicable.

    (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate in any material way any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject, or any provision of its articles of incorporation or bylaws, each as amended or (B) materially conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject.

    (d) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

    (e) Investment. The Buyer is knowledgeable about the industry in which the Company conducts its business, is an Accredited Investor and is not acquiring the Company Shares with a view to, or for sale in connection with, any distribution thereof within the meaning of the Securities Act.

4. Representations and Warranties of the Company.

    For purposes of this Agreement, "Material Adverse Effect" or "Material Adverse Change" means any effect, change, event, circumstance or condition which when considered with all other effects, changes, events, circumstances or conditions would reasonably be expected to affect materially and adversely the business, results of operations, financial condition or prospects of a party, in each case including its Subsidiaries together with it taken as a whole. In no event shall any of the following constitute a Material Adverse Effect or a Material Adverse Change: (i) effects, changes, events, circumstances or conditions generally affecting the industry in which the Company operates or arising from changes in general business or economic conditions; (ii) any effects, changes, events, circumstances or conditions resulting from any change in law or generally accepted accounting principles, which affect generally entities such as the Company; and (iii) any effect resulting from compliance by the Company with the terms of this Agreement. For all purposes of Section 4 of this Agreement, a statement about the "Company" refers to the Company and all of its Subsidiaries jointly and refers to the Company and each of its Subsidiaries separately.

    The Company hereby represents and warrants to Buyer that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete on the Closing Date, as though made then and as though the Closing Date was substituted for the date of this Agreement throughout this Section 4:

    4.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Company is a California corporation. The Company has the corporate power and corporate authority to own, lease and operate its properties and to carry on its business as it is now being conducted, and as proposed to be conducted, and to perform its obligations under any contracts by which it is bound. The Company is duly qualified or licensed to do business in California. The Company has delivered a true and correct copy of its Certificate or Articles of Incorporation and Bylaws, each as amended to date, to Buyer. Such Certificate or Articles of Incorporation and Bylaws are in full force and effect. The Company is not in violation of any of the provisions of its Certificate or Articles of Incorporation or Bylaws.

9

    4.2 Subsidiaries. The Company does not have any Subsidiaries or affiliated companies and does not otherwise own, directly or indirectly, any shares of capital stock or any equity, debt or similar interest in or any interest convertible, exchangeable or exercisable for any equity, debt or similar interest in, or control, directly or indirectly, any other corporation, partnership, association, joint venture or other business entity, foreign or domestic. The Company has not agreed nor is the Company obligated to make or be bound by any written, oral or other agreement, contract, sub-contract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sub-license, insurance policy, benefit plan, commitment or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make any future investment in or capital contribution to any other entity.

    4.3 Capitalization.

    (a) The authorized capital stock of the Company consists of 100,000 shares of authorized Common Stock, no par value, of which 100,000 shares are issued and outstanding ("Company Common Stock"). The Company has not authorized or issued any other class or series of equity securities (other than Company Common Stock). The Company Common Stock is held of record by the persons, with the addresses of record and in the amounts set forth on Schedule 3.1(d). No shares of Company Common Stock held by any shareholder are subject to a repurchase right in favor of the Company. All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Certificate or Articles of Incorporation or Bylaws of the Company, each as amended to date, or any agreement to which the Company is a party or by which it is bound. All issued and outstanding shares of Company Common Stock have been offered, sold and delivered by the Company in full compliance with applicable federal and state securities laws.

    (b) There are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of the Company or obligating the Company to grant, extend, accelerate the vesting of or enter into, any such subscription, option, warrant, equity security, call, right, commitment or agreement.

    (c) As of the date of this Agreement, except as contemplated by this Agreement, there are no registration rights agreements, no voting trust, proxy or other similar agreement or understanding to which the Company is a party or by which it is bound with respect to any equity security of any class of the Company.

    (d) As a result of the transactions contemplated by this Agreement, Buyer will be the record and sole beneficial owner of all Company Shares and rights to acquire or receive Company Shares.

    4.4 Authority. The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The Company's Board of Directors has unanimously approved such transaction and this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable in accordance with its terms.

    4.5 No Conflict. Except as set forth on Schedule 4.5, the execution, delivery and performance of this Agreement (and the other agreements contemplated by this Agreement) by the Company and the Sellers does not, and, as of the Closing Date, the consummation of the transactions contemplated hereby (and by the other agreements contemplated by this Agreement) (a) will not conflict with, contravene, or result in any violation or breach of, or default under (with or without notice or lapse of

10

time, or both), or give rise to a right of termination, refund, modification, cancellation or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict") (i) any provision of the Certificate or Articles of Incorporation or Bylaws of the Company or any of its Subsidiaries, or (ii) except to the extent that such Conflict would not have a Material Adverse Effect, any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, ruling, decree, statute, law, ordinance, rule or regulation applicable to the Company or its businesses, properties or assets; and (b) do not and will not result in the creation of any Lien against any property, asset or business of the Company.

    4.6 Consents. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other federal, state, county, local or foreign governmental authority, instrumentality, agency or commission ("Governmental Entity") or any third party, is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (a) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, and (b) such other consents, waivers, authorizations, filings, approvals and registrations that are set forth on Schedule 4.6.

    4.7 Company Financial Statements. Schedule 4.7 sets forth true and correct copies of the Company's unaudited pro forma balance sheet as of the Closing Date (the "Company Financials"). The Company Financials are complete and correct in all material respects. Subject to usual and customary year-end accounting adjustments, the Company Financials present fairly in all material respects the financial condition and operating results of the Company as of the dates and during the periods indicated therein. The Company's unaudited pro forma balance sheet as of the Closing Date shall be referred to herein as the "Current Company Balance Sheet."

    4.8 No Undisclosed Liabilities. Except as set forth in Schedule 4.8 or for those undisclosed liabilities that will not have a Material Adverse Effect, the Company does not have, as of the date hereof, any liability, indebtedness or obligation of any type, whether accrued, absolute, contingent, matured, unmatured, known or unknown or other (whether or not required to be reflected in financial statements in accordance with GAAP), which individually or in the aggregate, (a) has not been reflected in the Current Company Balance Sheet or (b) has not been set forth in a Disclosure Schedule.

    4.9 No Changes. Except as set forth in Schedule 4.9, since March 15, 2000 and through the date of this Agreement, there has not been, occurred or arisen any:

    (a) transaction by the Company except in the Ordinary Course of Business;

    (b) amendments or changes to the Certificate or Articles of Incorporation or Bylaws of the Company;

    (c) capital expenditure or capital commitment by the Company of $5,000 in any individual case or $25,000 in the aggregate (other than commitments to pay expenses incurred in connection with this transaction);

    (d) destruction of, damage to or loss of any material assets, business or customer of the Company (whether or not covered by insurance);

    (e) change in accounting methods, principles or practices (including any change in depreciation or amortization policies or rates) by the Company;

    (f)  revaluation by the Company of any of its material assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable;

11

    (g) declaration, setting aside or payment of a dividend or other distribution with respect to any Company Shares, or any direct or indirect redemption, purchase or other acquisition by the Company of any Company Shares;

    (h) split, combination or reclassification of any Company Shares;

    (i)  agreement, contract, covenant, instrument, lease, license or commitment to which the Company is a party or by which it or any of its assets is bound or any termination, extension, amendment or modification of the terms of any agreement, contract, covenant, instrument, lease, license or commitment to which the Company is a party or by which it or any of its assets is bound, except as set forth in Schedule 4.9(i);

    (j)  sale, lease, license or other disposition of any of the assets or properties of the Company, or creation of any lien or security interest in such assets or properties except in the Ordinary Course of Business;

    (k) loan by the Company to any person or entity, incurring by the Company of any indebtedness, guaranteeing by the Company of any indebtedness, issuance or sale of any debt securities of the Company or guaranteeing of any debt securities of others except for advances to employees for travel and business expenses in the Ordinary Course of Business;

    (l)  waiver or release of any right or claim of the Company, including any write-off or other compromise of any amount of any account receivable of the Company;

    (m) except as set forth in Schedule 4.14, (i) sale by the Company of any Company Intellectual Property (as defined in Section 4.14 below) or the entering into of any license agreement (other than end-user license agreements entered into by the Company in the Ordinary Course of Business), distribution agreement, reseller agreement, security agreement, assignment or other conveyance or option for the foregoing, with respect to the Company Intellectual Property with any person or entity, (ii) the purchase or other acquisition of any Intellectual Property (as defined in Section 4.14 below) or the entering into of any license agreement, distribution agreement, reseller agreement, security agreement, assignment or other conveyance or option for the foregoing, with respect to the Intellectual Property of any person or entity or (iii) the change in pricing or royalties set or charged by the Company to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Intellectual Property to Company;

    (n) issuance or sale by the Company of any Company Shares, or securities exchangeable, convertible or exercisable therefor, or any securities, warrants, options or rights to purchase any of the foregoing or any amendment of any existing equity arrangement; or

    (o) agreement by the Company or any officer or employee thereof to do any of the things described in the preceding clauses (a) through (n) (other than negotiations with Buyer and its representatives regarding the transactions contemplated by this Agreement).

    4.10 Taxes.

    (a) Definition of Taxes. For the purposes of this Agreement, "Tax" or, collectively, "Taxes", means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a predecessor entity.

12

    (b) Tax Returns and Audits. Except as set forth in Schedule 4.10:

    (i)  The Company has prepared and filed on a timely basis all required federal, state, local and foreign returns, estimates, information statements and reports ("Returns") relating to any and all Taxes concerning or attributable to the Company or its operations and such Returns are true and correct and have been completed in accordance with applicable law.

    (ii) The Company: (A) has paid or accrued all Taxes it is required to pay or accrue and (B) has withheld with respect to its employees all federal and state income taxes, FICA, FUTA and other Taxes required to be withheld.

    (iii) The Company has not been delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed or assessed against the Company, nor has the Company executed any waiver of any statute of limitations on or extended the period for the assessment or collection of any Tax.

    (iv) No audit or other examination of any Return of the Company is presently in progress, nor is the Company aware of or has the Company been notified of any request for such an audit or other examination.

    (v) The Company has no liabilities for unpaid federal, state, local or foreign Taxes that have not been accrued or reserved against in the Company Financials, whether asserted or unasserted, contingent or otherwise, and the Company has not incurred any liability for Taxes since the date of the Current Company Balance Sheet other than in the Ordinary Course of Business.

    (vi) The Company has provided to Buyer copies of all federal and state income and all state sales and use Returns for all periods since Company's organization.

    (vii) There are (and as of immediately following the Closing there will be) no liens, pledges, charges, claims, restrictions on transfer, mortgages, security interests or other encumbrances of any sort (collectively, "Liens") on the assets of the Company relating to or attributable to Taxes, other than Liens for Taxes not yet due and payable as of such time.

    (viii) To the Company's knowledge, there is no basis for the assertion of any claim relating or attributable to Taxes that, if adversely determined, would result in any Lien on the assets of the Company.

    (ix) None of the Company's assets are treated as "tax-exempt use property" within the meaning of Section 168(h) of the Code.

    (x) There is no contract, agreement, plan or arrangement to which the Company is a party, including but not limited to the provisions of this Agreement, covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Section 280G, 404 or 162(m) of the Code.

    (xi) The Company has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company.

    (xii) The Company is not a party to a tax sharing or allocation agreement nor does the Company owe any amount under any such agreement. The Company has not been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a consolidated income tax return.

13

    (xiii) The Company is not, and has not been at any time, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code.

    (xiv)  No adjustment or deficiency relating to any Return filed or required to be filed by the Company has been proposed formally or informally by any tax authority to the Company or any representative thereof, nor is the Company or any of its representatives, agents, employees, or advisors aware that any such proposal is being considered.

    (xv) The Company has not distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code or any other transaction. No Company Shares have been distributed in a transaction satisfying the requirements of Section 355 of the Code.

    4.11 Restrictions on Business Activities. There is no agreement (noncompete or otherwise), judgment, injunction, order or decree to which the Company is a party or otherwise binding upon the Company that has or reasonably would be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property (tangible or intangible) by the Company or the conduct of business by the Company. Without limiting the foregoing, the Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its products or services to any class of customers, in any geographic area, during any period of time or in any segment of the market.

    4.12 Title to Properties; Absence of Liens and Encumbrances.

    (a) The Company does not own any real property, nor has it ever owned any real property. Schedule 4.12(a) sets forth a list of all real property currently leased by the Company and the name of each lessor. The Company has provided true and complete copies of all real property leases and amendments thereto to Buyer. All such current leases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default, or to the Company's knowledge, any event which with notice or lapse of time, or both, would constitute a default. Except where such violation would not have a Material Adverse Effect, neither the operations of the Company on such real property nor such real property, including improvements thereon, violate any applicable building code, zoning requirement, or classification or pollution control ordinance or statute relating to the particular property or such operations, and such compliance is not dependent, in any instance, on so-called non-conforming use exceptions.

    (b) The Company has good and marketable title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except as reflected in the Company Financials or in Schedule 4.12(b) and except for liens for taxes not yet due and payable and such imperfections of title and encumbrances, if any, which are not material in character, amount or extent, and which do not materially interfere with the present use, of the property subject thereto or affected thereby.

    (c) Except as set forth in Schedule 4.12(c), all facilities, machinery, equipment, fixtures, vehicles, and other properties owned, leased or used by the Company are (i) adequate for the conduct of the business of the Company as currently conducted and (ii) in good operating condition, regularly and properly maintained, subject to normal wear and tear and reasonably fit and usable for the purposes for which they are being used, except where a failure to be in such condition would not have a Material Adverse Effect on the Company.

    4.13 Governmental Authorization. Schedule 4.13 accurately lists each consent, license, permit, grant or other authorization issued to the Company by a Governmental Entity (a) pursuant to which the Company currently operates or holds any interest in any of its properties or (b) which is required for

14

the operation of its business or the holding of any such interest (collectively called "Company Authorizations"). The Company Authorizations are in full force and effect and constitute all Company Authorizations required to permit the Company to operate or conduct its business or hold any interest in its properties or assets. To the Company's knowledge, the Company is in compliance in all material respects with the terms of the Company Authorizations except where the failure to comply would not have a Material Adverse Effect.

    4.14 Intellectual Property.

    (a) Definitions. For all purposes of this Agreement, the following terms shall have the following respective meanings:

    (i)  "Technology" shall mean any or all of the following: (A) works of authorship including, without limitation, computer programs, source code and executable code, whether embodied in software, firmware or otherwise, documentation, designs, files, net lists, records, data and mask works; (B) inventions (whether or not patentable), improvements and technology; (C) proprietary and confidential information, including technical data and customer and supplier lists, trade secrets and know how; (D) databases, data compilations and collections and technical data; (E) logos, trade names, trade dress, trademarks and service marks; (F) World Wide Web addresses, domain names and sites; (G) tools, methods and processes; and (H) all instances of the foregoing in any form and embodied in any media.

    (ii) "Intellectual Property Rights" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (A) all United States and foreign patents and utility models and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations and continuations-in-part thereof and equivalent or similar rights anywhere in the world in inventions and discoveries, including, without limitation, invention disclosures ("Patents"); (B) all trade secrets and other rights in know-how and confidential or proprietary information; (C) all copyrights, copyrights registrations and applications therefor and all other rights corresponding thereto throughout the world ("Copyrights"); (D) all mask works, mask work registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology ("Maskworks"); (E) all industrial designs and any registrations and applications therefor throughout the world; (F) all rights in World Wide Web addresses and domain names and applications and registrations therefor; (G) all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world ("Trademarks"); and (H) any similar, corresponding or equivalent rights to any of the foregoing anywhere in the world.

    (iii) "Company Intellectual Property" shall mean any Technology and Intellectual Property Rights including the Company Registered Intellectual Property Rights (as defined below) that are owned (in whole or in part) by the Company. For purposes of this Agreement, Company Intellectual Property includes any trademarks owned by Sellers, individually, and, for the avoidance of doubt, includes any and all intellectual property acquired pursuant to the Hixson Acquisition and the Technology Sale Agreement.

    (iv) "Registered Intellectual Property Rights" shall mean all United States, international and foreign: (A) Patents, including applications therefor; (B) registered Trademarks, applications to register Trademarks, including intent-to-use applications, or other registrations or applications related to Trademarks; (C) Copyrights registrations and applications to register Copyrights; (D) Mask Work registrations and applications to register Mask Works; and (E) any other Technology that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public or private legal authority at any time.

15

    (b) Schedule 4.14(b) lists all Registered Intellectual Property Rights owned by, filed in the name of, or applied for, by the Company (the "Company Registered Intellectual Property Rights") and lists any proceedings or actions before any court, tribunal (including the United States Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the world) related to any of the Company Registered Intellectual Property Rights or Company Intellectual Property.

    (c) Each registration of Company Registered Intellectual Property Rights is valid and subsisting, and all necessary registration, maintenance and renewal fees in connection with such Company Registered Intellectual Property Rights have been paid and all necessary documents and certificates in connection with such Company Registered Intellectual Property Rights have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Intellectual Property Rights. Except as set forth on Schedule 4.14(c), there are no actions that must be taken by the Company within one hundred twenty (120) days of the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to PTO office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Registered Intellectual Property Rights. In each case in which the Company have acquired all rights, title and interest in, as opposed to the right to use, any Technology or Intellectual Property Right from any person, the Company or such Subsidiary has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Technology and the associated Intellectual Property Rights to the Company. Except as set forth on Schedule 4.14(c), the Company has not claimed a particular status, including "Small Business Status," in the application for any Intellectual Property Rights, which claim of status was not at the time made, or which has since become, inaccurate or false or that will no longer be true and accurate as a result of the Closing.

    (d) The Company has no knowledge of any facts or circumstances that would render any Company Intellectual Property invalid or unenforceable. Except as set forth on Schedule 4.14(d), without limiting the foregoing, the Company knows of no information, materials, facts or circumstances, including any information or fact that would constitute prior art, that would render any of the Company Registered Intellectual Property Rights invalid or unenforceable, or would adversely effect any pending application for any Company Registered Intellectual Property Right and the Company has not misrepresented, or failed to disclose, and has no knowledge of any misrepresentation or failure to disclose, any fact or circumstances in any application for any Company Registered Intellectual Property Right that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the validity or enforceability of any Company Registered Intellectual Property Right.

    (e) Each item of Company Intellectual Property is free and clear of any Liens except for non-exclusive licenses granted to end-user customers in the Ordinary Course of Business. The Company is the exclusive owner of all Company Intellectual Property subject only to non-exclusive licenses granted to distributors, resellers and end-users. Without limiting the foregoing, to the knowledge of the Company: (i) the Company is the exclusive owner of all Trademarks used in connection with the operation or conduct of the business of the Company, including the sale, licensing, distribution or provision of any products or services by the Company; and (ii) except as set forth on Schedule 4.14(e), the Company owns exclusively, and has good title to, all Copyrighted Works that are products of the Company or which the Company otherwise purports to own.

    (f)  Except as set forth in Schedule 4.14(f), all Company Intellectual Property will be fully transferable, alienable or licensable by Company and/or Buyer without restriction except that any such transfer, alienation or license shall be subject to non-exclusive licenses granted to end user customers in the Ordinary Course of Business of the Company prior to the closing of the transactions contemplated hereby and without payment of any kind to any third party other than

16

royalties and fees payable in the Ordinary Course of Business of the Company prior to the closing of the transactions contemplated hereby.

    (g) To the extent that any Company Technology has been developed or created by a third party for the Company, the Company has a written agreement with such third party with respect thereto and the Company thereby either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a license (sufficient for the conduct of its business as currently conducted and as proposed to be conducted) to all such third party's Intellectual Property Rights in such Technology by operation of law or by valid assignment, to the fullest extent it is legally possible to do so.

    (h) Except as set forth on Schedule 4.14(h) and with the exception of "shrink-wrap" or similar widely-available commercial end-user licenses, all Technology used in or necessary to the conduct of Company's business as presently conducted or currently contemplated to be conducted by the Company was written and created solely by either (i) employees of the Company acting within the scope of their employment or (ii) by third parties who have validly and irrevocably assigned all of their rights, including Intellectual Property Rights therein, to the Company, and no third party owns or has any rights to any of the Company Intellectual Property.

    (i)  All current and former employees of the Company and current and former consultants and contractors engaged by the Company have entered into a valid and binding written proprietary information confidentiality and assignment agreement with the Company sufficient to vest title in the Company of all Technology, including all accompanying Intellectual Property Rights, created by such employee in the scope of his or her employment with the Company.

    (j)  Except as set forth on Schedule 4.14(j), and with the exception of "shrink-wrap" or similar widely-available commercial end-user licenses, no person who has licensed Technology or Intellectual Property Rights to the Company has ownership rights or license rights to improvements made by the Company in such Technology or Intellectual Property Rights.

    (k) The Company has not transferred ownership of, or granted any exclusive license of or right to use, or authorized the retention of any exclusive rights to use or joint ownership of, any Technology or Intellectual Property Right that is or was Company Intellectual Property, to any other person.

    (l)  Other than inbound "shrink-wrap" and similar publicly available commercial binary code end-user licenses and outbound "shrink-wrap" licenses in the form set forth on Schedule 4.14(l), Schedule 4.14(l) lists all contracts, licenses and agreements to which the Company is a party with respect to any Technology or Intellectual Property Rights. The Company is not in breach of nor has the Company failed to perform under, any of the foregoing contracts, licenses or agreements and, to the Company's knowledge, no other party to any such contract, license or agreement is in breach thereof or has failed to perform thereunder.

    (m) Schedule 4.14(m) lists all contracts, licenses and agreements between the Company and any other person wherein or whereby the Company have agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or liability or provide a right of rescission with respect to the infringement or misappropriation by the Company or such other person of the Intellectual Property Rights of any person other than the Company.

    (n) To the knowledge of the Company, there are no contracts, licenses or agreements between the Company and any other person with respect to Company Intellectual Property under which there is any dispute regarding the scope of such agreement, or performance under such agreement, including with respect to any payments to be made or received by the Company thereunder.

17

    (o) To the knowledge of the Company, the operation of the business of the Company as it currently is conducted or is contemplated to be conducted by the Company, including but not limited to the design, development, use, import, branding, advertising, promotion, marketing, manufacture and sale of the products, technology or services (including products, technology or services currently under development) of the Company does not and will not and will not when conducted by Buyer and/or Company (post-closing) in substantially the same manner following the Closing, infringe or misappropriate any Intellectual Property Right of any person, violate any right of any person (including any right to privacy or publicity) or constitute unfair competition or trade practices under the laws of any jurisdiction, and the Company has not received notice from any person claiming that such operation or any act, product, technology or service (including products, technology or services currently under development) of the Company infringes or misappropriates any Intellectual Property Right of any person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor does the Company have knowledge of any basis therefor).

    (p) To the Company's knowledge, no person is infringing or misappropriating any Company Intellectual Property Right.

    (q) No Company Intellectual Property or service of the Company is subject to any proceeding or outstanding decree, order, judgment or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by the Company or may affect the validity, use or enforceability of such Company Intellectual Property.

    (r) No (i) product, technology, service or publication of the Company, (ii) material published or distributed by the Company or (iii) conduct or statement of the Company constitutes obscene material, a defamatory statement or material, false advertising or, to the Company's knowledge, otherwise violates in any material respect any law or regulation, except where such publication, distribution, conduct or statement would not have a Material Adverse Effect.

    (s) To the Company's knowledge, except as set forth on Schedule 4.14(s), and except for Technology or Intellectual Property subject to "shrink wrap" or similar widely available commercial end user licenses, the Company Intellectual Property constitutes all the Technology and Intellectual Property Rights used in and/or necessary to the conduct of the business of the Company as it currently is conducted, including, without limitation, the design, development, manufacture, use, import and sale of products, technology and performance of services.

    (t)  Except to the extent resulting from the continuation of contracts and licenses of the Company following the Closing on the terms applicable prior to the Closing, neither this Agreement nor the transactions contemplated by this Agreement, including the assignment to Buyer or Company (post-closing), by operation of law or otherwise, of any contracts or agreements to which the Company is a party, will result in (i) either Buyer's or the Company's granting to any third party any right to or with respect to any Technology or Intellectual Property Right owned by, or licensed to, either of them, (ii) either the Buyer's or the Company's being obligated to pay any royalties or other amounts to any third party in excess of those payable by the Company or Buyer, respectively, prior to the Closing.

    (u) The Company's products and services as marketed to the public on the Closing Date shall not fail to perform any function specified in the product specifications therefor, or otherwise be adversely affected in any material respect, solely as a result of the date change from December 31, 1999 to January 1, 2000, including without limitation, date data century recognition, calculations which accommodate same century and multi-century formulas and date values, and date data interface values which reflect the correct century. In addition, to the Company's knowledge, all of the products and services upon which the Company relies, either individually or in the aggregate, including, without limitation, information technology systems such as financial and order entry systems, non-information technology systems such as phones and facilities, third party licensed

18

software and the products and services of the Company's customers, vendors and suppliers are designed to be used prior to, during, and after calendar year 2000 A.D., and such products and services will operate during each such time period without error relating to date data, including without limitation any error relating to, or the product of, date data that represents or references different centuries or more than one century.

    4.15 Product Warranties; Defects; Liabilities. Each Company product or service has been in all material respects in conformity with all applicable contractual commitments and all applicable express and implied warranties. The Company does not have any liability or obligation (and to the Company's knowledge, there is no current reasonable basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against the Company giving rise to any liability or obligation) for replacement or repair thereof or other damages in connection therewith except liabilities or obligations incurred in the Ordinary Course of Business which do not have a Material Adverse Effect on the Company. Except as disclosed in Schedule 4.15, no Company product or service is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale, license or lease or beyond that implied or imposed by applicable law. The Company has provided to Buyer a copy of the standard terms and conditions of sale, license or lease for each of the Company products and services and copies of the Company's standard forms of merchant agreements, portal agreements and professional services agreements.

    4.16 Agreements, Contracts and Commitments. As of the date hereof, except as set forth on Schedule 4.16(a), the Company does not have, is not a party to nor is it bound by:

    (a) any collective bargaining agreements;

    (b) any employment or consulting agreement, contract or commitment with any officer, director, employee or member of the Company's Board of Directors, other than those that are terminable by the Company without liability of financial obligation of the Company;

    (c) any employment or consulting agreement with an employee or individual consultant or salesperson or consulting or sales agreement, under which a firm or other organization provides services to the Company;

    (d) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement;

    (e) any fidelity or surety bond or completion bond;

    (f)  any lease of personal property having a value individually in excess of $5,000;

    (g) any agreement of indemnification or guaranty other than standard indemnification terms contained in contracts with resellers and distributors and licensees of the Company's products;

    (h) any agreement, contract or commitment containing any covenant limiting in any respect the right of Company to engage in any line of business or to compete with any person or granting any exclusive distribution rights;

    (i)  any agreement relating to capital expenditures and involving future payments in excess of $5,000;

    (j)  any agreement, contract or commitment currently in force relating to the disposition or acquisition by the Company after the date of this Agreement of a material amount of assets not in the Ordinary Course of Business or pursuant to which the Company has any ownership interest in any corporation, partnership, joint venture or other business enterprise;

19

    (k) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit, including guaranties referred to in clause (g) hereof;

    (l)  any purchase order or contract involving $5,000 or more;

    (m) any construction contracts;

    (n) any dealer, distribution, joint marketing (including any pilot program), development, content provider, destination site or merchant agreement;

    (o) any agreement pursuant to which the Company has granted or may be obligated to grant in the future, to any party a source-code license or option or other right to use or acquire source-code, including any agreements which provide for source code escrow arrangements;

    (p) any sales representative, original equipment manufacturer, value added, remarketer or other agreement for distribution of the Company's products or services or the products or services of any other person or entity;

    (q) any agreement pursuant to which the Company has advanced or loaned any amount to any shareholder of the Company or any director, officer, employee or consultant other than business travel advances in the ordinary course of business consistent with past practice;

    (r) any settlement agreement entered into since January 1, 1997 that provides for continuing obligations of the Company; or

    (s) any other agreement that involves $5,000 or more or is not cancelable without penalty within thirty (30) days.

Except as set forth on Schedule 4.16(b), the Company has not breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the terms or conditions of any agreement, contract or commitment required to be set forth on Schedule 4.16(a) or Schedule 4.14 (any such agreement, contract or commitment, a "Contract"). Each Contract is in full force and effect and, except as otherwise disclosed in Schedule 4.16(b), is not subject to any default thereunder of which the Company has knowledge by any party obligated to the Company pursuant thereto.

    4.17 Interested Party Transactions. No employee, officer or director of the Company or member of his or her immediate family is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them. To the best of the Company's knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company. No member of the immediate family of any officer or director of the Company is directly or indirectly interested in any contract with the Company. There are no receivables of the Company owing by any director, officer, employee or consultant to the Company (or any ancestor, sibling, descendant, or spouse of any such persons, or any trust, partnership or corporation in which any of such persons has an economic interest), other than advances in the ordinary and usual course of business for reimbursable business expenses (as determined in accordance with the Company's established employee reimbursement policies and consistent with past practice). None of the Company shareholders has agreed to, or assumed, any obligation or duty to guaranty or otherwise assume or incur any obligation or liability of the Company.

    4.18 Compliance with Laws. The Company is in compliance with each order, judgment and decree, and to its knowledge, each law, rule and regulation, applicable to the Company or by which its properties are bound or affected, except to the extent such non-compliance will not have a Material Adverse Effect. To the knowledge of the Company, no investigation or review by any governmental or regulatory body or authority is pending or threatened against the Company, nor has any governmental

20

or regulatory body or authority indicated an intention to conduct the same, other than, in each such case, those the outcome of which could not, individually or in the aggregate, reasonably be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property by the Company or the conduct of business by the Company.

    4.19 Litigation. There is no action, suit or proceeding of any nature pending or to the Company's knowledge threatened against the Company, its properties or any of its officers, directors or employees (in their capacities as officers, directors or employees, as the case may be), nor, to the knowledge of the Company, is there any reasonable basis therefor. There is no investigation pending or, to the Company's knowledge, threatened against the Company, its properties or any of its officers, directors or employees (in their capacities as officers, directors or employees, as the case may be) by or before any Governmental Entity. No Governmental Entity has at any time challenged or questioned the legal right of the Company to conduct its operations as presently or previously conducted.

    4.20 Insurance. With respect to the insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company, there is no claim by the Company pending under any of such policies or bonds as to which coverage has been denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). The Company has no knowledge of any threatened termination of, or premium increase with respect to, any of such policies.

    4.21 Minute Books. The minute books of the Company made available to Buyer and its counsel are the only minute books of the Company and contain an accurate summary of all meetings of directors (or committees thereof) and shareholders, in their respective capacities as such, or actions by written consent since the time of incorporation of the Company through the date hereof.

    4.22 Environmental Matters. Except where the failure would not have a Material Adverse Effect, the Company (a) has obtained all applicable and material permits, licenses and other authorizations that are required under Environmental Laws; (b) to the Company's knowledge, is in compliance with all material terms and conditions of such required permits, licenses and authorizations, and also is in compliance with all other material limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in such laws or contained in any regulation, code, plan, order, decree, judgment, notice or demand letter issued, entered, promulgated or approved thereunder; (c) is not aware of and has not received notice of any event, condition, circumstance, activity, practice, incident, action or plan that is reasonably likely to interfere with or prevent continued compliance or that would give rise to any common law or statutory liability, or otherwise form the basis of any Environmental Claim with respect to the Company or any person or entity whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law; (d) has not disposed of, released, discharged or emitted any Hazardous Materials into the soil or groundwater at any properties owned or leased at any time by the Company, or at any other property, or exposed any employee or other individual to any Hazardous Materials or condition in such a manner as would result in any material liability or result in any corrective or remedial action obligation; and (e) has taken all actions necessary under Environmental Laws to register any products or materials required to be registered by the Company (or any of its agents) thereunder. To the Company's knowledge, no Hazardous Materials are present in, on or under (or, to the knowledge of the Company, in the vicinity of) any properties owned, leased or used at any time (including both land and improvements thereon) by the Company so as to give rise to any material liability or corrective or remedial obligation of the Company under any Environmental Laws. For the purposes of this Section 4.22, "Environmental Claim" means any notice, claim, act, cause of action or investigation by any person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property

21

damages, personal injuries or penalties) arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Materials or (b) any violation, or alleged violation, of any Environmental Laws. "Environmental Laws" means all federal, state, local and foreign laws and regulations relating to pollution or the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or the protection of human health and worker safety, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic substances, radioactive and biological materials, asbestos-containing materials (ACM), hazardous substances, petroleum and petroleum products or any fraction thereof, excluding, however, Hazardous Materials contained in products typically used for office and janitorial purposes properly and safely maintained in accordance with Environmental Laws.

    4.23 Brokers' and Finders' Fees. The Company has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.

    4.24 Employee Matters and Benefit Plans.

    (a) Definitions. With the exception of the definition of "Affiliate" set forth in Section 4.24(a)(i) below (such definition shall only apply to this Section 4.24), for purposes of this Agreement, the following terms shall have the meanings set forth below:

    (i)  "Affiliate" shall mean any other person or entity under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder;

    (ii) "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended;

    (iii) "Company Employee Plan" shall refer to any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or otherwise, funded or unfunded, including without limitation, each "employee benefit plan", within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any Affiliate for the benefit of any Employee (as defined below), or with respect to whether the Company has or may have any liability or obligation;

    (iv) "DOL" shall mean the United States Department of Labor.

    (v) "Employee" shall include any current, former or retired employee, officer, director or consultant of the Company or any Affiliate;

    (vi) "Employee Agreement" shall include each management, employment, indemnification, severance, termination, consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract or understanding between the Company or any Affiliate and any Employee;

    (vii) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended;

    (viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as amended;

22

    (ix) "IRS" shall mean the Internal Revenue Service;

    (x) "Multiemployer Plan" shall mean any "Pension Plan" (as defined below) which is a "multiemployer plan", as defined in Section 3(37) of ERISA; and

    (xi) "Pension Plan" shall refer to each Company Employee Plan which is an "employee pension benefit plan", within the meaning of Section 3(2) of ERISA.

