8-K/A

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K/A

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

Date of Report (Date of earliest event reported) March 25, 2002

MedicaLogic/Medscape, Inc.
(Exact name of registrant as specified in charter)

Oregon
(State or other jurisdiction
of incorporation) 000-28285
(Commission file number) 93-0890696
(IRS employer
identification no.)

20500 NW Evergreen Parkway
Hillsboro, Oregon 97124
(Address of principal executive offices)

(503) 466-3620
Registrants telephone number,
including area code

Not applicable
(Former name or former address, if changed since last report)

Item 2. Acquisition or Disposition of Assets.

        On January 24, 2002, Medicalogic/Medscape, Inc. (the "Company") commenced cases under Chapter 11 of the Bankruptcy Code (collectively, the "Bankruptcy Cases") in the United States Bankruptcy Court District of Delaware (the "Bankruptcy Court"). The Bankruptcy Cases are jointly administered and coordinated under Case Numbers 02 - 10253 (PJW) through 02 - 10258 (PJW). The Company, as debtor in possession, sought Bankruptcy Court approval to: (i) sell free and clear of liens pursuant to Section 363 of the Bankruptcy Code substantially all of its assets including those of its Digital Health Record ("DHR") business; and (ii) assume and assign pursuant to Section 365 of the Bankruptcy Code contracts used in its operations throughout the United States of America to GE Medical Systems Information Technologies, Inc. ("GEMS"), pursuant to an Asset Purchase Agreement, dated as of January 24, 2002, as amended by the First Amendment to Asset Purchase Agreement, dated as of March 18, 2002, as further amended by the Second Amendment to Asset Purchase Agreement, dated as of March 25, 2002 (the "Purchase Agreement").

        On March 19, 2002, the United States Bankruptcy Court, District of Delaware approved the sale of substantially all of the assets and the assumption of certain liabilities of the Company's DHR segment to GEMS for approximately $35.3 million in cash. The transaction was structured as a sale by MedicaLogic/Medscape, Inc. of substantially all of the assets and the assumption of certain liabilities of the Company's Digital Health Records segment. The Company received initial proceeds of approximately $33.3 million at closing from GEMS on March 25, 2002. The remaining proceeds of approximately $2.0 million will be held in an escrow account for up to one year pursuant to the terms of an Escrow Agreement dated as of March 25, 2002.

Item 7. Financial Statements and Exhibits.

        MedicaLogic/Medscape, Inc. (the "Company") is filing this amendment to its Current Report on Form 8-K dated April 9, 2002 to include certain financial information relating to the sale of the Digital Health Records segment of the Company to GE Medical Systems Information Technologies, Inc. which was completed in March 2002.

(b)

Pro Forma Financial Information

INTRODUCTION

        The following unaudited pro forma combined condensed financial statements give effect to the sale of substantially all of the assets and the assumption of certain liabilities of the Digital Health Records ("DHR") segment of MedicaLogic/Medscape Inc. (the "Company") by GE Medical Systems Information Technologies, Inc. ("GEMS"). The Pro Forma Combined Condensed Statement of Operations for the year ended December 31, 2001 present unaudited pro forma operating results of MedicaLogic/Medscape, Inc. as if the sale had occurred as of January 1, 2001. The Pro Forma Combined Condensed Balance Sheet as of December 31, 2001 presents the unaudited pro forma financial condition of MedicaLogic/Medscape, Inc. as if the sale had occurred as of the balance sheet date.

        On January 24, 2002, the Company entered into an asset purchase agreement with GEMS and commenced cases under Chapter 11 of the Bankruptcy Code (collectively, the "Bankruptcy Cases") in the United States Bankruptcy Court District of Delaware (the "Bankruptcy Court"). The Bankruptcy Cases are jointly administered and coordinated under Case Numbers 02 - 10253 (PJW) through 02 - 10258 (PJW). On March 19, 2002, the United States Bankruptcy Court, District of Delaware approved the sale of the Company's DHR segment to GEMS for approximately $35.3 million in cash. The transaction was structured as a sale by MedicaLogic/Medscape, Inc. of substantially all of the assets and the assumption of certain liabilities of the Company's DHR segment. The Company received initial proceeds of approximately $33.3 million at closing from GEMS on March 25, 2002. The remaining sales proceeds of approximately $2.0 million will be held in an escrow account for up to one year pursuant to the terms of an Escrow Agreement dated as of March 25, 2002.

