Document:

Prepared by MerrillDirect

Exhibit 10.40

 

STOCK
PURCHASE AGREEMENT

by
and among

MEDICALOGIC/MEDSCAPE,
INC.,

MEDSCAPE
ENTERPRISES, INC.

and

TEM
HOLDINGS, LLC

 

 

Dated
as of July 31, 2001

 

 

 

 

TABLE
OF CONTENTS

	ARTICLE
  I SALE AND TRANSFER OF SHARES; PURCHASE PRICE; CLOSING; PURCHASE PRICE
  ADJUSTMENT
	 
	 	Section
  1.01	Sale
  and Transfer of Shares; Purchase Price
	 	Section
  1.02	Delivery
  of Shares and Payment of Purchase Price
	 	Section
  1.03	Closing
	 	 	 
	ARTICLE
  II REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY, THE SELLER AND THE
  SHARES
	 
	 	Section
  2.01	Organization,
  Qualifications and Corporate Power; Subsidiaries
	 	Section
  2.02	Authorization
  of Agreements, Etc.
	 	Section
  2.03	Validity
	 	Section
  2.04	Capitalization
  of the Company
	 	Section 2.05	Financial
  Statements
	 	Section
  2.06	Absence
  of Undisclosed Liabilities
	 	Section
  2.07	Absence
  of Certain Changes or Events
	 	Section 2.08	Governmental
  Approvals
	 	Section
  2.09	Title
  to Properties, Absence of Liens and Encumbrances
	 	Section 2.10	Intellectual Property
	 	Section 2.11	Status of
  Contracts
	 	Section 2.12	Litigation, Etc.
	 	Section 2.13	Taxes
	 	Section 2.14	Governmental
  Authorizations and Regulations
	 	Section 2.15	Labor Matters
	 	Section 2.16	Insurance
	 	Section
  2.17	Employee
  Benefit Plans
	 	Section
  2.18	Related
  Party Transactions
	 	Section 2.19	Brokers’
  or Finders’ Fees
	 	 	 
	ARTICLE
  III REPRESENTATIONS AND WARRANTIES AS TO THE PARENT
	 
	 	Section
  3.01	Organization
  and Corporate Power; Ownership of the Seller; Authorization of Agreements,
  Etc.
	 	Section
  3.02	Validity
	 	Section 3.03	Governmental
  Approvals
	 	Section
  3.04	Litigation
  Relating to the Transactions Contemplated Hereby
	 	 	 
	ARTICLE
  IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
	 
	 	Section 4.01	Power and
  Authority
	 	Section
  4.02	Authorization
  of Agreements, Etc.
	 	Section
  4.03	Validity
	 	Section 4.04	Governmental
  Approvals
	 	Section
  4.05	Litigation
  Relating to the Transactions Contemplated Hereby
	 	Section 4.06	Brokers’ or
  Finders’ Fees
	 	Section
  4.07	Purchase
  for Investment

 

 

	ARTICLE V COVENANTS
	 
	 	Section
  5.01	Certain
  Covenants of the Parent and the Seller
	 	Section 5.02	Books and Records
	 	Section 5.03	Certain Tax
  Matters
	 	 	 
	ARTICLE VI
  CONDITIONS PRECEDENT
	 
	 	Section
  6.01	Conditions
  Precedent to the Obligations of the Purchaser
	 	Section
  6.02	Conditions
  Precedent to the Obligations of the Seller
	 	 	 
	ARTICLE VII
  Survival
	 
	 	Section
  7.01	Survival
  of Representations and Warranties
	 	 	 
	ARTICLE VIII
  TERMINATION OF AGREEMENT
	 
	 	Section
  8.01	Termination
  of Agreement Prior to Closing
	 	Section
  8.02	Method
  and Effect of Termination
	 	Section
  8.03	Termination
  Fees
	 	 	 
	ARTICLE IX MISCELLANEOUS
	 
	 	Section 9.01	Specific Performance
	 	Section 9.02	Expenses,
  Etc.
	 	Section
  9.03	Execution
  in Counterparts
	 	Section
  9.04	Notices
	 	Section
  9.05	Waivers
	 	Section 9.06	Amendments,
  Supplements, Etc.
	 	Section 9.07	Entire Agreement
	 	Section 9.08	Applicable Law;
  Consent to Jurisdiction
	 	Section 9.09	Further Assurances
	 	Section 9.10	Interpretation
	 	Section 9.11	Binding Effect; Benefits
	 	Section
  9.12	Assignability

INDEX
TO EXHIBITS AND SCHEDULES

	Schedule	Description
	

	

	 	 
	2.01(c)	Subsidiaries
	2.07	Absence
  of Certain Events
	2.07(A)	Affiliates
  of Parent and Seller
	2.10	Real
  Property
	2.11	Intellectual
  Property
	2.12	Status
  of Contracts
	2.15	Customers
	2.16	Litigation
	2.17	Tax
  Matters
	2.18	Permits
	2.19	Labor
  Matters
	2.20	Insurance
	2.21	Employee
  Benefit Plans
	2.23	Related
  Party Transactions
	2.24	Bank
  Accounts
	 	 
	 	 
	Exhibit	Description
	

	

	 	 
	6.01(i)	Escrow
  Agreement
	6.01(j)	Transition
  Services Agreement
	6.01(k)	Opinion
  of Stoel Rives LLP

 

INDEX
TO DEFINED TERMS

THIS
INDEX IS INCLUDED FOR CONVENIENCE ONLY

AND DOES NOT CONSTITUTE A PART OF THE AGREEMENT

	Term	Reference
	

	

	 	 
	“Affiliate”	2.07
	“Ancillary
  Agreements”	2.02(a)
	“Balance
  Sheet”	2.05
	“Balance
  Sheet Date”	2.05
	“Claims”	7.05
	“Closing”	1.03
	“Closing
  Date”	1.03
	“Code”	2.13(d)
	“Company”	Recitals
	“Company
  Common Stock”	Recitals
	“Contracts”	2.11
	“Damages”	7.03
	“Employee
  Benefit Plans”	2.17
	“Expenses”	9.02(a)
	“Financial
  Statements”	2.05
	“GAAP”	2.05
	“Intellectual
  Property Rights”	2.10
	“Liens”	2.01(g)
	“Marks”	5.06(a)
	“Material
  Adverse Effect”	2.07
	“Non-Solicitation
  Agreement”	8.02
	“Parent”	Recitals
	“Permitted
  Cash Distribution”	5.01(d)
	“Permitted
  Liens”	2.09
	“Person”	2.11(c)
	“Purchase
  Price”	1.01(b)
	“Purchaser”	Recitals
	“Related
  Party”	2.18
	“Returns”	2.13(a)
	“Seller”	Recitals
	“Shares”	Recitals
	“Subsidiary”	2.01(h)
	“Taxes”	2.13(a)
	“Taxing
  Authorities”	2.13(a)
	“Third
  Party Claims”	7.05(a)(A)

STOCK
PURCHASE AGREEMENT

             STOCK
PURCHASE AGREEMENT dated as of July 31, 2001 by and among MEDICALOGIC/MEDSCAPE,
INC., an Oregon corporation (the “Parent”), MEDSCAPE ENTERPRISES, INC., a
Delaware corporation and wholly-owned subsidiary of the Parent (the “Seller”),
and TEM Holdings, LLC, a Delaware limited liability company (the “Purchaser”).