    (b) Schedule. Schedule 4.24(b) contains an accurate and complete list of each Company Employee Plan and each Employee Agreement. The Company does not have any plan or commitment to establish any new Company Employee Plan or Employee Agreement, to modify any Company Employee Plan or Employee Agreement (except to the extent required by law or to conform any such Company Employee Plan or Employee Agreement to the requirements of any applicable law, in each case as previously disclosed to Parent in writing, or as required by this Agreement), or to enter into any Company Employee Plan or Employee Agreement nor does it have any intention or commitment to do any of the foregoing.

    (c) Documents. The Company has provided or made available to Buyer (i) correct and complete copies of all documents embodying or relating to each Company Employee Plan and each Employee Agreement including, without limitation, all amendments thereto, all related trust documents and written interpretations thereof; (ii) the most recent annual actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the three most recent annual reports (Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Company Employee Plan or related trust; (iv) if the Company Employee Plan is funded, the most recent annual and periodic accounting of Company Employee Plan assets; (v) the most recent summary plan description together with the most recent summary(ies) of material modifications thereto, if any, required under ERISA with respect to each Company Employee Plan; (vi) all IRS determination, opinion, notification and advisory letters and rulings relating to Company Employee Plans and copies of all applications and correspondence to or from the IRS, DOL or any other governmental agency with respect to any Company Employee Plan; (vii) all material written agreements and contracts relating to each Company Employee Plan, including, but not limited to, administrative service agreements, ERISA fidelity bonds, group annuity contracts and group insurance contracts; (viii) all communications material to any Employee or Employees relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any liability to the Company; (ix) all correspondence to or from any governmental agency relating to any Company Employee Plan; (x) all COBRA forms and related notices; (xi) all policies pertaining to fiduciary liability insurance covering the fiduciaries of for each Company Employee Plan; (xii) all discrimination tests for each Company Employee Plan for the most recent plan year; and (xiii) all registration statements, annual reports (Form 11-K and all attachments thereto) and prospectuses prepared in connection with each Company Employee Plan.

    (d) Employee Plan Compliance. Except as set forth on Schedule 4.24(d), (i) the Company has performed in all material respects all obligations required to be performed by it under, is not in default or violation of, and has no knowledge of any default or violation of any other party to, each Company Employee Plan, and each Company Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA or the Code; (ii) each Company Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code is qualified and has received a favorable determination letter from the IRS with respect to each such Company Employee Plan as to its qualified status under the Code, including all amendments to the Code required by the Tax

23

Reform Act of 1986 and subsequent legislation, or has a period of time remaining under applicable Treasury regulations or IRS pronouncements in which to apply for such a letter and make any retroactive amendments necessary to obtain a favorable determination as to the qualified status of each such Company Employee Plan; (iii) no "prohibited transaction," within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee Plan; (iv) there are no actions, suits or claims pending, or, to the knowledge of the Company, threatened (other than routine claims for benefits) against any Company Employee Plan or against the assets of any Company Employee Plan; and (v) each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to the Company, Parent or any of its Affiliates (other than ordinary administration expenses typically incurred in a termination event); (vi) there are no audits, inquiries or proceedings pending or, to the knowledge of the Company or any Affiliates, threatened by the IRS or DOL with respect to any Company Employee Plan; and (vii) neither the Company nor any Affiliate is subject to any penalty or tax with respect to any Company Employee Plan under Section 501(i) of ERISA or Section 4975 through 4980 of the Code.

    (e) Pension Plans. Neither the Company nor any Affiliate has ever maintained, established, sponsored, participated in, or contributed to, any Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, and no Pension Plan is a "top-heavy plan" within the meaning of Section 416 of the Code.

    (f)  Multiemployer Plans. At no time has the Company or any Affiliate contributed to or been requested to contribute to any Multiemployer Plan.

    (g) No Post-Employment Obligations. Except as set forth in Schedule 4.24(g), no Company Employee Plan provides, or reflects or represents any liability to provide, life insurance, health or other employee benefits to any person upon his or her retirement or termination of employment for any reason, except as may be required by statute, and the Company has never represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) or any other person would be provided with life insurance, health or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by statute.

    (h) COBRA. Neither the Company nor any Affiliate has, prior to the Effective Time, violated any of the health care continuation requirements of COBRA, the requirements of FMLA, the requirements of the Women's Healthcare Cancer Rights Act, the requirements of the Newborns' and Mothers' Health Protection Act of 1996 or any similar provisions of state law applicable to its Employees.

    (i)  Effect of Transaction.

    (i)  Except as set forth on Schedule 4.24(i)(i), the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, Employee Agreement, trust or loan that will or may result in any current or future payment (whether of severance or termination pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, indemnification, increase in benefits or obligation to fund benefits with respect to any Employee.

    (ii) Except as set forth on Schedule 4.24(i)(ii), no payment or benefit which will or may be made by the Company or Parent or any of their respective affiliates with respect to any Employee resulting from the transactions contemplated by this Agreement or otherwise will be

24

characterized as a "parachute payment", within the meaning of Section 280G(b)(2) of the Code.

    (j)  Employment Matters. Schedule 4.24(j) lists all current officers, directors and employees of the Company as of the date hereof. The Company (i) to its knowledge, is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees (including any immigration laws with respect to the same); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). Schedule 4.24(j) also sets forth all outstanding offers of employment, whether written or oral, made to any employee or prospective employee, which offer has not been rejected by the offeree.

    (k) Labor. No work stoppage or labor strike against the Company is pending, or to the Company's knowledge, threatened. The Company does not know of any activities or proceedings of any labor union to organize any Employees. Except as set forth in Schedule 4.24(k), there are no actions, suits, claims, labor disputes or grievances pending, or, to the knowledge of the Company, threatened relating to any labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in any liability to the Company. The Company has not engaged in any unfair labor practices within the meaning of the National Labor Relations Act. Except as set forth in Schedule 4.24(k), the Company is not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Company.

    (l)  No Interference or Conflict. To the knowledge of the Company, no shareholder, officer, employee or consultant of the Company is obligated under any contract or agreement subject to any judgment, decree or order of any court or administrative agency that would interfere with such person's efforts to promote the interests of the Company or that would interfere with the Company's business. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company's business as presently conducted nor any activity of such officers, directors, employees or consultants in connection with the carrying on of the Company's business as presently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract or agreement under which any of such officers, directors, employees or consultants is now bound.

    4.25 Bank Accounts. Schedule 4.25 constitutes a full and complete list of all the bank accounts and safe deposit boxes of the Company, the number of each such account or box, and the names of the persons authorized to draw on such accounts or to access such boxes. All cash in such accounts is held in demand deposits and is not subject to any restriction or documentation as to withdrawal.

    4.26 Indemnification Obligations. The Company has no knowledge of any action, proceeding or other event pending or threatened against any officer or director of the Company that would give rise to any indemnification obligation of the Company to its officers and directors under its Certificate or Articles of Incorporation, Bylaws or any agreement between the Company and any of its officers or directors.

    4.27 Representations Complete. None of the representations or warranties made by the Company herein (as modified by any Disclosure Schedules), nor any statement made in any Schedule or certificate furnished by the Company pursuant to this Agreement, (to the extent that such documents

25

were prepared by or include information provided by the Company), contains or will contain, on and as of the Closing Date, any untrue statement of a material fact, or omits or will omit, on and as of the Closing Date, to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading.

5. Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing:

    5.1 General. Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 7 below).

    5.2 Notices and Consents. The Sellers will cause the Company to give any notices to third parties, and will cause the Company to use its reasonable best efforts to obtain any third party consents, necessary or advisable in order to consummate the transaction contemplated hereby. Each of the Parties will (and the Sellers will cause the Company to) give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies necessary or advisable in order to consummate the transaction contemplated hereby. Without limiting the generality of the foregoing, each of the Parties will file (and the Sellers will cause the Company to file) any Notification and Report Forms and related material that he or it may be required to file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Act, will use reasonable best efforts to obtain (and the Sellers will cause the Company to use its reasonable best efforts to obtain) a waiver from the applicable waiting period, and will make (and the Sellers will cause the Company to make) any further filings pursuant thereto that may be necessary, proper, or advisable in connection therewith.

    5.3 Operation of Business. The Sellers will not cause or permit the Company to engage in any practice, take any action, or enter into any transaction (other than those contemplated by this Agreement) outside the Ordinary Course of Business. Without limiting the generality of the foregoing, the Sellers will not cause or permit the Company to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, purchase, or otherwise acquire any of its capital stock, or (ii) grant any increase in the base compensation of the Sellers outside the Ordinary Course of Business.

    5.4 Access. The Sellers will permit, and the Sellers will cause each of the Company and Hixson to permit, representatives of the Buyer to have access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company or Hixson, to all premises, properties, books, records (including tax records), contracts, and documents of or pertaining to the Company or Hixson; provided, however, that the Buyer shall not directly or indirectly have any discussions, contact or communication of any type with any employee, agent, representative, franchisee or customer of the Company or Hixson without the Sellers' prior written consent in each specific instance. The Buyer will treat and hold as such any Confidential Information it receives from any of the Sellers, the Company or Hixson in the course of the reviews contemplated by this Section, will not use any of the Confidential Information except in connection with this Agreement, and, if this Agreement is terminated for any reason whatsoever, will return to the Sellers and the Company all tangible embodiments (and all copies) of the Confidential Information which are in its possession.

    5.5 Notice of Developments. Each Party will give prompt written notice to the others of any material adverse development causing a breach of any of his or its own representations and warranties in Section 3 or 4 above.

    5.6 Exclusivity. The Sellers will not (and the Sellers will not cause or permit any of the Company to): (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating

26

to the acquisition of all or substantially all of the capital stock or assets of any of the Company (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing.

    5.7 Balance Sheet. On the day prior to the Closing Date, the Sellers shall deliver to the Buyer a draft of the Current Company Balance Sheet, which shall include a statement as to the amount of the Funded Debt and Working Capital, as determined by such balance sheet.

    5.8 Hixson Agreement-Technology Sale Agreement; Royalty Agreements. Sellers agree to cause the Company to acquire substantially all of the assets of Hixson, including it Auto-DOC and Auto-PILOT product lines (the "Hixson Acquisition"), immediately prior to the Closing, in accordance with the terms set forth in the Hixson Asset Purchase Agreement attached hereto as Exhibit A (the "Hixson Agreement"). In addition, pursuant to the Technology Sale Agreement, certain source code owned by Mr. Hartsell shall be transferred to the Company simultaneously with the Closing and pursuant to an Assignment of Trademark, certain trademarks owned by Sellers, shall be transferred to the Company prior to the Closing.

6. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing:

    6.1 General. In case at any time after the Closing any further action is necessary to implement the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 8 below).

    6.2 Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each of the other Parties will cooperate with such Party and its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 8 below).

    6.3 Access to Records and Files. After the Closing Date, the Buyer will retain and preserve for five years or for the applicable statute of limitations with respect to tax matters, if longer, and, on any Seller's request and cost, make available to the Sellers during normal business hours for any proper purpose, any records relating to the Company's business prior to Closing. Additionally, the Buyer will, and will cause the Company to, permit the Sellers to make copies and extracts therefrom and will provide originals to the Sellers where reasonably required for any lawful purpose. The Buyer will not, and will cause the Company not to, dispose of or destroy such records without first giving the Sellers prior notice and a reasonable opportunity, at the Sellers' expense, to segregate and remove any of such records as any Seller may select. Notwithstanding the foregoing, the Buyer waives, and shall cause the Company to waive, any and all rights with respect to the Attorney Records, which the Buyer agrees will belong to the Sellers.

    6.4 Sellers' Health and Welfare Benefits. The Buyer shall, and shall cause the Company to, maintain at a minimum the Company's current level of employee benefits as of the Closing Date, and the Buyer shall not, and shall cause the Company not to, adversely change, alter or modify in any way such employee benefits for six (6) months from the Closing Date without the Sellers' prior written consent.

27

    6.5 Company Operating Budget and Salaries. The Sellers acknowledge that the Company will become a product development Subsidiary of Buyer at the close of the transaction contemplated hereby. An initial draft of the budget for the Company's product development activities shall be submitted to Buyer prior to Closing. This budget shall cover expenses in the following areas:

(a)

salaries for technical and support staff;



(b)

technology seminars and conferences;



(c)

travel; and



(d)

technology and office supplies.

    6.6 Royalty Agreements. On or before April 30, 2000, Sellers shall cause all outstanding royalty agreements relating to Hixson to be settled or terminated.

    6.7 Non-Compete. Each Seller agrees that for a period of two years after the expiration of the term of Seller's Employment Agreement, or three years after the Closing Date, whichever is later, Seller shall not, directly or indirectly, within the United States, engage or participate or make any financial investments in, or become employed by, or act as an agent, consultant or principal of, or render advisory or other services to or for, any person, firm or corporation (other than Buyer) that is engaged, directly or indirectly, in the business of developing software for hand-held computers for use by physicians and other healthcare professionals which include those functionalities demonstrated to the Buyer on the PocketRx prototype, including without limitation, patient charting and billing and communicating and reporting among laboratories and pharmacies regarding patient information, or the business of developing, or selling end-user licenses of, software and hardware for hand-held and desktop computers for patient charting and health care reporting for chiropractors and similar medical practitioners (a "Competing Enterprise"). Nothing herein contained shall restrict Sellers from (a) engaging in the activities contemplated by the Stock Purchase Agreement, and (b) holding investments in not more than three percent of the voting securities of any Competing Enterprise whose stock is listed on a national securities exchange or is actively traded on the National Association of Securities Dealers Automated Quotation System, so long as in connection with such investments Sellers do not render services to a Competing Enterprise. Each Seller acknowledges that the chronologic, geographic and business restrictions set forth in this Section are reasonable in light of the competitive nature of the businesses of the Company and Buyer, and consents to the imposition thereof in order to induce Buyer to enter into this Agreement.

7. Conditions to Obligation to Close.

    7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

    (a) the representations and warranties set forth in Section 3.1 and Section 4 above shall be true and correct in all material respects at and as of the Closing Date;

    (b) the Company and the Sellers shall have performed and complied with all of their respective covenants under this Agreement in all material respects, including without limitation, all covenants relating to the Hixson Acquisition, through the Closing;

    (c) the Sellers shall have delivered to the Buyer an Officer's Certificate to the effect that each of the conditions specified above in Section 7.1(a) and (b) is satisfied in all respects;

    (d) the Company shall have procured any consents necessary for the consummation of the transactions set forth herein;

28

    (e) no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right of the Buyer to own the Company Shares and to control the Company, or (D) affect materially and adversely the right of the Company to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

    (f)  all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Parties, the Company shall have received all other material authorizations, consents, and approvals of governments and governmental agencies referred to in Section 4.6 above;

    (g) the Buyer shall have received the resignation(s) of all of the directors of the Company;

    (h) the Buyer shall have received from counsel to the Sellers an opinion in form and substance as set forth in Exhibit B-1 attached hereto, addressed to the Buyer, and dated as of the Closing Date;

    (i)  the Hixson Agreement and the Technology Sale Agreement shall have been fully executed and delivered to Buyer, together with any and all documents relating thereto, and the transactions contemplated in such Agreements shall have been fully consummated.

    (j)  all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer.

The Buyer may waive any condition specified in this Section 7.1 if it executes a writing so stating at or prior to the Closing.

    7.2 Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions:

    (a) the representations and warranties set forth in Section 3.2 above shall be true and correct in all material respects at and as of the Closing Date;

    (b) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;

    (c) the Buyer shall have delivered to the Sellers an Officer's Certificate to the effect that each of the conditions specified above in Section 7.2(a) and (b) is satisfied in all respects;

    (d) no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

    (e) Sellers shall have received from counsel to Buyer an opinion in form and substance as set forth in Exhibit B-2 attached hereto, addressed to Sellers, and dated as of the Closing Date;

    (f)  each of the Sellers shall have received from the Buyer an executed Employment Agreement in the form or substantially in the form of the attached as Exhibit C.

29

    (g) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers.

The Sellers may waive any condition specified in this Section 7.2 if they execute a writing so stating at or prior to the Closing.

8. Remedies for Breaches of this Agreement.

    8.1 Survival of Representations and Warranties. All of the representations and warranties of the Sellers and of the Company contained in this Agreement shall survive the Closing hereunder (unless the Buyer knew of any misrepresentation or breach of warranty at the time of Closing) and shall continue in full force and effect for one year thereafter; provided, however, that (i) the representations and warranties of the Sellers and the Company contained in Sections 3.1(d) and 4.3 shall survive the Closing and shall continue in full force and effect until the expiration of any applicable statute of limitations; and (ii) the representations and warranties of the Sellers and the Company contained in Section 4.14 shall survive the Closing and shall continue in full force and effect for two years thereafter.

    8.2 Indemnification Provisions for Benefit of the Buyer.

    (a) In the event that: (i) the Sellers and/or the Company breach any of their representations, warranties, or covenants contained in this Agreement, or (ii) any Adverse Consequence is suffered by the Buyer or the Company as a result of any current or pending litigation disclosed on the schedules to the Hixson Agreement, or (iii) any party other than the Company breaches any representation, warranty or covenant contained in the Hixson Agreement or the Technology Sale Agreement, then the Sellers agree jointly and severally to indemnify the Buyer from and against any Adverse Consequences the Buyer or its affiliates may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyer or its affiliates may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach; provided, however, that (A)  the Sellers shall not have any obligation to indemnify the Buyer (x) from and against any Adverse Consequences amounting to less than $5,000 arising from a single breach or (y) until the Buyer has suffered Adverse Consequences by reason of all such breaches in excess of $25,000 in the aggregate (after which point the Sellers will be obligated to indemnify the Buyer for all of the Adverse Consequences without regard to such threshold), (B) the Sellers' maximum obligation to indemnify the Buyer from and against Adverse Consequences pursuant to this Agreement shall not exceed $7,000,000 and (C) the Sellers shall have no indemnity obligation related to any claim for indemnification that is not made by the Buyer to the Sellers in writing within one year of the Closing Date or, with respect to an indemnity claim arising from a breach of the representations and warranties in Section 3.1(d), 4.3 or 4.14, within the applicable survival period described in Section 8.1.

    (b) Subject to the terms of the Escrow Agreement, the Holdback shall be available to Buyer and its affiliates in payment of any claim for indemnification under this Section 8.2.

    8.3 Indemnification Provisions for Benefit of the Sellers. In the event the Buyer breaches any of its representations, warranties, or covenants contained in this Agreement, then the Buyer agrees to indemnify the Sellers from and against the entirety of any Adverse Consequences any Seller may suffer, through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the breach thereof on and after the Closing Date. The Buyer agrees to indemnify and reimburse the Sellers for all Adverse Consequences any Seller may suffer arising out of or relating to any liability or obligation of the Company reflected on the Financial Statements or assumed by the Buyer or the Company (other than liabilities or obligations which the Company failed

30

to disclose in breach of its obligations under this Agreement) under this Agreement whether arising out of nonpayment or otherwise.

    8.4 Matters Involving Third Parties.

    (a) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 8, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced.

    (b) Any Indemnifying Party will have the right to assume the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party at any time within 15 days after the Indemnified Party has given notice of the Third Party Claim; provided, however, that the Indemnifying Party must conduct the defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard; and provided further that the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim.

    (c) So long as the Indemnifying Party has assumed and is conducting the defense of the Third Party Claim in accordance with Section 8.4(b) above, (A) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages by one or more of the Indemnifying Parties and does not impose an injunction or other equitable relief upon the Indemnified Party and (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably).

    (d) In the event none of the Indemnifying Parties assumes and conducts the defense of the Third Party Claim in accordance with Section 8.4(b) above, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner he or it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith) and (B) the Indemnifying Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 8.

    8.5 Determination of Adverse Consequences. The Parties shall make appropriate adjustments for tax consequences, insurance coverage, rate adjustments, indemnification agreements, and similar arrangements and take into account the time cost of money (using the Applicable Rate as the discount rate) in determining Adverse Consequences for purposes of this Section 8. The Buyer shall cause the Company to make reasonable efforts to enforce the indemnity provisions in the Hixson Agreement and the Technology Sale Agreement to mitigate any Adverse Consequences related to any claim for indemnity under this Agreement. All indemnification payments under this Section 8 shall be deemed adjustments to the Purchase Price.

    8.6 Exclusive Remedy. The Buyer acknowledges and agrees that the foregoing indemnification provisions in this Section 8 shall be the sole and exclusive remedy of the Buyer for any inaccuracy or breach of the representations, warranties, or covenants in this Agreement of any Seller or the Company.

31

9. Cooperation on Tax Matters.

    9.1 Pre-Closing Returns. Consistent with the Company's past elections and methods, Buyer shall prepare or cause to be prepared and file or cause to be filed any and all Tax Returns for the Company for all periods (i) ending on or before the Closing Date that are filed after the Closing Date (other than income Tax Returns with respect to periods for which a consolidated, unitary or combined income Tax Return of any Seller will include the operations of the Company) and (ii) beginning before the Closing Date and ending after the Closing Date. Buyer shall permit Sellers to review and comment on each such Tax Return described in the preceding sentence prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by the Sellers.

    9.2 Post-Closing Returns. Buyer, the Company and the Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns filed after the Closing Date and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon any Party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company and the Sellers agree (i) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or the Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, the Company or the Sellers, as the case may be, shall allow the other Party to take possession of such books and records.

    9.3 Government Certificates. Buyer and the Sellers further agree, upon request, to use their reasonable best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

    9.4 Section 6043 Reports. Buyer and the Sellers further agree, upon request, to provide the other Parties with all information that any Party may be required to report pursuant to Section 6043 of the Code and all Treasury Department Regulations promulgated thereunder.

10. Termination.

    10.1 Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below:

    (a) the Buyer and all of the Sellers, as a group, may terminate this Agreement by mutual written consent at any time prior to the Closing;

    (b) the Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (A) in the event the Company and/or the Sellers have breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Sellers of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before April 30, 2000, by reason of the failure of any condition precedent under Section 7.1 hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and

    (c) the Sellers, as a group, may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the

32

Sellers have notified the Buyer of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before April 30, 2000, by reason of the failure of any condition precedent under Section 7.2 hereof (unless the failure results primarily from the Sellers themselves breaching any representation, warranty, or covenant contained in this Agreement).

    10.2 Effect of Termination. If any Party terminates this Agreement pursuant to Section 10.1 above, all rights and obligations of the Parties under this Agreement shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach); provided, however, that the confidentiality provisions contained in Section 5.4 above shall survive termination.

11. Miscellaneous.

    11.1 Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the Buyer and the Sellers.

    11.2 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.

    11.3 Entire Agreement. This Agreement (including the documents referred to in this Agreement) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter of this Agreement.

    11.4 Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations under this Agreement without the prior written approval of the Buyer and the Sellers.

    11.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

    11.6 Headings. The sections headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

    11.7 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to the Sellers:	Bryan D. Hixson Harold Hartsell 3528 El Camino Real Atascadero, California 93422 Tel: (800) 884-8268 Fax: (805) 460-1928
Copy to:	Sinsheimer, Schiebelhut & Baggett Attention: M. Suzanne Fryer PO Box 31 1010 Peach Street San Luis Obispo, California 93506/93401 Tel: (805) 541-2800 Fax: (805) 541-2802

33

If to the Buyer:	MedicaLogic, Inc. Attention: Annie Masullo, General Counsel 101 Green Street (@ Battery) San Francisco, CA 94111 Tel: (415) 678-3203 Fax: (415) 678-3300
Copy to:	Stoel Rives LLP Attention: Todd A. Bauman, Esq. 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204-1268 Tel: (503) 294-9812 Fax: (503) 220-2480

Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner set forth in this Agreement.

    11.8 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision, rule or principle (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.

    11.9 Dispute Resolution. If a dispute arises from or relates to this Agreement or the breach of this Agreement and if such dispute cannot be settled through direct discussions, the Parties agree to first endeavor to settle the dispute in an amicable manner by mediation to be held in San Francisco, California under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration. Thereafter, any unresolved controversy or claim arising from or relating to this Agreement, or breach of this Agreement, shall be settled by arbitration to be held in San Francisco, California. The arbitration will be governed by the Commercial Arbitration Rules of the American Arbitration Association, and the Parties shall be allowed discovery in accordance with the Federal Rules of Civil Procedure. In addition, in the event of a dispute between the Parties, Buyer agrees to provide Sellers with access to the Company's books and records or any of Buyer's books and records relating to the Company. If Buyer and the Sellers cannot jointly select a single arbitrator to determine the matter, one arbitrator shall be chosen by each of Buyer and the Sellers (or, if a party fails to make a choice, by the American Arbitration Association on behalf of such party) and the two arbitrators so chosen will select a third. The decision of the single arbitrator jointly selected by Buyer and the Sellers, or, if three arbitrators are selected, the decision of any two of them, will be final and binding on the parties and the judgment of a court of competent jurisdiction may be entered on such decision. Fees of the arbitrators and costs of arbitration shall be borne by Buyer and the Sellers in such manner as shall be determined by the arbitrator or arbitrators. The arbitrators shall prepare and provide to the parties a written decision on all matters subject to the arbitration, including factual findings and the reasons that form the basis of the arbitrators' decision. The arbitrator(s) shall not have the power to commit errors of law or legal reasoning, and the award of the arbitrator(s) shall be vacated or corrected for any such error or any other grounds specified in Code of Civil Procedure section 1286.2 or section 1286.6. The award of the arbitrators shall be mailed to the parties no later than thirty (30) days after the close of the arbitration hearing. The arbitration proceedings shall be reported by a certified shorthand court reporter. Written transcripts of the proceedings shall be prepared and made available to the parties.

34

    11.10 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer, the Sellers and the Company. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

    11.11 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

    11.12 Expenses. Except for expenses and filing fees arising under or relating to the filings made under the Hart-Scott-Rodino Act, which the Buyer will incur, each of the Parties will bear its or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Sellers agree that, after the date of this Agreement, the Company will bear any of the Sellers' costs and expenses (including any of its legal fees and expenses) incurred in connection with this Agreement or any of the transactions contemplated by this Agreement.

    11.13 Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation.

    11.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated into this Agreement by reference and made a part of this Agreement.

    [Signature page follows]

35

    IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date set forth in the preface to this Agreement.

MEDICALOGIC, INC., an Oregon corporation
By:	Name: Title:
ANYWHEREMD.COM, INC., a California corporation
By:	Name: Title:
SELLERS:
Bryan D. Hixson
Harold Hartsell

36

QuickLinks

TABLE OF CONTENTS
LIST OF SCHEDULES AND EXHIBITS
STOCK PURCHASE AGREEMENT

EX-10.14

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.14

PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

    THIS PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT is made as of December 22, 2000 by and among MedicaLogic/Medscape, Inc., an Oregon corporation (the "Company"), and the Investors listed on Schedule A attached hereto (the "Investors").

    THE PARTIES HEREBY AGREE AS FOLLOWS:

1.Purchase and Sale of Preferred Stock and Warrants.

    1.1  Sale and Issuance of Preferred Stock and Warrants.

    (a) The Company shall adopt and file with the Secretary of State of Oregon on or before the Closing (as defined below) the articles of amendment of its 1999 Restated Articles of Incorporation, as amended (the "Amended Articles") in the form attached hereto as Exhibit A.

    (b) Subject to the terms and conditions of this Agreement, the Investors severally and not jointly agree to purchase at the Closing, and the Company agrees to sell and issue to the Investors at the Closing, (i) that number of shares of the Company's Series 1 Convertible Redeemable Preferred Stock (the "Series 1 Preferred Stock") set forth opposite each Investor's name on Schedule A hereto for the purchase price set forth thereon, and (ii) a warrant to purchase that number of shares of the Company's Common Stock (the "Common Stock") set forth opposite each Investor's name on Schedule A hereto for the purchase price set forth thereon, such warrant to be in substantially the form attached hereto as Exhibit B (the "Warrants"). The rights, privileges and preferences of the Series 1 Preferred Stock will be as stated in the Amended Articles.

    1.2  Closings.  Unless this Agreement shall have terminated pursuant to Section 7, and subject to the satisfaction or waiver of the conditions set forth in Sections 5 and 6, the purchase and sale of the Series 1 Preferred Stock and Warrants shall take place at one or more closings at the offices of Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon at such times and places as the Company and the Investors mutually agree upon orally or in writing (which times and places are designated as a "Closing"). At the Closing the Company shall deliver to each Investor purchasing Series 1 Preferred Stock and Warrants at such Closing Warrants and stock certificates representing the number of shares of Series 1 Preferred Stock and Warrants that such Investor is purchasing against payment of the purchase price therefor by check or wire transfer in immediately available funds.

2.Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investors that, except as set forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished to the Investors, specifically identifying the relevant subparagraph hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder:

    2.1  Organization, Valid Existence and Qualification.  The Company is a corporation duly organized and validly existing under the laws of the state of Oregon and has all requisite corporate power and authority to carry on its business as now conducted. Each of the corporations or other persons in which the Company, directly or indirectly, holds 50% or more of (i) the voting power of the outstanding voting equity securities or (ii) the outstanding economic equity interest (each, a "Subsidiary") is a corporation duly organized or limited liability company duly formed and validly existing under the laws of the state of its incorporation or formation, and has all requisite corporate or limited liability company power and authority to carry on its business as now conducted. The Company and each of its Subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business requires such qualification.

    2.2  Subsidiaries.  Neither the Company nor any Subsidiary presently owns or controls, directly or indirectly, any interest in any other corporation, association or other entity. Neither the Company nor any Subsidiary is a participant in any joint venture, partnership, or similar arrangement.

    2.3  Authorization.  All corporate action on the part of the Company, its officers, directors and shareholders necessary for (a) the authorization, execution and delivery of this Agreement and the 2000 Second Amended and Restated Investor Rights Agreement of even date herewith, by and among the Company and the Investors (as defined therein) (the "Investors' Rights Agreement") and the Warrants (collectively, the "Transaction Documents"), (b) the performance of all obligations of the Company hereunder and thereunder, (c) the authorization, issuance (or reservation for issuance), sale and delivery of the Series 1 Preferred Stock and Warrants being sold pursuant to this Agreement and the Common Stock issuable upon conversion of the Series 1 Preferred Stock (the "Conversion Shares") and the exercise of the Warrants (the "Warrant Shares" and, together with the Conversion Shares, the "Shares"), and (d) the authorization and adoption of the Amended Articles has been taken or will be taken prior to the Closing, and the Transaction Documents constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained in the Investor Rights Agreement may be limited by applicable federal or state securities laws.

    2.4  Valid Issuance of Preferred and Common Stock.

    (a) The Series 1 Preferred Stock that is being purchased by the Investors pursuant to this Agreement, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, will be issued in compliance with the registration and qualification requirements of all applicable federal and state securities laws and will be free and clear of all Liens (as defined in Section 2.6) other than restrictions on transfer under the Amended Articles, this Agreement and the other Transaction Documents and under applicable state and federal securities laws. The Shares have been duly and validly reserved for issuance and, (i) in the case of the Conversion Shares, upon issuance in accordance with the terms of the Amended Articles and, (ii) in the case of the Warrant Shares, upon issuance in accordance with the terms of the Warrants, will be duly and validly issued, fully paid, and nonassessable and will be free and clear of all Liens other than restrictions on transfer under this Agreement and the other Transaction Documents and under applicable state and federal securities laws.

    (b) The issuance of the Series 1 Preferred Stock and the Warrants is not subject to any preemptive rights or similar rights and the issuance of the Conversion Shares upon the conversion of the Series 1 Preferred Stock and the Warrant Shares upon the exercise of the Warrants will not be subject to any preemptive rights or similar rights. The Company has denied preemptive rights to its shareholders as contemplated by Section 60.174 of the Business Corporation Act of Oregon, as amended. There are no approvals or consents required by Section 60.810 or Section 60.835 of the Oregon Business Corporation Act in order to consummate the transactions contemplated by the Transaction Documents.

    2.5  Capitalization.

    (a) At the Closing the authorized capital stock of the Company shall consist of 100,000,000 shares of Common Stock, 50,000,000 shares of preferred stock, of which 5,766,666 shares shall have been designated Series 1 Preferred Stock. At December 17, 2000, 55,719,682

2

shares of Common Stock (which includes shares of restricted Common Stock described below) and no shares of preferred stock were issued and outstanding. At December 17, 2000, 2,287,844 shares of Common Stock remained available for issuance under the Company's 1999 Employee Stock Purchase Plan. At December 17, 2000, the aggregate number of shares of restricted stock and options to purchase shares of Common Stock available to be issued or granted pursuant to any stock option plan or stock incentive plan of the Company or any Subsidiary was 959,779. At December 17, 2000, options to purchase 9,143,282 shares of Common Stock were outstanding and 2,210,750 shares of restricted Common Stock had been issued under such plans. Except for the Series 1 Preferred Stock and the Warrants, shares issuable under the Company's 1999 Employee Stock Purchase Plan and the stock options referred to in the preceding sentence (as may be updated pursuant to Section 5.16), there are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire (x) any authorized but unissued, unauthorized or treasury shares of the Company's capital stock or (y) any securities of the Company convertible into or exercisable or exchangeable for shares of Common Stock, and there are no commitments, contracts, agreements, arrangements or understanding by the Company to issue any such securities.

    (b) The Company owns all of the issued and outstanding capital stock of the Subsidiaries, free and clear of all Liens. All of such shares of capital stock are duly authorized, validly issued, fully paid and nonassessable, and were issued in compliance with the registration and qualification requirements of all applicable federal and state and foreign securities laws. There are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued, unauthorized or treasury shares of capital stock or other securities of, or any proprietary interest in, any of the Subsidiaries, and there is no outstanding security of any kind convertible into or exchangeable for such shares or proprietary interest.

    2.6  No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the Company's issuance of the Series 1 Preferred Stock and Warrants and the reservation for issuance and issuance of the Shares) will not (i) result in a violation of the Company's 1999 Restated Articles of Incorporation, as amended by the Amended Articles and as in effect on the date hereof, or the Company's Bylaws, as amended and as in effect on the date hereof (the "Bylaws") or (ii) conflict with, or constitute a breach or default (or an event which with notice or lapse of time or both would result in a breach or default) under, or result in the creation of any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences) (each, a "Lien"), or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any Subsidiary is a party (except for possible conflicts, breaches, defaults, terminations, amendments or other events that would not result in a material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company and its Subsidiaries, taken as a whole (a "Material Adverse Effect")), or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations), applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected. Except as specifically contemplated by this Agreement in connection with (i) the listing of the Shares on Nasdaq National Market ("Nasdaq"), (ii) registration of the resale of the Series 1 Preferred Stock and the Shares under the Securities Act of 1933, as amended (the "Act"), as contemplated by the Investors' Rights Agreement, and (iii) the filing of one of more Forms D with respect to the Series 1

3

Preferred Stock and the Shares as required under Regulation D, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms hereof or thereof. The Company is not, and upon consummation of the transactions contemplated by the Transaction Documents will not be, in violation of the listing requirements of Nasdaq.