        On December 26, 2001, the Company, completed the sale of its Internet portals business to WebMD Corporation, a Delaware corporation ("WebMD"), for approximately $10.0 million. In August 2001, the Company completed sale of its transcription services segment to TEM Holdings, LLC, a newly formed limited liability company funded by Parthenon Capital, LLC ("Parthenon"), a Boston based private equity firm, for approximately $6.0 million. The results of operations of the Internet portals and transcription services segments are classified as discontinued operations in the accompanying Combined Condensed Statement of Operations.

        These unaudited pro forma condensed consolidated financial statements may not be indicative of the Company's financial position or results of operations for any future period. The unaudited pro forma condensed consolidated financial statements set forth below should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2001 filed on Form 10-K with the Securities and Exchange Commission on April 16, 2002.

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
(in thousands, except share data)

				As Reported			Pro Forma Adjustments			Pro Forma As Adjusted
ASSETS
Current assets:
	Cash and cash equivalents			$	21,286		$	33,250	(a)	$	54,536
	Net assets of discontinued operations				338			(338	)(b)		—
	Prepaid expenses and other current assets				2,837			2,000	(a)		4,837
		Total current assets			24,461			34,912			59,373
Long-term investment and other assets					3,156			—			3,156
			Total assets	$	27,617		$	34,912		$	62,529
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	2,640		$	—		$	2,640
	Accrued and other liabilities				4,396			—			4,396
	Other current liabilities				438			—			438
		Total current liabilities			7,474			—			7,474
Long-term liabilities, net of current portion					221			—			221
			Total liabilities		7,695			—			7,695
Series 1 convertible redeemable preferred stock, 50,000,000 authorized, no par value, 5,472,207 and no shares issued and outstanding at December 31, 2001					17,878			—			17,878
Shareholders' equity:
	Common stock, no par value; authorized 100,000,000 shares; issued and outstanding 51,476,502 shares at December 31, 2001				1,254,458			—			1,254,458
	Common stock notes receivable, net				(569	)		—			(569	)
	Warrants				52,722			—			52,722
	Deferred stock compensation				(238	)		—			(238	)
	Accumulated deficit				(1,304,329	)		34,912	(c)		(1,269,417	)
		Total shareholders' equity			2,044			34,912			39,956
			Total liabilities and shareholders' equity	$	27,617		$	34,912		$	62,529

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.

MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001
(in thousands, except share data)

			As Reported			Pro Forma Adjustments			Pro Forma As Adjusted
Operating expense:
	General and administrative		$	7,129		$	—		$	7,129
		Total operating expense		—			—			7,129
Operating loss				(7,129	)		—			(7,129	)
	Other income, net			492			—			492
Loss from continuing operations				(6,637	)		—			(6,637	)
Discontinued operations:
	Loss from operations of discontinued operations			(653,262	)		46,377	(A)		(606,885	)
	Loss on disposal of discontinued operations			(249,582	)		34,912	(B)		(214,670	)
Net loss			$	(909,481	)	$	81,289		$	(828,192	)
Accretion of preferred stock redemption preference				(9,851	)		—			(9,851	)
Net loss attributable to common shareholders			$	(919,332	)	$	81,289		$	(838,043	)
Basic and diluted net loss per share:
	Loss from continuing operations, including accretion of preferred stock redemption preference		$	(0.29	)				$	(0.29	)
	Loss from discontinued operations			(16.15	)					(14.69	)
Net loss per share attributable to common shareholders			$	(16.44	)				$	(14.98	)
Weighted average shares:
basic and diluted				55,931,676						55,931,676

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.

MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

(1)  UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS

a.

Reflects initial proceeds of $33.3 million received by the Company as part of the total purchase price of $35.3 million pursuant to an Asset Purchase Agreement among the Company and GE Medical Systems Information Technologies, Inc. ("GEMS") dated as of January 24, 2002, as amended by the First Amendment to Asset Purchase Agreement, dated as of March 18, 2002, as further amended by the Second Amendment to Asset Purchase Agreement, dated as of March 25, 2002 (the "Purchase Agreement"). The Company has agreed, pursuant to the Escrow Agreement dated March 25, 2002, that $2.0 million of the purchase price will be held in escrow for up to one year.

b.