W
I T N E S S E T H:

             WHEREAS,
the Seller owns all of the issued and outstanding shares of capital stock of
Total eMed, Inc., a Delaware corporation (the “Company”), consisting of 100
shares of Common Stock, par value $.01 per share (“Company Common Stock”); and

             WHEREAS,
on the terms and subject to the conditions hereinafter set forth, the Seller
desires to sell to the Purchaser, and the Purchaser desires to purchase from
the Seller, all 100 issued and outstanding shares of Company Common Stock (the
“Shares”);

             NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

ARTICLE I

SALE AND TRANSFER OF SHARES; PURCHASE PRICE;

CLOSING; PURCHASE PRICE ADJUSTMENT

             Section 1.01     Sale and Transfer of
Shares; Purchase Price.

                           (a)         In
reliance upon the representations and warranties contained herein, and subject
to the terms and conditions set forth herein, the Seller shall sell and
transfer to the Purchaser, and the Purchaser shall purchase from the Seller, on
the Closing Date (as hereinafter defined), all of the Shares.

                           (b)        The
purchase price for the Shares (the “Purchase Price”) shall be $60,000 per
Share, or $6,000,000 in the aggregate.

                           (c)         The
portion of the Purchase Price to be put into escrow (the “Escrow Amount”) shall
be $1,000,000.

                           (d)        “Closing Debt” means the
aggregate outstanding indebtedness for borrowed money (including any
intercompany receivables owed by the Company or the Subsidiaries (as hereafter
defined) to the Seller, Parent or any of their affiliates) and the deferred
purchase price of property of the Company and the Subsidiaries as of
immediately prior to the Closing (but not including any capital leases or other
deferred purchase price of property set forth on Schedule 2.12 hereto),
including all principal, interest, prepayment fees and other amounts required to
be paid in order to discharge fully all such amounts at Closing.

                           (e)         At least two days prior
to the Closing, the Seller shall furnish to the Purchaser (i) wire
transfer instructions for the Purchase Price (less the Escrow Amount),
(ii) wire transfer instructions from the Escrow Agent for the Escrow
Amount and (iii) evidence satisfactory to the Purchaser of payment or
release of all Closing Debt, including, in the case of intercompany debt from
the Seller, Parent or an affiliate, evidence of the contribution to capital of
the Company of all such amounts.

             Section 1.02     Delivery
of Shares and Payment of Purchase Price.

                           (a)         On the Closing Date, against delivery
of the Purchase Price, the Seller shall deliver to the Purchaser one or more
certificates in definitive form, registered in the name of the Purchaser,
evidencing the Shares being purchased by the Purchaser hereunder, duly endorsed
for transfer or accompanied by a stock transfer power duly endorsed in blank.

                           (b)        On
the Closing Date, against delivery of the certificates evidencing the Shares as
aforesaid, the Purchaser shall pay, by wire transfer of immediately available
funds in accordance with the wire transfer instructions referenced above,
(i) the Purchase Price (less the Escrow Amount) to the Seller and
(ii) the Escrow Amount to the Escrow Agent.

             Section 1.03     Closing.  The closing of the sale and transfer of the
Shares pursuant to Sections 1.01 and 1.02 above (the “Closing”) shall take
place at the offices of Choate, Hall & Stewart, Exchange Place, 53 State
Street, Boston, Massachusetts 02109, or at such other location as the parties
mutually agree, at 10:00 (EST) on the second business day following the
satisfaction or waiver of all of the conditions set forth in Article VI of this
Agreement (other than those conditions that by their nature are to be satisfied
at such Closing, subject to the fulfillment or waiver of such conditions at
such Closing), or at such other time and on such other date as the parties
mutually agree (such date and time of Closing being herein called the “Closing
Date”).  The Closing shall be deemed to
be effective for tax and accounting purposes as of the close of business on the
Closing Date.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

AS TO THE COMPANY, THE SELLER AND THE SHARES

             The
Parent and the Seller hereby jointly and severally represent and warrant to the
Purchaser that each of the statements contained in this Article II is true and
correct and will be true and correct as of the Closing Date:

             Section 2.01     Organization,
Qualifications and Corporate Power; subsidiaries.

                           (a)         Each
of the Seller and the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.  The Company is duly licensed or qualified as
a foreign corporation to do business, and is in good standing, in each other
jurisdiction in which the failure to be so licensed or qualified has had or
could reasonably be expected to have a Material Adverse Effect.  Each of the Seller and the Company has all requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as currently conducted and as currently
proposed by the Seller and the Company to be conducted.

                           (b)        The
Seller has previously made available to the Purchaser or its counsel complete
and correct copies of the Certificate of Incorporation and Bylaws of the
Company, each as in effect on the date hereof and which shall be in effect on
the Closing Date.  The Company is not in
default in the performance, observance or fulfillment of any provision of its
Certificate of Incorporation or Bylaws.

                           (c)         Except
as set forth on Schedule 2.01(c), the Company has no subsidiaries.  The entities indicated on such Schedule as
subsidiaries are referred to herein as the “Subsidiaries” and each as a
“Subsidiary”.  Except as set forth on
Schedule 2.01(c), neither the Company nor any of the Subsidiaries directly or
indirectly owns or has the right or obligation to acquire any equity interest,
or any security convertible or exchangeable into any equity interest, in any
other corporation, partnership, limited liability company, joint venture, trust
or other business enterprise, except in the ordinary course of business and
except for the interests of the Company in the Subsidiaries.  Neither the Company nor any Subsidiary is
subject to any obligation or requirement to make any investment (in the form of
a loan or capital contribution) in any corporation, partnership, limited
liability company, joint venture, trust or other business enterprise.

                           (d)        Schedule
2.01(c) sets forth the name and jurisdiction of organization of each
Subsidiary.  There are no authorized or
outstanding subscriptions, warrants, options, convertible or exchangeable
securities or other rights (contingent or other) to purchase or acquire any
shares of any class of capital stock (or membership interests) of any of the
Subsidiaries or commitments of any such Subsidiary (contingent or other) to
issue any shares of capital stock or membership interests or any subscriptions,
warrants, options, convertible securities or other rights in respect thereof.