    2.7  Offering.  Assuming the accuracy of the Investors' representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Units as contemplated by this Agreement are exempt from the registration requirements of the Act and from the qualification requirements of the Oregon Securities Law, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

    2.8  SEC Documents; Financial Statements.  As of the Closing, the Company shall have filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission ("SEC") pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Investors which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

    2.9  Absence of Certain Changes.  Since the Company's Form 10-Q for the quarter ended September 30, 2000 (the "Most Recent Filing"), there has been no material adverse change and no development that would result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings.

    2.10  Liabilities.  Neither the Company nor any Subsidiary has any direct or indirect obligation or liability and, to the Company's knowledge, there is no existing condition, event or arrangement that could reasonably be expected to give rise to such an obligation or liability, other than (a) those provided for in the financial statements included in the SEC Documents and (b) those incurred since the Most Recent Filing in the ordinary course of business consistent with past practices.

4

    2.11  Material Contracts.  Each of the agreements, contracts, leases and other commitments listed as an exhibit to any SEC Document filed since January 1, 2000 (each, a "Material Contract") is a legal, valid and binding agreement of the Company or a Subsidiary, and is in full force and effect, except to the extent such agreement has been fully performed or terminated pursuant to its terms, and, to the Company's knowledge, no party thereto is in default or breach, and there exists no event or circumstance that with notice or lapse of time or both would constitute a default or breach thereunder, except in each case for those defaults and breaches which could not reasonably be expected, either individually or in the aggregate, to result in a Material Adverse Effect.

    2.12  Absence of Litigation.  Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of the Company's or any Subsidiary's officers or directors in their capacities as such that would have a Material Adverse Effect and, to the knowledge of the Company, there is no reasonable basis for any of the foregoing.

    2.13  Intellectual Property.

    (a) The Company or one of its Subsidiaries owns, or has a valid license to use, all patents, trademarks, service marks, trade names, copyrights, trade secrets, domain names, software, technology, know-how and other intellectual property (the "Intellectual Property") necessary to or used in the conduct of the business of the Company and its Subsidiaries as now conducted and as proposed to be conducted. All Intellectual Property owned by the Company or any of its Subsidiaries is owned by them free and clear of all Liens. To the knowledge of the Company, the conduct of the business of the Company and its Subsidiaries does not conflict with or infringe upon any Intellectual Property rights of any other person and no claims of conflict or infringement are pending or threatened against the Company or any of its Subsidiaries which, in any event, would reasonably be expected to have a Material Adverse Effect.

    (b) All of the Intellectual Property licenses, sublicenses, distributor agreements and other agreements under which the Company or any Subsidiary is either a licensor, licensee or distributor (excluding those related to off-the-shelf software commercially available on a retail basis and used solely on the computers of the Company and/or any Subsidiary) are valid, enforceable and in full force and effect, and neither the Company nor any Subsidiary is required to pay any royalty payment pursuant to any such agreement (except for such agreements that were entered into in the ordinary course of business consistent with past practice). Except as set forth in the SEC Documents, no former employer of any employee of the Company or any Subsidiary, and no current or former client of any consultant of the Company or any Subsidiary, has made a claim against the Company or any Subsidiary or, to the Company's knowledge, against any other person, that such employee or consultant is utilizing Intellectual Property of such former employer or client.

    (c) The Company has policies and procedures that provide that all employees of the Company and each Subsidiary execute and deliver proprietary invention agreements with the Company, and be obligated under the terms thereof to assign all inventions made by them during the course of employment to the Company or such Subsidiary, and the Company uses its best efforts to abide by those policies and procedures.

    2.14  Compliance with Other Instruments.  Neither the Company nor any Subsidiary is in violation or default in any respect (i) of any provision of its 1999 Restated Articles of Incorporation, as amended by the Amended Articles (when filed), or Bylaws, or (ii) of any judgment, order, writ, decree to which it is a party or by which it is bound, or of any provision of

5

any federal or state statute, rule or regulation applicable to it, or (iii) of any agreement, indenture or instrument to which it is a party (except for violations or defaults with respect to clauses (ii) and (iii) that would not have a Material Adverse Effect). The execution, delivery and performance of the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any Lien upon any assets of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties (except for violations, conflicts, defaults, liens, damages, encumbrances, suspensions, revocations, impairments or forfeitures that would not, either individually or in the aggregate, have a Material Adverse Effect).

    2.15  Related-Party Transactions.  Except as set forth in the SEC Documents, no 5% or greater shareholder of the Company, officer, or director of the Company or any Subsidiary or member of his or her immediate family is indebted to the Company in any material amount, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them in any material amount. To the best of the Company's knowledge, none of the Company's officers or directors has any direct or indirect ownership interest in any firm or corporation with which the Company or any Subsidiary is affiliated or with which the Company or any Subsidiary has a business relationship, or any firm or corporation that competes with the Company or any Subsidiary, except that officers or directors of the Company and members of their immediate families may own less than 2% of the outstanding stock in a publicly traded company that may compete with the Company. No member of the immediate family of any officer or director of the Company is directly or indirectly interested in any material contract with the Company. None of the foregoing transactions is currently contemplated by the Company.

    2.16  Permits.  The Company and each of its Subsidiaries have all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted or proposed to be conducted by it, the lack of which could result in a Material Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses, or other similar authority.

    2.17  Outstanding Borrowing.  Except as set forth in the SEC Documents and incurred in the ordinary course of business consistent with past practices, since the Most Recent Filing, neither the Company nor any Subsidiary has (a) any obligation for borrowed money (including, without limitation, reimbursement or other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured), (b) any obligation to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (c) any payment obligation, whether periodic or upon the occurrence of a contingency, under any interest rate or currency swap, cap, collar or similar agreement or hedging device, (d) indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such party (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) any obligation under leases which have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (f) any indebtedness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (e)) on any property or asset owned or held by such party regardless of whether the indebtedness secured thereby shall have been assumed by that party or is nonrecourse to the credit of that party, and (g) any direct or indirect liability with respect to any obligation of a third party of the type described in clauses (a) through (e) of this section (the "Primary Obligation"), whether or not contingent, (i) to purchase, repurchase or otherwise acquire

6

such Primary Obligation or any property constituting direct or indirect security therefor, (ii) to advance or provide funds for the payment or discharge of any such Primary Obligation or to maintain working capital or equity capital of the third party or to otherwise maintain the net worth or solvency of any balance sheet item, level of income or financial condition of such third party, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Primary Obligation of the ability of such third party to make payment of such Primary Obligation, or (iv) to otherwise assure or hold harmless the owner of any such Primary Obligation against loss or failure or inability to perform in respect thereof.

    2.18  Environmental and Safety Laws.  The Company is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.

    2.19  Manufacturing and Marketing Rights.  The Company has not granted rights to manufacture, produce, assemble, license, market or sell its products to any other person and is not bound by any agreement that affects the Company's exclusive right to develop, manufacture, assemble, distribute, market or sell its products.

    2.20  Disclosure.  Neither the Transaction Documents nor any other statements or certificates made or delivered in connection therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made herein or therein not misleading.

    2.21  Registration Rights.  Except as provided in the Investor Rights Agreement, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.

    2.22  Title to Property and Assets.  The Company and each Subsidiary owns their respective properties and assets free and clear of all Liens, except such Liens that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with such leases and, to the best of the Company's knowledge, such leases are in full force and effect and the Company holds a valid leasehold interest free of any Liens. No other property or assets are necessary to the conduct of their respective businesses, as presently conducted or as proposed to be conducted.

    2.23  Taxes.

    (a) The Company and each of its Subsidiaries has timely filed all income, franchise and other material tax returns, reports, forms and other such documents ("Tax Returns") required to be filed by it prior to the date hereof. Such Tax Returns are true and correct in all material respects. The Company and each of its Subsidiaries has paid or caused to be paid all Tax liabilities for all fiscal years that have not been examined and closed by any Tax authority (or closed by applicable statutes). No additional Tax assessment, Tax deficiency (whether assessed or unassessed) or claim for additional Taxes (including interest thereon and penalties in connection therewith) has been heretofore proposed or threatened by any Tax authority and no audit is in progress and no extension of time is in force with respect to any date on which any Tax Return is to be filed and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax. Neither the Company nor any Subsidiary has made an election under Section 341(f) of the Code

    (b) There are no Liens for Taxes (other than for taxes not yet due and payable) upon the assets of the Company or any Subsidiary.

7

    (c) Neither the Company or any Subsidiary (i) is a party to or bound by, or has any obligations under, any tax allocation, sharing, indemnity or similar agreement or arrangement, (ii) is or has been a member of any consolidated, combined or unitary group of corporations, other than a group of which the Company is the common parent, for purposes of filing tax returns or paying taxes and (iii) other than as a result of being a member of a consolidated, combined or unitary group of corporations of which the Company is the common parent, is liable for the taxes of any other Person, under Treasury Regulations section 1.1502-6 (or any similar provision of foreign, state or local law) or as a transferee, successor or otherwise.

    (d) Neither the Company nor any Subsidiary is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of section 280G of the Code or any similar provision of foreign, state or local law as a result of a transaction occurring on or before the date hereof.

    (e) Neither the Company nor any Subsidiary has ever been a "United States real property holding corporation" (a "USRPHC") as that term is defined in Section 897(c)(2) of the Code and the treasury regulations promulgated thereunder (the "Treasury Regulations").

    (f)  There are no (i) outstanding rulings of, or requests for rulings with, the Internal Revenue Service or any other Tax authority addressed to the Company or any Subsidiary, that are, or if issued would be, binding on the Company or any Subsidiary, (ii) closing agreements with any Tax authority and (iii) other binding agreements entered into with any Tax authority. The Company and each Subsidiary have provided the Investors with copies of any such rulings, ruling requests, closing agreement or other binding agreements.

    (g) Neither the Company nor any Subsidiary has been a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355 of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.

    (h) As used in this Agreement, "Tax" or "Taxes" means any federal, state, county, local, foreign and other taxes (including, without limitation, income, profits, premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital levy, production, transfer, withholding, employment, unemployment compensation, payroll and property taxes, import duties and other governmental charges and assessments), whether or not measured in whole or in part by net income, and including deficiencies, interest, additions to tax or interest, and penalties with respect thereto, and including expenses associated with contesting any proposed adjustments related to any of the foregoing, except that they do not contain footnotes or normal period-end adjustments.

    2.24  Insurance.  The Company and each of its Subsidiaries has in full force and effect insurance policies in such amounts and against such risks as are customarily maintained and insured against by comparable businesses. The Company has in full force and effect products liability and errors and omissions insurance in amounts customary for companies similarly situated. All such policies are listed on the Schedule of Exceptions, together with the effective date and coverage amounts with respect thereto.

    2.25  Labor Agreements and Actions.  Neither the Company nor any Subsidiary is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the best of the Company's knowledge, has sought to represent any of the employees, representatives or agents of the Company or any Subsidiary. There is no strike or other labor dispute involving the Company or any Subsidiary pending, or to the best of the

8

Company's knowledge, threatened, that could have a Material Adverse Effect, nor is the Company aware of any labor organization activity involving its employees. To the best of the Company's knowledge, no officer or key employee, or any group of key employees, intends to terminate their employment with the Company or any Subsidiary. The employment of each officer and employee of the Company or any Subsidiary is terminable at the will of the Company or any Subsidiary, and neither the Company nor any Subsidiary has an employment agreement with any officer. The Company and each Subsidiary has complied in all respects with all applicable state and federal equal employment opportunity and other laws related to employment.

    2.26  "Company's Knowledge" Defined.  As used in this Section 2, the terms "to the best of the Company's knowledge," "to the best knowledge of the Company," or "known to the Company" shall mean the knowledge of the Company, its Subsidiaries and the officers, directors and management of each, after careful consideration of the matters set forth in the representation that is so qualified.

    2.27  Eligibility.  As of December 9, 2000, the Company will be eligible to register the resale of the Unit Shares on a registration statement on Form S-3 under the Act.

    2.28  Employee Benefit Plans.  The Company does not have any Employee Benefit Plan as defined in the Employee Retirement Income Security Act of 1974, as amended.

3.Representations and Warranties of the Investors.  Each Investor severally and not jointly hereby represents and warrants that:

    3.1  Authorization.  Such Investor has full power and authority to enter into the Transaction Documents to which it is a party, and each such agreement constitutes its valid and legally binding obligation enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained in the Investor Rights Agreement may be limited by applicable federal or state securities laws.

    3.2  Purchase Entirely for Own Account.  This Agreement is made with the Investors in reliance upon such Investor's representations to the Company, that the Series 1 Preferred Stock and Warrant to be received by such Investor and the Shares (the "Securities") will be acquired for investment for such Investor's own account in the ordinary course of business, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention, agreements or understandings, directly or indirectly, of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, such Investor further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.

    3.3  Disclosure of Information.  Such Investor represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Series 1 Preferred Stock and Warrant and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of such Investor to rely thereon.

    3.4  Investment Experience.  Such Investor is an investor in securities of companies in the development stage and acknowledges that it can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the

9

merits and risks of the investment in the Series 1 Preferred Stock and Warrants. Such Investor has not been organized for the purpose of acquiring the Series 1 Preferred Stock and Warrants.

    3.5  Accredited Investor.  Such Investor is an "accredited investor" within the meaning of Rule 501 promulgated under the Act, as presently in effect.

    3.6  Restricted Securities.  Such Investor understands that the Securities it is purchasing are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold, without registration under the Act, only in certain limited circumstances. In this connection, such Investor represents that it is familiar with Rule 144 promulgated under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act.

    3.7  Further Limitations on Disposition.  Without in any way limiting the representations set forth above, such Investor (and, by accepting delivery of the Securities, each transferee) further agrees not to make any disposition of all or any portion of the Securities that are "restricted securities" under the Act unless, if reasonably requested by the Company, such Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. Such opinion shall not be required if there is then in effect a Registration Statement under the Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement.

    3.8  Legends.  It is understood that the certificates evidencing the Securities may bear legends similar to the following:

    (a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. EACH INVESTOR SHOULD BE AWARE THAT IT MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT, UNLESS THE SECURITIES ARE RESOLD IN COMPLIANCE WITH RULE 144, AND ANY APPLICABLE STATE SECURITIES LAWS.

    (b) A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS OF STOCK OF THE ISSUER, THE VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES OF PREFERRED STOCK SO FAR AS FIXED AND DETERMINED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE RECORD HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER AT ITS PRINCIPAL OFFICE.

    (c) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS AS SET FORTH IN A UNIT PURCHASE AGREEMENT TO WHICH THE ORIGINAL HOLDER OF THESE SHARES IS A

10

PARTY, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.

4.Covenants of the Company.

    4.1  Conduct of Business.  From the date of this Agreement until the Closing, the Company will (a) conduct its business in a reasonable and prudent manner and in accordance with its normal practices; (b) engage in no transaction (including, without limitation, capital expenditures) out of the ordinary course of its business and consistent with past practices; (c) not dispose of any of its assets or properties except to the extent these are used, retired or replaced in the ordinary course of its business; (d) conduct its business in accordance with all applicable laws, regulations and ordinances; (e) maintain and keep in force any governmental licenses, permits, authorizations, consents or approvals required by the Company to own its assets and properties or to carry on its business as currently conducted; (f) maintain and keep in force its Intellectual Property rights; (g) perform all material obligations required to be performed by it under any of the Material Contracts; (h) refrain from entering into transactions with affiliates of the Company; (i) not pay dividends to, or redeem the shares of, stockholders of the Company other than pursuant to existing restricted stock purchase agreement with current or former employees; and (j) not amend the 1999 Restated Articles of Incorporation or Bylaws of the Company.

    4.2  Anti-dilution.

    (a) The Company shall not, without first obtaining shareholder approval, issue shares of Common Stock or Other Securities (as defined in the Amended Articles) for a per share consideration less than (i) the then-current Conversion Price (as defined in the Amended Articles) or (ii) the Fair Market Price (as defined in the Amended Articles) of the Common Stock at the time of such issuance, if such issuance would violate Nasdaq Marketplace Rule 4460(i)(1)(D)(i).

    (b) The Company shall use its best efforts to obtain the shareholder approval necessary to allow it to make any adjustments (i) to the Conversion Price or otherwise required by the anti-dilution provisions set forth in the Amended Articles and (ii) the Exercise Price (as defined in the Warrant) or otherwise required by the anti-dilution provisions set forth in the Warrant without any subsequent shareholder approval, in compliance with Nasdaq Marketplace Rule 4460(i)(1)(D)(i), at its next regularly scheduled annual meeting of shareholders following the Closing.

    4.3  Registration.  The Company shall use its efforts to prepare and file with the SEC, within sixty (60) days after the Closing and after giving Investors' legal counsel reasonable time to review and comment, a registration statement to register the resale of the Shares by the Investors from time to time under the Act. This filing and registration shall be treated as a request for registration pursuant to Section 1.2(a)(iii) of the Investors' Rights Agreement and shall otherwise be governed by the terms and conditions set forth in the Investors' Rights Agreement.

5.Conditions of Investors' Obligations at Closing.  The obligations of the Investors under subsection 1.1(b) of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent in writing thereto:

    5.1  Representations and Warranties.  The representations and warranties of the Company contained in Section 2 shall be true in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing.

11

    5.2  Performance.  The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

    5.3  Compliance Certificate.  The President of the Company shall deliver to the Investors at the Closing a certificate stating that the conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating that there shall have been no material adverse change in the business, affairs, prospects, operations, properties, assets or condition of the Company since the date of the financial statements contained in the Most Recent Filing.

    5.4  Qualifications.  All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing.

    5.5  Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investors, and they shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request.

    5.6  Board of Directors.  The directors of the Company as of Closing shall consist of the following individuals, and may include up to two other individuals to be appointed by the Board of Directors:

Bruce Fried
C. Martin Harris, M.D.
Ronald H. Kase
Mark Leavitt, M.D.
Arthur Leibowitz, M.D.
George Lundberg, M.D.
David C. Moffenbeier
Neal Moszkowski
Mark A. Stevens

    5.7  Articles of Amendment.  The Company shall have filed the Amended Articles with the Secretary of State of Oregon and the Investors shall have received evidence of such filing prior to the Closing.

    5.8  Opinion of Company Counsel.  The Investors shall have received from Stoel Rives LLP, counsel for the Company, an opinion, dated as of the Closing, in the form attached hereto as Exhibit C.

    5.9  Certificate of Existence.  The Company shall have delivered to the Investors a certificate dated as of a recent date issued by the Secretary of State of the State of Oregon to the effect that the Company is validly existing.

    5.10  Secretary's Certificate.  The Company shall have delivered to the Investors a certificate executed by the Secretary of the Company dated as of the Closing, certifying the following matters: (a) resolutions adopted by the Company's Board of Directors relating to the transactions contemplated by this Agreement; (b) Amended Articles of the Company; (c) Bylaws of the Company; (d) incumbency of officers of the Company; and (e) such other matters as the Investors may reasonably request.

    5.11  Investor Rights Agreement.  The Company, the Investors and the holders of a majority of the outstanding Registrable Securities (as defined in the 2000 Amended and Restated Investor

12

Rights Agreement, dated May 19, 2000, among the Company and the shareholders signatory thereto) shall have entered into the Investor Rights Agreement in the form attached as Exhibit D.

    5.12  Minimum Investment.  The Company shall have received an aggregate minimum investment from the Investors of $17,000,000.

    5.13  Nasdaq Approval.  The Investors shall have received reasonably satisfactory evidence that Nasdaq has approved (i) the proposals set forth by the Company in (a) the letter dated December 6, 2000 and (b) the letter dated December 11, 2000 from the Company to the office of Nasdaq Listing Qualifications and (ii) the Shares for listing on the Nasdaq National Market.

    5.14  Due Diligence.  The Investor's counsel shall be reasonably satisfied with the results of its due diligence inquiry regarding the outstanding litigation of the Company and its Subsidiaries.

    5.15  Adverse Change.  There shall have been no material adverse change in the Company's business from that reported in the Most Recent Filing prior to the Closing. For purposes of this Section 5.13, "material adverse change" means a circumstance, fact, change, development or effect (i) that has been, could or could reasonably be expected to be materially adverse to the properties, business, prospects, results of operations or condition, financial or otherwise, of the Company taken as a whole or (ii) that adversely effects the ability of the Company to consummate the transactions contemplated by the Transaction Documents or materially impairs or delays the ability of the Company to effect the Closing or (iii) that could reasonably be expected to require a material expenditure by any of the Company, a Subsidiary or the Investors.

    5.16  Capitalization Schedule.  The Company shall have delivered to the Investors a schedule reasonably satisfactory to the Investors reflecting, after giving effect to the transactions contemplated by this Agreement, (i) the Company's authorized, issued and outstanding shares of Common Stock and Series 1 Preferred Stock and (ii) the aggregate number of shares of restricted stock and options to purchase shares of Common Stock which may be issued and which have been granted pursuant to any stock option plan or stock incentive plan of the Company or any Subsidiary or are issuable pursuant to the Company's 1999 Employee Stock Purchase Plan. The information in such Schedule shall be as of the Closing.

    5.17  Viacom Waiver.  The Investors shall have received a copy of a waiver, in form reasonably satisfactory to Investor's counsel, executed by Viacom waiving its right of participation in the transactions contemplated by this Agreement.

6.Conditions of the Company's Obligations at Closing.  The obligations of the Company to the Investors under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by the Investors:

    6.1  Representations and Warranties.  The representations and warranties of the Investors contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

    6.2  Payment of Purchase Price.  The Investors shall have delivered the purchase price specified in Section 1.

    6.3  Qualifications.  All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing.

13

    6.4  Minimum Investment.  The Company shall have received an aggregate minimum investment from the Investors of $17,000,000.

7.Termination.

    7.1  Right to Termination.  This Agreement may be terminated and the proposed transactions abandoned:

    (a) At any time, by mutual written consent of the Company and Investors committed to purchase a majority of the Series 1 Preferred Stock;

    (b) At the option of an Investor and by notice to the Company stating the reasons for such action, (i) in the event the Closing shall not have occurred by January 31, 2001 (or any other date that the parties may designate by mutual agreement) by reason of the failure of any of the conditions set forth in Section 5 or (ii) at any time prior to the Closing, in the event of a material breach of any of the representations or warranties by the Company set forth in Section 2 or a material breach of any of the covenants of the Company set forth in Section 4; or

    (c) At the option of the Company and by notice to the Investors stating the reasons for such action, (i) in the event the Closing shall not have occurred by January 31, 2001 (or any other date that the parties may designate by mutual agreement) by reason of the failure of any of the conditions set forth in Section 6 or (ii) at any time prior to the Closing, in the event of a material breach of any of the representations or warranties of the Investors set forth in Section 3.

    7.2  Effect of Termination.  Termination by a party pursuant to subsection 7.1(b) or subsection 7.1(c) shall not adversely affect such party's other available rights and remedies. The rights and remedies of the party terminating this Agreement pursuant to subsection 7.1(b) or subsection 7.1(c), whether contained in this Agreement or conferred pursuant to applicable law or in equity, shall be cumulative and concurrent and may be pursued singly, successively or together, at the discretion of the holder thereof.

8.Miscellaneous.

    8.1  Survival of Warranties.  The warranties, representations and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investors or the Company.

    8.2  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 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.

    8.3  Governing Law.  This Agreement shall be governed by and construed under the laws of the state of Oregon.

    8.4  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.

    8.5  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.

14

    8.6  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, certified mail, Federal Express, or other express courier, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. Any notice given to the Company under this Section 6.6 shall be copied via email to legal@medscapeinc.com.

    8.7  Finder's Fee.  Except for the Shemano Group and as otherwise as set forth in the Schedule of Exceptions, each party represents that it neither is nor will be obligated for any finders' fee or commission in connection with this transaction. The Investors agree to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which the Investors or any of their officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Investors from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

    8.8  Expenses.  Each of the Company and the Investors shall bear their own legal and other expenses incurred with respect to this Agreement and the transactions contemplated hereby; provided, however, that the Company shall pay up to an aggregate of $75,000 in the reasonable legal fees and expenses of counsel to the Investors, contingent upon the Closing. The Investors shall require their counsel to submit all invoices related to this Agreement and the transactions contemplated hereby to the Company's General Counsel for his review.

    8.9  Attorneys' Fees.  If any action at law or in equity is necessary to enforce or interpret the terms of the Transaction Documents, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

    8.10  Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term or condition 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 Investors that have purchased, or, prior to the Closing, have agreed to purchase, a majority of the Shares. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities, and the Company.

    8.11  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.

    8.12  Entire Agreement.  This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.

    8.13  Restriction on Separate Transfer of Warrants and Series 1 Preferred Stock.  Until the first anniversary of the Closing, no holder of Series 1 Preferred Stock shall transfer, sell, assign or hypothecate any such shares without also transferring, selling, assigning or hypothecating (a) Warrants to purchase a number of shares of Common Stock or (b) a number of shares of Common Stock issued upon the exercise of Warrants, in either case equal to one-half of the number of shares of Series 1 Preferred Stock so transferred.

15

    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	MEDICALOGIC/MEDSCAPE, INC.
	By:
	Printed Name: David Moffenbeier Title: Chief Executive Officer
	Address: 20500 NW Evergreen Parkway Hillsboro, Oregon 97124
INVESTORS:	QUANTUM INDUSTRIAL PARTNERS LDC
	By:
	Its: Printed name:
	Address: c/o Curacao Corporation Company NV Kaya Flamboyan 9, Villemstad, Curacao Netherlands Antilles
	SFM DOMESTIC INVESTMENTS LLC
	By:
	Its: Printed name:
	Address: c/o Soros Private Equity Partners 888 Seventh Avenue New York, NY 10106

16

HALIFAX FUND LP

By:

Its: Printed name: 

Address: 

GRUBER & MCBAINE INTERNATIONAL

By:

Its: Printed name: 

Address: 

HBK INVESTMENTS LP

By:

Its: Printed name: 

Address: 

17

COLEMAN SWENSON HOFFMAN
BOOTH IV, LP

By:

Its: Printed name: 

Address: 

CROSSLINK CROSSOVER FUND III, LP

By:

Its: Printed name: 

Address: 

OFFSHORE CROSSLINK CROSSOVER
FUND III, LP

By:

Its: Printed name: 

Address: 

18

DELTA GROWTH, LP

By:

Its: Printed name: 

Address: 

RITCHIE CAPITAL MANAGEMENT

By:

Its: Printed name: 

Address: 

CRANSHIRE CAPITAL

By:

Its: Printed name: 

Address: 

LAGUNITAS PARTNERS LP

By:

Its: Printed name: 

Address: 

19

SCHEDULE A

SCHEDULE OF INVESTORS

Investor	Number of Shares of Series 1 Preferred Stock	Number of Warrants Shares	Total Purchase Price
Quantum Industrial Partners LDC	1,666,666	1,274,509	$	4,999,998.00
SFM Domestic Investments LLC	1,666,666	1,274,509		4,999,998.00
Halifax Fund LP	333,333	254,902		999,999.00
Lagunitas Partners LP	500,000	382,353		1,500,000.00
Gruber & McBaine International	166,667	127,451		500,001.00
Montrose Investments Ltd.	666,667	509,804		2,000,001.00
Coleman Swenson Hoffman Booth IV, LP	333,333	254,902		999,999.00
Crosslink Crossover Fund III, LP	88,000	67,295		264,000.00
Offshore Crosslink Crossover Fund III, LP	6,000	4,588		18,000.00
Delta Growth, LP	6,000	4,588		18,000.00
Ram Trading, Ltd.	166,667	127,451		500,001.00
Cranshire Capital	166,667	127,451		500,001.00
TOTAL	5,766,666	4,409,803	$	17,299,996.00

QuickLinks

PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
SCHEDULE A SCHEDULE OF INVESTORS

EX-10.14-1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.14.1

FIRST AMENDMENT
TO
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

    This First Amendment to Preferred Stock and Warrant Purchase Agreement (the "Amendment") is made as of December 22, 2000 between MedicaLogic/Medscape, Inc., an Oregon corporation (the "Company"), and the Investors listed on Schedule A hereto (the "Investors").

    The Company and the Investors are parties to a Preferred Stock and Warrant Purchase Agreement dated as of December 22, 2000 (the "Agreement"). The parties wish to amend the Agreement to reflect the purchase of additional securities by one of the Investors.

    NOW, THEREFORE, the parties agree as follows:

    1.  All capitalized terms used herein and are defined herein shall have the meanings assigned to such terms in the Agreement.

    2.  Section 2.5(a) of the Agreement is amended and restated to read in its entirety as follows:

    "(a) At the Closing the authorized capital stock of the Company shall consist of 100,000,000 shares of Common Stock, 50,000,000 shares of preferred stock, of which 5,933,332 shares shall have been designated Series 1 Preferred Stock. At December 17, 2000, 55,719,682 shares of Common Stock (which includes shares of restricted Common Stock described below) and no shares of preferred stock were issued and outstanding. At December 17, 2000, 2,287,844 shares of Common Stock remained available for issuance under the Company's 1999 Employee Stock Purchase Plan. At December 17, 2000, the aggregate number of shares of restricted stock and options to purchase shares of Common Stock available to be issued or granted pursuant to any stock option plan or stock incentive plan of the Company or any Subsidiary was 959,779. At December 17, 2000, options to purchase 9,143,282 shares of Common Stock were outstanding and 2,210,750 shares of restricted Common Stock had been issued under such plans. Except for the Series 1 Preferred Stock and the Warrants, shares issuable under the Company's 1999 Employee Stock Purchase Plan and the stock options referred to in the preceding sentence (as may be updated pursuant to Section 5.16), there are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire (x) any authorized but unissued, unauthorized or treasury shares of the Company's capital stock or (y) any securities of the Company convertible into or exercisable or exchangeable for shares of Common Stock, and there are no commitments, contracts, agreements, arrangements or understanding by the Company to issue any such securities."

    3.  Schedule A to the Agreement is amended and restated to read in its entirety as attached as Schedule A hereto.

    4.  Exhibit A to the Agreement is amended as follows:

(a) the first paragraph of Section D is amended and restated to read in its entirety as follows:

    "D.  Series 1 Preferred Stock.  This Article II.D sets forth the designation, relative rights, preferences and limitations of a new series of Preferred Stock of the Corporation as determined by the Board of Directors of the Corporation pursuant to its authority under ORS 60.134 and Article II.C. above. The shares of such series shall be designated Series 1 Convertible Redeemable Preferred Stock ("Series 1 Preferred Stock") and the number of shares constituting such series shall be 5,933,332."

(b) Section (D)(7) is amended and restated to read in its entirety as follows:

    "7.  Protective Provisions.  So long as 2,966,666 shares of Series 1 Preferred Stock are outstanding (subject to adjustment for stock dividends, splits or combinations or other

recapitalizations), the Corporation shall not without first obtaining the approval, by vote or written consent (which consent need not be unanimous and may be obtained without a shareholders' meeting), of the holders of at least a majority of the then outstanding shares of Series 1 Preferred Stock:

    (a) authorize any voluntary liquidation under applicable bankruptcy legislation, any dissolution, liquidation or winding up of the Corporation or any deemed dissolution, liquidation or winding up within the meaning of Section 3(b);

    (b) effect or taking any action to facilitate any transaction or series of transactions resulting in the disposition of more than 50% of the voting power of the Corporation;

    (c) authorize any merger, acquisition or consolidation with any other corporation or joint venture involving consideration (determined in accordance with Section 3(c)) in excess of $5,000,000;

    (d) declare or pay any dividends or other distributions on the Corporation's capital stock (other than a dividend payable solely in shares in Common Stock or a dividend accruing pursuant to Section 2(b) hereof) or redeem, purchase or otherwise acquire any share or shares of Preferred Stock (except as provided in Section 4) or Common Stock; provided, however, that this restriction shall apply neither to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares at cost or at cost upon the occurrence of certain events, such as the termination of employment;

    (e) permit any subsidiary to issue and sell securities having a fair market value (as determined in accordance with Section 3(c)) in excess of $5,000,000;

    (f)  sell more than $5,000,000 in its assets in a single or series of related transactions or create or suffer to be imposed any lien, mortgage, security interest or other charge on or against more than $5,000,000 of assets;

    (g) incur any indebtedness for borrowed money in excess of $5,000,000 in aggregate principal amount;

    (h) redeem, purchase or otherwise acquire any indebtedness of the Corporation (unless such indebtedness is otherwise due in accordance with its terms);

    (i)  authorize any transactions with any affiliates (other than wholly-owned subsidiaries of the Corporation); or

    (j)  amend or repeal any provision of the Corporation's Articles of Incorporation or Restated Bylaws if such action would adversely affect the relative rights, preferences and privileges of the Series 1 Preferred Stock (including, without limitation, (A) the authorization, creation or issuance of any Senior Capital Stock or Parity Capital Stock or any obligation or security convertible into or exchangeable into, or evidencing a right to purchase, shares of any class or series of Senior Capital Stock or Parity Capital Stock, (B) the increase of the directors on the Corporation's Board of Directors to a number greater than 12, or (C) the designation and issuance after the Series 1 Purchase Date of any additional shares of Series 1 Preferred Stock)."

    5.  The first paragraph of Exhibit C to the Agreement is amended and restated to read in its entirety as follows:

    "We have acted as counsel to MedicaLogic/Medscape, Inc., an Oregon corporation (the "Company"), in connection with the sale by the Company to you of an aggregate of 5,933,332 shares of the Company's Series 1 Convertible Redeemable Preferred Stock, without par value, and Common Stock Purchase Warrants (the "Warrants") to purchase an aggregate of 4,537,254 shares

2

of its Common Stock, without par value, pursuant to the Preferred Stock and Warrant Purchase Agreement dated as of December 22, 2000, as amended (the "Agreement"). This opinion is delivered to you pursuant to Section 4.8 of the Agreement. Capitalized terms not otherwise defined in this opinion shall have the meanings ascribed to them in the Agreement or in the Legal Opinion Accord of the ABA Section of Business Law (1991) (the "Accord")."