Reflects the sale of the net DHR segment assets to GEMS as described in the Purchase Agreement as if the transaction occurred as of the balance sheet date.

c.

Reflects the estimated gain on disposal of the sale of the DHR segment.

(2)  UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS

A.

Reflects the elimination of the operations of the DHR segment for the year ended December 31, 2001.

B.

Reflects the estimated gain on disposal of the sale of the DHR segment.

(c)

Exhibits

Exhibit No.	Description
2.1	Second Amendment to Asset Purchase Agreement
99.1	Escrow Agreement

SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MedicaLogic/Medscape, Inc.
Date: April 16, 2002	By:	/s/ ADELE KITTREDGE MURRAY Adele Kittredge Murray Chief Executive Officer and President

EXHIBIT INDEX

Exhibit No.	Description
2.1	Second Amendment to Asset Purchase Agreement, dated as of March 25, 2002, by and among MedicaLogic/Medscape, Inc., MedicaLogic Enterprises, Inc., MSCP Holdings, Inc., MedicaLogic of Texas, Inc., MediaLogic of Pennsylvania, LLC, and GE Medical Systems Information Technologies, Inc.
99.1	Escrow Agreement, dated as of March 25, 2002, by and among MedicaLogic/Medscape, Inc., GE Medical Systems Information Technologies, Inc., and Wells Fargo Bank Minnesota, National Association.

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MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 (in thousands, except share data)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001 (in thousands, except share data)
MEDICALOGIC/MEDSCAPE, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SIGNATURE
EXHIBIT INDEX

EX-2.1

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SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT

        SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of March 25, 2002 (this "Second Amendment"), among MedicaLogic/Medscape, Inc., an Oregon corporation ("Parent"), MedicaLogic Enterprises, Inc., a Delaware corporation ("MedicaLogic Enterprises"), MSCP Holdings, Inc., a Delaware corporation ("MSCP Holdings"), MedicaLogic of Texas, Inc., a Delaware corporation ("MedicaLogic Texas"), and MedicaLogic Pennsylvania, LLC, a Delaware limited liability company ("MedicaLogic Pennsylvania" and, together with Parent, MedicaLogic Enterprises, MSCP Holdings and MedicaLogic Texas, "Seller"), and GE Medical Systems Information Technologies, Inc., a Wisconsin corporation ("Buyer").

W I T N E S S E T H:

        WHEREAS, Buyer and Seller have entered into the Asset Purchase Agreement, dated as of January 24, 2002, as amended by First Amendment to Asset Purchase Agreement, dated as of March 18, 2002 (as amended, the "Asset Purchase Agreement"), providing for the sale of substantially all of the assets of the Business (as defined in the Asset Purchase Agreement) upon the terms and subject to the conditions contained therein;

        WHEREAS, Buyer and Seller have entered into the Consent To Exclude Certain Leases dated March 14, 2002;

        WHEREAS, Buyer and Seller have entered into the First Amendment to Asset Purchase Agreement dated March 18, 2002; and

        WHEREAS, Buyer and Seller desire to amend the Asset Purchase Agreement in certain respects in accordance with Section 12.7 thereof.

        NOW, THEREFORE, in consideration of the premises and of the agreements herein contained, the parties hereto agree as follows:

        1.    The Disclosure Schedules to the Asset Purchase Agreement shall be revised as follows:

        a.    Schedule 2.2(d) is hereby amended by amending and restating in its entirety item 3 as follows: "The laptop computers (including the Microsoft licenses loaded onto such computers), peripherals and other office equipment used by the Retained Employees. In the event of any inconsistency between this Schedule 2.2(d) Item 3 and the other schedules to the Agreement, this Schedule 2.2(d) Item 3 shall control."

        b.    Schedule 3.2 is hereby amended by amending and restating in its entirety item (v) as follows: "(v) Employee promissory notes in favor of Seller, except for the following employees: Chad Aicklen; Mike Cohen; Malcolm Costello; John Geller; Mitchell Jackson; Rheta Kwan; Mark Leavitt; David Moffenbeier; and, Pat Wolfram.