                           (e)         Each
Subsidiary is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate (or comparable) power and
authority to own or lease and operate its properties and assets and to carry on
its business as currently conducted and as currently proposed by the Company to
be conducted.  Each Subsidiary is duly
licensed or qualified as a foreign corporation or limited liability company to
do business, and is in good standing, in each other jurisdiction in which the
failure to be so licensed or qualified has had or could reasonably be expected
to have a Material Adverse Effect.

                           (f)         The
Seller has previously made available to the Purchaser or its counsel complete
and correct copies of the Certificates or Articles of Incorporation and Bylaws
(or comparable governing documents) of each of the Subsidiaries, each as in
effect on the date hereof and which shall be in effect on the Closing
Date.  No Subsidiary is in default in
the performance, observance or fulfillment of any provision of such governing documents.

                           (g)        All
of the outstanding shares of capital stock or membership interests, as
applicable, of each Subsidiary are validly issued, fully paid and nonassessable
and are owned beneficially and of record by the Company or by a wholly-owned
Subsidiary as set forth on Schedule 2.01(c), free and clear of any liens,
pledges, security interests, mortgages, charges or other encumbrances or
adverse claims (“Liens”), and there are no proxies outstanding or restrictions
on voting with respect to any such shares. 
None of such shares or membership interests are subject to, nor were any
of them issued in violation of, any preemptive rights or any right of first
refusal, right of first offer or other similar right in favor of any person.

             Section 2.02     Authorization of
Agreements, Etc.

                           (a)         The
Seller has all requisite corporate power and authority to execute and deliver
this Agreement and all related documents, certificates, instruments and
agreements to be delivered at Closing or otherwise in connection with this
Agreement to which it is a party (collectively, the “Ancillary Agreements”),
and to perform its obligations hereunder and thereunder.

                           (b)        The
execution, delivery and performance of this Agreement by the Seller and the
Parent, including the sale and transfer of the Shares hereunder, and of the
Ancillary Agreements to which they are a party have been duly authorized by all
requisite corporate action on the part of the Seller and the Parent (including
all requisite action of the Board of Directors of the Seller and of the Parent,
as the sole stockholder of the Seller). 
Neither the execution and delivery by the Parent and the Seller of this
Agreement and the Ancillary Agreements to which they are party nor the
performance by the Parent and the Seller of their respective obligations
hereunder and thereunder, including the sale and transfer of the Shares
hereunder, will (A) violate (i) any provision of law or any governmental
regulation or order of any court or other agency of government that is
applicable to the Seller, the Company or any Subsidiary, (ii) the Certificate
or Articles of Incorporation or Bylaws (or equivalent governing document of
each noncorporate Subsidiary) of the Seller, the Parent, the Company or any
Subsidiary, or (iii) any judgment, award or decree applicable to the Seller, the
Parent, the Company or any Subsidiary, or (B) cause a material default, breach or penalty under any Material Contract
or under any material contract, indenture, agreement or note to which the
Seller or the Parent is a party, or (D) result in the creation or
imposition of any Lien upon any of the properties or assets of the Seller, the
Company or any Subsidiary, or (E) result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any Permit (as hereinafter defined) of
the Company or any Subsidiary.

             Section 2.03     Validity.  This Agreement has been duly executed and
delivered by the Seller and constitutes, and each of the Ancillary Agreements
to which the Seller is to be a party, when executed and delivered by the Seller
as contemplated hereby, will constitute, the legal, valid and binding
obligation of the Seller, enforceable against it in accordance with their
respective terms.

             Section 2.04     Capitalization of the
Company.

                           (a)         The
authorized capital stock of the Company consists of 100 shares of Company
Common Stock, all of which are validly issued and outstanding, fully paid and
nonassessable and owned beneficially and of record by the Seller free and clear
of all Liens and adverse claims.  The
Seller has good and marketable title to the Shares.  Upon the delivery by the Seller of certificates evidencing the
Shares, duly endorsed for transfer or accompanied by stock transfer powers duly
endorsed in blank, to the Purchaser pursuant to Section 1.02(a) above, against
payment of the Purchase Price as provided in Section 1.02(b) above, the Seller
will transfer good and marketable title to said Shares to the Purchaser, free
and clear of any and all Liens or adverse claims.  None of the Shares are subject to, nor were any of them issued in
violation of, any preemptive rights or any right of first refusal, right of
first offer or other similar right in favor of any person.

                           (b)        (i) No
subscription, warrant, option, convertible security or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock of
the Company is authorized or outstanding, (ii) there is not any commitment
(contingent or other) of the Company to issue any shares, warrants, options or
other such rights or to distribute to holders of any class of its capital stock
any evidences of indebtedness or assets, (iii) the Company has no obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of
the capital stock of the Company or any Subsidiary or any interest therein or
to pay any dividend or make any other distribution in respect thereof and (iv)
there is not any agreement (contingent or other) relating to the voting,
transfer or registration under any securities laws of any shares of any class
of capital stock of the Company or any Subsidiary nor any outstanding proxies
with respect thereto.

             Section 2.05     Financial Statements.  The Parent and the Seller have previously
delivered to the Purchaser (i) the unaudited consolidated balance sheet of the
Company (the “Balance Sheet”) as of December 31, 2000 (the “Balance Sheet
Date”) and the related unaudited consolidated statements of operations, changes
in stockholders’ equity (deficit) and cash flows for the year then ended, (ii)
the audited consolidated balance sheet of the Company as of December 31, 1999
and the related audited consolidated statements of operations, changes in
stockholders’ equity (deficit) and cash flows for the year then ended, together
with the report thereon of Arthur Andersen LLP, the Company’s independent certified
public accountants for the year then ended, (iii) the audited consolidated
balance sheet of the Company as of December 31, 1998 and the related audited
consolidated statements of operations, changes in stockholders’ equity
(deficit) and cash flows for the period from March 4, 1998 (inception) through
December 31, 1998, together with the report thereon of Arthur Andersen LLP, the
Company’s independent certified public accountants for the period then ended,
and (iv) the unaudited consolidated balance sheet of the Company as of June 30,
2001 and the related unaudited consolidated statements of operations, changes
in stockholders’ equity (deficit) and cash flows for the six month period then
ended, certified by the principal financial officer of the Company (collectively,
the “Financial Statements”).  The
Financial Statements (i) were prepared in accordance with United States
generally accepted accounting principals, applied on a consistent basis in
accordance with the Company’s historical methods, policies, practices,
estimations and judgments (“GAAP”), from the books and records of the Company
and its Subsidiaries and (ii) fairly present the financial position of the
Company and its Subsidiaries as of the respective dates specified therein and
the results of operations, shareholders’ equity (deficit) and cash flows for
the respective periods then ended (subject to, in the case of the Financial
Statements referred to in (iv) above, normal, nonmaterial year-end
adjustments).