    6.  Recital G of Exhibit D to the Agreement is amended and restated to read in its entirety as follows:

    G. The Company proposes to sell and issue up to 5,933,332 shares of Series 1 Convertible Redeemable Preferred Stock, without par value (the "Series 1 Preferred Stock"), and warrants to purchase up to 4,537,254 shares of common stock, without par value (the "Series 1 Warrant Shares") in a closing pursuant to the Preferred Stock and Warrant Purchase Agreement (the "Series 1 Agreement") among the Company and certain investors listed on Signature Page I dated as of December 22, 2000, as amended (the "Series 1 Purchasers")."

    7.  Except as expressly modified by this Amendment, the Agreement remains in full force and effect as written.

    8.  This Amendment shall be governed by and construed under the laws of the state of Oregon.

    9.  This Amendment 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.

(Signature page follows.)

3

    IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and years first written above.

MEDICALOGIC/MEDSCAPE, INC.
By:	Name: David Moffenbeier Title: Chief Executive Officer
QUANTUM INDUSTRIAL PARTNERS LDC
By:	Name: Title:
SFM DOMESTIC INVESTMENTS LLC
By:	Name: Title:
RAM TRADING, LTD.
By:	Name: Title:

4

SCHEDULE A

SCHEDULE OF INVESTORS

Investor	Number of Shares of Series 1 Preferred Stock	Number of Warrants Shares	Total Purchase Price
Quantum Industrial Partners LDC	1,666,666	1,274,509	$	4,999,998.00
SFM Domestic Investments LLC	1,666,666	1,274,509		4,999,998.00
Halifax Fund LP	333,333	254,902		999,999.00
Lagunitas Partners LP	500,000	382,353		1,500,000.00
Gruber & McBaine International	166,667	127,451		500,001.00
Montrose Investments Ltd.	666,667	509,804		2,000,001.00
Coleman Swenson Hoffman Booth IV, LP	333,333	254,902		999,999.00
Crosslink Crossover Fund III, LP	88,000	67,295		264,000.00
Offshore Crosslink Crossover Fund III, LP	6,000	4,588		18,000.00
Delta Growth, LP	6,000	4,588		18,000.00
RAM Trading, Ltd.	333,333	254,902		999,999.00
Cranshire Capital	166,667	127,451		500,001.00
TOTAL	5,933,332	4,537,254	$	17,799,994.00

QuickLinks

FIRST AMENDMENT TO PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
SCHEDULE A SCHEDULE OF INVESTORS

EX-10.15

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.15

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE CORPORATION MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT, UNLESS THE SECURITIES ARE RESOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE ACT, AND ANY APPLICABLE STATE SECURITIES LAWS.

COMMON STOCK PURCHASE WARRANT

MedicaLogic/Medscape, Inc.

    THIS CERTIFIES that for good and valuable consideration received,            , or registered assigns (each herein sometimes called the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from MedicaLogic/Medscape, Inc., an Oregon corporation (the "Corporation") up to             validly issued fully paid and nonassessable shares of common stock, no par value per share, of the Corporation, as may be adjusted from time to time pursuant to Section 11 (the "Warrant Shares") at a purchase price per share (the "Exercise Price") of $0.01. This Warrant is being issued in connection with the issuance and sale by the Corporation of            shares of the Corporation's Series 1 Preferred Stock (the "Series 1 Preferred Stock") and this Warrant, pursuant to the Preferred Stock and Warrant Purchase Agreement, dated as of December 22, 2000 among the Corporation and the Investor parties thereto, as amended (the "Purchase Agreement").

1.  Term of Warrant

    Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time in part, at any time on or after the date hereof (the "Initial Exercise Date") and at or prior to 11:59 p.m., Pacific Standard Time, on January 4, 2006 (the "Expiration Time"), unless otherwise extended by the Corporation.

2.  Exercise of Warrant

    (a) The purchase rights represented by this Warrant are exercisable by the registered Holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 20500 NW Evergreen Parkway, Hillsboro, Oregon 97124 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered Holder hereof at the address of such Holder appearing on the books of the Corporation), and, subject to Section 2(b) upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the Holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the Holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of Warrant Shares so purchased.

    (b) In lieu of the payment of the aggregate Exercise Price, the Holder shall have the right (but not the obligation), to require the Corporation to convert this Warrant, in whole or in part, into shares of Common Stock (the "Conversion Right") as provided for in this Section 2. Upon exercise of the Conversion Right, the Corporation shall deliver to the Holder (without payment by the Holder of any of the Exercise Price) that number of shares of Common Stock equal to the quotient obtained by

dividing (i) the value of the Warrant or portion thereof at the time the Conversion Right is exercised (determined by subtracting the aggregate Exercise Price at the time of the exercise of the Conversion Right from the aggregate Current Market Price for the shares of Common Stock issuable upon exercise of the Warrant at the time of the exercise of the Conversion Right) by (ii) the Current Market Price of one share of Common Stock at the time of the exercise of the Conversion Right. "Current Market Price" shall mean, as of the date of determination, (x) the average of the closing prices of the Common Stock on The Nasdaq National Market (or other principal securities exchange on which the Common Stock is then traded) over the thirty day period ending on such date or (y) if the Common Stock is not listed on a principal securities exchange, the fair market value thereof, as determined mutually by the Corporation's Board of Directors and such Holder, or if the Board of Directors and such Holder shall fail to agree, at the Corporation's expense by an appraiser chosen by the Board of Directors of the Corporation and reasonably acceptable to such Holder.

    The Conversion Right may be exercised by the Holder on any business day prior to the Expiration Time by surrender of this Warrant to the Company, with a duly executed Exercise Form with the conversion section completed, exercising the Conversion Right and specifying the total number of shares of Common Stock that the Holder will be issued pursuant to such conversion.

3.  Issuance of Shares; No Fractional Shares

    Certificates for shares purchased hereunder shall be delivered to the Holder hereof by the Corporation's transfer agent at the Corporation's expense within five (5) business days after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the Holder hereof and shall be registered in the name of such Holder or, subject to applicable laws, other name as shall be requested by such Holder. If, upon exercise of this Warrant, fewer than all of the Warrant Shares evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of Warrant Shares not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all Warrant Shares which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Shares). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the Current Market Price of one share of Common Stock at the time of such exercise shall be paid in cash to the Holder of this Warrant.

4.  Charges, Taxes and Expenses

    Issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the Holder of this Warrant or in such name or names as may be directed by the Holder of this Warrant; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder hereof.

2

5.  No Rights as Shareholders

    This Warrant does not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof.

6.  Registration Rights

    A holder of Warrant Shares may become a "Holder," as defined in the 2000 Second Amended and Restated Investor Rights Agreement dated as of January 4, 2001 between the Corporation and the parties listed on the signature pages thereto (the "Investor Rights Agreement"), upon compliance with the requirements of such agreement.

7.  Exchange and Registry of Warrant

    This Warrant is exchangeable, upon the surrender hereof by the registered Holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

8.  Loss, Theft, Destruction or Mutilation of Warrant

    Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

9.  Saturdays, Sundays and Holidays

    If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

10. Merger, Sale of Assets, Etc.

    If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the Holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the Holder of this Warrant ten (10) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate.

3

11. Certain Adjustments

    11.1Adjustment of Warrant Shares.  The number, class and Exercise Price per share of securities for which this Warrant may be exercised are subject to adjustment from time to time upon the happening of certain events as hereinafter provided:

    (a)Recapitalization.  If the outstanding shares of the Corporation's common stock are divided into a greater number of shares or if the Corporation shall effect a stock dividend, the number of Warrant Shares shall be proportionately increased and the Exercise Price per share shall be proportionately reduced. Conversely, if the outstanding shares of the Corporation's common stock are combined into a smaller number of shares of common stock, the number of shares of common stock purchasable upon the exercise of this Warrant shall be proportionately reduced and the Exercise Price per share shall be proportionately increased. The increases and reductions provided for in this Section 11.1(a) shall be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Corporation obtainable on exercise of this Warrant nor the aggregate price payable for such percentage shall be affected by any event described in this Section 11.1(a).

    (b)Merger or Reorganization, Etc.  In the event of any change in the Corporation's common stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation or other change in the capital structure of the Corporation (not including the issuance of additional shares of capital stock other than by stock dividend or stock split), then, the Holder of this Warrant will have the right thereafter to receive upon the exercise of this Warrant the kind and amount of shares of stock or other securities or property to which it would have been entitled if, immediately before the merger, consolidation, reclassification, reorganization, recapitalization or other change in the capital structure, it had held the number of shares of common stock obtainable upon the exercise of this Warrant. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 11 with respect to the rights of the Holder after the merger, consolidation, reclassification, reorganization, recapitalization or other change to the end that the provisions of this Section 11 (including adjustment of the Exercise Price then in effect and the number of shares issuable upon exercise of this Warrant) shall be applicable after that event as nearly equivalent as may be practicable.

    (c)Adjustment for Dividends or Distributions of Stock or Other Securities or Property.  In case the Corporation shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Corporation (other than as provided for in Section 11.1(a) or (b) above) or any other entity or (ii) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, upon exercise of this Warrant at any time after the consummation, effective date or record date of such dividend or other distribution, the Holder shall receive, in addition to the Warrant Shares (or such other shares or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Corporation to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the Initial Exercise Date and had thereafter, during the period from the Initial Exercise Date to and including the date of such exercise, retained such shares and/or all other additional stock or securities available by it as aforesaid during such period giving effect to all adjustments called for by this Section 11.

    (d)Adjustment in Respect of Spin-Off.  In case of any spin-off by the Corporation of another person (the "Spin-off Entity") at any time after the issuance of this Warrant but prior to the exercise hereof, the Corporation shall issue to the Holder a new warrant entitling the Holder to purchase, at a nominal exercise price, the number of shares of common stock or other

4

proprietary interest in the Spin-off Entity that the Holder would have owned had the Holder, immediately prior to such spin-off, exercised this Warrant.

    (e)Anti-Dilution.

The number of Warrant Shares shall at all times be determined by the following formula:

WS = OWS × S10IP
S1CP

Where
WS = Warrant Shares;
OWS = the number of shares originally subject to this Warrant (as such number may be adjusted to account for stock splits, stock dividends, combinations and other recapitalizations of the Common Stock);
S10IP = Series 1 Original Issuance Price (as defined in the Corporation's 1999 Restated Articles of Incorporation, as amended (the "Articles"); and
S1CP = Series 1 Conversion Price (as defined in the Articles and as may be adjusted from time to time pursuant to the Articles).

    11.2Notice of Adjustment.  Whenever an event occurs requiring any adjustment to be made pursuant to Section 11.1, the Corporation shall promptly file with its Secretary or an assistant secretary at its principal office and with its stock transfer agent, if any, a certificate of its President or Chief Financial Officer specifying such adjustment, setting forth in reasonable detail the acts requiring such adjustment, and stating such other facts as shall be necessary to show the manner and figures used to compute such adjustment. Such certificate shall be made available at all reasonable times for inspection by the Holder. Promptly (but in no event more than 30 days) after each such adjustment, the Corporation shall give a copy of such certificate by certified mail to the Holder.

12. Transferability; Compliance with Securities Laws

    12.1 This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject to such restrictions, and the restrictions set forth in Sections 12.2 and 12.3 below, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the Holder hereof, in whole or in part, to transferees, including without limitation entities controlling, controlled by or under common control with            at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the Holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed.

    12.2 The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Shares issuable upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that: (a) the Holder will not offer, sell or otherwise transfer this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933 (the "Act"), as amended, or any state securities laws; and (b) until the first anniversary of the Initial Exercise Date (the "First Anniversary"), the Holder will not offer, sell or otherwise transfer this Warrant or any Warrant Shares to be issued upon exercise hereof without also offering, selling or otherwise transferring a number of shares of Series 1 Preferred Stock equal to 1.307603565 multiplied by the number of Warrant Shares which the Holder shall then be eligible to purchase hereunder (in the case of any offer, sale or other disposition of this Warrant), or 1.307603565 multiplied by the number of such Warrant Shares (in the case of any offer, sale or other disposition of Warrant Shares), as the case may be. If the shareholders of the Corporation fail to approve the issuance of the Series 1 Preferred Stock and the

5

Warrant, and the anti-dilution provisions relating thereto and prior to the First Anniversary the Holder of this Warrant elects to have its shares of Series 1 Preferred Stock redeemed pursuant to Article II.D.4.B. of the Corporation's 1999 Restated Articles of Incorporation, as amended, then the Holder of this Warrant shall forfeit to the Corporation for no additional consideration the right to purchase Common Stock pursuant to this Warrant, or Warrant Shares, as the case may be, in a number equal to .764705778 multiplied by the number of shares of Series 1 Preferred Stock being redeemed. Upon exercise of this Warrant, the Holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the Warrant Shares so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

    12.3 The Warrant Shares have not been and, except as otherwise provided in the Investor Rights Agreement, will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Shares or other securities issued in respect of the Warrant Shares upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE CORPORATION MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE 1933 ACT, UNLESS THE SECURITIES ARE RESOLD IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE ACT, AND ANY APPLICABLE STATE SECURITIES LAWS.

    Notwithstanding the foregoing, the Holder may require the Corporation to issue a warrant or a certificate for Warrant Shares, in each case without a legend, if either (i) such Warrant or such Warrant Shares, as the case may be, have been registered for resale under the Act, (ii) the Holder has delivered to the Corporation an opinion of legal counsel (from a firm reasonably satisfactory to the Corporation) which opinion shall be addressed to the Corporation and be reasonably satisfactory in form and substance to the Corporation's counsel, to the effect that such registration is not required with respect to such Warrant or such Warrant Shares, as the case may be or (iii) such Warrant or Warrant Shares may be sold pursuant to Rule 144(k) (or any successor provision then in effect) under the Act.

13. Representations and Warranties

    The Corporation hereby covenants, represents and warrants to the Holder hereof that:

    (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Shares upon the exercise of this Warrant;

    (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares issuable upon exercise of this Warrant;

6

    (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to issue the common stock issuable upon exercise of this Warrant and to carry out and perform its obligations under the terms of this Warrant;

    (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Shares, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken;

    (e) the Warrant Shares, when issued in compliance with the provisions of this Warrant and the Corporation's 1999 Restated Articles of Incorporation (as they may be amended from time to time (the "Articles"), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and

    (f)  the issuance of the Warrant Shares will not be subject to any preemptive rights, rights of first refusal or similar rights.

14. Corporation

    The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of the Warrant against impairment.

15. Governing Law

    This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon.

16. Amendments

    Any provision of this Warrant may be amended and the observance thereof waived only with the written consent of the Corporation and the Holder.

17. Miscellaneous

    (a)Entire Agreement.  This Warrant and the Preferred Stock and Warrant Purchase Agreement constitute the entire agreement between the Corporation and the Holder with respect to the Warrant and supersedes all prior agreements and understanding with respect to the subject matter of this Warrant.

    (b)Binding Effect; Benefits.  This Warrant shall inure to the benefit of and shall be binding upon the Corporation and the Holder and their respective permitted successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person other than the Corporation and the Holder, or their respective permitted successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant.

    (c)Severability.  Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the terms and provisions of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction.

7

    IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officer.

Dated:  , 200                                      &nbs ;                  

MEDICALOGIC/MEDSCAPE, INC.
By:	Name: David C. Moffenbeier Title: Chief Executive Officer

8

NOTICE OF EXERCISE

To: MedicaLogic/Medscape, Inc.

    (1) The undersigned hereby elects to purchase      shares of common stock of MedicaLogic/Medscape, Inc. pursuant to the terms of the attached Warrant, and [tenders herewith payment of the purchase price in full/hereby exercises the Conversion Right].

    (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.

    (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below:

(Name)

(Address)

    (4) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

(Date) (Signature)

9

ASSIGNMENT FORM

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

    FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of MedicaLogic/Medscape, Inc. set forth below:

Name of Assignee
Address No. of Shares

and does hereby irrevocably constitute and appoint Attorney            to make such transfer on the books of MedicaLogic/Medscape, Inc., maintained for the purpose, with full power of substitution in the premises.

    The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale.

Dated: 

Holder's Signature: 

Holder's Address: 

Guaranteed Signature:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

10

QuickLinks

COMMON STOCK PURCHASE WARRANT MedicaLogic/Medscape, Inc.
NOTICE OF EXERCISE
ASSIGNMENT FORM

EX-10.16

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.16

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE CORPORATION MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT, UNLESS THE SECURITIES ARE RESOLD IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE ACT, AND ANY APPLICABLE STATE SECURITIES LAWS.

COMMON STOCK PURCHASE WARRANT

MedicaLogic/Medscape, Inc.

    THIS CERTIFIES that for good and valuable consideration received, General Motors Corporation, or registered assigns (each herein sometimes called the "Holder"), is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from MedicaLogic/Medscape, Inc., an Oregon corporation (the "Corporation") up to five million (5,000,000) fully paid and nonassessable shares of common stock, no par value per share, of the Corporation (the "Warrant Shares") at a purchase price per share (the "Exercise Price") of $2.31.

1. Term of Warrant

    Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time in part, at any time on or after the date hereof (the "Initial Exercise Date") and at or prior to 11:59 p.m., Pacific Standard Time, on January 24, 2006 (the "Expiration Time"), unless otherwise extended by the Corporation.

2. Exercise of Warrant

    (a) The purchase rights represented by this Warrant are exercisable by the registered Holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 20500 NW Evergreen Parkway, Hillsboro, Oregon 97124 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered Holder hereof at the address of such Holder appearing on the books of the Corporation), and, subject to Section 2(b), upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or by bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the Holder hereof, if any, at the time of exercise in an amount equal to the purchase price of shares thereby purchased); whereupon the Holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of Warrant Shares so purchased.

    (b) In lieu of the payment of the aggregate Exercise Price, the Holder shall have the right (but not the obligation) at any time after July 24, 2002, to require the Corporation to convert this Warrant, in whole or in part, into shares of Common Stock (the "Conversion Right") as provided for in this Section 2. Upon exercise of the Conversion Right, the Corporation shall deliver to the Holder (without payment by the Holder of any of the Exercise Price) that number of shares of Common Stock equal to the quotient obtained by dividing (i) the value of the Warrant or portion thereof at the time the

1

Conversion Right is exercised (determined by subtracting the aggregate Exercise Price at the time of the exercise of the Conversion Right from the aggregate Current Market Price for the shares of Common Stock issuable upon exercise of the Warrant at the time of the exercise of the Conversion Right) by (ii) the Current Market Price of one share of Common Stock at the time of the exercise of the Conversion Right. "Current Market Price" shall mean, as of the date of determination, (x) the average of the closing prices of the Common Stock on the Nasdaq National Market (or other principal securities exchange on which the Common Stock is then traded) over the thirty day period ending on such date or (y) if the Common Stock is not listed on a principal securities exchange, the fair market value thereof, as determined mutually in good faith by the Corporation's Board GM Warrant Page 2 Execution Copy of Directors and such Holder , or if the Board of Directors and such Holder fail to agree, at the Corporation's expense by an appraiser chosen by the Board of Directors of the Corporation and reasonably acceptable to such Holder.

    The Conversion Right may be exercised by the Holder on any business day prior to the Expiration Time by surrender of this Warrant to the Company, with a duly executed Exercise Form with the conversion section completed, exercising the Conversion Right and specifying the total number of shares of Common Stock that the Holder will be issued pursuant to such conversion.

3. Sale Lock-Up

    The Holder of this Warrant, by acceptance hereof, acknowledges that the Holder will not sell or otherwise dispose of the Warrant Shares in excess of the amounts set forth below during the time periods set forth below:

    (i) From January 23, 2001 until July 23, 2001: 2,500,000 Warrant Shares;

    (ii) From July 24, 2001 until January 23, 2002: 3,750,000 Warrant Shares, less any Warrant Shares sold or otherwise disposed of pursuant to clause (i); and

    (iii) From January 24, 2002 until January 24, 2003: 5,000,000 Warrant Shares, less any Warrant Shares sold or otherwise disposed of pursuant to clauses (i) and (ii).

    After January 24, 2003, there shall be no restriction on Holder's disposition of Warrant Shares, other than those imposed by state or federal securities laws. Holder further acknowledges that the Corporation may impose stop-transfer instructions with respect to the Warrant Shares until the Expiration Time to enforce this Section 3. Notwithstanding any provision of this Section 3 to the contrary, Holder may transfer Warrant Shares to entities controlling, controlled by or under common control with General Motors Corporation prior to January 24, 2003, provided that such transferees shall also be bound by the restrictions set forth in this Section 3.

4. Issuance of Shares; No Fractional Shares

    Certificates for shares purchased hereunder shall be delivered to the Holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the Holder hereof and shall be registered in the name of such Holder or, subject to applicable laws, other name as shall be requested by such Holder. If, upon exercise of this Warrant, fewer than all of the Warrant Shares evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of Warrant Shares not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all Warrant Shares which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the

2

holder of the Warrant Shares). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the Holder of this Warrant.

5. Charges, Taxes and Expenses

    Issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the Holder of this Warrant or in such name or names as may be directed by the Holder of this Warrant; GM Warrant Page 3 Execution Copy provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder hereof.

6. No Rights as Shareholders

    This Warrant does not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof.

7. Exchange and Registry of Warrant

    This Warrant is exchangeable, upon the surrender hereof by the registered Holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

8. Loss, Theft, Destruction or Mutilation of Warrant

    Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

9. Saturdays, Sundays and Holidays

    If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

10. Merger, Sale of Assets, Etc.

    If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other

3

entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the Holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the Holder of this Warrant ten (10) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate.

11. Certain Adjustments

11.1 Adjustment of Warrant Shares. The number, class and Exercise Price per share of securities for which this Warrant may be exercised are subject to adjustment from time to time upon the happening of certain events as hereinafter provided:

    (a) Recapitalization. If the outstanding shares of the Corporation's common stock are divided into a greater number of shares or if the Corporation shall effect a stock dividend, the number of shares of common stock purchasable upon the exercise of this Warrant shall be proportionately increased and the Exercise Price per share shall be proportionately reduced. Conversely, if the outstanding shares of the Corporation's common GM Warrant Page 4 Execution Copy stock are combined into a smaller number of shares of common stock, the number of shares of common stock purchasable upon the exercise of this Warrant shall be proportionately reduced and the Exercise Price per share shall be proportionately increased. The increases and reductions provided for in this Section 11.1(a) shall be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Corporation obtainable on exercise of this Warrant nor the aggregate price payable for such percentage shall be affected by any event described in this Section 11.1(a).

    (b) Merger or Reorganization, Etc. In the event of any change in the Corporation's common stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation or other change in the capital structure of the Corporation (not including the issuance of additional shares of capital stock other than by stock dividend or stock split), then, the Holder of this Warrant will have the right thereafter to receive upon the exercise of this Warrant the kind and amount of shares of stock or other securities or property to which it would have been entitled if, immediately before the merger, consolidation, reclassification, reorganization, recapitalization or other change in the capital structure, it had held the number of shares of common stock obtainable upon the exercise of this Warrant. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 11 with respect to the rights of the Holder after the merger, consolidation, reclassification, reorganization, recapitalization or other change to the end that the provisions of this Section 11 (including adjustment of the Exercise Price then in effect and the number of shares issuable upon exercise of this Warrant) shall be applicable after that event as nearly equivalent as may be practicable.

    (c) Adjustment for Dividends or Distributions of Stock or Other Securities or Property. In case the Corporation shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Corporation (other than as provided for in Section 11.1(a) or (b) above) or any other entity or (ii) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, upon exercise of this Warrant at any time after the

4

consummation, effective date or record date of such dividend or other distribution, the Holder shall receive, in addition to the Warrant Shares (or such other shares or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Corporation to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the Initial Exercise Date and had thereafter, during the period from the Initial Exercise Date to and including the date of such exercise, retained such shares and/or all other additional stock or securities available by it as aforesaid during such period giving effect to all adjustments called for by this Section 11.

11.2 Notice of Adjustment. Whenever an event occurs requiring any adjustment to be made pursuant to Section 11.1, the Corporation shall promptly file with its Secretary or an assistant secretary at its principal office and with its stock transfer agent, if any, a certificate of its President or Chief Financial Officer specifying such adjustment, setting forth in reasonable detail the acts requiring such adjustment, and stating such other facts as shall be necessary to show the manner and figures used to compute such adjustment. Such certificate shall be made available at all reasonable times for inspection by the Holder. Promptly (but in no event more than 30 days) after each such adjustment, the Corporation shall give a copy of such certificate by certified mail to the Holder.

12. Transferability; Compliance with Securities Laws

    12.1 This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject to such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the Holder hereof, in whole or in part, to transferees, including without limitation entities controlling, controlled by or under common control with General Motors Corporation at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the Holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed.

    12.2 The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Shares issuable upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this GM Warrant Page 5 Execution Copy Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the Warrant Shares so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

    12.3 The Warrant Shares have not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Shares or other securities issued in respect of the Warrant Shares upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD OR

5

OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE CORPORATION MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT, UNLESS THE SECURITIES ARE RESOLD IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE ACT, AND ANY APPLICABLE STATE SECURITIES LAWS.

13. Representations and Warranties

    The Corporation hereby represents and warrants to the Holder hereof that:

    (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Shares upon the exercise of this Warrant;

    (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares issuable upon exercise of this Warrant;

    (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to issue the common stock issuable upon exercise of this Warrant and to carry out and perform its obligations under the terms of this Warrant;

    (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Shares, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken;

    (e) the Warrant Shares, when issued in compliance with the provisions of this Warrant and the Corporation's 1999 Restated Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and

    (f) the issuance of the Warrant Shares will not be subject to any preemptive rights, rights of first refusal or similar rights.

14. Corporation

    The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of the Warrant against impairment.

15. Governing Law

    This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon.

6

    IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officer.

Dated: January 23^rd, 2001

MEDICALOGIC/MEDSCAPE, INC.
By:	Name: David C. Moffenbeier Title: President and Chief Executive Officer

ACKNOWLEDGED:
GENERAL MOTORS CORPORATION
By:	Name: Title:

7

NOTICE OF EXERCISE

To: MedicaLogic/Medscape, Inc.

    (1) The undersigned hereby elects to purchase      shares of common stock of MedicaLogic/Medscape, Inc. pursuant to the terms of the attached Warrant, as follows [check one]:

[  ] Exercise for Cash. Pursuant to Section 2(a) of the Warrant, the undersigned hereby elects to exercise the Warrant for cash and tenders payment herewith (or has made a wire transfer), including applicable transfer taxes, to the order of MedicaLogic/Medscape, Inc. in the amount of $            .

[  ] Cashless Exercise. Pursuant to Section 2(b) of the Warrant, the undersigned hereby elects to exercise the Warrant on a cashless basis, based on the following:

•

Value of the Warrant or portion thereof (determined in accordance with Section 2(b) of the Warrant: $            .



•

Current Market Price of the common stock (determined in accordance with Section 2(b) of the Warrant: $            .

    (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.

    (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below:

(Name)

(Address)

    (4) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

(Date) (Signature)

8

ASSIGNMENT FORM

    (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

    FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of MedicaLogic/Medscape, Inc. set forth below:

Name of Assignee
Address No. of Shares

and does hereby irrevocably constitute and appoint Attorney            to make such transfer on the books of MedicaLogic/Medscape, Inc., maintained for the purpose, with full power of substitution in the premises.

    The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale.

Dated: 

Holder's Signature: 

Holder's Address:
 

Guaranteed Signature:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

9

QuickLinks

COMMON STOCK PURCHASE WARRANT MedicaLogic/Medscape, Inc.
NOTICE OF EXERCISE
ASSIGNMENT FORM

EX-10.23-1

                                                               Exhibit 10.23.1

                         BAYLOR COLLEGE OF MEDICINE
                             AMENDMENT NO. 1

This Amendment No. 1 is effective as of the date this Amendment is executed,
and amends the Agreement to Issue Shares of Common Stock (thereto, the
"Agreement"), dated as of February 16, 1999, between MedicaLogic/Medscape,
Inc. ("Medscape") and Baylor College of Medicine ("BCM").

     The parties agree as follows:

     1.    Except as specifically provided in this Amendment No. 1, all other
           terms of the Agreement remain in effect.

     2.    Amend Section 3.1 as follows:

           Medscape will issue Shares to BCM according to the following
           formula:

           N=R DIVIDED BY P

           -  N = the number of Shares to be issued by Medscape to BCM
           -  R = 25% percent of the license fees received by Medscape from
              the sale of licenses for the Software to BCM from the date of this
              Amendment through December 31, 2004 other than pursuant to the
              Purchase Order.
           -  P = the fair market value of Medscape's Common Stock

     3.    Amend Section 4.0 to extend the term of the Agreement through
           12/31/2004.

     IN WITNESS WHEREOF, the parties have executed this Amendment No. 1
     effective as of 12/27, 2000.

                                       MedicaLogic/Medscape, Inc.
                                       20500 NW Evergreen Parkway
                                       Hillsboro, OR 97124

                                       By: /s/ David C. Moffenbeier
                                          --------------------------------
                                          David C. Moffenbeier

                                       Title:    CEO
                                             -----------------------------


                                       Baylor College of Medicine
                                       One Baylor Plaza
                                       Houston, TX 77030

                                       By: /s/ Ralph D. Feigin
         [SEAL]                           --------------------------------
                                          Ralph D. Feigin, M.D.

                                       Title:
                                             -----------------------------

EX-10.24-1

                                                               Exhibit 10.24.1

                          SECOND AMENDMENT TO LEASE

DATED:    November 24, 1999

BETWEEN:  EVERGREEN CORPORATE CENTER LLC,
          an Oregon limited liability company                      ("Landlord")

AND:      MEDICALOGIC, INC., an Oregon corporation                   ("Tenant")


          A.   Landlord and Tenant are parties to an Industrial Business Park
Lease dated January 15, 1997 (the "Lease Agreement"), as amended by an
Addendum to Lease dated January 15, 1997 (the "Addendum") and as further
amended by an Amendment to Lease dated July 15, 1999 (the "First
Amendment"). The Lease Agreement, the Addendum, and the First Amendment are
collectively referred to in this Second Amendment to Lease (the "Second
Amendment") as the "Lease."

          B.   Pursuant to the First Amendment, Landlord and Tenant agreed to
expand the Premises by adding approximately 27,652 square feet to the
Premises, as described in the First Amendment (the "First Expansion Space").
Landlord and Tenant desire to expand the First Expansion Space as described
in the First Amendment, in accordance with the terms and conditions set forth
in this Second Amendment.

          C.   The capitalized terms used in this Second Amendment shall have
the meanings given to them in the Lease unless expressly amended by this
Second Amendment.

          NOW, THEREFORE, in consideration of the mutual promises of the
parties set forth in this Second Amendment, Landlord and Tenant agree as
follows, effective as of July 15, 1999:

     1.   EXPANSION OF EXPANSION SPACE. The Expansion Space as described in
the First Amendment is increased by 18,226 square feet (the "Additional
Expansion Space"). The description of the Expansion Space, as set forth in
Section 1 of the First Amendment, is deleted and replaced with:
approximately 45,878 square feet of space in Building 3 in the area which is
crosshatched on the attached Exhibit A (the "Expansion Space").

     2.   RENT. In addition to the Base Monthly Rent increases set forth in
Section 2 of the First Amendment, Base Monthly Rent shall increase due to the
addition of the Additional Expansion Space, commencing on July 1, 2000, and
continuing throughout the Term in accordance with the following schedule:




             Time Period                  Base Monthly Rent Increase
             -----------                  --------------------------
                                       
July 1, 2000 through April 30, 2003               $18,773.00
May 1, 2003 through April 30, 2006                $20,462.00
May 1, 2006 through December 14, 2007             $22,304.00



                                       1



     3.   ADDITIONAL RENT. The reference to 27,652 in the sixth line of
Section 3 of the First Amendment is replaced with 45,878.

     4.   ADDITIONAL MODIFICATIONS TO FIRST AMENDMENT. The First Amendment is
further modified as follows:

     4.1  Section 6 of the First Amendment is deleted.

     4.2  Section 1.1 of the Expansion Space Work Agreement which is attached
as Exhibit C to the First Amendment is deleted and replaced with the
following:

          1.1   Landlord agrees to provide certain improvements in the
     Expansion Space in accordance with this Expansion Space Work Agreement.

                1.1.1  Landlord shall pay up to $774,256.00 ($28.00 per
     square foot in the First Expansion Space)(the "First TI Allowance")
     towards the cost of designing and constructing the improvements in the
     First Expansion Space subject to and in accordance with the terms and
     conditions of this Expansion Space Work Agreement. At least $553,040.00
     ($20.00 per square foot in the First Expansion Space) of the First TI
     Allowance must be used for improvements made to the First Expansion
     Space on or before May 31, 2000 or else the First TI Allowance shall be
     reduced as follows. If $553,040.00 is not spent for improvements made to
     the First Expansion Space on or before May 31, 2000, the First TI
     Allowance shall be reduced by the difference between $774,256.00, and
     the amount spent for improvements made to the First Expansion Space on
     or before May 31, 2000. Tenant acknowledges that the availability of the
     First TI Allowance is conditioned on Tenant accepting the work in the
     First Expansion Space on or before May 31, 2000, as described in the
     certificate attached as Exhibit D (the "Teachers Certificate") to be
     executed and delivered by Tenant on or before May 31, 2000. If such
     conditions are fulfilled then, on or before May 31, 2000, Tenant shall
     execute the Teachers Certificate and send the original and a copy
     thereof to Landlord. If at least $553,040.00 of the First TI Allowance
     is spent for improvements made to the First Expansion Space on or before
     May 31, 2000, then any remaining amount of the First TI Allowance may be
     spent at any time during the Term.