        c.    Schedule 2.1(e) is hereby amended by adding as "Seller Agreements" the Contracts listed on Annex A and deleting the Contract listed as item 80 (Letter Agreement for Consulting Services with J. Robert Beck (Consultant) and Medscape, Inc., dated September 30, 1999). Schedule 2.1(e) is hereby further amended by adding the following Contract as a "Seller Agreement": Data Supply Agreement, by and between MedicaLogic/Medscape, Inc. and Surveillance Data Inc., dated February 2002.

        d.    Schedule 5.13(a) is hereby amended by adding the following person: John LeClair.

        e.    Schedule 5.13(b)(ii) is hereby amended by deleting the following consultant: John LeClair.

        f.      Attachment 2.1(e)(iii) is hereby amended by deleting the following consultant: John LeClair.

        2.    Capitalized terms not defined herein shall have the respective meanings provided in the Asset Purchase Agreement. The Asset Purchase Agreement, as amended by this Second Amendment, shall

remain in full force and effect in accordance with its terms. This Second Amendment may be executed in two or more counterparts.

        3.    To the extent of any inconsistencies between this Second Amendment and the Asset Purchase Agreement, this Second Amendment shall govern.

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be signed by their respective officers thereunto duly authorized all as of the date first written above.

MEDICALOGIC/MEDSCAPE, INC.
By	/s/  MARK E. BOULDING
Name:	Mark E. Boulding
Title:	General Counsel, Executive Vice President and Secretary
MEDICALOGIC ENTERPRISES, INC.
By	/s/  MARK E. BOULDING
Name:	Mark E. Boulding
Title:	Secretary
MSCP HOLDINGS, INC.
By	/s/  MARK E. BOULDING
Name:	Mark E. Boulding
Title:	Secretary
MEDICALOGIC OF TEXAS, INC.
By	/s/  MARK E. BOULDING
Name:	Mark E. Boulding
Title:	Secretary
MEDICALOGIC PENNSYLVANIA, LLC
By	/s/  MARK E. BOULDING
Name:	Mark E. Boulding, on behalf of the sole member
GE MEDICAL SYSTEMS INFORMATION TECHNOLOGIES, INC.
By	/s/  PAM S. KROP
Name:	Pam S. Krop
Title:	Counsel

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SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT

EX-99.1

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Execution Copy

ESCROW AGREEMENT

ESCROW AGREEMENT (this "Agreement"), dated as of March 25, 2002, by and among GE Medical Systems Information Technologies, Inc., a Wisconsin corporation ("Buyer"), MedicaLogic/Medscape, Inc., an Oregon corporation ("Seller"), and Wells Fargo Bank Minnesota, National Association, a national banking association, as escrow agent (the "Escrow Agent"). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Asset Purchase Agreement (as hereinafter defined).

WHEREAS, Buyer and Seller and certain of its Affiliates have entered into the Asset Purchase Agreement, dated as of January 24, 2002, as amended by the First Amendment to Asset Purchase Agreement, dated as of March 18, 2002, as further amended by the Second Amendment to Asset Purchase Agreement, dated as of March 25, 2002 (as amended, the "Asset Purchase Agreement"), pursuant to which Seller has agreed to sell substantially all of the assets of the Business to Buyer in accordance with the terms thereof;

WHEREAS, Buyer and Seller have agreed that a portion of the Purchase Price shall be deposited into escrow in order to provide the source of funds for payment of any amounts that may be owed to Buyer pursuant to Section 3.2 of the Asset Purchase Agreement, which provides for a working capital adjustment that may result in a Subsequent Payment being owed to Buyer from Seller, and Section 12.1 of the Asset Purchase Agreement, which provides for the payment of certain amounts with respect to Excluded Liabilities for which Buyer may be indemnified; and

WHEREAS, Buyer and Seller have requested that the Escrow Agent have custody of the Escrow Fund (as hereinafter defined) in accordance with and subject to the terms of this Agreement and the Escrow Agent desires to hold, invest and distribute the Escrow Fund pursuant to the terms of this Agreement.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, Buyer, Seller and the Escrow Agent hereby agree as follows:

        1.    Appointment.    Buyer and Seller nominate, constitute and appoint Wells Fargo Bank Minnesota, National Association as escrow agent to hold the Escrow Fund in escrow upon the terms and conditions hereinafter set forth.