             Section 2.06     Absence of Undisclosed
Liabilities.  Except as and to the extent reflected or
reserved against in the Balance Sheet, or incurred since the Balance Sheet Date
in the ordinary course of business and consistent with past practice, the
Company and its Subsidiaries have no material liabilities, debts or obligations
of any kind or nature whatsoever (whether fixed, absolute, accrued, contingent,
secured or unsecured, known or unknown or otherwise, and whether due or to
become due), including, without limitation, any tax liabilities due or to
become due, or whether incurred in respect of or measured by the assets, sales,
income or receipts of the Company and its Subsidiaries for any period.

             Section 2.07     Absence of Certain
Changes or Events.  (a)   Since June 30, 2001, other than
as shown on Schedule 2.07, the Company and each Subsidiary has operated only in
the usual and ordinary course (and consistent with the provisions of Section
5.01(a)(i-v), and there has been no (i) acquisition or disposition of
assets or securities, or commitment therefor by the Company or any Subsidiary,
except in the ordinary course of business, (ii) liens, security interests
or encumbrances placed upon any of the Company’s or any Subsidiary’s assets,
except in the ordinary course of business, (iii) increase in the compensation
or commission rates payable by the Company or any Subsidiary to any officer,
director, employee with annual compensation of at least $70,000, (iv) except
for the Permitted Cash Distribution, 
dividend, distribution, redemption, recapitalization or other
transaction involving the capital stock of the Company or any Subsidiary or
non-cash distribution or payment to any of the Parent, the Seller or their
Affiliates or (v) other event or condition which has had or could reasonably be
expected to have a material adverse effect on the business as currently
conducted, assets, liabilities, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries, taken as a whole (a “Material Adverse
Effect”).  As used in this Agreement,
“Affiliate” means the direct and indirect majority-owned subsidiaries of Parent
other than the Company and the Subsidiaries, all of which are listed on
Schedule 2.07(A).

             Section 2.08     Governmental Approvals.  No order, authorization, approval or consent
from, or filing with, any federal or state governmental or public body,
non-governmental self-regulatory or standard-setting authorities or other
authority having jurisdiction over the Seller, the Company or any Subsidiary is
required for the execution, delivery and performance by the Parent and/or the
Seller of this Agreement or any of the Ancillary Agreements to which either the
Parent or the Seller is a party, is necessary in order to ensure the legality,
validity, binding effect or enforceability against the Parent or the Seller of
this Agreement or any such Ancillary Agreement, or is necessary in order that
the business of the Company and its Subsidiaries can be conducted following the
Closing Date substantially in the same manner as heretofore conducted.

             Section 2.09     Title to Properties,
Absence of Liens and Encumbrances.  The Company and each Subsidiary has good and
marketable title to, or a valid leasehold or license interest in, all assets
and properties used by it in connection with its business (including good and
marketable title to all assets reflected on the Balance Sheet, except for
accounts receivable collected in the ordinary course since the Balance Sheet
Date), in each case free and clear of all Liens other than (x) liens for taxes
not yet due and payable, (y) imperfections of title that do not detract from
the value or impair the use of the property subject thereto and (z)
materialmen’s, mechanics’, and other like liens arising in the ordinary course
of business and for which related payments are not past due (the Liens
described in clauses (x), (y) and (z) above being referred to herein as
“Permitted Liens”).  All material assets
of the Company and each Subsidiary are in good operating condition and repair,
normal wear and tear excepted.  The assets
and properties of the Company and each Subsidiary include all assets currently
used in the conduct of their businesses and are adequate to conduct the
operations of the Company and the Subsidiaries.

             Section 2.10     Real
Property.  Neither the Company nor any Subsidiary owns
any real property.  Schedule 2.10 sets
forth each interest in real property leased by the Company or any Subsidiary,
the lessor of such leased property, the annual rent payable by the Company or
any Subsidiary in respect of such leased property, and each lease or any other
arrangement under which such property is leased.  To the knowledge of Parent, Seller and the Company (and, for all
purposes hereunder, the knowledge of the Parent, Seller and/or the Company
shall include the knowledge of each of the Subsidiaries), the Company or any
Subsidiary, as applicable, enjoys peaceful and quiet possession of its leased
premises and is not in material default under any such leasehold, and neither
the Company nor any Subsidiary has been informed that the lessor under any of
the leases has taken action or threatened to terminate the lease before the
expiration date specified in the lease. 
There is no pending nor, to the knowledge of Parent, Seller or the Company,
threatened condemnation, eminent domain or similar proceeding with respect to
any real property occupied by the Company or any Subsidiary.  All real property leased by the Company or
any Subsidiary is in compliance in all material respects with all building,
zoning, subdivision, health, safety and other applicable foreign, federal,
state and local laws and regulations.

             Section 2.11     Intellectual
Property.(a)            As
used herein “Intellectual Property” means all (i) patents, patent applications,
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos and corporate names (in each case, whether registered or
unregistered) and registrations and applications for registration thereof
together, to the extent applicable, with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (iv) computer
software, data, data bases and documentation thereof, (v) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), and (vi)
domain name registrations.  As used herein
“Company Intellectual Property” means Intellectual Property owned or used by
the Company or any Subsidiary for the conduct of its current business.

                           (b)        Schedule 2.11 hereto contains a complete
and accurate list of all Company Intellectual Property included in clauses (i)
– (iii) of the definition of Intellectual Property.  Schedule 2.11 also contains a complete and accurate list of all
material licenses and other rights granted by the Company or any Subsidiary to
any third party with respect to any Company Intellectual Property and all material
licenses and other rights granted by any third party to the Company or any
Subsidiary with respect to any Company Intellectual Property (excluding
“off-the-shelf” programs or products or other software licensed in the ordinary
course of business) identifying the subject Intellectual Property.  To the knowledge of Parent, Seller and the
Company, there is no reasonably foreseeable loss or expiration of any material
Company Intellectual Property.  The
Company and each Subsidiary has taken commercially reasonable and appropriate
actions to maintain and protect the Company Intellectual Property.