                1.1.2  Landlord shall pay up to $510,328.00 ($28.00 per
     square foot in the Additional Expansion Space) (the "Additional TI
     Allowance") towards the cost of designing and constructing the
     improvements in the Additional Expansion Space subject to and in
     accordance with the terms and conditions of this Expansion Space Work
     Agreement. At least $364,520.00 ($20.00 per square foot in the
     Additional Expansion Space) of the Additional TI Allowance must be used
     for improvements made to the Additional Expansion Space on or before
     September 30, 2000 or else the Additional TI Allowance shall be reduced
     as follows. If $364,520.00 is not spent for improvements made to the
     Additional Expansion Space on or before September 30, 2000, the
     Additional TI Allowance


                                       2



     shall be reduced by the difference between $364,520.00, and the amount
     spent for improvements made to the Additional Expansion Space on or
     before September 30, 2000. If at least $364,520.00 of the Additional TI
     Allowance is spent for improvements made to the Additional Expansion
     Space on or before September 30, 2000, then any remaining amount of the
     Additional TI Allowance may be spent at any time during the Term.

     4.3  The First TI Allowance and the Additional TI Allowance are
collectively referred to in the First Amendment and this Second Amendment as
the "TI Allowance."

     4.4  Section 1.2 of the Expansion Space Work Agreement which is attached
as Exhibit C to the First Amendment is deleted and replaced with the following:

                1.2.1  All costs, fees, and expenses in connection with the
     design and construction of the improvements in the First Expansion Space
     in excess of the First TI Allowance paid in accordance with Section
     1.1.1 shall be paid for by Tenant within twenty (20) days after billing
     therefor. If Tenant desires to borrow funds from Landlord for such excess
     amount, Landlord agrees to loan funds to Tenant in an amount not to
     exceed $138,260.00 ($5.00 per square foot in the First Expansion Space)
     solely for costs, fees, and expenses to design and construct
     improvements in the First Expansion Space (the "First Expansion TI
     Loan"). The First Expansion TI Loan shall accrue interest at the rate of
     11 percent per annum, commencing on the date of the first advance on the
     First Expansion TI Loan (the "First Expansion First Advance Date") and
     continuing until such time as the entire First Expansion TI Loan and all
     accrued interest are paid in full. Tenant shall repay the First
     Expansion TI Loan with monthly payments sufficient to amortize the First
     Expansion TI Loan over the period of time beginning on the First
     Expansion First Advance Date and ending on December 14, 2007, taking
     into account interest at the rate of 11 percent per annum. Payments on
     the First Expansion TI Loan will begin on the first day  of the first
     calendar month following the First Expansion First Advance Date and shall
     continue on the first day of each month through December 1, 2007 and
     shall be paid in full on or before December 1, 2007 or any earlier
     termination date of the Lease. Landlord shall inform Tenant of the
     monthly amount to be paid under the Expansion TI Loan as soon as
     practicable after substantial completion of the tenant improvements
     for which the First Expansion TI Loan is used. If the amount is not
     determined prior to May 1, 2000, then Tenant's first payment under the
     First Expansion TI Loan shall be sufficient to pay the monthly payments
     due from May 1, 2000 to the date on which Tenant is informed of the
     monthly payment amount. Upon Landlord's request, Tenant shall execute
     and deliver to Landlord a promissory note, setting forth the terms of
     Tenant's obligation to repay the First Expansion TI Loan, in the form
     attached as Exhibit E.

                1.2.2 All costs, fees, and expenses in connection with the
     design and construction of the improvements in the Additional Expansion
     Space in


                                       3



     excess of the Additional TI Allowance paid in accordance with Section
     1.1.2 shall be paid for by Tenant within twenty (20) days after billing
     therefor. If Tenant desires to borrow funds from Landlord for such excess
     amount, Landlord agrees to loan funds to Tenant in an amount not to
     exceed $91,113.00 ($5.00 per square foot in the Additional Expansion
     Space) solely for costs, fees, and expenses to design and construct
     improvements in the Additional Expansion Space (the "Additional
     Expansion TI Loan"). The Additional Expansion TI Loan shall accrue
     interest at the rate of 11 percent per annum, commencing on the date of
     the first advance on the Additional Expansion TI Loan (the "Additional
     Expansion First Advance Date") and continuing until such time as the
     entire Additional Expansion TI Loan and all accrued interest are paid in
     full. Tenant shall repay the Additional Expansion TI Loan with monthly
     payments sufficient to amortize the Additional Expansion TI Loan over
     the period of time beginning on the Additional Expansion First Advance
     Date and ending on December 14, 2007, taking into account interest at
     the rate of 11 percent per annum. Payments on the Additional Expansion
     TI Loan will begin on the first day of the first calendar month
     following the Additional Expansion First Advance Date and shall
     continue on the first day of each month through December 1, 2007 and
     shall be paid in full on or before December 1, 2007 or any earlier
     termination date of the Lease. Landlord shall inform Tenant of the
     monthly amount to be paid under the Additional Expansion TI Loan as soon
     as practicable after substantial completion of the tenant improvements
     for which the Additional Expansion TI Loan is used. If the amount is not
     determined prior to September 30, 2000, then Tenant's first payment
     under the Additional Expansion TI Loan shall be sufficient to pay the
     monthly payments due from September 30, 2000 to the date on which Tenant
     is informed of the monthly payment amount. Upon Landlord's request,
     Tenant shall execute and deliver to Landlord a promissory note, setting
     forth the terms of Tenant's obligation to repay the Additional Expansion
     TI Loan, in the form attached as Exhibit E.

     4.5  The Teachers Certificate attached as Exhibit D to the First
Amendment is replaced with the Teachers Certificate attached as Exhibit B to
this Second Amendment.

     4.6  Landlord approves Zimmer Gunsul Frasca as the architect to serve as
the Planner, as defined in Section 2.1 of the Expansion Space Work Agreement
which is attached as Exhibit C to the First Amendment.

     4.7  Landlord approves either Baugh Construction Company, R&H
Construction Company or Melvin Mark Construction Company as the contractor to
construct the improvements in the Expansion Space. With respect to all work
related to the improvements to the Expansion Space, the cost of which exceeds
the TI Allowance, Tenant shall pay Melvin Mark Development Company a fee in
the amount of five percent (5%) of the cost of the work in excess of the TI
Allowance.

                                       4



     5.     SECURITY DEP0SIT. Contemporaneously with the execution of this
Second Amendment, Tenant shall pay Landlord $22,304.00 as an increased
security deposit which shall be held and disbursed in accordance with the
provisions of Section 6.1 of the Lease Agreement.

     6.     BROKERAGE COMMISSIONS. Landlord agrees to pay Tenant's broker,
Norris Beggs & Simpson Northwest Limited Partnership ("NBS") a fee in the
amount described in a letter addressed to NBS from Melvin Mark Brokerage
Company dated June 18, 1999 for the additional area (18,226 square feet)
added to the Expansion Space pursuant to this Second Amendment. One half of
the commission shall be payable upon full execution of this Second Amendment
by Landlord and Tenant, and the remainder shall be paid when Tenant begins
paying rent for the Expansion Space at the rate of $1.03 per square foot.

     7.     EFFECT OF SECOND AMENDMENT. The Lease is modified only in the
specific respects set forth in this Second Amendment. Except as expressly
modified, the Lease remains in full force and effect.

            IN WITNESS WHEREOF, the parties have executed this Second
Amendment as part of the Lease effective as of July 15, 1999.


            LANDLORD:     EVERGREEN CORPORATE CENTER LLC

                          By:   Marzer Venture, and Oregon general partnership

                                By:   Mark Group Partnership No. 4

                                      By:
                                             --------------------------------

                                      Title:
                                             ---------------------------------

                                By:   Schnitzer Investment Corp., an Oregon
                                      corporation

                                      By:
                                             ---------------------------------

                                      Title: ---------------------------------

            TENANT:       MEDICALOGIC, INC., an Oregon corporation

                                      By:    /s/ Guy E. Field
                                             ---------------------------------
                                      Its:   VP Finance
                                             ---------------------------------

                                       5





                                 EXHIBIT B

                      STATEMENT OF TENANT IN RE: LEASE

                                                        Date: May 31, 2000

Teachers Insurance and Annuity
  Association of America
730 Third Avenue
New York, New York  10017
Attn:
     ---------------------------

                            RE: TIAA Appl. #OR-108
                                TIAA Mtge. #000447000
                                Name of Project:    Evergreen Corporate Center
                                Address:            20540 NW Aloclek
                                                    Hillsboro, Oregon  97124

Ladies and Gentlemen:

     It is our understanding that you have a mortgage upon the subject
premises and as a condition precedent thereof have required this
certification of the undersigned.

     The undersigned, as tenant, under that certain lease dated January
15,1997, as amended by an Amendment to Lease dated July 15, 1999, and a
Second Amendment to Lease dated November 24, 1999, made with Evergreen
Corporate Center LLC, as landlord, hereby ratifies said lease and certifies
that:

     1.   the "Commencement Date" of said lease is December 15, 1997; and

     2.   the undersigned is presently solvent and free from reorganization
          and/or bankruptcy; and

     3.   the operation and use of the premises do not involve the
          generation, treatment, storage, disposal or release of a hazardous
          substance or a solid waste into the environment other than to the
          extent necessary to conduct its ordinary course of business in the
          premises and in accordance with all applicable environmental laws,
          and that the premises are being operated in accordance with all
          applicable environmental laws, zoning ordinances and building
          codes; and

     4.   the current base rental payable pursuant to the terms of said lease
          is $126,004.00 per month; and further, additional rental pursuant
          to said lease is payable as provided in the Lease; and

                                       1





     5.   said lease is in full force and effect and has not been assigned,
          modified, supplemented, or amended in any way (except as set forth
          above) and the undersigned is not in default thereunder; and

     6.   the lease described above represents the entire agreement between
          the parties as to the leasing of the premises; and

     7.   the term of said lease expires on December 14, 2007; and

     8.   Landlord has spent at least $553,040.00 of the First TI Allowance,
          as defined in the Second Amendment to Lease, and the work performed
          in the Expansion Space is acceptable to the undersigned.

     9.   no rental has been paid in advance and no security (except the
          security deposit in the amount of $143,143.00) has been deposited
          with landlord; and

     10.  tenant's floor area is 120,888 rentable square feet; and

     11.  the most recent payment of current basic rental was for the payment
          due on May 1, 2000, and all basic rental and additional rental
          payable pursuant to the terms of the lease have been paid up to
          said date; and

     12.  the undersigned acknowledges notice that landlord's interest under
          the lease and the rent and all other sums due thereunder will be
          assigned to you as part of the security for a mortgage loan by you
          to landlord. In the event that Teachers Insurance and Annuity
          Association of America, as lender, notifies the undersigned of a
          default under the mortgage and demands that the undersigned pay its
          rent and all other sums due under the lease to lender, tenant agrees
          that it shall pay its rent and all such other sums to lender.

                                       Very truly yours,

                                       MEDICALOGIC, INC.



                                       By: /s/ Guy E. Field
                                          ---------------------
                                       Its: VP Finance
                                           --------------------


                                       2

EX-10.25

                                                                  Exhibit 10.25

                                 OFFICE LEASE
STATE OF TENNESSEE:
COUNTY OF WILLIAMSON:

         THIS LEASE (the "Lease"), is made this the 22nd day of November,
1999, by and between HIGHWOODS/TENNESSEE HOLDINGS, L.P., a Tennessee limited
partnership hereinafter "Landlord" and NETWORK HEALTH SERVICES, INC. d/b/a/
TOTAL eMED.com, INC., a Tennessee corporation hereinafter "Tenant":

                                 WITNESSETH:

         Upon the terms and conditions hereinafter set forth, Landlord leases
to Tenant and Tenant leases from Landlord property referred to as the
Premises, all as follows:

         1. PREMISES. The property hereby leased to Tenant is that area shown
on Exhibit A hereto attached, which consists of approximately 26,084 rentable
square feet (Tenant reserves the right to have space measured), which is
located in what is sometimes called the CoolSprings I Building (the
"Building"), located at 720 Cool Springs Boulevard, Suite 200, The City of
Franklin, Williamson County, State of Tennessee (the "Premises").

         If Landlord and Tenant desire for improvements to be made to the
Premises prior to the Commencement Date such improvements shall be made
pursuant to the workletter attached hereto as Exhibit A-1 (the "Workletter").

         2. TERM. This Lease Term (the "Term") is for 60 months, and shall
commence on April 1, 2000 ("Commencement Date"), and shall expire (unless
sooner terminated or extended as herein provided) at 6:00 p.m. on March 31,
2005 ("Expiration Date"). In the event Landlord shall permit Tenant to take
possession of the Premises prior to the Commencement Date referenced above,
all the terms and conditions of this Lease shall apply.

         If Landlord, for any reason whatsoever, cannot deliver possession of
the Premises to Tenant on the Commencement Date, then this Lease shall not be
void or voidable, no obligation of Tenant shall be affected thereby, and
neither Landlord nor Landlord's agents shall be liable to Tenant for any loss
or damage resulting from the delay in delivery of possession; provided,
however, that in such event, the Commencement Date and Expiration Date of
this Lease, and all other dates that may be affected by their change, shall
be revised to conform to the date of Landlord's delivery of possession to
Tenant. The above, however, is subject to the provision that the period
permitted for the delay of delivery of possession of the Premises shall not
exceed sixty (60) days after the Commencement Date set forth in the first
sentence of this SECTION 2 (except that those delays beyond Landlord's
control, including, without limitation, those encompassed in the meaning of
the term "force majeure", or caused by Tenant (the "Delays") shall be
excluded in calculating such period). If Landlord does not deliver possession
to Tenant within such period, then Tenant may terminate this Lease by written
notice to Landlord; provided, that written notice shall be ineffective if
given after Tenant takes possession of any part of the Premises, or if given
more than one hundred (100) days after the original Commencement Date plus
the time of any Delays. Unless expressly otherwise provided herein, Rent (as
hereinafter defined) shall commence on the earlier of: (i) the Commencement
Date; (ii) occupancy of the Premises by Tenant; (iii) the date Landlord has
the Premises ready for occupancy by Tenant, as such date is adjusted under
the Workletter, if any, attached hereto; or (iv) the date Landlord could have
had the Premises ready had there been no Delays attributable to Tenant.
Unless the context otherwise so requires, the term "Rent" as used herein
includes both Base Rent and Additional Rent as set forth in Section 4.

         If the Expiration Date, as determined herein, does not occur on the
last day of a calendar month, then Landlord, at its option, may extend the
Term by the number of days necessary to cause the Expiration Date to occur on
the last day of the last calendar month of the Term. Tenant shall pay Base
Rent and Additional Rent for such additional days at the same rate payable
for the portion of the last calendar month immediately preceding such
extension. The Commencement Date, Term (including any extension by Landlord
pursuant to this Section 2) and Expiration Date may be set forth in a
commencement letter (the

                                       1



"Commencement Letter") prepared by Landlord and executed by Tenant.

    3. USE. The Premises may be used only for general office purposes in
connection with Tenant's present business, which is currently medical
information management services, and be occupied by no more than one hundred
thirty (130) persons (the "Permitted Use"), but for no other use without
Landlord's prior written consent which shall not be unreasonably withheld.
Tenant shall never make any use of the Premises which is in violation of any
governmental laws, rules or regulations, whether now existing or hereafter
enacted or which is in violation of the general rules and regulations for
tenants (a copy of the present rules are attached as Exhibit B) as may be
developed or modified from time to time by Landlord effective as of the date
delivered to Tenant or posted on the Premises providing such rules are
uniformly applicable to all tenants in the Building (the "Rules and
Regulations"), nor may Tenant make any use of the Premises not permitted, or
otherwise prohibited, by any restrictive covenants which apply to the
Premises. Tenant may not make any use that is or may be a nuisance or
trespass, which increases any insurance premiums, or makes such insurance
unavailable to Landlord on the Building. In the event of an increase in any
of Landlord's insurance premiums which results from Tenant's use or occupancy
of the Premises, if Tenant does not pay Landlord, on demand, the amount of
such increase, Landlord may treat such use as a default hereunder.

    4. RENT. As used herein, the term "Rent" shall mean Base Rent (as
hereinafter defined) plus Additional Rent (as hereinafter defined). Tenant
shall pay to Landlord Rent, on or before the first day of each calendar month
during the Term, without previous demand or notice therefor by Landlord and
without set off or deduction; provided, however, if the Term commences on a
day other than the first day of a calendar month, then Rent for such month
shall be (i) prorated for the period between the Commencement Date and the
last day of the month in which the Commencement Date falls, and (ii) due and
payable on the Commencement Date. Notwithstanding anything contained herein
to the contrary, Tenant's obligation to pay Rent under this Lease is
completely separate and independent from any of Landlord's obligations under
this Lease. For each monthly Rent payment Landlord receives after the tenth
(10th) day of the month, Landlord shall be entitled to all remedies provided
under SECTIONS 13 and 14 below, and a late charge in the amount of five
percent (5%) of all Rent due for such month. If Landlord presents Tenant's
check to any bank and Tenant has insufficient funds to pay for such check,
then Landlord shall be entitled to all remedies provided under SECTIONS 13
and 14 below and a lawful bad check fee or five percent (5%) of the amount of
such check, whichever amount is less.

    4.1 BASE RENT. As used herein, "Base Rent" shall refer to the following
schedule.

        FROM        THROUGH       RATE/SF       MONTHLY         ANNUALLY
       4/1/00       3/31/01       $18.50      $40,212.83      $482,553.96
       4/1/01       3/31/02       $18.50      $40,212.83      $482,553.96
       4/1/02       3/31/03       $19.25      $41,843.08      $502,116.96
       4/1/03       3/31/04       $19.63      $42,669.08      $512,028.96
       4/1/04       3/31/05       $20.02      $43,516.81      $522,201.72

    4.2 ADDITIONAL RENT. As used in this Lease, the term "Additional Rent"
shall mean all sums and charges, excluding Base Rent, due and payable by
Tenant under this Lease, including, but not limited to, the following:

    (a) sales or use tax imposed on rents collected by Landlord or any tax on
rents in lieu of ad valorem taxes on the Building, even though laws imposing
such taxes attempt to require Landlord to pay the same.

    (b) Tenant's Proportionate Share (as hereinafter defined) of the increase
in Landlord's Operating Expenses (as hereinafter defined) as set forth in the
attached Addendum.

    5. SERVICES BY LANDLORD. Provided that Tenant is not then in default,
Landlord shall cause to be furnished to the Building, or as applicable, the
Premises, in common with other tenants, during business hours of 7:00 A.M. to
6:00 P.M. Monday through Friday and 8:00 A.M. to 12:00 P.M. on Saturday
(excluding National and State holidays), the following services; janitorial
services (five (5) days a week after normal working hours), water (if
available from city mains) for drinking, lavatory and toilet purposes,
operatorless elevator service and heating and air conditioning for the
reasonably comfortable use and occupancy of the Premises, provided heating
and cooling conforming to any governmental regulation prescribing
limitations thereon

                                       2


shall be deemed to comply with this service. Landlord shall furnish the
Premises with electricity for the maintenance of building standard
fluorescent lighting composed of 2' X 4' fixtures. Incandescent fixtures,
table lamps, all lighting other than the aforesaid building standard
fluorescent light, dimmers and all lighting controls other than controls for
the aforesaid building standard fluorescent lighting shall be serviced,
replaced and maintained at Tenant's expense. Landlord shall also furnish the
Premises with electricity for lighting for the aforesaid building standard
fluorescent lighting and for the operation of general office machines, such
as electric typewriters, desk top computers, word processing equipment,
dictating equipment, adding machines and calculators, and general service
non-production type office copy machines. Landlord shall have the right to
enter and inspect the Premises and all electrical devices therein from time
to time, provided that Landlord shall have no obligation to provide more than
five (5) watts per usable square foot of electricity serving the Premises.
Landlord must give Tenant reasonable notice before making such inspection,
and Landlord shall conduct such inspection in a manner and at a time which
shall not create a disruption to Tenant's business. Landlord reserves the
right to separately meter the Premises should Tenants use of electricity be
deemed excessive. After hours heating and air conditioning is available at a
charge of $30.00 per hour, per zone, with a minimum of one (1) hour per
occurrence. All additional costs resulting from Tenant's extraordinary usage
of heating, air conditioning or electricity shall be paid by Tenant upon
demand as Additional Rent for each month or portion thereof, and Tenant shall
not install equipment with unusual demands for any of the foregoing without
Landlord's prior written consent, which Landlord may withhold if it
determines that in its opinion such equipment may not be safely used in the
Premises or that electrical service is not adequate therefor. If heat
generating machines or equipment or other intensive activities shall be used
or carried on in the Premises by Tenant which affect the temperature
otherwise maintained by the heating and air conditioning system, Landlord
shall have the right to install supplemental air conditioning units in the
Premises and the cost thereof, including the cost of engineering and
installation, and the cost of operation and maintenance thereof, shall be
paid by Tenant upon demand by Landlord. Landlord shall further provide a
reasonable pro rata amount of unreserved free parking, in common with the
other tenants, for Tenant's employees and visitors. There shall be no
abatement or reduction of Rent by reason of any of the foregoing services not
being continuously provided to Tenant.

    Tenant shall report to Landlord immediately any defective condition in or
about the Premises reasonably known to Tenant and if such defect is not so
reported and such failure to promptly report results in other damage, Tenant
shall be liable for same. Landlord shall not be liable to Tenant for any
damage caused to Tenant and its property due to the Building or any part or
appurtenance thereof being improperly constructed or being or becoming out of
repair, or arising from the leaking of gas, water, sewer or steam pipes, or
from problems with electrical service unless such damage arises from the
willful acts, omissions, or gross negligence of Landlord or its contractors.

    6. TENANT'S ACCEPTANCE AND MAINTENANCE OF PREMISES; LANDLORD'S DUTIES AND
RIGHTS. Subject to the terms of the attached Workletter, if any, Tenant's
occupancy of the Premises is Tenant's representation to Landlord that Tenant
has examined and inspected the same, finds the Premises to be as represented
by Landlord and satisfactory for Tenant's intended use, and constitutes
Tenant's acceptance "as is" with the exception of latent defects which may
not be reasonably known to Tenant at the time. Landlord makes no
representation or warranty as to the condition of said Premises. During
Tenant's move-in, a representative of Tenant must be on-site with Tenant's
moving company to insure proper treatment of the Building and the Premises.
Elevators in multi-story office buildings must remain in use for the general
public during business hours as defined herein in SECTION 5. Any specialized
use of elevators must be coordinated with Landlord's property manager. Tenant
must properly dispose of all packing material and refuse in accordance with
the Rules and Regulations. Any damage or destruction to the Building or the
Premises due to moving will be the sole responsibility of Tenant. Tenant
shall deliver at the end of this Lease each and every part of the Premises in
good repair and condition, ordinary wear and tear and damage by insured
casualty excepted. The delivery of a key or other such tender of possession
of the Premises to Landlord or to an employee of Landlord shall not operate
as a termination of this Lease or a surrender of the Premises except upon
written notice by Landlord. Tenant shall: (i) keep the Premises and fixtures
in good order; (ii) make repairs and replacements to the Premises or Building
needed because of Tenant's misuse or primary negligence; (iii) repair and
replace special equipment or decorative treatments installed by or at
Tenant's request and that serve the Premises only, except if this Lease is
ended because of casualty loss or condemnation; and (iv) not commit waste.
Tenant, however, shall make no structural or interior alterations of the
Premises. If Tenant requires alterations, Tenant shall provide Landlord's

                                      3



managing agent with a complete set of construction drawings, and such agent
shall then determine the actual cost of the work to be done (to include a
construction supervision fee of five percent (5%) to be paid to Landlord's
managing agent). Tenant may then either agree to pay Landlord to have the
work done or withdraw its request for alterations. On termination of this
Lease or vacation of the Premises by Tenant, Tenant shall restore the
Premises, at Tenant's sole expense, to the same condition as existed at the
Commencement Date, ordinary wear and tear and damage by insured casualty only
excepted. Landlord, however, may elect to require Tenant to leave alterations
performed for Tenant unless at the time of such alterations Landlord agreed
in writing such alterations could be removed on the Expiration Date, upon the
termination of this Lease or upon Tenant's vacation of the Premises.

     Tenant shall keep the Premises and the Building free from any liens
arising out of any work performed, materials furnished, or obligations
incurred by or on behalf of Tenant. Should any claim of lien or other lien be
filed against the Premises or the Building by reason of any act or omission
of Tenant or any of Tenant's agents, employees, contractors or
representatives, then Tenant shall cause the same to be canceled and
discharged of record by bond or otherwise within ten (10) days after the
filing thereof. Should Tenant fail to discharge such lien within such ten
(10) day period, then Landlord may discharge the same, in which event Tenant
shall reimburse Landlord, on demand, as Additional Rent, for the amount of
the lien or the amount of the bond, if greater, plus all administrative costs
incurred by Landlord in connection therewith. The remedies provided herein
shall be in addition to all other remedies available to Landlord under this
Lease or otherwise. Tenant shall have no power to do any act or make any
contract that may create or be the foundation of any lien, mortgage or other
encumbrance upon the reversionary or other estate of Landlord, or any
interest of Landlord in the Premises. NO CONSTRUCTION LIENS OR OTHER LIENS
FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED TO THE PREMISES SHALL ATTACH
TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE PREMISES OR THE BUILDING.

     Notwithstanding anything to the contrary set forth above in this SECTION
6, if Tenant does not perform its maintenance obligations in a timely manner
as set forth in this Lease, commencing or diligently attempting to commence
the same within ten (10) days after receipt of notice from Landlord
specifying the work needed and thereafter diligently and continuously pursuing
completion of unfulfilled maintenance obligations, then Landlord shall have
the right, but not the obligation, to perform such maintenance, and any
amounts so expended by Landlord shall be paid by Tenant to Landlord within
thirty (30) days after demand, with interest at the maximum rate allowed by
law (or the rate of fifteen percent (15%) per annum, whichever is less)
accruing from the date of expenditure through the date paid.

     Except for repairs and replacements that Tenant must make under this
SECTION 6, Landlord shall pay for and make all other repairs and replacements
to the Premises, common areas and Building (including Building fixtures and
equipment). This maintenance shall include the roof, foundation, exterior
walls, interior structural walls, all structural components, and all
exterior (outside of walls) systems, such as mechanical, electrical, HVAC,
and plumbing. Repairs or replacements required under SECTION 6 shall be made
within a reasonable time (depending on the nature of the repair or
replacement needed) after receiving notice from Tenant or Landlord having
actual knowledge of the need for a repair or replacement.

     7.  DAMAGES TO PREMISES. If the Premises shall be partially damaged by
fire or other casualty insured under Landlord's insurance policies, and if
Landlord's lender(s) shall permit insurance proceeds paid as a result thereof
to be so used, then upon receipt of the insurance proceeds, Landlord shall,
except as otherwise provided herein, promptly repair and restore the Premises
(exclusive of improvements made by Tenant, Tenant's trade fixtures,
decorations, signs, and contents) substantially to the condition thereof
immediately prior to such damage or destruction; limited, however, to the
extent of the insurance proceeds received by Landlord. If by reason of such
occurrence: (i) the Premises is rendered wholly untenantable; (ii) the
Premises is damaged in whole or in part as a result of a risk which is not
covered by Landlord's insurance policies; (iii) Landlord's lender does not
permit a sufficient amount of the insurance proceeds to be used for
restoration purposes; (iv) the Premises is damaged in whole or in part during
the last two years of the Term; or (v) the Building containing the Premises
is damaged (whether or not the Premises is damaged) to an extent of fifty
percent (50%) or more of the fair market value thereof, then Landlord may
elect either to repair the damage as aforesaid, or to cancel this Lease by
written notice of cancellation given to Tenant within sixty (60) days after
the date of such occurrence, and thereupon this Lease shall terminate. Tenant
shall vacate and surrender the Premises within thirty (30) days after receipt
of such notice of termination. In addition, Tenant may also terminate this
Lease by written notice given

                                       4



to Landlord at any time between the one hundred twenty-first (121st) and one
hundred thirty-sixth (136th) days after the occurrence of any such casualty,
if Landlord has failed to restore the damaged portions of the Building
(including the Premises) within one hundred twenty (120) days of such
casualty. However, if Landlord is prevented by Delays as defined in SECTION
2, from completing the restoration within said one hundred twenty (120) day
period, and if Landlord provides Tenant with written notice of the cause for
the Delays within fifteen (15) days after the occurrence thereof, such notice
to contain the reason for the Delays and a good faith estimate of the period
of the Delays caused thereby, then Landlord shall have an additional period
beyond said one hundred twenty (120) days, equal to the Delays in which to
restore the damaged areas of the Building; and Tenant may not elect to
terminate this Lease until said additional period required for completion has
expired with the Building not having been substantially restored. In such
case, Tenant's fifteen (15) day notice of termination period shall begin to
run upon the expiration of Landlord's additional period for restoration set
forth in the preceding sentence. Upon the termination of this Lease as
aforesaid, Tenant's liability for the Rent and other charges reserved
hereunder shall cease as of the effective date of the termination of this
Lease, subject, however, to the provisions (or abatement of Rent hereinafter
set forth.

     Notwithstanding the foregoing, Landlord shall use commercially
reasonable efforts to provide Tenant temporary space which is reasonably
acceptable to Tenant during the time period in which the damage to the
Building (including the Premises) is being repaired.

     Unless this Lease is terminated as aforesaid, this Lease shall remain in
full force and effect, and Tenant shall promptly repair, restore, or replace
Tenant's improvements, trade fixtures, decorations, signs, and contents in
the Premises in a manner and to at least a condition equal to that existing
prior to their damage or destruction, and the proceeds of all insurance
carried by Tenant on said property shall be held in trust by Tenant for the
purposes of such repair, restoration, or replacement.

     If, by reason of such fire or other casualty, the Premises is rendered
wholly untenantable, then the Rent payable by Tenant shall be fully abated,
or if only partially damaged, such Rent and other charges shall be abated
proportionately as to that portion of the Premises rendered untenantable, in
either event (unless the Lease is terminated, as aforesaid) from the date of
such casualty until the Premises have been substantially repaired and
restored, or until Tenant's business operations are restored in the entire
Premises, whichever shall first occur. Tenant shall continue the operation of
Tenant's business in the Premises or any part thereof not so damaged during
any such period to the extent reasonably practicable from the standpoint of
prudent business management. However, if such damages or other casualty shall
be caused by the negligence or other wrongful conduct of Tenant or of
Tenant's subtenants, licensees, contractors, or invitees, or their respective
agents or employees, there shall be no abatement of Rent. Except for the
abatement of the Rent hereinabove set forth, Tenant shall not be entitled to,
and hereby waives, all claims against Landlord for any compensation or damage
for loss of use of the whole or any part of the Premises and/or for any
inconvenience or annoyance occasioned by any such damage, destruction,
repair, or restoration.

     8.  ASSIGNMENT SUBLEASE. Tenant may not assign or encumber this Lease or
its interest in the Premises arising under this Lease, and may not sublet any
part or all of the Premises without first obtaining the written consent of
Landlord first had had and obtained, which consent may be withheld in
Landlord's sole discretion. Any assignment or sublease to which Landlord may
consent (one consent not being any basis that Landlord should grant any
further consent) shall not relieve Tenant of any or all of its obligations
hereunder. For the purpose of this SECTION 8, the word "assignment" shall be
defined and deemed to include the following: (i) if Tenant consists of more
than one person, an assignment, whether voluntary, involuntary, or by
operation of law, by one person to one of the other persons that is a Tenant;
(ii) if Tenant is a corporation, any dissolution or reorganization of Tenant,
or the sale or other transfer of a controlling percentage (hereafter defined)
of capital stock of Tenant other than to an affiliate or subsidiary or the
sale of fifty-one percent (51%) in value of the assets of Tenant; (iii) if
Tenant is a limited liability company, the change of members whose interest
in the company is fifty percent (50%) or more. The phrase "controlling
percentage" means the ownership of, and the right to vote, stock possessing
at least fifty-one percent (51%) of the total combined voting power of all
classes of Tenant's capital stock issued, outstanding and entitled to vote
for the election of directors, or such lesser percentage as is required to
provide actual control over the affairs of the corporation. Acceptance of
Rent by Landlord after any non-permitted assignment shall not constitute
approval thereof by Landlord. Notwithstanding the foregoing provisions of

                                       5



this SECTION 8, Tenant may assign or sublease part or all of the Premises
without Landlord's consent to: (i) any corporation or partnership that
controls, is controlled by, or is under common control with, Tenant; or (ii)
any corporation resulting from the merger or consolidation with Tenant or to
any entity that acquires all of Tenant's assets as a going concern of the
business that is being conducted on the Premises, as long as the assignee or
sublessee is a bona fide entity and assumes the obligations of Tenant, and
continues the same Permitted Use as provided under SECTION 3. However,
Landlord must be given prior written notice of any such assignment or
subletting, and failure to do so shall be a default hereunder. Landlord will
never consent to an assignment or sublease that might result in a use that
conflicts with the rights of an existing tenant under its lease.

    In no event shall this Lease be assignable by operation of any law, and
Tenant's rights hereunder may not become, and shall not be listed by Tenant
as an asset under any bankruptcy, insolvency or reorganization proceedings.
Tenant is not, may not become, and shall never represent itself to be an
agent of Landlord, and Tenant acknowledges that Landlord's title is
paramount, and that it can do nothing to affect or impair Landlord's title.

    If Landlord consents to any assignment or subletting, Tenant shall pay
all reasonable out-of-pocket costs and expenses incurred by Landlord in
connection with the assignment or sublease transaction, including Landlord's
reasonable attorneys' fees.

    If this Lease shall be assigned or the Premises or any portion thereof
sublet by Tenant at a rental that exceeds the rentals to be paid to Landlord
hereunder, attributable to the Premises or portion thereof so assigned or
sublet, then fifty percent (50%) of any such excess shall be paid over to
Landlord by Tenant. If Landlord assists Tenant in finding a permissible
subtenant, Landlord shall be paid a fee for such assistance in addition to a
fee in an amount necessary to cover the subtenant's improvements to the
Premises or any portion thereof so assigned or sublet.

    9. TENANT'S COMPLIANCE; INSURANCE REQUIREMENTS. Tenant shall comply with
all applicable laws, ordinances and regulations affecting the Premises, now
existing or hereafter adopted, including the Rules and Regulations.