        2.    Agreement of Escrow Agent.    The Escrow Agent hereby agrees to act as escrow agent in accordance with the terms, conditions and instructions contained in this Agreement.

        3.    Deposit of the Escrow Fund.    At the direction and on behalf of Seller, Buyer is hereby delivering to the Escrow Agent the sum of $2,000,000 in cash (the "Escrow Fund"), to be held in escrow and invested and distributed in accordance with the terms and conditions hereinafter set forth. The Escrow Agent hereby acknowledges receipt from Buyer of the Escrow Fund.

        4.    Disposition of Escrow Fund.    (a) If Seller is obligated to pay the Independent Accountant's fees and expenses pursuant to Section 3.2(c) of the Asset Purchase Agreement or owes Buyer a Subsequent Payment as determined pursuant to Section 3.2 of the Asset Purchase Agreement, the Escrow Agent shall be so notified and shall promptly pay, in the following order, (i) first, any fees, costs and expenses owing to the Independent Accountant which Seller is obligated to pay and (ii) next, the amount of the Subsequent Payment.

        (b)  Buyer shall be entitled to receive payment from the Escrow Fund in the amount which, at any time and from time to time, Buyer is entitled to be indemnified, held harmless or reimbursed as provided in Section 12.1(b) of the Asset Purchase Agreement, in each case in accordance with the following provisions:

          (i)  If and whenever Buyer shall assert a claim for indemnification under the Asset Purchase Agreement (a "Claim"), Buyer shall provide the Escrow Agent and Seller with a written notice (a

"Claim Notice") to the Escrow Agent and Seller, signed by a duly authorized officer of Buyer, which (i) sets forth in reasonable detail the facts giving rise to such Claim for indemnification under the Asset Purchase Agreement, (ii) includes the amount (if then known) or the method of computation of the amount of such Claim and (iii) includes a reference to the provision of the Asset Purchase Agreement or any other agreement, document or instrument executed under the Asset Purchase Agreement or in connection with the Asset Purchase Agreement upon which such Claim is based.

        (ii)  If Seller receives a Claim Notice, Seller may, as herein provided, respond in writing to such Claim Notice (with a copy to the Escrow Agent) within 10 business days from the date the same was delivered (herein called the "Response Period"). If neither Buyer nor the Escrow Agent receives such written response from Seller within the Response Period, then Seller shall be deemed to have acknowledged the adequacy of such notice and the correctness of such Claim for the full amount thereof as specified in the Claim Notice, and the Escrow Agent, shall immediately deliver to Buyer out of the Escrow Fund cash in the amount specified in the Claim Notice or such lesser amount as shall then remain in escrow.

        (iii)  At any time during the Response Period, Seller may notify Buyer, with a copy to the Escrow Agent, that the Claim described in the Claim Notice or any portion thereof is disputed by Seller by defending the basis for the Claim (such notice being hereinafter referred to as the "Dispute Notice"). Upon receipt of a Dispute Notice, the Escrow Agent: (1) shall deliver to Buyer out of the Escrow Fund the amount equal to any portion of the Claim that is not disputed by Seller and (2) shall designate and segregate out of the Escrow Fund the portion of the Escrow Fund subject to the Claim that is disputed by Seller. Thereafter, the Escrow Agent shall not dispose of that remaining portion of the Escrow Fund subject to the Claim until the Escrow Agent shall have received a certified copy of a final judgment or decree of a court of competent jurisdiction with respect to the Claim or Claims set forth in the Claim Notice, or the Escrow Agent shall have received a copy of a written agreement between Buyer and Seller resolving such dispute and setting forth the amount, if any, of the Claim which Buyer is entitled to receive. The Escrow Agent will pay Buyer the amount Buyer is entitled to receive as set forth in such judgment or decree after the expiration of 10 business days from the receipt of such judgment or decree or, in the event that the amount to which Buyer is entitled is established pursuant to an agreement between Buyer and Seller, as soon as possible after the Escrow Agent's receipt of such agreement. Copies of any written agreement between Seller and Buyer confirming that Buyer is entitled to a portion, but not all of the amount, claimed by Buyer may be filed by Buyer with the Escrow Agent, with the effect set forth in the preceding sentence as to the agreed amount, but no such agreement or filing thereof shall operate as a waiver of Buyer's rights as to the disputed amount, including without limitation its right to recover the same (unless such waiver is expressly set forth in such agreement), and any final judgment or decree of a court of competent jurisdiction that Buyer is entitled to receive the disputed amount may be filed with the Escrow Agent and shall, when filed with the Escrow Agent, be acted on as set forth above. The judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined.