                           (c)         To the knowledge of Parent, Seller and
the Company:  (i) the Company and each
Subsidiary own or possess sufficient legal rights to all Company Intellectual
Property used in its business as now conducted, without any infringement of the
rights of others; (ii) neither the Company nor any Subsidiary has violated or
is violating or infringing any Intellectual Property of any other natural
person, corporation, limited liability company, partnership, trust or other
entity (each, a “Person”), (iii) no Person has violated or is violating or
infringing any Company Intellectual Property and (iv) no employee of the
Company or any Subsidiary is obligated under any agreement or commitment, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with such employee’s duties to the Company or any
Subsidiary or that would conflict with any of their businesses as now conducted
and as currently proposed to be conducted.

             Section 2.12     Status of Contracts.  Schedule 2.12 sets forth a complete and
accurate list of all:

                           (a)         contracts with respect to which the
Company or any Subsidiary has any liability or obligation involving more than $50,000,
contingent or otherwise, or which may extend for a term of more than one year
after the Closing;

                           (b)        material contracts under which the
amount payable by the Company or any Subsidiary is calculated based on the
revenue, income or similar measure of the Company, the Subsidiaries or any
other Person;

                           (c)         material licenses, leases, contracts
and other arrangements with respect to property of the Company or any
Subsidiary, including without limitation, real estate leases, material licenses
relating to Company Intellectual Property (other than as listed on Schedule
2.10 and 2.11), and material sales and supply contracts;

                           (d)        material contracts or instruments to
which the Company or any Subsidiary is a party relating to the borrowing of
money, the capital lease or purchase on an installment basis of any asset, or
the guarantee of any of the foregoing;

                           (e)         material (either individually or, if
related to a similar set of rights or benefits provided for under such
contracts, in the aggregate) contracts of the Company or any Subsidiary with
employees, officers or directors of the Company or any Subsidiary, including
employment, consulting or severance agreements; material (either individually
or, if related to a similar set of circumstances or conditions, in the
aggregate) contracts of the Company or any Subsidiary with the Parent or any
Affiliate (other than as listed on Schedule 2.23, which contracts on Schedule
2.23 shall be considered Material Contracts as defined below);

                           (f)         contracts which contain any noncompete
or similar provision, including any contract that limits the geographical area
in which the Company’s or any Subsidiary’s business may be conducted or the
type, scope or method of business to be conducted by any of them;

                           (g)        contracts under which the Company or any
Subsidiary provides transcription services;

                           (h)        collective bargaining, deferred
compensation, benefit and similar plans and agreements involving the Company or
any Subsidiary; and

                           (i)          other material (either individually
or, if related to a similar set of circumstances or conditions, in the
aggregate) contracts, instruments and commitments of the Company or any
Subsidiary, other than those relating to the categories of contracts described
above.

             All the foregoing, including all
amendments or modifications thereto, are referred to as “Material
Contracts”.  The Seller and the Parent
have furnished to the Purchaser copies of all Material Contracts.  To the knowledge of Parent, Seller and the
Company:  (i) each Material Contract sets
forth the entire agreement and understanding between the Company and/or each
Subsidiary and the other parties thereto; (ii) each Material Contract is valid,
binding and in full force and effect, and (iii) there is no event which has
occurred or exists, which constitutes or which, with notice, the happening of
any event and/or the passage of time, would constitute a material default or
breach under any such contract by the Company and/or any Subsidiary or any
other party thereto, or would cause the acceleration of any obligation of any
party thereto or give rise to any right of termination or cancellation
thereof.  The Seller and the Company
have no reason to believe that the parties to any Material Contract will not
fulfill their obligations thereunder in all material respects.

             Section 2.13     Accounts
Receivable.  All of the accounts receivable of the
Company and each Subsidiary as of the Closing will be valid and enforceable
claims, collectable and subject to no set-off or counterclaim, except to the
extent of the allowance for doubtful accounts with respect to accounts
receivable reflected in the June 30, 2001 balance sheet of the Company referred
to in Section 2.05.  All accounts
receivable of the Company and each Subsidiary are determined in accordance with
GAAP and arose out of bona fide transactions in the ordinary course of
business.

             Section 2.14     Warranty
Claims.  There are, and since May 11, 2000 there have
been, no material claims against the Company or any Subsidiary alleging any
material defects in the Company’s services or products, or alleging any failure
of the Company’s services or products to meet specifications.  The warranty reserve included in the Balance
Sheet will be adequate to cover all warranty claims relating to services and
products sold prior to the Closing.

             Section 2.15     Customers
and Suppliers.  Schedule 2.15 sets forth a list of all
current customers of the Company or any Subsidiary.  To the knowledge of Parent, Seller and the Company, all customers
listed on Schedule 2.15 and the Company’s and the Subsidiaries’ other customers
will in the aggregate continue purchasing such services from the Company and
any Subsidiary.  To the knowledge of
Parent, Seller or the Company, the Company’s and the Subsidiaries’ suppliers
will continue to provide supplies consistently to the Company and any
Subsidiary.

             Section 2.16     Litigation,
Etc.  Except as listed on Schedule 2.16, no
action, suit, litigation, proceeding or investigation is pending before any
court, arbitrator or governmental authority or, to the Parent’s, the Seller’s
or the Company’s knowledge, is threatened against or relates to the Company or
any of its Subsidiaries, their respective officers or directors in their
capacities as such, or any of their respective properties or businesses.

             Section
2.17     Taxes.

                           (a)         Except
as set forth on Schedule 2.17 hereto, the Company, and each of its Subsidiaries
have (i) duly and timely filed all returns, declarations, reports, estimates,
schedules, amendments and statements (“Returns”) required to be filed by them
in respect of any Taxes, all of which Returns were true and correct as filed
(or as subsequently amended) and correctly reflect the facts regarding the
income, business, assets, operations, activities and status of the Company and
its Subsidiaries as well as any Taxes required to be paid or collected by the
Company and its Subsidiaries, (ii) timely paid or withheld all Taxes that are
or were due and payable with respect to the Returns referred to in clause (i)
whether or not shown as due on such Returns, (iii) established, consistent with
past practice, an adequate reserve, if any, on their books and records for the
payment of all Taxes with respect to any taxable period (or portion thereof)
ending on or prior to the Closing Date for which a Return or payment of Tax is
not yet due, and (iv) complied with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and has timely withheld from
employee wages and paid over to the proper governmental authorities when due
all amounts required to be so withheld and paid over.

             For
purposes of this Agreement, “Tax” and “Taxes” shall mean (i) all taxes,
charges, fees, levies or other assessments, including any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid or received, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit taxes, or custom
duties or other taxes, together with any interest or any penalty, addition to
tax or additional amount imposed on the Company or any of its Subsidiaries by
any governmental authority responsible for the imposition of any such taxes
(domestic or foreign) (“Taxing Authorities”), (ii) liability for the payment of
any amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated (including without limitation by operation of Treas.
Reg. § 1.1502-6), combined or unitary group, or being a party to any agreement
or arrangement whereby liability for payments of such amounts was determined or
taken into account with reference to the liability of any other person for any
period prior to the Closing Date and (iii) liability with respect to the
payment of any amounts described in (i) as a result of any express or implied
obligation to indemnify any other person.