    Throughout the Term, Tenant, at its sole cost and expense, shall keep or
cause to be kept for the mutual benefit of Landlord, Landlord's managing
agent, (presently Highwoods/Forsyth Limited Partnership and its affiliates)
and Tenant, Commercial General Liability Insurance (1986 ISO Form or its
equivalent) with a combined single limit, each Occurrence and General
Aggregate-per location of at least TWO MILLION DOLLARS ($2,000,000), which
policy shall insure against liability of Tenant, arising out of and in
connection with Tenant's use of the Premises, and which shall insure the
indemnity provisions contained herein. Not more frequently than once every
three (3) years, Landlord may require the limits to be increased if in its
reasonable judgment (or that of its mortgagee) the coverage is insufficient.
Tenant shall also carry the equivalent of ISO Special Form Property Insurance
on its personal property and fixtures located in the Premises and any
improvements made by Tenant for their full replacement value and with
coinsurance waived, and Tenant shall neither have, nor make, any claim
against Landlord for any loss or damage to the same, regardless of the cause
thereof.

    Prior to taking possession of the Premises, and annually thereafter,
Tenant shall deliver to Landlord certificates or other evidence of insurance
satisfactory to Landlord. All such policies shall be non-assessable and shall
contain language to the extent obtainable that: (i) any loss shall be payable
notwithstanding any act or negligence of Landlord or Tenant that might
otherwise result in forfeiture of the insurance, (ii) that the policies are
primary and non-contributing with any insurance that Landlord may carry, and
(iii) that the policies cannot be canceled, non-renewed, or coverage reduced
except after thirty (30) days' prior written notice to Landlord. If Tenant
fails to provide Landlord with such certificates or other evidence of
insurance coverage, Landlord may obtain such coverage and Tenant shall
reimburse the cost thereof on demand.

    Anything in this Lease to the contrary notwithstanding, Landlord hereby
releases and waives unto Tenant (including all partners, stockholders,
officers, directors, employees and agents thereof), its successors and
assigns, and Tenant hereby releases and waives unto Landlord (including all
partners, stockholders, officers, directors, employees and agents thereof),
its successors and assigns, all rights to claim damages for any injury, loss,
cost or damage to persons or to the Premises or any other casualty, as long
as the amount of which

                                       6



injury, loss, cost or damage has been paid either to Landlord, Tenant, or any
other person, firm or corporation, under the terms of any Property, General
Liability, or other policy of insurance, to the extent such releases or
waivers are permitted under applicable law. As respects all policies of
insurance carried or maintained pursuant to this Lease and to the extent
permitted under such policies, Tenant and Landlord each waive the insurance
carriers' rights of subrogation. Subject to the foregoing, Tenant shall
indemnify and hold Landlord harmless from and against any and all claims
arising out of (i) Tenant's use of the Premises or any part thereof, (ii) any
activity, work, or other thing done, permitted or suffered by Tenant in or
about the Premises or the Building, or any part thereof, (iii) any breach or
default by Tenant in the performance of any of its obligations under this
Lease, or (iv) any act or negligence of Tenant, or any officer, agent,
employee, contractor, servant, invitee or guest of Tenant; and in each case
from and against any and all damages, losses, liabilities, lawsuits, costs
and expenses (including attorneys' fees at all tribunal levels) arising in
connection with any such claim or claims as described in (i) through (iv)
above, or any action brought thereon.

    If such action is brought against Landlord, Tenant upon notice from
Landlord shall defend the same through counsel selected by Tenant's insurer,
or other counsel acceptable to Landlord. Tenant assumes all risk of damage or
loss to its property or injury or death to persons in, on, or about the
Premises, from all causes except those resulting from any act of gross
negligence by Landlord, or for which the law imposes liability on Landlord
regardless of any attempted waiver thereof, and Tenant hereby waives such
claims in respect thereof against Landlord. The provisions of this paragraph
shall survive the termination of this Lease.

    Landlord shall keep the Building, including the improvements, insured
against damage and destruction by perils insured by the equivalent of ISO
Special Form Property Insurance in the amount of the full replacement value
of the Building.

    Each party shall keep its personal property and trade fixtures in the
Premises and Building insured with the equivalent of ISO Special Form
Property Insurance in the amount of the full replacement cost of the property
and fixtures. Tenant shall also keep any non-standard improvements made to
the Premises at Tenant's request insured to the same degree as Tenant's
personal property.

    Tenant's insurance policies required by this Lease shall: (i) be issued
by insurance companies licensed to do business in the state in which the
Premises are located with a general policyholder's ratings of at least A- and
a financial rating of at least VI in the most current Best's Insurance
Reports available on the Commencement Date, or if the Best's ratings are
changed or discontinued, the parties shall agree to a comparable method of
rating insurance companies; (ii) name the non-procuring party as an
additional insured as its interest may appear [other landlords or tenants may
be added as additional insureds in a blanket policy]; (iii) provide that the
insurance not be canceled, non-renewed or coverage materially reduced unless
thirty (30) days advance notice is given to the non-procuring party; (iv) be
primary policies; (v) provide that any loss shall be payable notwithstanding
any gross negligence of Landlord or Tenant which might result in a forfeiture
thereunder of such insurance or the amount of proceeds payable; (vi) have no
deductible exceeding TEN THOUSAND DOLLARS ($10,000), unless accepted in
writing by Landlord; and (vii) be maintained during the entire Term and any
extension terms.

    10. SUBORDINATION-ATTORNMENT-LANDLORD FINANCING. Tenant agrees that this
Lease will be either subordinate or superior to any mortgage heretofore or
hereafter executed by Landlord covering the Premises, depending on the
requirements of such mortgagee. Tenant, within ten (10) days after request
to do so from Landlord or its mortgagee, will execute such agreement making
this Lease superior or subordinate and containing such other agreements and
covenants on Tenant's part as Landlord's mortgagee may request, and will
agree to attorn to said mortgagee provided the mortgagee agrees not to
disturb Tenant's possession hereunder so long as Tenant is in compliance with
this Lease. Further, Tenant and Landlord, respectively, agree to execute
within five (5) days after request therefor, and as often as requested,
estoppel certificates confirming any factual matter requested therein which
is true and is within Tenant's or Landlord's knowledge regarding this Lease,
the Premises, or Tenant's use thereof, including, but not limited to date of
occupancy, Expiration Date, the amount of Rent due and date to which Rent is
paid, whether or not Tenant has any defense or offsets to the enforcement of
this Lease or the Rent payable hereunder or knowledge of any default or
breach by Landlord, and that this Lease together with any modifications or
amendments is in full force and effect. Tenant and Landlord shall attach to
such estoppel certificate copies of all modifications or amendments.

                                       7



     Tenant agrees to give any mortgagee of Landlord which has provided a
non-disturbance agreement to Tenant, notice of, and a reasonable opportunity
(which shall in no event be less than thirty (30) days after written notice
thereof is delivered to mortgagee as herein provided) to cure, any Landlord
default hereunder; and Tenant agrees to accept such cure if effected by such
mortgagee. No termination of this Lease by Tenant shall be effective until
such notice has been given and the cure period has expired without the
default having been cured. Further, Tenant agrees to permit such mortgagee
(or other purchaser at any foreclosure sale), and its successors and assigns,
on acquiring Landlord's interest in the Premises and the Lease, to become
substitute Landlord hereunder, with liability only for such Landlord
obligations as accrue after Landlord's interest is so acquired. Tenant agrees
to attorn to any successor Landlord.

     11.  SIGNS.  Tenant may not erect, install or display any sign or
advertising material upon the Building exterior, the exterior of the Premises
(including any exterior doors), or the exterior walls thereof, or in any
window therein, without the prior written consent of Landlord which shall not
be unreasonably withheld. Tenant shall have the right to such building
standard signage which cost shall be deducted from Tenant's Allowance (as
hereinafter defined in Exhibit A-1).

     12.  ACCESS TO PREMISES.  Landlord shall have the right, at all reasonable
times and with prior notice to Tenant (except in the case of an emergency),
either itself or through its authorized agents, to enter the Premises,
(i) to make repairs, alterations or changes as Landlord deems necessary, (ii)
to inspect the Premises, and (iii) to show the Premises to prospective
mortgagees and purchasers. Landlord shall have the right, either itself or
through its authorized agents, to enter the Premises at all reasonable times
for inspection to show prospective tenants if within one hundred eighty (180)
days prior to the Expiration Date as extended by any exercised option.
Tenants, its agents, employees, invitees and guests, shall have the right
of ingress and egress to common and public areas of the Building, provided
Landlord by reasonable regulation may control such access for the comfort,
convenience, safety and protection of all tenants in the Building, or as
needed for making repairs and alterations. Tenant shall be responsible for
providing access to the Premises to its agents, employees, invitees and guests
after hours, but in no event shall Tenant's use of and access to the Premises
after hours compromise the security of the Building. Landlord shall have the
right to enter the Premises at any time, with or without notice to Tenant, in
the event of an emergency. Upon any event of entry to the Premises, Landlord
shall use all reasonable efforts not to disrupt or interfere with Tenant's
ability to conduct its normal business operations.

     13.  DEFAULT.  If Tenant: (i) fails to pay when due any Rent, or any
other sum of money which Tenant is obligated to pay, as provided in this
Lease; or (ii) breaches any other agreement, covenant or obligation herein
set forth and such breach shall continue and not be remedied within fifteen
(15) days after Landlord shall have given Tenant written notice specifying
the breach, or if such breach cannot, with due diligence, be cured within
said period of fifteen (15) days and Tenant does not within said fifteen (15)
day period commence and thereafter with reasonable diligence completely cure
the breach within thirty (30) days after notice; or (iii) files (or has filed
against it and not stayed or vacated within sixty (60) days after filing) any
petition or action for relief under any creditor's law (including bankruptcy,
reorganization, or similar action), either in state or federal court; or (iv)
makes any transfer in fraud of creditors as defined in Section 548 of the
United States Bankruptcy Code (11 U.S.C. 548, as amended or replaced), has a
receiver appointed for its assets (and appointment shall not have been stayed
or vacated within thirty (30) days), or makes an assignment for benefit of
creditors; then Tenant shall be in default hereunder, and, in addition to any
other lawful right or remedy which it may have, Landlord at its option may do
the following: (i) terminate this lease; (ii) repossess the Premises, and
with or without terminating, relet the same at such amount as Landlord deems
reasonable; and if the amount for which the Premises is relet is less than
Tenant's Rent and all other obligations of Tenant to Landlord hereunder, then
Tenant shall immediately pay the difference on demand to Landlord, but if in
excess of Tenant's Rent, and all other obligations of Tenant hereunder, the
entire amount obtained from such reletting shall belong to Landlord, free of
any claim of Tenant thereto; (iii) seize and hold any personal property of
Tenant located in the Premises and assert against the same a lien for monies
due Landlord; or (iv) without obtaining any court authorization, lock the
Premises and deny Tenant access thereto. All reasonable expenses of Landlord
in repairing, restoring, or altering the Premises for reletting as general
office space, together with leasing fees and all other expenses in seeking
and obtaining a new Tenant, shall be charged to and be a liability of Tenant.
Landlord's reasonable attorneys' fees in pursuing any of the forgoing
remedies, or in collecting [ILLEGIBLE] by Tenant hereunder shall be paid by
Tenant

                                       8





States Bankruptcy Code, as amended, (the "Code") may have certain rights to
assume or assign this Lease. Landlord and Tenant further understand that, in
any event, pursuant to the Code, Landlord is entitled to adequate assurances
of future performance of the provisions of this Lease. The parties agree
that, with respect to any such assumption or assignment, the term "adequate
assurance" shall include at least the following:

          (a)  In order to assure Landlord that the proposed assignee will
have the resources with which to pay all Rent payable pursuant to the
provisions of this Lease, any proposed assignee must have, as demonstrated to
Landlord's satisfaction, a net worth (as defined in accordance with
generally accepted accounting principles consistently applied) of not less
than the net worth of Tenant on the Effective Date (as hereinafter defined),
increased by seven percent (7%), compounded annually, for each year from the
Effective Date through the date of the proposed assignment. It is understood
and agreed that the financial condition and resources of Tenant were a
material inducement to Landlord in entering into this Lease.

          (b)  Any proposed assignee must have been engaged in the conduct of
business for the five (5) years prior to any such proposed assignment, which
business does not violate the Permitted Use allowed under Section 3 above and
such proposed assignee shall continue to engage in the Permitted Use. It is
understood that Landlord's asset will be substantially impaired if the
trustee in bankruptcy or any assignee of this Lease makes any use of the
Premises other than the Permitted Use.

          (c)  Any proposed assignee of this Lease must assume and agree to
be personally bound by the provisions of this Lease.

     17.  EMINENT DOMAIN. If all of the Premises, or such part thereof as
will make the same unusable for the purposes contemplated by this Lease, be
taken under the power of eminent domain (or a conveyance in lieu thereof), then
this Lease shall terminate as of the date possession is taken by the
condemnor, and Rent shall be adjusted between Landlord and Tenant as of such
date. If only a portion of the Premises is taken and Tenant can continue use
of the remainder, then this Lease will not terminate, but Rent shall abate in
a just and proportionate amount to the loss of use occasioned by the taking.
Landlord shall be entitled to receive and retain the entire award for the
affected portion of the Building. Tenant shall have no right or claim to
advance any claim against Landlord for any part of any award made to or
received by Landlord for any taking and no right or claim for any alleged
value of the unexpired portion of this Lease, or its leasehold estate, or for
costs of removal, relocation, business interruption expense or any other
damages arising out of such taking. Tenant, however, shall not be prevented
from making a claim against the condemning party (but not against Landlord)
for any moving expenses, loss of profits, or taking of Tenants's personal
property (other than its leasehold estate) to which Tenant may be entitled.
Any such award shall not reduce the amount of the award otherwise payable to
Landlord, if any.

     18.  ADA GENERAL COMPLIANCE.  Upon the Commencement Date, Landlord shall
deliver the Premises to Tenant in full compliance with the requirements of
ADA. Thereafter, Tenant, at Tenant's sole expense, shall comply with all
laws, rules, orders, ordinances, directions, regulations and requirements of
federal, state, county and municipal authorities now in force, which shall
impose any duty upon Landlord or Tenant with respect to the use, occupation
or alteration of the Premises, and Tenant shall use all reasonable efforts to
fully comply with The Americans With Disabilities Act of 1990 (the "ADA").
Landlord's responsibility for compliance with ADA shall include the common
areas and restrooms of the Building, but not the Premises (after the
commencement Date).

     If Tenant receives any notices alleging violation of ADA relating to any
portion of the Building or of the Premises; any written claims or threats
regarding non-compliance with ADA and relating to any portion of the Building
or of the Premises, or any governmental or regulatory actions or
investigations instituted or threatened regarding non-compliance with ADA and
relating to any portion of the Building or of the Premises, then Tenant shall,
within ten (10) days after receipt of such, advise Landlord in writing, and
provide Landlord with copies of any such claim, threat, action or
investigation (as applicable).

     19.  QUIET ENJOYMENT. If Tenant promptly and punctually complies with
each of its obligations hereunder, Tenant shall have and enjoy peacefully the
possession of the Premises during the Term hereof, provided that no action of
Landlord or other tenants working in other space in the Building, or in
repairing or restoring the Premises, shall be deemed a breach of this covenant
or give to Tenant any right to modify this Lease either as to term, rent
payables or


                                       10



other obligations to be performed.

     20.   SECURITY DEPOSIT. Tenant shall deposit with Landlord the sum of
$31,376.00, which sum Landlord shall retain as security for the performance
by Tenant of each of its obligations hereunder (the "Security Deposit"). The
Security Deposit shall not bear interest. If, at any time, Tenant fails to
perform its obligations, then Landlord may, at its option, apply the Security
Deposit, or any portion thereof required to cure Tenant's default; provided,
however, if prior to the Expiration Date or any termination of this Lease,
Landlord depletes the Security Deposit, in whole or in part, then immediately
following such depletion, Tenant shall restore the amount so used by
Landlord. Unless Landlord uses the Security Deposit to cure a default of
Tenant, or to restore the Premises to the condition to which Tenant is
required to leave the Premises upon the Expiration Date or any termination of
the Lease, then Landlord shall, within  thirty (30) days after the Expiration
Date or any termination of this Lease, refund to Tenant any funds remaining
in the Security Deposit. Tenant may not credit against or deduct the Security
Deposit from any month's Rent.

     21.   NOTICES. All notices, demands and requests which may be given or
which are required to be given by either party to the other must be in
writing. All notices, demands and requests by Landlord or Tenant shall be
addressed as follows (or to such other address as a party may specify by duly
given notice):

     RENT PAYMENT
     ADDRESS:           HIGHWOODS/TENNESSEE HOLDINGS, L.P.
                        P.O. Box 307310
                        Nashville, TN 37230
                        Tax ID# 56-1993393

     LEGAL NOTICE
     ADDRESS FOR
     LANDLORD:          HIGHWOODS/TENNESSEE HOLDINGS, L.P.
                        c/o Highwoods Properties, Inc.
                        Suite 600, 3100 Smoketree Court
                        Raleigh, North Carolina 27604
                        Attn: Manager, Lease Administration
                        Facsimile: 919-790-8749

     WITH A
     COPY TO:           Highwoods Properties, Inc.
                        2100 West End Avenue
                        Suite 950
                        Nashville, TN 37203
                        Facsimile: 615-320-5607

     TENANT:            Network Health Services, Inc. d/b/a Total eMed.com, Inc.
                        720 CoolSprings Blvd. Ste. 200
                        Franklin, TN 37067
                        Contact: Ted MacDonald
                        Phone:
                        Facsimile #

     Notices, demands or requests which Landlord or Tenant are required or
desire to give the other hereunder shall be deemed to have been properly
given for all purposes if (i) delivered against a written receipt of
delivery, (ii) mailed by express, registered or certified mail of the United
States Postal Service, return receipt requested, postage prepaid, or (iii)
delivered to a nationally recognized overnight courier service for next
business day delivery, to its addressee at such party's address as set forth
above or (iv) delivered via telecopier or facsimile transmission to the
facsimile number listed above, provided, however, that if such communication
is given via telecopier or facsimile transmission, an original counterpart of
such communication shall be sent concurrently in either the manner specified
in section (ii) or (iii) above and written confirmation of receipt of
transmission shall be provided. Each such notice, demand or request shall be
deemed to have been received upon the earlier of the actual receipt or
refusal by the addressee or three (3) business days after deposit thereof at
any main or branch United States post office if sent in accordance with
section (ii) above, and the next business day after deposit thereof with
the courier if sent pursuant to section (iii) above. The parties shall notify
the other of any change in address, which notification must be at least
fifteen


                                       11


(15) days in advance of it being effective.

     Notices may be given on behalf of any party by such party's legal
counsel.

     22.   HOLDING OVER. If Tenant shall hold over after the Expiration Date
or other termination of this Lease, such holding over shall not be
deemed to be a renewal of this Lease but shall be deemed to create a
tenancy-at-sufferance and by such holding over Tenant shall continue to be
bound by all of the terms and conditions of this Lease, except that during
such tenancy-at-sufferance Tenant shall pay to Landlord (i) Rent at the rate
equal to one hundred-twenty-five percent (125%) of that provided for in the
foregoing Section 4.1, as such rental amount may have been increased in
accordance with the terms of such Section 4.1 hereof, and (ii) any and all
Operating Expenses and other forms of Additional Rent payable under this
Lease. The increased Rent during such holding over is intended to compensate
Landlord partially for losses, damages and expenses, including frustrating
and delaying Landlord's ability to secure a replacement tenant. If Landlord
loses a prospective tenant because Tenant fails to vacate the Premises on the
Expiration Date or any termination of the Lease after notice to do so, then
Tenant will be liable for such damages as Landlord can prove because of
Tenant's wrongful failure to vacate.

     23.   RIGHT TO RELOCATE. INTENTIONALLY DELETED

     24.   BROKER'S COMMISSIONS. Tenant represents and warrants that it has
not dealt with any real estate broker, finder or other person, with respect
to this Lease in any manner, except The John A. Brewer Company whose address
is 2103 Crestmoor Road, Nashville, Tennessee 37215. Landlord shall pay only
any commissions or fees that are payable to the above-named broker or finder
with respect to this Lease pursuant to Landlord's separate agreement with
such broker or finder. Tenant shall indemnify and hold Landlord harmless from
any and all damages resulting from claims that may be asserted against
Landlord by any other broker, finder or other person (including, without
limitation, any substitute or replacement broker claiming to have been
engaged by Tenant in the future), claiming to have dealt with Tenant in
connection with this Lease or any amendment or extension hereto, or which may
result in Tenant leasing other or enlarged space from Landlord. The
provisions of this paragraph shall survive the termination of this Lease.

     25.   ENVIRONMENTAL COMPLIANCE.

     (a)   TENANT'S RESPONSIBILITY. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any
biologically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner
not sanctioned by law or in compliance with the highest standards prevailing
in the industry for the storage and use of such substances or materials, nor
allow to be brought into the Building any such materials or substances except
to use in the ordinary course of Tenant's business, and then only after
written notice is given to Landlord of the identity of such substances or
materials. Tenant covenants and agrees that the Premises will at all times
during its use or occupancy thereof be kept and maintained so as to comply
with all now existing or hereafter enacted or issued statutes, laws, rules,
ordinances, orders, permits and regulations of all state, federal, local and
other governmental and regulatory authorities, agencies and bodies applicable
to the Premises, pertaining to environmental matters or regulating,
prohibiting or otherwise having to do with asbestos and all other toxic,
radioactive, or hazardous wastes or material including, but not limited to,
the Federal Clean Air Act, the Federal Water Pollution Control Act, and the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as from time to time amended (all hereafter collectively called "Laws"). Tenant
shall execute affidavits, representations and the like, from time to time, at
Landlord's request, concerning Tenant's best knowledge and belief regarding
the presence of hazardous substances or materials on the Premises.

     (b)   TENANT'S LIABILITY. Tenant shall hold Landlord free, harmless, and
indemnified from any penalty, fine, claim, demand, liability, cost or charge
whatsoever which Landlord shall incur, or which Landlord would otherwise
incur, by reason of Tenant's failure to comply with this SECTION 25
including, but not limited to: (i) the cost of bringing the Premises into
compliance with all Laws and in a non-contaminated state, the same condition
as prior to occupancy; (ii) the reasonable cost of all appropriate tests and
examinations of the Premises to confirm that the Premises have been brought
into compliance with all Laws; and (iii) the reasonable fees and expenses of
Landlord's attorneys, engineers, and consultants incurred by Landlord in
enforcing and confirming compliance with this SECTION 25.

                                       12



     (c) PROPERTY. For the purposes of this SECTION 25, the Premises shall
include the real estate covered by this Lease; all improvements thereon; all
personal property used in connection with the Premises (including that owned
by Tenant); and the soil, ground water, and surface water of the Premises, if
the Premises includes any ground area.

     (d) INSPECTIONS BY LANDLORD. With prior reasonable notice given to
Tenant, Landlord and its engineers, technicians, and consultants
(collectively the "Auditors") may, from time to time as Landlord deems
appropriate, conduct periodic tests and examinations ("Audits") of the
Premises to confirm and monitor Tenant's compliance with this SECTION 25.
Such Audits shall be conducted in such a manner as to minimize the
interference with Tenant's Permitted Use; however in all cases, the Audits
shall be of such nature and scope as shall be reasonably required by then
existing technology to confirm Tenant's compliance with this SECTION 25.
Tenant shall fully cooperate with Landlord and its Auditors in the conduct of
such Audits. The cost of such Audits shall be paid by Landlord unless an
Audit shall disclose a material failure of Tenant to comply with this
SECTION 25, in which case, the cost of such Audit, and the cost of all
subsequent Audits made during the Term and within thirty (30) days thereafter
(not to exceed two (2) such Audits per calendar year), shall be paid for on
demand by Tenant.

     (e) LANDLORD'S LIABILITY. Provided, however, the foregoing covenants
and undertakings of Tenant contained in this SECTION 25 shall not apply to
any condition or matter constituting a violation of any Law; (i) which
existed prior to the commencement of Tenant's use or occupancy of the
Premises; (ii) which was not caused, in whole or in part, by Tenant or
Tenant's agents, employees, officers, partners, contractors or invitees; or
(iii) to the extent such violation is caused by, or results from the acts or
neglects of Landlord or Landlord's agents, employees, officers, partners,
contractors, guests, or invitees.

     (f) TENANT'S LIABILITY AFTER TERMINATION OF LEASE. The covenants
contained in this SECTION 25 shall survive the expiration or termination of
this Lease, and shall continue for so long as Landlord and its successors and
assigns may be subject to any expense, liability, charge, penalty, or
obligation against which Tenant has agreed to indemnify Landlord under this
SECTION 25.

     26. COMMUNICATIONS COMPLIANCE. Tenant acknowledges and agrees that any
and all telephone and telecommunication services desired by Tenant shall be
ordered and utilized at the sole expense of Tenant. Unless Landlord otherwise
requests or consents in writing, all of Tenant's telecommunications equipment
shall be located and remain solely in the Premises and the telephone
closet(s) on the floor(s) on which the Premises is located, in accordance
with rules and regulations adopted by Landlord from time to time. Landlord
shall have no responsibility for the maintenance of Tenant's
telecommunications equipment, including wiring; nor for any wiring or other
infrastructure to which Tenant's telecommunications equipment may be
connected. Tenant agrees that, to the extent any such service is interrupted,
curtailed or discontinued, Landlord shall have no obligation or liability
with respect thereto. Landlord shall have the right, upon reasonable prior
notice to Tenant, to interrupt or turn off telecommunications facilities in
the event of emergency or as necessary in connection with repairs to the
Building or installation of telecommunications equipment for other tenants of
the Building. In the event that Tenant wishes at any time to utilize the
services of a telephone or telecommunications provider whose equipment is not
then servicing the Building, no such provider shall be permitted to install
its lines or other equipment within the Building without first securing the
prior written approval of the Landlord which such approval shall not be
unreasonably withheld. Such approval may be conditioned in such a manner to
as to protect Landlord's financial interests and the interest of the
Building, and the other tenants therein. The refusal of Landlord to grant
its approval to any prospective telecommunications provider shall be
deemed a default or breach by Landlord of its obligation under this Lease.
The provision of this paragraph may be enforced solely by Tenant and
Landlord, are not for the benefit of any other party, and specifically but
without limitation, no telephone or telecommunications provider shall be
deemed a third party beneficiary of this Lease. Tenant shall not utilize any
wireless communications equipment (other than usual and customary cellular
telephones), including antennae and satellite receiver dishes, within the
Premises or the Building, without Landlord's prior written consent which
shall not be unreasonably withheld. Such consent may be conditioned in such a
manner so as to protect Landlord's financial interests and the interests of
the Building, and the other tenants therein. At Landlord's option, Tenant may
be required to remove any and all telecommunications equipment (including
wireless equipment) installed in the Premises or elsewhere in or on the
Building by or on behalf of Tenant, including wiring, or other facilities for
telecommunications transmittal prior to the expiration or termination of the
Lease Term and at Tenant's sole cost.


                                       13


     27. MISCELLANEOUS. Headings of sections are for convenience only and
shall not be considered in construing the meaning of the contents of such
section. The invalidity of any portion of this Lease shall not have any
effect on the balance hereof. Should Landlord institute any legal proceedings
against Tenant for breach of any provision herein contained, and prevail in
such action, Tenant shall be liable for the costs and expenses of Landlord,
including its reasonable attorneys' fees (at all tribunal levels). This Lease
shall be binding upon the respective parties hereto, and upon their heirs,
executors, successors and assigns. This Lease supersedes and cancels all
prior negotiations between the parties, and no changes shall be effective
unless in writing signed by both parties. Tenant acknowledges and agrees that
it has not relied upon any statements, representations, agreements or
warranties except those expressed in this Lease, and that this Lease contains
the entire agreement of the parties hereto with respect to the subject matter
hereof. Landlord may sell the Premises or the Building without affecting the
obligations of Tenant hereunder; upon the sale of the Premises or the
Building, Landlord shall be relieved of all responsibility for the Premises
and shall be released from any liability thereafter accruing under this
Lease. If any Security Deposit or prepaid Rent has been paid by Tenant,
Landlord may transfer the Security Deposit or prepaid Rent to Landlord's
successor and upon such transfer, Landlord shall be released from any
liability for return of the Security Deposit or prepaid Rent. This Lease may
not be recorded without Landlord's prior written consent which shall not be
unreasonably withheld, but Tenant agrees on request of Landlord to execute a
memorandum hereof for recording purposes. The singular shall include the
plural, and the masculine, feminine or neuter includes the other. If
Landlord, or its employees, officers, directors, stockholders or partners are
ordered to pay Tenant a money judgment because of Landlord's default under
this Lease, said money judgment may only be enforced against and satisfied
out of: (i) Landlord's interest in the Building in which the Premises are
located including the rental income and proceeds from sale; and (ii) any
insurance or condemnation proceeds received because of damage or condemnation
to, or of, said Building that are available for use by Landlord. No other
assets of Landlord or said other parties exculpated by the preceding sentence
shall be liable for, or subject to, any such money judgment. This Lease shall
be interpreted and enforced in accordance with the laws of the State of
Tennessee. If requested by Landlord, Tenant shall furnish appropriate legal
documentation evidencing the valid existence in good standing of Tenant, and
the authority of any person signing this Lease to act for the Tenant. If
Tenant signs as a corporation, each of the persons executing this Lease on
behalf of Tenant does hereby covenant and warrant that Tenant is a duly
authorized and existing corporation, that Tenant has and is qualified to do
business in the State of Tennessee, that the corporation has a full right and
authority to enter into this Lease and that each of the persons signing on
behalf of the corporation is authorized to do so. The submission of this
Lease to Tenant for review does not constitute a reservation of or option for
the Premises, and this Lease shall become effective as a contract only upon
the execution and delivery by both Landlord and Tenant. The date of execution
shall be entered on the top of the first page of this Lease by Landlord, and
shall be the date on which the last party signed the Lease, or as otherwise
may be specifically agreed by both parties. Such date, once inserted, shall
be established as the final day of ratification by all parties to this Lease,
and shall be the date for use throughout this Lease as the "Effective Date".

     28.   ADDENDUM. The following special conditions of the attached
Addendum shall apply, and where in conflict with earlier provisions of this
Lease shall control. The attached Addendum is incorporated herein and made a
part of this Lease.


                                       14


IN WITNESS WHEREOF, Landlord and Tenant have executed this lease in two (2)
originals, all as of the day and year first above written.

LANDLORD:

HIGHWOODS/TENNESSEE HOLDINGS, L.P.,
a Tennessee limited partnership

By:  Highwoods/Tennessee Properties, Inc.,
     a Tennessee corporation, its sole General
     Partner


By:  __________________________________________

Title: Vice President

Date:__________________________________________


TENANT:

NETWORK HEALTH SERVICES, INC. d/b/a TOTAL eMED.com, INC.


By: /s/ [ILLEGIBLE]
   --------------------------------------------

Title:   President & CEO
      -----------------------------------------

Date:   11/22/99
      -----------------------------------------


                                       15



                                ADDENDUM

1. ADDITIONAL RENT - OPERATING EXPENSE PASS THROUGHS [BASE YEAR]. For the
calendar year commencing on January 1, 2001 and for each calendar year
thereafter, Tenant shall pay to Landlord as Additional Rent, in a lump sum,
Tenant's Proportionate Share of any increase in Operating Expenses (as
hereinafter defined) incurred by Landlord's operation or maintenance of the
Building during calendar year 2000 (the "Base Year"). For purposes of
calculating Tenant's Proportionate Share of real and personal property taxes,
Landlord shall use the Base Year or the year in which the Building and
improvements are completed and are fully assessed, whichever shall be
later. Tenant's Proportionate Share shall be calculated by dividing the
28,084 rentable square feet of the Premises by the 153,044 net rentable square
feet of the Building, which equals 17.043%. If during any calendar year the
occupancy of the rentable area of the Building is less than full, then
Operating Expenses (as hereinafter defined) will be adjusted for such
calendar year at a rate of 95% occupancy.

    As used herein, the term "Operating Expenses" shall mean direct costs of
operation, repair and maintenance as determined by standard accounting
practices, including, but not limited to ad valorem real and personal
property taxes, hazard and liability insurance premiums, utilities, heat, air
conditioning, janitorial service, labor, materials, supplies, equipment and
tools, permits, licenses, inspection fees, management fees, and common area
expenses; provided, however, the term "Operating Expenses" shall not include
depreciation on the Building or equipment therein, interest, executive
salaries, real estate brokers' commissions, or other expenses that do not
relate to the operation of the Building. The annual statement of Operating
Expenses shall be accounted for and reported in accordance with generally
accepted accounting principles (the "Annual Statement").

    For the calendar year commencing on January 1, 2001 and for each calendar
year thereafter during the Term, Landlord shall estimate the amount the
Operating Expenses shall increase for such calendar year above the Operating
Expenses incurred during the Base Year. Landlord shall send to Tenant a
written statement of the amount of Tenant's Proportionate Share of any
estimated increase in Operating Expenses and Tenant shall pay to Landlord,
monthly, Tenant's Proportionate Share of such increase in Operating Expenses.
Within ninety (90) days after the end of each calendar year, Landlord shall
send a copy of the Annual Statement to Tenant. Pursuant to the Annual
Statement, Tenant shall pay to Landlord Additional Rent as owed or Landlord
shall adjust Tenant's Rent payments if Landlord owes Tenant a credit, such
payment or adjustment to be made within thirty (30) days after the Annual
Statement is received by Tenant. After the Expiration Date, Landlord shall
send Tenant the final Annual Statement for the Term, and Tenant shall pay to
Landlord Additional Rent as owed or if Landlord owes Tenant a credit, then
Landlord shall pay Tenant a refund. If this Lease expires or terminates on a
day other than December 31, then Additional Rent shall be prorated on a
365-day calendar year (or 366 if a leap year).

2. SPECIAL PROVISION TO CONSIDER RELOCATION. Provided Tenant is not in
default hereunder, both Landlord and Tenant may agree to terminate this
Lease, in which event Tenant will be required to relocate to space in another
building owned by Highwoods/Tennessee Holdings, L.P., provided, however, that
such space is available. Tenant's new rentable square footage shall be a
minimum of fifty percent (50%) larger than the existing Leased Premises under
this Lease, and provided further that Landlord and Tenant shall mutually
agree to the terms and conditions of a new lease, including, but not limited
to, Landlord's consideration for remaining lease term relative to the new
lease term, unamortized improvements and commissions, and other market
related conditions.