        (c)  The Escrow Agent shall not dispose of all or any portion of the Escrow Fund other than as provided in this Agreement.

        5.    Permitted Investments.    At the written direction of Seller, the Escrow Fund shall be invested in (a) direct obligations of the United States Government (or agencies or instrumentalities thereof) or any state of the United States (or agencies or instrumentalities of any thereof), (b) certificates of deposit, time deposits or other interest bearing deposits of commercial banks and savings and loan institutions having total capital and surplus of at least $100,000,000, (c) commercial paper issued by any corporation organized and existing under the laws of the United States of America or any state thereof

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(other than any corporation that is a party hereto or an Affiliate of such party), which at the time of purchase are rated A1 or better by Standard & Poor's Corporation, Inc. or P1 or better by Moody's Investors Services, (d) interests in any money market mutual fund registered under the Investment Company Act of 1940, as amended, or (e) investments that are mutually approved in writing by Buyer and Seller (collectively, "Permitted Investments"). In the event that the Escrow Agent does not receive investment instructions to invest funds comprising the Escrow Fund, the Escrow Agent shall invest such funds in the Wells Fargo Treasury Plus Money Market Fund, or a successor or similar fund, which invests in (i) short-term securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities; and/or (ii) repurchase agreements relating to such securities.

        6.    Release of Escrow Fund; Termination.    (a) On the earlier of (i) the 9-month anniversary of the date hereof or (ii) the winding up of Seller (such earlier date, the "Termination Date"), the Escrow Agent shall, subject to the provisions of Section 8 below, deliver to Seller an amount equal to (A) the balance of the Escrow Fund plus (B) earnings on the Escrow Fund as provided in Section 7 below minus (C) any amount designated as subject to a Claim pursuant to a Claim Notice to the extent such Claim has not been resolved prior to such date, and minus (D) Seller's portion of any unpaid expenses or indemnity amounts due to the Escrow Agent pursuant to Section 8 or Section 12 below. Any amount retained as a portion of the Escrow Fund after the Termination Date shall be held by the Escrow Agent subject to the terms and conditions of this Agreement and upon resolution of all pending Claims, any portion of the Escrow Fund retained which is not required to satisfy such Claims shall be distributed to Seller.

        (b)  Upon distribution of the entire Escrow Fund this Agreement shall be terminated.

        (c)  At any time prior to final termination of the escrow as provided in Section 6(b) hereof, the Escrow Agent shall, if so instructed in a writing signed by Buyer and Seller, release from the Escrow Fund to Buyer or Seller, the amount of cash specified in such writing.

        7.    Earnings on Escrow Fund.    (a) On the Termination Date the Escrow Agent shall pay to Seller any earnings on the balance of the Escrow Fund.

        (b)  The parties hereby agree that Seller shall include in income and otherwise report, for all tax purposes, the interest on the Permitted Investments and any other income earned or accrued with respect to the Escrow Fund.

        8.    Compensation and Reimbursement of Escrow Agent.    (a) The Escrow Agent shall be entitled to the fees listed on Annex A attached hereto for the performance of services by the Escrow Agent hereunder.

        (b)  The compensation and expenses payable to the Escrow Agent hereunder shall be paid one-half by Buyer and one-half by Seller. At the election of the Escrow Agent, the Escrow Agent may withhold and retain (for the sole benefit of the Escrow Agent) from the amounts otherwise payable to Seller any amount (or portion thereof) payable by Seller under this Section 8, any such withheld amounts being deemed to have been paid by Seller in respect of its obligations under this Section 8.