                           (b)        Except
as set forth on Schedule 2.17 hereto, since May 11, 2000, and, to the
knowledge of Parent, Seller and the Company, prior to May 11, 2000, no
Federal, state, local or foreign Returns of the Company or any of its
Subsidiaries have been audited or examined by any Taxing Authority and neither
the Company nor any Subsidiary have received any written notice of any proposed
audit or examination.

                           (c)         Except
as set forth on Schedule 2.17 hereto, the Company and its Subsidiaries have not
incurred any liabilities for Taxes other than liabilities arising in the
ordinary course of business since the Balance Sheet Date.

                           (d)        Except
as set forth on Schedule 2.17 hereto, the Company and each of its Subsidiaries
have never (i) requested or received a Tax ruling (other than a determination
with respect to a qualified employee benefit plan) or entered into a legally
binding agreement (such as a closing agreement) with any Taxing Authority,
which ruling or agreement could have an effect on the Taxes of the Company or
any of its Subsidiaries on or after the Closing Date, (ii) been a partner in a
partnership or a member of a limited liability company or any other entity
treated as a partnership for federal, state or foreign income tax purposes or
(iii) filed any election or caused any deemed election under Section 338 of the
Internal Revenue Code of 1986, as amended (the “Code”), or any similar state or
local provision.  Neither Company nor
any Subsidiary (A) is liable, contractually or otherwise, for the Taxes of
any other Person (other than withholding Taxes arising in the ordinary course
of business and other than as arising from the consolidated federal income tax
regulations and comparable state, local and foreign tax laws), (B) is a
“consenting corporation” under Section 341(f) of the Code or (C) has
agreed to or is required to make any adjustment under Code Section 481(a)
or 263A (as a result of any examination by a taxing authority).  Each of the Seller and the Company is a
“United States person” as such term is used in Section 1445 of the Code.

                           (e)         No
property used by the Company or the Subsidiaries is “tax-exempt use property”
within the meaning of Section 168(h) of the Code; (ii) none of the assets of
the Company or the Subsidiaries secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code; and (iii) neither the Company nor
any Subsidiary is a party to the safe harbor lease within the meaning of
Section 168(f)(8) of the Code, as in effect prior to the Tax Equity and Fiscal
Responsibility Act of 1982.

                           (f)         Except
as set forth on Schedule 2.17 hereto, (i) no extensions of time have been
granted to the Company or any of its Subsidiaries to file any Return, (ii) no
deficiency or adjustment for any Taxes has been proposed, asserted or assessed
in writing against the Company or any of its Subsidiaries, (iii) there have
never been any, and no Federal, state, local or foreign audits or other
administrative proceedings or court proceedings are currently in progress or
pending against the Company or any of its Subsidiaries with respect to any
Taxes owed by the Company or any of its Subsidiaries, and (iv) no waiver or
consent extending any statute of limitations for the assessment or collection
of any Taxes owed by the Company or any of its Subsidiaries, has been executed
by the Company or any of its Subsidiaries or on behalf of the Company or any of
its Subsidiaries, nor are any requests for such waivers or consents pending.

                           (g)        Except
as set forth on Schedule 2.17 hereto, neither the Company nor any of its
Subsidiaries has ever been a party to any Tax sharing or allocation agreement.

                           (h)        Neither
the Company nor any of its Subsidiaries is a party to any agreement, contract
or arrangement that will result in the payment of any “excess parachute
payment” within the meaning of Section 280G of the Code as a result of the sale
of the Shares pursuant to this Agreement.

                           (i)          The
Purchaser has been supplied with true and complete copies of each Tax Return of
the Company and the Subsidiaries, including each franchise or excise Tax Return
based on income filed for the last three taxable years.

             Section 2.18     Governmental
Authorizations and Regulations.

                           (a)         The
business of the Company and its Subsidiaries is being conducted in compliance
in all material respects with all applicable laws, ordinances, rules and
regulations of all governmental authorities relating to its properties or
applicable to their business.  Neither
the Company nor any of its Subsidiaries has received any notice of any alleged
violation of any of the foregoing. 
Neither the Company nor any of its Subsidiaries nor any of their assets
or properties, operations or businesses are subject to any court or
administrative order, judgment, injunction or decree specific to the Company or
any of the Subsidiaries.

                           (b)        Schedule
2.18 sets forth all licenses, permits, authorizations and certifications of
governmental authorities and non-governmental self-regulatory or
standard-setting authorities held by the Company or any Subsidiary which are
material to the Company, any Subsidiary or their business (each a
“Permit”).  The Company and each
Subsidiary is in material compliance with all Permits, all of which are in full
force and effect.  There are no other
such licenses, permits, authorizations or certifications which are material to
the Company, any Subsidiary or their business as currently conducted which the
Company has not obtained and which, in good industry practice, the Company or
any Subsidiary should hold for the conduct of its business.

             Section 2.19     Labor Matters.

                           (a)         Neither
the Company nor any of its Subsidiaries is a party to any labor or collective
bargaining agreement, and there are no labor or collective bargaining
agreements that pertain to any of their employees.  No employees of the Company or any of its Subsidiaries are
represented by any labor organization. 
No labor organization or group of employees of the Company or any of its
Subsidiaries has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of the Parent, the Seller, the Company
or any Subsidiary, threatened to be brought or filed with the National Labor
Relations Board or other labor relations tribunal.  There is no organizing activity involving the Company or any of
its Subsidiaries pending or, to the knowledge of the Parent, the Seller, the
Company or any Subsidiary, threatened by any labor organization or group of
employees of the Company or any of its Subsidiaries.  There are no (x) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (y) material grievances or other material labor disputes
pending or, to the knowledge of the Parent, the Seller, the Company and the
Subsidiaries of the Company, threatened against or involving the Company or any
of its Subsidiaries.  There are no
unfair labor practice charges, grievances or complaints pending or, to the
knowledge of the Parent, the Seller, the Company or any Subsidiary, threatened
against or involving the Company or any of its Subsidiaries or any group of
employees of the Company or any of its Subsidiaries.  There are no complaints, charges or claims against the Company or
any of its Subsidiaries pending or, to the knowledge of the Parent, the Seller,
the Company or any Subsidiary, threatened to be brought or filed with any
governmental body based on, arising out of, in connection with, or otherwise
relating to the employment by the Company or any of its Subsidiaries of any
individual, including any claim for workers’ compensation.  Hours worked by and payments made to employees
of the Company and its Subsidiaries have not been in violation of the federal
Fair Labor Standards Act or any other law dealing with such matters.