3. OPTION TO EXTEND LEASE TERM. Tenant shall have the right and option to
extend the Lease (the "Renewal Option") for one (1) additional period of
sixty (60) months (the "Renewal Lease Term"); provided, however, such renewal
Option is contingent upon the following: (i) Tenant is not in default at the
time Tenant gives Landlord written notice of Tenant's intention to exercise
the renewal option; (ii) upon the Expiration Date or the expiration of any
Renewal Lease Term, Tenant has no outstanding default; (iii) no event has
occurred that upon notice or the passage of time would constitute a default;
(iv) Tenant is not disqualified by multiple defaults as provided in the
Lease; and (v) Tenant is occupying the Premises. Tenant shall exercise each
Renewal Option by giving Landlord written notice at least one hundred eighty
(180) days prior to the Expiration Date or the last day of any Renewal Lease
Term. If Tenant fails to give such notice to landlord prior to one hundred
eighty (180) day period, then Tenant shall forfeit the Renewal Option. If
Tenant exercises the Renewal Option, then during any such Renewal Lease Term,
Landlord and Tenant's respective rights, duties and obligations shall be
governed by the terms and conditions of the Lease.

    If Tenant exercises the Renewal Option, then during any such Renewal
Lease Term, all references to the term "Term", as used in this Lease, shall
mean the "Renewal Lease Term".



    The Base Rent for the first year of the Renewal Lease Term shall be at
one hundred three percent (103%) of the then current Rent being paid by
Tenant in the final year of the Term, increasing three percent (3%) per
annum, provided Tenant gives notice of its exercise of the Renewal Option.

4. RIGHT OF FIRST REFUSAL. Provided Tenant is not in default of any
provisions of the Lease and subordinate to the rights and options of other
tenants on the first floor of the building, Tenant shall have a one time
Right of First Refusal on approximately 16,941 rentable square feet on the
first floor of the building (hereafter referred to as the "First Refusal
Space") as outlined on EXHIBIT C attached hereto. If this right is exercised
by Tenant in writing to Landlord within five (5) days of received written
notice from Landlord of its intent to lease the First Refusal Space to a
bonafide third party, then such First Refusal Space shall be leased under the
terms and conditions as mutually agreed upon between Tenant and Landlord. If
Tenant and Landlord cannot mutually agree to terms and conditions within five
(5) days of Landlord's receipt of notice from Tenant, Landlord will be free
to lease the First Refusal Space to a third party and will have no further
notice obligations to Tenant.

5. ADDITIONAL GROWTH. Landlord will use commercially reasonable efforts to
notify Tenant of any existing space in the Building that comes available
during the term, but in no way will Landlord be in default of this Lease
should notice not be given by Landlord or should Landlord choose to lease to
or renew a third party tenant.



                    COOL SPRINGS @ 1 HIGHWOODS OFFICE PARK

                                   EXHIBIT A

SECOND LEVEL FLOOR PLAN



                                 EXHIBIT-A-1

    WORKLETTER. This Exhibit A-1 shall set forth the rights and obligations
of Landlord and Tenant with respect to space planning, engineering, final
workshop drawings, and the construction and installation of any improvements
to the Premises to be completed before the Commencement Date ("Tenant
Improvements"). This Exhibit A-1 comtemplates that the performance of this
work will proceed in four stages in accordance with the following schedule:
(i) preparation of a space plan; (ii) final design and engineering and
preparation of final plans and working drawings; (iii) preparation by the
Contractor (as hereinafter defined) of an estimate of the additional cost of
the initial Tenant Improvements; (iv) submission and approval of plans by
appropriate governmental authorities and construction and installation of the
Tenant Improvements by the Commencement Date.

    In consideration of the mutual covenants hereinafter contained, Landlord
and Tenant do mutually agree to the following:

1. SPACE PLANNING, DESIGN AND WORKING DRAWINGS. On Tenant's behalf, Landlord
shall provide and designate architects and engineers, who, at Tenant's
expense, which expense shall be deducted from the Allowance (as hereinafter
defined), will do the following:

   a.   Attend a reasonable number of meetings with Tenant and Landlord's
      agent to define Tenant's requirements. Landlord shall provide one
      complete space plan prepared by Landlord's architect in order to obtain
      Tenant's approval. Tenant shall approve such space plan, in writing,
      within five (5) days after receipt of the space plan.

   b.   Complete construction drawings for Tenant's partition layout,
      reflected ceiling grid, telephone and electrical outlets, keying, and
      finish schedule (subject to the limitation expressed in Section 2 below).

   c.   Complete building standard mechanical plans where necessary (for
      installation of air conditioning system and duct work, and heating and
      electrical facilities) for the work to be done in the Premises.

   d.   All plans and working drawings for the construction and completion of
      the Premises (the "Plans") shall be subject to Landlord's prior written
      approval. Any changes or modifications Tenant desires to make to the Plans
      shall also be subject to Landlord's prior approval. Landlord agrees that
      it will not unreasonably withhold its approval of the Plans, or of any
      changes or modifications thereof; provided, however, Landlord shall
      have sole and absolute discretion to approve or disapprove any
      improvements that will be visible to the exterior of the Premises,
      or which may affect the structural integrity of the Building. Any
      approval of the Plans by Landlord shall not constitute approval of any
      Delays caused by Tenant and shall not be deemed a waiver of any rights
      or remedies that may arise as a result of such Delays. Landlord may
      condition its approval of the Plans if: (i) the Plans require design
      elements or materials that would cause Landlord to deliver the Premises
      to Tenant after the scheduled Commencement Date, or (ii) the estimated
      cost for any improvements under the Plan is more than the Allowance.

2.  ALLOWANCE. Landlord agrees, at its sole cost and expense to provide an
allowance of up to $21.00 per rentable square foot (for a total to be spent
by Tenant on buildout of $547,784.00), for all space planning and final
workshop drawings, engineer, install, supply and otherwise to construct the
Tenant Improvements in the Premises that will become a part of the Building
(the "Allowance"); otherwise, Tenant is fully responsible for the payment of
all costs in connection with the Tenant Improvements and all design costs.

3.  SIGNAGE AND KEYING. Door and/or directory signage and suite keying in
accordance with building standards shall be provided and installed by
Landlord and deducted from the Allowance.

4.  WORK AND MATERIALS AT TENANT'S EXPENSE

    a. Prior to commencing and providing any such work or materials to the
       Premises, Landlord shall select a licensed general contractor or
       contractors (the "Contractor") to construct and install the Tenant
       Improvements and Landlord shall submit to Tenant a written estimate(s)
       of the cost of such work and materials and Tenant shall approve said
       estimate(s) in writing within five (5) business days after the receipt
       thereof. Landlord shall not be authorized to proceed thereon until such
       estimate(s) is mutually agreed upon and approved in writing and delivered
       to Landlord.



    b. Tenant agrees to pay to Landlord, promptly upon being billed
       periodically or otherwise, all costs and expenses in excess of the
       Allowance incurred in connection with the Tenant Improvement
       engineering, space planning and final workshop drawings. Tenant's
       payment of periodic billings for costs and expenses in excess of the
       Allowance is not subject to the completion of punch list items as
       defined herein. Such costs and expenses shall include all amounts
       charged by the Contractor for performing such work and providing such
       materials (including the Contractor's general conditions, overhead and
       profit). If unpaid within ten (10) days after receipt of invoice from
       Landlord, a late charge in the amount of ten percent (10%) of the
       amount due shall be paid by Tenant.

5.  TENANT PLAN DELIVERY DATE

    a. Tenant covenants and agrees that although certain plans and drawings
       may be prepared by Landlord's architect or engineer, Tenant shall be
       solely responsible for the timely completion of the Plans and it is
       hereby understood time is of the essence.

    b. Tenant covenants and agrees to deliver to Landlord the final Plans for
       the Tenant Improvements on or before December 13, 1999 (the "Tenant
       Plan Deliver Date"). If Tenant fails to provide final plans or fails
       to respond to Landlord in a timely fashion on any matters of approval,
       Landlord shall not carry out any of Tenant's work set forth herein
       until approval thereof is received. It is vital that the final Plans
       be delivered to Landlord by the Tenant Plan Delivery Date in order to
       allow Landlord sufficient time to review such Plans, to discuss with
       Tenant any changes therein which Landlord believes to be necessary or
       desirable, to enable the Contractor to prepare an estimate of the cost
       of the initial Tenant Improvements, and to substantially complete the
       Premises within a reasonable time frame. All requirements above,
       whether performed by Landlord or Contractor, are subject to Tenant's
       delivering of a fully executed Lease Agreement.

6.  SUBSTANTIAL COMPLETION

    a. The Premises shall be deemed to be substantially complete when the
       work to be performed by Landlord pursuant to the Plans approved by
       Landlord and Tenant has been completed as certified by Landlord and
       architect, except for items of work and adjustment of equipment and
       fixtures that can be completed after the Premises are occupied without
       causing material interference with Tenant's use of the Premises (i.e.,
       "punch list items").

    b. Notwithstanding the foregoing, if Landlord shall be delayed in
       substantially completing the Premises as a result of:

       (i)   Tenant's failure to furnish to Landlord the final Plans on or
             before the Tenant Plan Delivery Date; or

       (ii)  Tenant's failure to furnish the Plans and/or Tenant's failure to
             approve Landlord's cost estimates within the time specified in
             Section 4 herein and/or Tenant's failure to approve the space plan
             within the time specified in Section 1 herein; or

       (iii) Tenant's changes in the Tenant Improvements or the Plans
             (notwithstanding Landlord's approval of any such changes); or

       (iv)  Tenant's request for changes in or modifications to the Plans
             subsequent to the Tenant Plan Delivery Date; or

       (v)   Inability to obtain non-building standard materials, finishes or
             installations requested by Tenant; or

       (vi)  The performance of any work by any person, firm or corporation
             employed or retained by Tenant; or

       (vii) Any other act or omission by Tenant or its agents,
             representatives, and/or employees;

then, in any such event, for purposes of determining the Commencement Date,
the Premises shall be deemed to have been substantially completed on the date
that Landlord and architect determine that the Premises would have been
substantially completed if such Delay or Delays had not occurred.



7.   MATERIALS AND WORKMANSHIP. Landlord covenants and agrees that all work
performed in connection with the construction of the Premises shall be
performed in a good and workmanlike manner and in accordance with all applicable
laws and regulations and with the final approved Plans. Landlord agrees to
exercise due diligence in completing the construction of the Premises.

8.   REPAIRS AND CORRECTIONS. Landlord agrees to repair and correct any work
or materials installed by Landlord or its Contractor in the Premises that
prove defective as a result of faulty materials, equipment, or workmanship
and that first appear within ninety (90) days after the date of occupancy of
the Premises. Notwithstanding the foregoing, Landlord shall not be
responsible to repair or correct any defective work or materials installed by
Tenant or any contractor other than Landlord's Contractor, or any work or
materials that prove defective as a result of any act or omission of Tenant
or any of its employees, agents, invitees, licensees, subtenants, customers,
clients, or guests.

9.    POSSESSION BY TENANT. The taking of possession of the Premises by
Tenant shall constitute an acknowledgment by Tenant that the Premises are in
good condition and that all work and materials provided by Landlord are
satisfactory as of such date of occupancy, except as to any defects or
incomplete work that are described in a written notice given by Tenant to
Landlord no later than thirty (30) days after Tenant commences occupancy of
the Premises, and except for any equipment that is used seasonally if Tenant
takes possession of the Premises during a season when such equipment is not in
use.

10.   ACCESS DURING CONSTRUCTION. During construction of the Tenant
Improvements in the Premises with the approval of Landlord, Tenant shall be
permitted reasonable access to the Premises, as long as such access does not
interfere with or delay construction work on the Premises for the purposes of
taking measurements, making plans, installing trade fixtures, and doing such
other work as may be appropriate or desirable to enable Tenant eventually to
assume possession of and operate in the Premises.



                                   EXHIBIT B
                            RULES AND REGULATIONS


1.   ACCESS TO BUILDING. On Saturdays, Sundays, legal holidays and weekdays
between the hours of 6:00 P.M. and 8:00 A.M., access to the Building and/or
to the halls, corridors, elevators or stairways in the Building may be
restricted and access shall be gained by use of a key or electronic card to
the outside doors of the Buildings. Landlord may from time to time establish
security controls for the purpose of regulating access to the Building.
Tenant shall be responsible for providing access to the Premises for its
agents, employees, invitees and guests at times access is restricted, and
shall comply with all such security regulations so established.

2.   PROTECTING PREMISES. The last member of Tenant to leave the Premises
shall close and securely lock all doors or other means of entry to the
Premises and shut off all utilities in the Premises.

3.   BUILDING DIRECTORIES. The directories for the Building in the form
selected by Landlord shall be used exclusively for the display of the name and
location of tenants. Any additional names and/or name change requested by
Tenant to be displayed in the directories must be approved by Landlord and, if
approved, will be provided at the sole expense of Tenant.

4.   LARGE ARTICLES. Furniture, freight and other large or heavy articles may
be brought into the Building only at times and in the manner designated by
Landlord and always at Tenant's sole responsibility. All damage done to the
Building, its furnishings, fixtures or equipment by moving or maintaining
such furniture, freight or articles shall be repaired at Tenant's expense.

5.   SIGNS. Tenant shall not paint, display, inscribe, maintain or affix any
sign, placard, picture, advertisement, name, notice, lettering or direction
on any part of the outside or inside of the Building, or on any part of the
inside of the Premises which can be seen from the outside of the Premises,
without the written consent of Landlord which such consent shall not be
unreasonably withheld, and then only such name or names or matter and in such
color, size, style, character and material as shall be first approved by
Landlord in writing. Landlord, without notice to Tenant, reserves the right
to remove, at Tenant's expense, all matter other than that provided for above.

6.   COMPLIANCE WITH LAWS. Tenant shall comply with all applicable laws,
ordinances, governmental orders or regulations and applicable orders or
directions from any public office or body having jurisdiction, whether now
existing or hereinafter enacted with respect to the Premises and the use or
occupancy thereof. Tenant shall not make or permit any use of the Premises
which directly or indirectly is forbidden by law, ordinance, governmental
regulations or order or direction of applicable public authority, which may
be dangerous to persons or property or which may constitute a nuisance to
other tenants.

7.   HAZARDOUS MATERIALS. Tenant shall not use or permit to be brought into
the Premises or the Building any flammable oils or fluids, or any explosive
or other articles deemed hazardous to persons or property, or do or permit to
be done any act or thing which will invalidate, or which, if brought in,
would be in conflict with any insurance policy covering the Building or its
operation, or the Premises, or any part of either, and will not do or permit
to be done anything in or upon the Premises, or bring or keep anything
therein, which shall not comply with all rules, orders, regulations or
requirements of any organization, bureau, department or body having
jurisdiction with respect thereto (and Tenant shall at all times comply with
all such rules, orders, regulations or requirements), or which shall increase
the rate of insurance on the Building, its appurtenances, contents or operation.

8.   DEFACING PREMISES AND OVERLOADING. Tenant shall not place anything or
allow anything to be placed in the Premises near the glass of any door,
partition, wall or window that may be unsightly from outside the Premises.
Tenant shall not place or permit to be placed any article of any kind on any
window ledge or on the exterior walls; blinds, shades, awnings or other forms
of inside or outside window ventilators or similar devices shall not be
placed in or about, the outside windows in the Premises except to the extent
that the character, shape, color, material and make thereof is approved by
Landlord which such approval shall not be unreasonably withheld. Tenant shall
not do any painting or decorating in the Premises or install any floor
coverings in the Premises or make, paint, cut or drill into, or in any way
deface any part of the Premises or Building without in each instance
obtaining the prior written consent of Landlord which such consent shall not
be unreasonably withheld. Tenant shall not overload any floor or part thereof
in the Premises, or any facility in the Building or any public corridors or
elevators therein by bringing in or removing any large or heavy articles and
Landlord may direct and control the location of sales, [ILLEGIBLE]



at its expense to supply whatever supplementary supports necessary to
properly distribute the weight.

9.   OBSTRUCTION OF PUBLIC AREAS. Tenant shall not, whether temporarily,
accidentally or otherwise, allow anything to remain in, place or store
anything in, or obstruct in any way, any sidewalk, court, hall, passageway,
entrance, or shipping area. Tenant shall lend its full cooperation to keep
such areas free from all obstruction and in a clean and sightly condition,
and move all supplies, furniture and equipment as soon as received directly
to the Premises, and shall move all such items and waste (other than waste
customarily removed by Building employees) that are at any time being taken
from the Premises directly to the areas designated for disposal. All courts,
passageways, entrances, exits, elevators, escalators, stairways, corridors,
halls and roofs are not for the use of the general public and Landlord shall
in all cases retain the right to control and prevent access thereto by all
persons whose presence, in the judgment of Landlord, shall be prejudicial to
the safety, character, reputation and interest of the Building and its
tenants; provided, however, that nothing herein contained shall be construed
to prevent such access to persons with whom Tenant deals within the normal
course of Tenant's business so long as such persons are not engaged in
illegal activities.

10.   ADDITIONAL LOCKS. Tenant shall not attach, or permit to be attached,
additional locks or similar devices to any door or window, change existing
locks or the mechanism thereof, or make or permit to be made any keys for any
door other than those provided by Landlord. Upon termination of this Lease or
of Tenant's possession, Tenant shall immediately surrender all keys to the
Premises.

11.   COMMUNICATIONS OR UTILITY CONNECTIONS. If Tenant desires signal, alarm
or other utility or similar service connections installed or changed, then
Tenant shall not install or change the same without the approval of Landlord,
and then only under direction of Landlord and at Tenant's expense. Tenant
shall not install in the Premises any equipment which requires a greater than
normal amount of electrical current for the permitted use without the advance
written consent of Landlord which such consent shall not be unreasonably
withheld. Tenant shall ascertain from Landlord the maximum amount of load or
demand for or use of electrical current which can safely be permitted in the
Premises, taking into account the capacity of the electric wiring in the
Building and the Premises and the needs of other tenants in the Building, and
shall not in any event connect a greater load than that which is safe.

12.   OFFICE OF THE BUILDING. Service requirements of Tenant will be attended
to only upon application at the office of Highwoods Properties, Inc.
Employees of Landlord shall not perform, and Tenant shall not engage them to
do any work outside of their duties unless specifically authorized by
Landlord.

13.   RESTROOMS. The restrooms, toilets, urinals, vanities and the other
apparatus shall not be used for any purpose other than that for which they
were constructed, and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage resulting
from the violation of this rule shall be borne by the tenant whom, or whose
employees or invitees, shall have caused it.

14.   INTOXICATION. Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is intoxicated, or
under the influence of liquor or drugs, or who in any way violates any of the
Rules and Regulations of the Building.

15.   NUISANCES AND CERTAIN OTHER PROHIBITED USES. Tenant shall not (a) install
or operate any internal combustion engine, boiler, machinery, refrigerating,
heating or air conditioning apparatus in or about the Premises; (b) engage in
any mechanical business, or in any service in or about the Premises or
Building, except those ordinarily embraced within the Permitted Use as
specified in SECTION 3 of the Lease; (c) use the Premises for housing,
lodging, or sleeping purposes; (d) prepare or warm food in the Premises or
permit food to be brought into the Premises for consumption therein (heating
coffee and individual lunches of employees excepted) except by express
permission of Landlord; (e) place any radio or television antennae on the
roof or on or in any part of the inside or outside of the Building other than
the inside of the Premises, or place a musical or sound producing instrument
or device inside or outside the Premises which may be heard outside the
Premises; (f) use any power source for the operation of any equipment or
device other than dry cell batteries or electricity; (g) operate any
electrical device from which may emanate waves that could interfere with or
impair radio or television broadcasting or reception from or in the Building
or elsewhere; (h) bring or permit to be in the Building any bicycle, other
vehicle, dog (except in the company of a blind person), other animal or bird;
(i) make or permit any objectionable noise or odor to emanate from the
Premises; (j) disturb, harass, solicit or canvass any occupant of the
Building; (k) do anything in or about the Premises which could be a nuisance
or tend to injure the reputation of the Building; (l) allow any firearms in
the Building or the Premises except as approved by Landlord in writing.



16.   SOLICITATION. Tenant shall not canvass other tenants in the Building to
      solicit business or contributions and shall not exhibit, sell or offer
      to sell, use, rent or exchange any products or services in or from the
      Premises unless ordinarily embraced within the Tenant's Permitted Use
      as specified in SECTION 3 of the Lease.

17.   ENERGY CONSERVATION. Tenant shall not waste electricity, water, heat or
      air conditioning and agrees to cooperate fully with Landlord to insure
      the most effective operation of the Building's heating and air
      conditioning, and shall not allow the adjustment (except by Landlord's
      authorized Building personnel) of any controls.

18.   BUILDING SECURITY. At all times other than normal business hours the
      exterior Building doors and suite entry door(s) must be kept locked to
      assist in security. The janitorial service, upon completion of its
      duties, will lock all Building doors. Problems in Building and suite
      security should be directed to Landlord at (615) 320-5566.

19.   PARKING. Parking is in designated parking areas only. There may be no
      vehicles in "no parking" zones or at curbs. Handicapped spaces are for
      handicapped persons and the Police Department will ticket unauthorized
      (unidentified) cars in handicapped spaces. Landlord reserves the right
      to remove vehicles that do not comply with the Lease or these Rules and
      Regulations and Tenant shall indemnify and hold harmless Landlord from
      its reasonable exercise of these rights with respect to the vehicles of
      Tenant and its employees, agents and invitees.

20.   JANITORIAL SERVICE. The janitorial staff will remove all trash from
      trash cans. Any container or boxes left in hallways or apparently
      discarded unless clearly and conspicuously labeled DO NOT REMOVE may be
      removed without liability to Tenant. Any large volume of trash
      resulting from delivery of furniture, equipment, etc., should be
      removed by the delivery company, Tenant, or Landlord at Tenant's
      expense. Janitorial service will be provided after hours five (5) days
      a week. All requests for trash removal other than normal janitorial
      services should be directed to Landlord at (615) 320-5566.

21.   CONSTRUCTION. Tenant shall make no structural or interior alterations
      of the Premises. All structural and nonstructural alterations and
      modifications to the Premises shall be coordinated through Landlord as
      outlined in the Lease. Completed construction drawings of the requested
      changes are to be submitted to Landlord or its designated agent for
      pricing and construction supervision.



                           [FIRST LEVEL FLOOR PLAN]

                                   EXHIBIT C

EX-10.26-1

                                                               Exhibit 10.26.1

                 LEASE MODIFICATION AGREEMENT

         LEASE MODIFICATION AGREEMENT dated as of the 5th day of April 2000
between 224 West 30 LLC, having an office in care of C & K Properties, Pier
40; West Houston & West Streets, New York, New York 10014 (hereinafter
referred to as "Owner") and Medscape, Inc., a Delaware corporation, having an
office at 224 West 30th Street, New York, New York 10001 (hereinafter
referred to as "Tenant")

                         WITNESSETH:

         WHEREAS, Owner and Tenant entered into that certain Loft Lease
agreement dated as of February 8, 2000, covering certain commercial loft
space more particularly described in said Loft Lease agreement (the "Demised
Premises") in the building known as 224 West 30th Street, New York, New York
("the Building"), under the terms and conditions contained therein
(hereinafter referred to as the "Loft Lease"); and

         WHEREAS, Tenant desires to add to the Demised Premises the entire
third (3rd) floor of the Building, approximately as indicated on the location
plan annexed hereto and made a part hereof, the rentable square foot area of
which Owner and Tenant acknowledge and agree shall be deemed to be 11,286
rentable square feet (the "3rd Floor Additional Space); and

         WHEREAS, Tenant and Owner wish to modify the Loft Lease as set forth
below;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:

    1.   ADDITION OF SPACE. A. The 3rd Floor Additional Space is hereby added
to the Demised Premises effective as of June 1, 2000 (the A3rd Floor
Additional Space



Commencement Date) under the same terms, covenants and conditions of the
Loft Lease, except as specifically modified by this agreement and except for
Articles 48, 61, 64 and 65 of the Lease which shall not apply to this
agreement or the 3rd Floor Additional Space. Tenant acknowledges and agrees
that the 3rd Floor Additional Space is presently occupied by another tenant
of the Building (the "Existing Tenant"), who has agreed to surrender and
vacate the 3rd Floor Additional Space on or before May 31, 2000, in
accordance with a surrender agreement with Owner. Owner and Tenant agree that
if the Existing Tenant does not surrender and vacate the 3rd Floor Additional
Space on or before May 31, 2000, and as a result Owner is unable to deliver
possession of the 3rd Floor Additional Space to Tenant as required by this
agreement, then Owner shall not be subject to any liability for such failure,
and this agreement shall remain in full force and effect without extension of
the term of the Lease, however, Tenant's obligation to pay rent and
additional rent hereunder for such portion of the 3rd Floor Additional Space
which has not been delivered by Owner shall not commence and that part of any
rent credits to which Tenant is entitled hereunder and which is allocable to
such portion of the 3rd Floor Additional Space shall be similarly delayed
until possession thereof is delivered to Tenant, subject to the provisions of
Article 24 of the Lease. In the event of such a failure by the Existing
Tenant to surrender and vacate all or a portion of the 3rd Floor Additional
Space, Owner shall promptly commence and diligently prosecute to completion
appropriate summary proceedings in order to evict the Existing Tenant
therefrom and recover lawful possession thereof. In such event, upon Owner's
recovery of actual and lawful possession thereof, Owner shall furnish Tenant
with notice to that effect and deliver possession to Tenant promptly
thereafter, at which point Tenant's obligation to pay rent and additional
rent, to the extent

                                       2



delayed pursuant to the provisions of this Article, shall commence and any
rent credits to which Tenant is entitled hereunder shall commence as well.

     B.    Effective as of the 3rd Floor Additional Space Commencement Date
in order to reflect the addition of the 3rd Floor Additional Space to the
Demised Premises: (1) the fixed annual rent payable under the Loft Lease
(exclusive of electricity) shall be increased by the sum of:

(a) $327,294.00 per annum for the period from the 3rd Floor Additional Space
Commencement Date through January 31, 2001 and (b) by the sum of $342,022.23
per annum for the period from February 1, 2001 through January 31, 2002 and
(c) by the sum of $357,413.23 per annum for the period from February 1, 2002
through January 31, 2003 and (d) by the sum of $373,496.83 per annum for the
period from February 1, 2003 through January 31, 2004 and (e) by the sum of
$390,304.18 per annum for the period from February 1, 2004 through January
31, 2005; and (2) Tenant's Share, as defined in Article 53 of the Loft Lease,
shall be amended and increased by seven and eight tenths (7.8%) percent to
forty-one and eight tenths (41.8%) percent; and (3) the deemed rentable
square foot area of the Demised Premises shall be amended and increased by
11.286 deemed rentable square feet to 60,462 deemed rentable square feet for
purposes of the Loft Lease including, without limitation, Articles 53 and 62
thereof; and (4) it shall be a material obligation of Tenant under this
agreement and the Lease that it shall increase the security deposited with
Landlord pursuant to Article 32 of the Lease by means of cash payment in the
sum of $109,098.00 to be delivered to Owner upon execution and delivery of
this agreement by Tenant, to be held by Owner in accordance with the
provisions of said Article 32 of the Lease, in

                                       3


order that the aggregate amount of security deposited with Landlord shall
thereafter be the sum of $446,842.00.

           2.    CONDITION OF 3RD FLOOR ADDITIONAL SPACE. Tenant expressly
acknowledges that it has inspected the 3rd Floor Additional Space and is
fully familiar with the physical condition thereof. Tenant agrees to accept
the 3rd Floor Additional Space as of the 3rd Floor Additional Space
Commencement Date in its then "as is" condition. Owner shall have no
obligation to do any work in or to the 3rd Floor Additional Space in order to
make them suitable and ready for occupancy and use by Tenant other than the
work expressly set forth below which Owner shall perform with reasonable
dispatch, subject to delay by causes beyond its control or by the action or
inaction of Tenant:

           (i)   demolish and remove the existing interior installation and
                 build-out throughout the 3rd Floor Additional Space within
                 thirty (30) days after Owner's recovery of lawful possession
                 thereof; and

           (ii)  obtain and deliver to Tenant a form ACP-5 with respect to
                 the 3rd Floor Additional Space; and

           (iii) furnish and install, at Owner's sole cost and expense within
                 ninety (90) days after Owner's delivery of possession of the
                 3rd Floor Additional Space to Tenant, new windows in the 3rd
                 Floor Additional Space in a building standard manner using
                 building standard materials in accordance with Owner's ongoing
                 Building window replacement program.

     The performance by Owner of the above work ("Owner's 3rd Floor
Additional Space Work") is expressly conditioned upon compliance by Tenant
with all the terms and conditions of the Lease, as amended hereby, including
payment of rent.

     B.    Any changes in or additions to the work and installations
mentioned in Section A above which shall be consented to by Owner as provided
in Article 7 of the Lease, and further changes in or additions to the 3rd
Floor Additional Space after said Owner's 3rd Floor


                                       4


Additional Space Work has been completed, if so consented to by Owner and if
made at Tenant's request by Owner or its agents, shall be paid for by Tenant
promptly when billed at cost plus 10% for insurance and overhead and plus 10%
for profit, and in the event of the failure of Tenant so to pay for said
changes or additions, Owner at its option may consider the cost thereof, plus
the above percentages, as additional rent payable by Tenant and collectible
as such hereunder, as part of the rent for the next ensuing months.

     C.    Owner agrees to use reasonable efforts to complete Owner's 3rd
Floor Additional Space Work on or before June 15, 2000, subject to acts or
omissions of Tenant and causes beyond Owner's reasonable control. Owner's
failure to complete Owner's 3rd Floor Additional Space Work on or before June
15, 2000 shall not entitle Tenant to any abatement or set-off of any monies
due under the Loft Lease or to cancel the Loft Lease or this agreement. In
the event that Owner shall not have delivered to Tenant possession of the 3rd
Floor Additional Space on or before September 1, 2000, Tenant may within
thirty (30) days thereafter unequivocally and unconditionally notify Owner
that Tenant elects to terminate and cancel this agreement effective as of the
date which is thirty (30) days after the delivery of Tenant's notice (the "3rd
Floor Additional Space Cancellation Date") provided, however, that the 3rd
Floor Additional Cancellation Date shall be extended by one (1) day for each
day of delay in Owner's delivery of the 3rd Floor Additional Space which is
due to any acts or omissions by Tenant. If Tenant duly exercises this option,
this agreement shall be cancelled on the 3rd Floor Additional Cancellation
Date and neither Owner nor Tenant shall have any further liability hereunder
except that the representations and indemnifications contained in Article 9
hereof shall survive and any security deposited with Owner hereunder shall be
returned to Tenant. Notwithstanding the


                                       5


foregoing, however, in the event that Owner shall give Tenant notice that the
3rd Floor Additional Space shall be delivered to Tenant prior to the 3rd
Floor Additional Space Cancellation Date, and provided same occurs prior to
the 3rd Floor Additional Space Cancellation Date then, in such event, Owner's
notice shall negate and nullify Tenant's notice.

     D.    If the substantial completion of Owner's 3rd Floor Additional
Space Work is delayed by acts, omissions or changes made or requested by
Tenant, its agents, designers, architects or any other party acting or
apparently acting on Tenant's behalf, then Tenant shall pay as hereinbefore
provided rent and additional rent on a per diem basis for each day of delay
of Owner's substantial completion caused by Tenant or any of the
aforementioned parties.

     E.    Owner's 3rd Floor Additional Space Work shall be deemed to be
substantially completed notwithstanding that (i) minor or non-material
details of construction, mechanical adjustment or decoration ("Punch List
Items") remain to be performed, provided that said Punch List Items shall be
completed by Owner within a reasonable time thereafter or (ii) a portion of
Owner's 3rd Floor Additional Space Work is incomplete because construction
scheduling requires that such work be done after incomplete finishing or
after other work to be done by or on behalf of Tenant is completed.

     F.    Any failure by Owner to complete Owner's 3rd Floor Additional
Space Work within any time period provided for in this Article shall not
entitle Tenant to any abatement or set-off of rent or additional rent or to
cancel the Lease or this agreement, or to make any claim for damages as a
result thereof unless caused by the willful misconduct of Owner.


                                       6



    3. RENT COMMENCEMENT. A. Tenant's obligation to pay fixed annual rent
under this agreement for the 3rd Floor Additional Space shall commence on a
date (the "3rd Floor Additional Space Rent Commencement Date") which shall be
the earlier of:

             (1) the date that Owner delivers to Tenant possession of the 3rd
Floor Additional Space with Owner's 3rd Floor Additional Space Work as set
forth in Article 2, Section A hereof substantially complete; or

             (2) the date that Tenant first occupies the 3rd Floor Additional
Space for either (a) the conduct of its business in accordance with the terms
hereof or (b) the commencement of any initial alteration work to be performed
by Tenant, at its sole cost and expense, in order to prepare the 3rd Floor
Additional Space for the conduct of Tenant's business.

        B. When the 3rd Floor Additional Space Rent Commencement Date has
occurred, Tenant, upon the request of Owner, shall execute a statement
prepared by Owner, fixing the 3rd Floor Additional Space Rent Commencement
Date unless Tenant disputes the correctness thereof. Any failure of Tenant to
execute such statement shall not affect the 3rd Floor Additional Space Rent
Commencement Date as determined by Owner.

        C. Tenant expressly waives any right to rescind this agreement under
Section 223-a of the New York Real Property Law or under any present or
future statute of similar import then in force and further expressly waives
the right to recover any damages, direct or indirect, which may result from
Owner's failure to deliver possession of the 3rd Floor Additional Space on a
date certain. Tenant agrees that the provisions of this Article, Article 2 of
this agreement and Article 24 of the Lease are intended to constitute "an
express provision to the contrary" within the meaning of said New York Real
Property Law Section 223-a.