        9.    Replacement of Escrow Agent.    (a) The Escrow Agent may resign its duties and obligations hereunder by giving to Buyer and Seller written notice to that effect, but its resignation shall not become effective until a successor escrow agent shall have been appointed by mutual agreement, in writing, by Buyer and Seller. In the event the Escrow Agent is dissolved, becomes bankrupt or is otherwise incapable of acting hereunder, Buyer and Seller shall within 10 business days of the occurrence of the event which renders the Escrow Agent incapable of performing hereunder, by mutual consent, appoint a new escrow agent. The Escrow Agent shall, upon receipt of joint written instructions from Buyer and Seller, deliver the Escrow Fund to any such successor escrow agent. In the event Buyer and Seller are unable to agree upon a successor escrow agent within 10 business days after receipt of the Escrow Agent's written resignation or within 10 business days after the occurrence of the event

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which renders the Escrow Agent incapable of performing hereunder, the Escrow Agent shall have the right to petition a court of competent jurisdiction for the appointment of a successor escrow agent.

        (b)  Buyer and Seller shall have the power at any time by mutual consent to remove the Escrow Agent by written notice. Such removal shall take effect upon delivery of the Escrow Fund to a successor escrow agent designated in joint written instructions signed by Buyer and Seller. The Escrow Agent shall deliver the Escrow Fund without unreasonable delay after receiving the designation of such successor escrow agent.

        (c)  Upon the appointment of a successor escrow agent pursuant to this Section 9, the successor escrow agent shall be deemed to be the Escrow Agent for all purposes of this Agreement.

        10.    Concerning the Escrow Agent.    Neither the Escrow Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. The Escrow Agent shall have only those duties specified herein which shall be deemed purely ministerial in nature. Without limiting the generality of the foregoing, the Escrow Agent (i) makes no representation or warranty with respect to this Agreement, other than the representations and warranties set forth in Section 11, except that the Escrow Agent represents and warrants that it has duly executed and delivered this Agreement and that this Agreement is a valid and binding obligation of the Escrow Agent enforceable against it in accordance with its terms, (ii) shall not have any duty to ascertain or inquire into the performance or observance by Buyer or Seller of any of the terms, covenants or conditions of the Asset Purchase Agreement referred to in the preamble or the body of this Agreement and shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument, or document between the other parties hereto, in connection herewith, including, without limitation, the Asset Purchase Agreement, (iii) may consult with legal counsel selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel and (iv) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing reasonably believed by it to be genuine and signed or sent by the proper party or parties. Buyer and Seller shall each execute a certificate of incumbency (in the form of a Secretary's Certificate or otherwise) for the purpose of establishing the identity of the representatives of each entitled to issue instructions or directions to the Escrow Agent on behalf of such party.

        11.    Representations and Warranties.    Each of the parties hereto represents and warrants to each of the other parties hereto that:

          (i)  it has full legal right, power, capacity and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to comply with the terms and conditions hereof;

        (ii)  the execution, delivery and performance of this Agreement have each been duly authorized and approved by all necessary corporate action on the part of such party and do not require any further authorization or consent of such party or any other person;

        (iii)  this Agreement constitutes the legal, valid and binding agreement of such party and is enforceable in accordance with its terms against such party; and

        (iv)  the execution, delivery and performance of this Agreement by such party will not result in a breach of or loss of rights under or constitute a default under or a violation of any trust (constructive or other), agreement, judgment, decree, order or other instrument to which it is a party or it or its properties or assets may be bound.

        12.    Indemnification of Escrow Agent.    Each of Buyer and Seller agree jointly and severally to fully indemnify and hold harmless the Escrow Agent against and in respect of (i) any claim made against the

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Escrow Agent because of its acting or failing to act in connection with any of the transactions contemplated hereby and (ii) any loss the Escrow Agent may sustain as a result of its acceptance of the Escrow Fund or arising from the performance of its duties hereunder, including the reasonable fees and expenses of counsel; provided that the Escrow Agent shall not be entitled to indemnification with respect to any claim or loss caused by or arising out of its gross negligence or willful misconduct. Buyer and Seller agree that any payments required by this Section 12 shall be paid one-half by Buyer and one-half by Seller. Such indemnification shall survive the resignation or removal of the Escrow Agent and the termination of this Agreement until extinguished by any applicable statute of limitations.