                           (b)        The
Company and each of its Subsidiaries have complied in all material respects
with all laws, statutes, rules, regulations, orders, decrees and other
governmental requirements relating to the hiring and retention of all
employees, leased employees and independent contractors, including those
relating to wages, hours, labor, employment and employment practices, terms and
conditions of employment, equal employment opportunity, collective bargaining
and the payment of social security and other employment taxes.

                           (c)         Schedule 2.19
sets forth a complete list of all employees of the Company and each Subsidiary,
with annual compensation in excess of $70,000, showing date of hire, hourly
rate or salary or other basis of compensation and other benefits accrued as of
a recent date, and job function of salaried employees.

             Section 2.20     Insurance.  All policies of fire, liability, workers’
compensation and other forms of insurance providing insurance coverage to or
for the Company and its Subsidiaries are listed on Schedule 2.20 hereto,
together with the scheduled expiration date of such policies, and (i) the
Company and each of its Subsidiaries are named insureds under all such
policies, (ii) all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, (iii) no notice of cancellation or
termination has been received with respect to any such policy, and (iv) such
policies provide insurance in such amounts and against such risks as are
customary for companies of similar size in the same business as the Company and
its Subsidiaries.  All such policies are
in full force and effect and will remain in full force and effect to the
Closing Date.

             Section 2.21     Employee Benefit Plans.

                           (a)         Schedule
2.12 sets forth all employee compensation and benefit plans, agreements,
commitments, practices or arrangements of any type (including, but not limited
to, plans described in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) offered, maintained or contributed to by the
Company or any Subsidiary for the benefit of current or former employees or
directors of the Company or any Subsidiary, or with respect to which the
Company or any Subsidiary has or may have any liability, whether direct or
indirect, actual or contingent (including, but not limited to, liabilities
arising from affiliation under Section 414(b), (c), (m) or (o) of the Code or
Section 4001 of ERISA) (collectively, the “Benefit Plans”).

                           (b)        With
respect to each Benefit Plan, the Company and each Subsidiary has delivered to
the Purchaser true and complete copies of: 
(i) any and all plan texts and agreements (including, but not limited
to, trust agreements, insurance contracts and investment management
agreements); (ii) any and all material written employee communications by
or on behalf of the Parent, the Seller, the Company or any Subsidiary
(including all summary plan descriptions and material modifications thereto);
(iii) the two most recent annual reports, if applicable; (iv) the most recent
annual and periodic accounting of plan assets, if applicable; (v) the most
recent determination letter received from the Internal Revenue Service (the
“Service”), if applicable; and (vi) in the case of any unfunded or self-insured
plan or arrangement, a current estimate of accrued and anticipated liabilities
thereunder.

                           (c)         With
respect to each Benefit Plan, except as set forth on Schedule 2.21:  (i) if intended to qualify under Section
401(a) of the Code, such plan so qualifies, and its trust is exempt from
taxation under Section 501(a) of the Code; (ii) such plan has been administered
and enforced in accordance with its terms and all applicable laws, regulations
and rulings in all material respects; (iii) no breach of fiduciary duty has
occurred with respect to which the Company or any Subsidiary or any Benefit
Plan may be liable or otherwise damaged in any material respect; (iv) no
material disputes nor any audits or investigations by any governmental
authority are pending or, to the knowledge of Parent, Seller or the Company,
threatened; (v) no “prohibited transaction” (within the meaning of either
Section 4975(c) of the Code or Section 406 of ERISA) has occurred with respect
to which the Company or any Subsidiary may be liable or otherwise damaged in
any material respect; (vi) all contributions, premiums, and other payment
obligations have been recognized on the consolidated financial statements of
the Company and each Subsidiary in accordance with generally accepted
accounting principles in the United States, and, to the extent due, have been
made on a timely basis, in all material respects; (vii) all nonforfeitable
contributions or benefit payments made or required to be made under each
Benefit Plan with respect to which a deduction is available meet the
requirements for deductibility under the Code or will meet such requirements
with the passage of time; (viii) there is nothing that would prevent the
Company and each participating Subsidiary from amending, modifying or
terminating such plan, or any portion of it, at any time without liability to
itself; and (ix) no Benefit Plan requires the Company to continue to employ any
employee or director.

                           (d)        No
Benefit Plan is, or has ever been, subject to Title IV of ERISA.

                           (e)         With
respect to each Benefit Plan which provides welfare benefits of the type
described in Section 3(1) of ERISA:  no
such plan provides medical or death benefits with respect to current or former
employees or directors of the Company beyond their termination of employment,
other than coverage mandated by Sections 601-608 of ERISA and 4980B(f) of the
Code, (ii) each such plan has been administered in compliance with Sections
601-609 of ERISA and 4980B(f) of the Code where applicable; (iii) no such plan
is or is provided through a “multiple employer welfare arrangement” within the
meaning of Section 3(40) of ERISA; and (iv) no such plan has reserves, assets,
surpluses or prepaid premiums in excess of the qualified asset account limits
under Code Section 419A.

                           (f)         The
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements (except as specifically provided in the Ancillary Agreements)
will not, solely as a result of the sale of the Shares and the resulting change
of control of the Company, (i) entitle any individual to severance pay,
(ii) accelerate the time of payment or vesting under any Benefit Plan, or
(iii) increase the amount of compensation or benefits due to any
individual.

             Section 2.22     Environmental
Matters.  The ownership or use of the Company’s and
each Subsidiary’s premises and assets, the occupancy and operation thereof, and
the conduct of the Company’s and each Subsidiary’s operations and businesses
are in material compliance with all applicable foreign, federal, state and
local laws, ordinances, regulations, standards and requirements relating to
pollution, environmental protection, hazardous substances and related matters.  To the knowledge of Parent, Seller and the
Company, there is no material liability attaching to such premises or assets or
the ownership or operation thereof as a result of any hazardous substance that
may have been discharged on or released from such premises, or disposed of
on-site or off-site, or any other circumstance occurring prior to the Closing
or existing as of the Closing.  For
purposes of this Section, “hazardous substance” shall mean oil or any other
substance which is included within the definition of a “hazardous substance”,
“pollutant”, “toxic substance”, “toxic waste”, “hazardous waste”, “contaminant”
or other words of similar import in any foreign, federal, state or local
environmental law, ordinance or regulation.