                                       7



    4. RENT CREDIT. A. If and so long as Tenant is not in default under the
Loft Lease after notice and beyond any grace period, in addition to the rent
credit currently provided for therein, Tenant shall be entitled to a further
rent credit in the sum of $81,823.50, to be applied in equal monthly
increments, each in the sum of $13,637.25, against the first six (6) full
monthly installments of fixed annual rent (without electricity) accruing
under the Loft Lease from and after the 3rd Floor Additional Space
Commencement Date.

         B. Anything contained hereinabove to the contrary notwithstanding,
if Tenant at any time during the term of this Loft Lease, breaches any
covenant, condition or provision of this Loft Lease and fails to cure such
breach within any applicable grace period, and provided that this Loft Lease
is terminated by Owner because of such default, then, in addition to all
other damages and remedies herein provided and to which Owner may be
otherwise entitled, Owner shall also be entitled to the repayment in full of
any rent credit theretofore enjoyed by Tenant, which repayment Tenant shall
make upon demand therefor.

    5. SUCCESSORS/ASSIGNS. This agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns.

    6. ENTIRE AGREEMENT.

         A. This agreement represents the entire understanding between the
parties with regard to the matters addressed herein and may only be modified
by written agreement executed by all parties hereto. All prior understandings
or representations between the parties hereto, oral or written, to the extent
that they pertain to the matters addressed herein, are hereby merged herein.

                                      8



         B. Tenant acknowledges that neither Owner nor any representative or
agent of Owner has made any representation or warranty, express or implied,
as to the physical condition, state of repair, layout, footage or use of the
Demised Premises or any matter or thing affecting or relating to the Demised
Premises except as specifically set forth in this Agreement. Tenant has not
been induced by and has not relied upon any statement, representation or
agreement, whether express or implied, not specifically set forth in this
agreement. Tenant shall not be liable or bound in any manner by any oral or
written statement, broker's "set-up", representation, agreement or
information pertaining to the Demised Premises or this agreement furnished by
any real estate broker, agent, servant, employee or other person, unless
specifically set forth herein, and no rights are or shall be acquired by
Tenant by implication or otherwise unless expressly set forth herein.

    7. EFFECTIVENESS. This agreement shall not be binding upon Owner until
executed and delivered by both Owner and Tenant.

    8. RATIFICATION. Except as specifically modified herein, all other terms,
covenants and conditions of the Loft Lease are and shall remain in full force
and effect and are hereby ratified and confirmed.

    9. NO BROKERS/INDEMNIFICATION: Tenant warrants that it has not dealt with
any broker, agent or finder in connection with the 3rd Floor Additional Space
and that no broker, finder or consultant participated in procuring this
agreement other than Harry Krausman of Colliers/ABR, Inc. and Sam Gavish of
SAG, Inc., each of whom acted solely as consultants to Tenant ("Tenant's
Consultants"). Tenant warrants to Owner that it shall pay any fee due to
Tenant's Consultants, in accordance with the terms of separate agreements
with each of them.


                                       9



Tenant hereby indemnifies and agrees to defend and hold Owner, its agents,
servants and employees harmless from any suit, action, proceeding,
controversy, claim or demand whatsoever at law or in equity that may be
instituted against Owner by anyone who claimed to have dealt with Tenant for
recovery of compensation or damages for procuring this Agreement or by reason
of a breach or purported breach of the representations and warranties
contained herein.

    10.  MISCELLANEOUS.

         A. The captions in this agreement are for convenience only are not
to be considered in construing this agreement.

         B. This agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing
this agreement to be drafted.

         C. Terms used in this agreement and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Loft Lease.

         D. If any provision of this agreement or its application to any
person or circumstances is invalid or unenforceable to any extent, the
remainder of this agreement, or the applicability of such provision to other
persons or circumstances, shall be valid and enforceable to the fullest
extent permitted by law and shall be deemed to be separate from such invalid
or unenforceable provisions and shall continue in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
date first set forth above.

224 WEST 30 LLC                            MEDSCAPE, INC.

By:  /s/ Ben Korman                        By: /s/ Peter Frishauf
   ----------------                          --------------------
   Ben Korman    Managing Partner          Peter Frishauf - Chairman and Founder
    (Name)         (Title)


                                        10

EX-10.26-2

                                                               Exhibit 10.26.2

                     SECOND LEASE MODIFICATION AGREEMENT

    LEASE MODIFICATION AGREEMENT dated as of the 5th day of April 2000
between 224 West 30 LLC, having an office in care of C & K Properties, Pier
40, West Houston & West Streets, New York, New York 10014 (hereinafter
referred to a "Owner") and Medscape, Inc., a Delaware corporation, having an
office at 224 West 30th Street, New York, New York 10001 (hereinafter
referred to as "Tenant")

                                 WITNESSETH:

    WHEREAS, Owner and Tenant entered into that certain loft lease agreement
dated as of February 8, 2000, covering certain commercial loft space more
particularly described in said Loft Lease agreement (the "Demised Premises")
in the building known as 224 West 30th Street, New York, New York ("the
Building"), under the terms and conditions contained therein (hereinafter
referred to as the "Loft Lease"): and

    WHEREAS, Owner and Tenant entered into that certain lease modification
agreement, dated as of April 5th, 2000, whereby the entire third (3rd) floor
of the Building was added to the Demised Premises upon the terms and
conditions contained therein (hereinafter referred to as the "Lease
Modification Agreement"); and

    WHEREAS, Tenant desires to add to the Demised Premises a portion of the
seventh (7th) floor of the Building, approximately as indicated on the
location plan annexed hereto and made a part hereof, the rentable square foot
area of which Owner and Tenant acknowledge and agree shall be deemed to be
1,377 rentable square feet (the "7th Floor Additional Space); and

    WHEREAS, Tenant and Owner wish to modify the Loft Lease as set forth
below;

    NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:



1. ADDITION OF SPACE. A. The 7th Floor Additional Space is hereby added to
the Demised Premises effective as of March 3, 2000 (the "7th Floor Additional
Space Commencement Date") under the same terms, covenants and conditions of
the Loft Lease, except as specifically modified by this agreement and except
for Articles 48, 61, 64, and 65 of the Lease which shall no apply to this
agreement or the 7th Floor Additional Space.

    B. Effective as of the 7th Floor Additional Space Commencement Date in
order to reflect the addition of the 7th Floor Additional Space to the
Demised Premises; (1) the fixed annual rent payable under the Loft Lease
(exclusive of electricity) shall be increased by the sum of:

(a) $39,933.00 per annum for the period from 7th Floor Additional Space
Commencement Date through January 31, 2001 and (b) by the sum of $41,730.00
per annum for the period from February 1, 2001 through January 31, 2002 and
(c) by the sum of $43,608.99 per annum for the period from February 1, 2002
through January 31, 2003 and (d) by the sum of $45,570.00 per annum for the
period from February 1, 2003 through January 31, 2004 and (e) by the sum of
$47,621.00 per annum for the period from February 1, 2004 through January 31,
2005; and (2) Tenant's Share, as defined in Article 53 of the Loft Lease,
shall be amended and increased by one (1%) percent to forty-two and eight
tenths (42.8%) percent; and (3) the deemed rentable square foot area of the
Demised Premises shall be amended and increased by 1,377 deemed rentable
square feet to 61,839 deemed rentable square feet for purposes of the Loft
Lease including, without limitation, Articles 53 and 62 thereof; and (4) it
shall be material obligation of Tenant under this agreement and the Lease
that it shall increase the security deposited with Landlord pursuant to
Article 32 of the Lease by means of cash payment in the sum of $13,311.00 to
be delivered to Owner upon execution and delivery of this agreement by
Tenant, to be held by Owner in accordance with the provisions of said Article
32 of the Lease, in order that the aggregate amount of security deposited
with Landlord shall thereafter be the sum of $460,153.00.



     2.    CONDITION OF 7TH FLOOR ADDITIONAL SPACE. Tenant expressly
acknowledges that it has inspected the 7th Floor Additional Space and is
fully familiar with the physical condition thereof. Tenant agrees to accept
the 7th Floor Additional Space as of the 7th Floor Additional Space
Commencement Date in its then "as is" condition. Owner shall have no
obligation to do any work in or to the 7th Floor Additional Space in order to
make them suitable and ready for occupancy and use by Tenant.

     3.    SUCCESSORS/ASSIGNS. This agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.

     4.    ENTIRE AGREEMENT.

           A.    This agreement represents the entire understanding between
the parties with regard to the matters addressed herein and my only be
modified by written agreement executed by all parties hereto. All prior
understandings or representations between the parties hereto, oral or
written, to the extent that they pertain to the matters addressed herein, are
hereby merged herein.

           B.    Tenant acknowledges that neither Owner nor any
representative or agent of Owner has made any representation or warranty,
express or implied, as the the physical condition, state of repair, layout,
footage or use of the Demised Premises or any matter or thing affecting or
relating to the Demised Premises except as specifically set forth in this
Agreement. Tenant has not been induced by and has not relied upon any
statement, representation or agreement, whether express or implied, not
specifically set forth in this agreement. Tenant shall not be liable or
bound in any manner by any oral or written statement, broker's "set-up",
representation, agreement or information pertaining to the Demised Premises
or this agreement furnished by any real estate broker, agent, servant,
employee or other person, unless specifically set forth herein, and no rights
are or shall be acquired by Tenant by implication or otherwise unless
expressly set forth herein.

     5.    EFFECTIVENESS. This agreement shall not be binding upon Owner
until executed and delivered by both Owner and Tenant.




     6.    RATIFICATION.  Except as specifically modified herein, all other
terms, covenants and conditions of the Loft Lease are and shall remain in
full force and effective and are hereby ratified and confirmed.

     7.    NO BROKERS/INDEMNIFICATION: Tenant warrants that it has not dealt
with any broker, agent or finder in connection with the 7th Floor Additional
Space and that no broker, finder or consultant participated in procuring this
agreement other than Harry Krausman of Colliers/ABR, Inc and Sam Gavish of
SAG, Inc., each of whom acted solely as consultants to Tenant ("Tenant's
Consultants"). Tenant warrants to Owner that is shall pay any fee due to
Tenant's Consultants, in accordance with the terms of  separate agreements
with each of them.



Tenant hereby indemnifies and agrees to defend and hold Owner, its agents,
servants and employees harmless from any suit, action, proceeding,
controversy, claim or demand whatsoever at law or in equity that may be
instituted against Owner by anyone who claimed to have dealt with Tenant for
recovery of compensation or damages for procuring this Agreement or by reason
of a breach or purported breach of the representations and warranties
contained herein.

    8.   MISCELLANEOUS.

         A. The captions in this agreement are for convenience only are not
to be considered in construing this agreement.

         B. This agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing
this agreement to be drafted.

         C. Terms used in this agreement and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Loft Lease.

         D. If any provision of this agreement or its application to any
person or circumstances is invalid or unenforceable to any extent, the
remainder of this agreement, or the applicability of such provision to other
persons or circumstances, shall be valid and enforceable to the fullest
extent permitted by law and shall be deemed to be separate from such invalid
or unenforceable provisions and shall continue in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
date first set forth above.

224 WEST 30 LLC                        MEDSCAPE, INC.

By: /s/ Ben Korman                    By: /s/ Peter Frishauf
   ----------------------------           ---------------------------------
   Ben Korman    Managing Partner
   (Name)       (Title)                   Peter Frishauf - Chairman and Founder

                                       5

EX-10.27-1

                                                               Exhibit 10.27.1

                                AMENDMENT ONE
                                   TO THE
                         ORACLE ALLIANCE AGREEMENT
                                  BETWEEN
                         MEDICALOGIC/MEDSCAPE, INC.
                                    AND
                             ORACLE CORPORATION

This document ("Amendment One") shall serve to amend the Oracle Alliance
Agreement between Medicalogic Inc (the "Alliance Member") and Oracle
Corporation ("Oracle") dated Jan. 1, 2000 (the "Agreement").

The Agreement is amended as follows:

1.   At the end of Section 2.3.B.2, add the following:

     "With Oracle's written consent, which will not be unreasonably withheld,
     Sublicensee may assign its rights under this Agreement to an entity
     resulting from a merger or sale or other transfer of substantially all of
     Sublicensee's assets provided that the assignee company is not a
     competitor of Oracle, and the assignee agrees in writing to the terms and
     conditions of the Agreement."

2.   Before the last sentence of Section 5.1, add the following:

     "Also, if the audit reveals that the Alliance Member has overpaid fees to
     Oracle, Oracle will use best efforts to reimburse the Alliance Member in a
     timely manner."

3.   Delete Section 6.2 in its entirety.

4.   The following shall be added to the end of the first paragraph of
     Section 6.5:

     "Expiration or termination of a Sublicense Addendum or this Agreement shall
     not affect any sublicense agreement between the Alliance Member and its
     Sublicensees."

5.   Delete Section 8.5 in its entirety and replace with the following:

     "8.5 ASSIGNMENT

     Upon notice to Oracle, Alliance Member may assign its rights under this
     Agreement to an entity resulting from a merger or a sale or other transfer
     of substantially all of Alliance Member's assets provided that the assignee
     company


                                       1


     is not a competitor of Oracle, and the assignee agrees in writing to the
     terms and conditions of the Agreement."

6.   Begin the second sentence of Section 8.10, ad the following:

     "Except with respect to the exclusive remedies of Section 7.1,"

Other than the modifications set forth above, the terms and conditions of the
Agreement remain unchanged and in full force and effect.

The Effective Date of this Amendment One is January 1, 2000.


MEDICALOGIC/MEDSCAPE, INC.                 ORACLE CORPORATION


By: /s/ DONALD BLOODWORTH                  By: /s/ SIMEON ENEMUO
   -------------------------------            ----------------------------
Name: Donald Bloodworth                    Name: SIMEON ENEMUO
     -----------------------------              --------------------------
Title:   CFO                               Title:  CONTRACT SPECIALIST
      ----------------------------               -------------------------


                                       2



[ORACLE LOGO]

                APPLICATION SPECIFIC SUBLICENSE ADDENDUM

This document (the "Addendum") is between Oracle Corporation ("Oracle") and
MedicaLogic/Medscape, Inc. (the "Alliance Member") and shall be governed by
the terms of the Oracle Alliance Agreement between the Alliance Member and
Oracle effective January 1, 2000 (the "Agreement") and the terms set forth
below.

1.    SUBLICENSES

1.1   SUBLICENSE PROGRAMS AND TERMS

           The Alliance Member may only Sublicense Application Specific Full
      Use Programs for which the Alliance Member has previously acquired a
      Supported Development License for the applicable Designated System.
      Notwithstanding any other provision of this Agreement, the Alliance Member
      shall have no right to Sublicense Programs designated as Oracle
      Applications Programs, Oracle Express Programs, Limited Production
      Programs, or other Programs specified by Oracle from time-to-time without
      the prior written consent of Oracle.

           The Alliance Member shall have the right to market and grant
      Sublicenses of Application Specific Full Use Programs under the conditions
      set forth in the Agreement and under the following restrictions:

      A.   Sublicense Application Specific Full Use Programs with the
      Application Program in the Application Package for use on Designated
      Systems to Sublicensees. Each copy of the Application Specific Full Use
      Programs distributed shall be for the Sublicensee's own internal use in
      the Territory only on a single Designated System limited to a maximum
      number of Users; and

      B.   Make and deliver to the Sublicensee a single copy of the Application
      Specific Full Use Programs in the Application Package for each Sublicense
      granted.

           The Alliance Member shall use all practical means available, both
      contractual and technical, to control the restricted use of each
      Application Specific Full Use Program Sublicense. If a Sublicensee uses
      the Application Specific Full Use Program beyond the limited functionality
      described in Section 1.2 hereof, the Alliance Member or Distributor shall
      immediately notify the Sublicensee of such unauthorized use and if the
      Sublicensee fails to discontinue such unauthorized use following
      notification either terminate the Sublicense or forward to Oracle one
      hundred percent (100%) of the applicable Full Use standard Program license
      fees in effect at the time the payment is made to Oracle together with a
      written request by the Sublicensee for a Full Use Program license from
      Oracle. Oracle must approve, in writing, the Sublicensee's request before
      continued use of the Programs by the Sublicensee shall be deemed
      authorized.

1.2   APPLICATION SPECIFIC FULL USE PROGRAMS

           For the purposes of this Addendum, "Application Specific Full Use
      Program(s)" shall mean Programs which are limited to use in conjunction
      with the Application Program. Such use may include development work to
      create modifications to customize such Application Program for the
      Sublicensee's requirements within the scope of the Application Program as
      described in the Application Package Attachment. Application Specific Full
      Use Programs may not be used in conjunction with or to create additional
      functionality or applications not described in the applicable Application
      Package Attachment. Without limiting the usage permitted above, the
      Sublicensee may use the Application Specific Full Use Programs only for
      the purpose of implementation and support of the Application Program.
      "Full Use Programs" shall mean unaltered versions of the Programs with
      all functions intact.

1.3   VALUE-ADDED PACKAGE

           For the purposes of this Addendum, "Application Program(s)" shall
      mean the Alliance Member's value-added application software, described in
      the attached Application Package Attachment with which the Application
      Specific Full Use Programs are to be coupled. "Application Package(s)"
      shall mean the Application Specific Full Use Programs coupled with the
      Application Programs. For purposes of the Agreement, the Application
      Program shall be regarded as the Alliance Member's Value-Added Package.

1.4   TRIAL SUBLICENSES

           The Alliance Member and its Distributors shall be entitled to grant,
      at no charge, up to a maximum combined total of ten (10) temporary Trial
      Sublicenses of the Application Package at any one time. Such Sublicenses
      shall be for evaluation purposes only and shall be for a period not to
      exceed thirty (30) days. The Alliance Member shall pay Oracle Sublicense
      fees for any Trial Sublicenses in excess of thirty (30) days. Each such
      Trial Sublicense shall be Sublicensed under a Sublicense agreement which
      provides for such trial use.

1.5   DISTRIBUTORS

           Oracle Grants the Alliance Member the right to appoint third parties
      ("Distributors") to market and Sublicense the Application Specific Full
      Use Programs in the Territory, under the terms of the Agreement and this
      Addendum. However, Distributors shall have no right to make copies of the
      Programs for Sublicensing and shall obtain all such Programs from the
      Alliance Member. Each Distributor shall execute a written agreement with
      the Alliance Member binding the Distributor to provisions substantially
      similar to those contained in Sections 2.3, 2.4, 2.5, 5.1, 5.2, 6.1, 6.3,
      6.4, 6.5, 7.2.D, 7.5, 8.1, 8.2, 8.3, 8.5, 8.7, 8.9, 8.10, and 8.11 of the
      Agreement and to those contained in Sections 1 (except 1.5), 3, 4, 5, and
      6 of this Addendum. Each obligation of the Alliance Member under such
      provisions shall also be applicable to each Distributor. Each Distributor
      agreement shall also contain any other provisions necessary for the



      Alliance Member to satisfy its commitments under the Agreement. The
      Alliance Member shall notify Oracle promptly in writing of the appointment
      of each such Distributor.

         In addition, the Alliance Member shall keep executed Distributor
      agreements and records of the Distributor information required under the
      Alliance Member's Sublicense reports, and shall allow Oracle to inspect
      such information as specified under the Agreement. The Alliance Member
      will defend and indemnify Oracle against all damages to Oracle caused by
      the Distributors' failure to include the required contractual terms set
      forth in Section 2.3.B of the Agreement in each Sublicense agreement. The
      Alliance Member agrees to enforce the terms of its Distributor agreements
      required under this Section so as to effect a timely cure of any
      Distributor breach, and to notify Oracle of any known breach of such
      terms.

1.6   DOCUMENTATION

         The Alliance Member shall be responsible for providing documentation
      for Sublicensees. The Alliance Member shall have the right to incorporate
      portions of the Documentation into the Alliance Member's documentation,
      subject to the provisions of Section 5.2 of the Agreement.

2.    SUBLICENSE FEES

2.1   SUBLICENSE FEES AND RATE

         For each copy of the Programs Sublicensed by the Alliance Member or
      its Distributor in the Application Package, the Alliance Member agrees to
      pay Oracle a Sublicense fee equal to forty percent (40%) of the applicable
      license fee for each such Program, as specified in the applicable Price
      List and Alliance Member Price List supplement to such Price List in
      effect at the time the applicable Programs are Sublicensed.

         As further specified in Section 5 of this Addendum, Sublicense fees
      shall be due and payable within twenty (20) days of the last day of each
      month. The Alliance Member shall not be relieved of its obligation to pay
      Sublicense fees owed to Oracle by the nonpayment of such fees by the
      Sublicensee...

         On or after each anniversary during the Term of this Addendum. Oracle
      may amend the Sublicense fee percentage rate set forth above based on
      Oracle'sthen-current standard Sublicense fee percentage rate schedule and
      the actual amount of Sublicense fees received by Oracle hereunder.

2.2   PRICE LIST FOR SUBLICENSES

         Notwithstanding any other provision of the Agreement, the applicable
      Price List for determining Sublicense fees shall be the standard Price
      List in effect at the time the Application Package is Sublicensed.

         Notwithstanding any other provision of this Agreement, if the Alliance
      Member issues a written Sublicense quote and such quote is accepted by the
      applicable Sublicensee, for a period of ninety (90) days after the date
      of submission of the quote to the Sublicensee, the Sublicense fee
      applicable to the Programs identified in the quote shall be based on the
      Price List in effect on such date.

2.3   USERS

         The Sublicense fees for a Program shall be based and priced on the
      applicable User Level for the maximum number of Users for such Program, as
      specified in the Price List. The Alliance Member shall have the right to
      Sublicense Programs on any User basis specified in the Price List in
      effect at the time the applicable Program is Sublicensed.

3.    TERM

         This Addendum shall become effective on the Effective Date of this
      Addendum and shall be valid for three (3) years (the "Term") from the
      Effective Date. Unless terminated as provided in the Agreement. Any
      renewal of this Addendum shall be subject to renegotiation of terms and
      fees.

         Unless the expiration or termination is for default by the Alliance
      Member, the Alliance Member may continue using the release of the Programs
      then in the Alliance Member's possession on the Designated Systems for
      which Development Licenses were granted, solely for the purpose of
      continuing technical support for Sublicenses granted prior to termination.
      Such continued use of the Programs shall be subject to all the provisions
      of this Agreement, including, without limitation, payment of the Technical
      Support Fees specified herein.

4.    TERRITORY

         The Alliance Member shall have the right to market and grant
      Sublicenses of Programs in the United States only (the "Territory").

5.    TECHNICAL SUPPORT

5.1   TECHNICAL SUPPORT FOR SUBLICENSEES

      A.   INSTALLATION

         The Alliance Member or its Distributors will be responsible for any
      assistance needed to install the Application Package at Sublicensee
      sites.

      B.   SUBLICENSING SUPPORT

         The Alliance Member is responsible for providing all technical
      support, training and consultations to its Sublicensees and
      Distributors. In consideration of the payments specified in
      Section 5.2, the Alliance Member shall have the right to use the Oracle
      Technical Support services acquired for its Supported Development
      Licenses to provide technical support services to its Sublicensees
      as further set forth in the Agreement. The Alliance Member shall
      continuously maintain Oracle Technical Support services for the
      Development Licenses during the period during which the Alliance Member
      provides technical support services to any Sublicensees. Any questions
      from the Alliance Member's Sublicensees or Distributors will be referred
      by Oracle to the Alliance Member.

6.2   TECHNICAL SUPPORT FEES

         For Technical Support services for Sublicensees, each year the
      Alliance Member agrees to pay Oracle annual Technical Support Fees for
      each Program Sublicensed under this Addendum, a previous Alliance Member
      Addendum, or previous distribution agreement between the parties hereto,
      where the Sublicensee received technical support services for such
      Application Specific Full Use Program during the applicable support
      period from the Alliance Member. If the Sublicensee has not continuously


                                       2



     maintained Technical Support services from the earlier of the date of
     Sublicense or the date of shipment, the Alliance Member shall be
     required to reinstate lapsed Technical Support services for the
     applicable Sublicense at the fees set forth in this Section.

          Annual Technical Support Fees for a Program shall be equal to the
     applicable Technical Support Percentage Rate specified below,
     corresponding to the highest Technical Support Services level specified
     below for any Development License used under this Addendum, of the
     cumulative Sublicense fees accrued to Oracle for a Sublicensed Program
     supported by the Alliance Member.

     
     
     Technical Support                 Technical Support
     Services Level                    Percentage Rate
     -----------------                 -----------------
                                          
     Silver                                  19%
     Gold                                    26%
     

          In addition, the Alliance Member shall pay reinstatement charges to
     reinstate lapsed Technical Support services at an amount equal to the
     applicable Technical Support Percentage Rate specified above,
     corresponding to the highest Technical Support Services level specified
     below for any Development License used under this Addendum, of the
     cumulative Sublicense fees accrued to Oracle for the Sublicensed
     Program multiplied by the number of years for which Technical Support
     services have lapsed. For example, if the period of lapse was 2.5 years,
     the Alliance Member has acquired Silver Technical Support services for
     its Development Licenses in the Technical Support renewal year, and the
     original Sublicense fee for the Program was $100, then the reinstatement
     fee would be calculated as follows: .19 X $100 X 2.5.

          Upon December 31 of each year, the Alliance Member shall provide
     Oracle a report setting forth all of the Alliance Members' Sublicenses
     and those Sublicensed Programs which were supported by the Alliance
     Member during the calendar year. The report shall also include the
     applicable Technical Support Fees and reinstatement fees due and payable
     to Oracle for such calendar year. The Alliance Member shall provide
     Oracle with payment of all Technical Support Fees and reinstatement fees
     for such calendar year required under the applicable December 31 report
     with such report in the form of a check made out in the amount of such
     fees. All Technical Support Fees paid to Oracle are noncancelable and
     nonrefundable.

          On or after each anniversary during the Term of this Addendum,
     Oracle may amend the Technical Support Percentage Rates set forth above
     based on Oracle's then-current standard Technical Support percentage
     rate schedule.

8.   SUBLICENSE REPORTS

          Within twenty (20) days of the last day of each and every month,
     the Alliance Member shall send Oracle a report detailing for that month:

     A. For each Sublicensed Application Package shipped during the prior
     month, Sublicensee name, address, make/model and operating system of the
     Designated System, date of shipment, Application Specific Full Use
     Programs shipped, maximum number of licensed Users, whether the
     Sublicense is a Trial Sublicense, and total Sublicense fees and
     Technical Support Fees due to Oracle;

     B. For each Application Program licensed to end-users to be used with
     previously installed software licensed by Oracle in conjunction with the
     Application Program, Sublicensee name, address, make/model and operating
     system of the computer, and date of installation; and

     C. The Distributor agreements executed during the prior month, including
     names and addresses of the Distributors.

          The Alliance Member shall require its Distributors to report this
     information to the Alliance Member on a monthly basis and will include
     it in the report for the month in which the Alliance Member received the
     information. The Alliance Member shall provide Oracle with payment of
     all fees required under the monthly report with such report in the form
     of a check made out in the amount of such fees.

7.   ADDITIONAL LICENSES

          During the Term, the Alliance Member may order production release
     versions of Oracle off-the-shelf Programs available as production
     release as of the Effective Date of this Addendum and listed on the Price
     List in effect as of such date. The license fee for Development Licenses
     shall be equal to Oracle's standard list license fees in effect when an
     order is placed. The Alliance Member shall have the right to order
     Programs for use as Marketing Support Licenses at no further charge to
     the Alliance Member. The Alliance Member may obtain Technical Support
     services from Oracle for such Programs under Oracle's applicable
     Technical Support fees and policies in effect when such services are
     ordered.

     The Effective Date of this Addendum shall be January 1, 2000.
                                                  ----------------

     EXECUTED BY THE ALLIANCE MEMBER:

     Authorized Signature: /s/ Donald Bloodworth
                           ---------------------
     Name: Donald Bloodworth
           -------------------------------------
     Title: CFO
            ------------------------------------


     EXECUTED BY ORACLE CORPORATION:


     Authorized Signature: /s/ Simeon Enemuo
                           ---------------------
     Name: /s/ SIMEON ENEMUO
           -------------------------------------
     Title: CONTRACT SPECIALIST
           -------------------------------------


                                       3



Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94095
(650) 506-7000
Oracle is a registered trademark of Oracle Corporation.
1-00



                                AMENDMENT ONE
                                   TO THE
                   APPLICATION SPECIFIC SUBLICENSE ADDENDUM
                                   TO THE
                          ORACLE ALLIANCE AGREEMENT
                                   BETWEEN
                               MEDICALOGIC INC
                                     AND
                              ORACLE CORPORATION

This document ("Amendment One") shall serve to amend the Application Specific
Addendum dated Jan. 1, 2000 (the "Addendum") to the Oracle Alliance Agreement
between Medicalogic Inc (the "Alliance Member") and Oracle Corporation
("Oracle") dated Jan. 1, 2000 (the "Agreement").

The Addendum is amended as follows:

1.   In the first paragraph of Section 2.1, delete the words "forty percent
     (40%)" and replace with the words "thirty-five percent (35%)".

2.   In the second paragraph of Section 2.1, replace the words "twenty (20)"
     with the words "thirty (30)".

3.   In the first sentence of Section 3, delete the words "for three (3) years
     (the "Term") from the Effective Date," replace with the words "until
     December 31, 2001".

4.   In Section 5.2, delete the following:




     "Technical Support                              Technical Support
     Services Level                                  Percentage Rate
     ------------------                              -----------------
                                                  
     Bronze                                                16%
     Silver                                                19%
     Gold                                                  26%"


and replace with the following:




     "Technical Support                              Technical Support
     Services Level                                  Percentage Rate
     ------------------                              -----------------
                                                  
     Bronze                                                16%
     Product Support & Update Subscription                 19%


The Alliance Member can sell only Update Subscription Services at fifteen
percent (15%) royalty rate of net license fees, provided that the Alliance
Member does not sell technical phone support to those customers."


                                       1


5.   In Section 6A, delete the words, "and Technical Support Fees due to
     Oracle".

6.   In the first sentence of Section 6, replace the words "twenty (20)" with
     the words "thirty (30)".

Other than the modifications set forth above, the terms and conditions of the
Addendum remain unchanged, and in full force and effect.

The Effective Date of this Amendment One is January 1, 2000.


MEDICALOGIC/MEDSCAPE, INC.                 ORACLE CORPORATION


By: /s/ Donald Bloodworth                  By: /s/ Simeon Enemuo
   -------------------------------            -------------------------------
Name: Donald Bloodworth                    Name: SIMEON ENEMUO
     -----------------------------              -----------------------------
Title:   CFO                               Title:  CONTRACT SPECIALIST
      ----------------------------               ----------------------------


                                       2

EX-10.34-1

                                                                Exhibit 10.34.1

                                                                 Execution Copy

                                  CONFIDENTIAL
             AMENDMENT NO. 1 TO INTERACTIVE SERVICES AGREEMENT

    This Amendment No. 1 to Interactive Services Agreement (this
"Amendment"), effective as of September 27, 2000, is made and entered into by
and between America Online, Inc. ("AOL"), a Delaware corporation, with its
principal offices at 22000 AOL Way, Dulles, Virginia 20166, and Medscape,
Inc. ("Interactive Content Provider" or "ICP"), a Delaware corporation, with
its principal offices at 224 West 30th Street, New York, New York 10001. AOL
and ICP may be referred to individually as a "Party" and collectively as the
"Parties."

                                 INTRODUCTION

    WHEREAS, AOL and ICP are parties to a Interactive Services Agreement
dated as of September 3, 1999 (the "Original Agreement"); and

    WHEREAS, the Parties desire to modify certain terms of the Original
Agreement, as provided below.

    NOW, THEREFORE, in consideration of the terms and conditions set forth in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, AOL and ICP hereby agree to
amend the Original Agreement in accordance with the following terms and
conditions:

                                    TERMS

1.  CARRIAGE AND PROMOTIONAL FEE. Section 3.4 of the Original Agreement is
hereby amended by striking the following language, "$10,000,000 is due on the
twelfth (12th) month anniversary of the Effective Date, and $10,000,000 is
due on the 24 month anniversary of the Effective Date" and replacing it with
the following language, "$5,000,000 is due on October 2, 2000, $3,083,340 is
due on January 2, 2001, $2,750,001 is due on May 1, 2000, $2,750,001 is due
on August 1, 2001, $2,750,001 is due on November 1, 2001, $2,750,001 is due
on February 1, 2002, and $916,656 is due on May 2, 2002."

3.  DEFINITIONS. Capitalized terms used but not defined herein shall have the
meanings given thereto in the Original Agreement.

4.  ORIGINAL AGREEMENT. Except as specifically amended hereby, the Original
Agreement remains in full force and effect.

5.  COUNTERPARTS. This Amendment may be executed in counterparts, each of
which will be deemed an original and all of which together will constitute
one and the same document.

    IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have executed this Amendment as of the date first above written.


AMERICA ONLINE, INC.                       MEDSCAPE, INC.

By:                                        By:
   ------------------                         ---------------------

Print Name:                                Print Name:
           ----------                                 -------------

Title:                                     Title:
      ---------------                            ------------------

EX-21.1

Exhibit 21.1

Subsidiaries of the Company.

AnywhereMD.com, Inc. (California)
MedicaLogic of Texas, Inc. (Delaware)
MedicaLogic S.A. (Switzerland)
Medscape, Inc. (Delaware)
Medscape Enterprises, Inc. (Delaware)
Medscape Pennsylvania, LLC (Delaware)
Medscape Portals, Inc. (Delaware)
Medscape Texas, LP (Texas)
Medscape U.K. Limited (U.K.)
Total eMed, Inc. (Delaware)
Total eMed of Tennessee, Inc. (Tennessee)
Total eMed Leasing Company, LLC (Tennessee)
Total eMed Financing Co., Inc. (Tennessee)

EX-23.1

Exhibit 23.1

Consent of Independent Auditors

The Board of Directors

MedicaLogic/Medscape, Inc.:

    We consent to incorporation by reference in the Registration Statements (Nos. 333-94751, 333-94761 and 333-37294) on Form S-8 of MedicaLogic/Medscape, Inc. of our report dated February 26, 2001, with respect to the consolidated balance sheets of MedicaLogic/Medscape, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the year sin the three-year period ended December 31, 2000, which report appears in the December 31, 2000 annual report on Form 10-K of MedicaLogic/Medscape, Inc.

/s/ KPMG LLP
Portland, Oregon
March 2, 2001