        13.    Notices.    All notices or other communications required or permitted hereunder shall be in writing and shall be given or delivered by personal delivery, by registered or certified mail (first class postage prepaid) or by recognized private courier addressed as follows:

If to Buyer, to:

GE Medical Systems Information Technologies, Inc.
8200 West Tower Avenue
Milwaukee, WI 53233
Attention: President

with copies to:

GE Medical Systems Information Technologies, Inc.
8200 West Tower Avenue
Milwaukee, WI 53233
Attention: General Counsel

and:

Sidley Austin Brown & Wood
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: David J. Zampa, Esq.

If to Seller, to:

121 Magnolia Lane
Princeton, New Jersey 08540
Attention: Mark E. Boulding

with copies to:

Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
Attention: Conor D. Reilly, Esq.
Scott A. Kislin, Esq.

If to the Escrow Agent, to:
Wells Fargo Bank Minnesota, National Association
213 Court Street, Suite 902
Middletown, CT 06457
Attention: Corporate Trust Services

or to such other address as such party may indicate by a notice delivered to the other party hereto.

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Any notice, consent, authorization, direction or other communication delivered as aforesaid shall be deemed to have been effectively delivered and received, if sent by recognized private overnight courier service, on the date following the date upon which it is delivered to such courier service, if sent by mail, on the earlier of the date of actual receipt or the fifth business day after deposit in the United States mail, or, if delivered personally, on the date of such delivery.

        14.    Assignment.    Neither this Agreement nor any interest in the Escrow Fund shall be assignable by Seller. Buyer and the Escrow Agent may assign their respective rights hereunder to any person including any successor corporation in the event of a merger, consolidation or transfer or sale of all or substantially all of its stock or assets. The Escrow Agent may assign its rights hereunder to a successor Escrow Agent appointed hereunder. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs, executors, administrators, legal representatives and permitted assigns.

        15.    Miscellaneous.    Neither this Agreement nor any provision hereof may be amended, modified, waived, discharged or terminated orally, but only by an instrument in writing duly signed by or on behalf of all of the parties hereto. The headings of this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 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.

        16.    Further Assurances.    In case at any time any further action is necessary or desirable to carry out 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 may be reasonably requested by another party.

        17.    Governing Law.    Except as otherwise provided herein, this Agreement shall be governed by and construed in accordance with the laws in effect in the State of New York without giving effect to its conflicts of law principles.

        18.    Jurisdiction / Arbitration.    Upon the Bankruptcy Court no longer having jurisdiction over this Agreement and the transactions contemplated hereby, any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination or validity thereof ("Dispute") shall be finally settled by binding arbitration in New York, New York, administered by the CPR Institute under its commercial Arbitration Rules then in effect, as amended by this Agreement. The law applicable to the arbitration, including the administration and enforcement thereof, shall be the Federal Arbitration Act, 9 U.S.C. §§ 1-16, as amended from time to time, and the law governing this Agreement. The cost of the arbitration, including the fees and expenses of the arbitrator(s), shall be shared equally by Buyer and Seller. Each party shall bear the cost of preparing and presenting its case. The arbitration award ("Award") shall be presented to the parties in writing, and upon request of either Buyer or Seller, shall specify the factual and legal bases for the Award. The Award may be confirmed and enforced in any court of competent jurisdiction. Any post-Award proceedings will be governed by the Federal Arbitration Act. Notwithstanding any of the foregoing, either Buyer or Seller may, without inconsistency with this arbitration provision, apply to any court having jurisdiction hereof and seek interim provisional, injunctive or other equitable relief until the Award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or any Award, or to obtain interim relief, neither Buyer or Seller nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of Buyer and Seller.

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written by their duly authorized officers.

MEDICALOGIC/MEDSCAPE, INC.
By:	/s/  MARK E. BOULDING Name: Mark E. Boulding Title: General Counsel, Executive Vice President and Secretary
GE MEDICAL SYSTEMS INFORMATION TECHNOLOGIES, INC.
By:	/s/  PAM S. KROP Name: Pam S. Krop Title: Counsel
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,     as Escrow Agent
By:	/s/  ROBERT L. REYNOLDS Name: Robert L. Reynolds Title: Vice President

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ESCROW AGREEMENT