             Section 2.23     Related Party
Transactions.  Except as set forth on Schedule 2.23 hereto
and except as contemplated by this Agreement and the Ancillary Agreements,
there are no existing, and have not been since the Balance Sheet Date, any
agreements individually or in the aggregate in an amount greater than $50,000
which are (i) between the Company or any of its Subsidiaries,
(ii) between the Company or any of its Subsidiaries, on the one hand, and
either (A) the Parent, Seller or an Affiliate, on the other hand, or
(B) any officer or director of the Company, any Subsidiary, the Parent or
the Seller.  For purposes of this
section, agreements within each subpart (i), (ii)(A) or (ii)(B) are aggregated
to determine whether the $50,000 threshold is met.

             Section 2.24     Bank Accounts.  Schedule 2.24 contains a true and compete
list of (i) all banks, trust companies, savings and loan associations and
brokerage firms with which the Company or any Subsidiary has an account or safe
deposit box and (ii) the names of all persons authorized to draw thereon, to
have access thereto or to authorize transactions therein.

             Section 2.25     Brokers’
or Finders’ Fees.  All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out directly with
the Purchaser, without the intervention of any person on behalf of the Parent,
the Seller, the Company or any Subsidiary in such manner as to give rise to any
claim by any person against the Purchaser or the Company or any of its
Subsidiaries for a finder’s fee, brokerage commission or similar payment.

             Section 2.26     Disclosure.  The representations and warranties contained
in this Agreement do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements contained
herein not misleading.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

AS TO THE PARENT

             The
Parent represents and warrants to the Purchaser that each of the statements
contained in this Article III is true and correct and will be true and correct
as of the Closing Date:

             Section 3.01     Organization and
Corporate Power; Ownership of the Seller; Authorization of Agreements, Etc.

                           (a)         The
Parent is a corporation duly organized and validly existing under the laws of
the State of Oregon.  The Parent has all
requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as currently conducted and
to execute and deliver this Agreement and each of the Ancillary Agreements to
which it is a party and to perform its obligations hereunder and
thereunder.  The Parent is the
beneficial and record owner of all of the issued and outstanding shares of
capital stock of the Seller.

                           (b)        The
execution, delivery and performance of this Agreement by the Parent has been duly
authorized by all requisite corporate action on the part of the Parent
(including all requisite action of the Board of Directors and stockholders of
the Parent).  Neither the execution and
delivery by the Parent of this Agreement and the Ancillary Agreements to which
it is a party nor the performance by the Parent of its obligations hereunder
and thereunder will (A) violate (i) any provision of law or any governmental
regulation or order of any court or other agency of government that is
applicable to the Parent, (ii) the Articles of Incorporation or Bylaws of the
Parent, (iii) any judgment, award or decree applicable to the Parent, or (iv)
any provision of any note, indenture, agreement, lease or other instrument to
which the Parent is a party, or by which the Parent or any of its properties or
assets are bound or affected, or (B) conflict with, give rise to a right of
acceleration or termination under, result in any payment or benefit becoming
due thereunder, result in the increase of any payment or benefit due
thereunder, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any note, indenture, agreement, lease or other
instrument to which the Parent is a party, or (C) result in the creation or
imposition of any Lien upon any of the properties or assets of the Parent.

             Section 3.02     Validity.  This Agreement has been duly executed and
delivered by the Parent and constitutes, and each of the Ancillary Agreements
to which the Parent is a party, when executed and delivered by the Parent as
contemplated hereby, will constitute, the legal, valid and binding obligation
of the Parent, enforceable against the Parent in accordance with their
respective terms.

             Section 3.03     Governmental Approvals.  No order, authorization, approval or consent
from, or filing with, any federal or state governmental or public body or other
authority having jurisdiction over the Parent is required for the execution,
delivery and performance by the Parent of this Agreement or any Ancillary Agreement
to which the Parent is a party, or is necessary in order to ensure the
legality, validity, binding effect or enforceability against the Parent of this
Agreement or any such Ancillary Agreement.

             Section 3.04     Litigation Relating to
the Transactions Contemplated Hereby.  There are no actions, suits, proceedings or
claims pending before any court, arbitrator or government agency against or
affecting the Parent which might enjoin or prevent the consummation of the
transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER

             The
Purchaser represents and warrants to the Parent and the Seller that each of the
statements contained in this Article IV is true and correct and will be true
and correct as of the Closing Date:

             Section 4.01     Power and Authority.
 The Purchaser has full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party, and to perform its obligations hereunder and thereunder.

             Section 4.02     Authorization of
Agreements, Etc.  The execution, delivery and performance of
this Agreement by the Purchaser has been duly authorized by all requisite
action on the part of the Purchaser. 
Neither the execution and delivery by the Purchaser of this Agreement
and the Ancillary Agreements to which the Purchaser is a party nor the
performance by the Purchaser of its obligations hereunder and thereunder will
violate (i) any provision of law or any governmental regulation or order of any
court or other agency of government that is applicable to the Purchaser, (ii)
the Certificate of Formation of the Purchaser, (iii) any judgment, award or
decree applicable to the Purchaser, or (iv) any provision of any note,
indenture, agreement, lease or other instrument to which the Purchaser is a
party, or by which the Purchaser or any of its properties or assets are bound
or affected.

             Section 4.03     Validity.  This Agreement has been duly executed and
delivered by the Purchaser and constitutes, and the Ancillary Agreements to
which the Purchaser is a party, when executed and delivered by the Purchaser as
contemplated hereby, will constitute, the legal, valid and binding obligation
of the Purchaser, enforceable against it in accordance with their respective
terms.

             Section 4.04     Governmental Approvals.  No order, authorization, approval or consent
from, or filing with, any federal or state governmental or public body or other
authority having jurisdiction over the Purchaser is required for the execution,
delivery and performance by the Purchaser of this Agreement or any Ancillary
Agreement to which the Purchaser is a party, or is necessary in order to ensure
the legality, validity, binding effect or enforceability against the Purchaser
of this Agreement or any such Ancillary Agreement.

             Section 4.05     Litigation Relating to
the Transactions Contemplated Hereby.  There are no actions, suits, proceedings or
claims pending before any court, arbitrator or government agency against or
affecting the Purchaser that might enjoin or prevent the consummation of the
transactions contemplated by this Agreement.

             Section 4.06     Brokers’ or Finders’
Fees.  All negotiations relative to this Agreement
and the transactions contemplated hereby and thereby have been carried out by
the Purchaser and its stockholders directly with the Parent and the Seller,
without the intervention of any person on behalf of the Purchaser in such
manner as to give rise to any claim by any person against the Parent or the
Seller for a finder’s fee, brokerage commission or similar payment.

             Section 4.07     Purchase for Investment; Related Party.  Purchaser is an accredited investor within
the meaning of Rule 501 issued under the Securities Act of 1933, as
amended.  Purchaser will acquire the
Shares for its own account for the purpose of investment, it being understood
that the right to dispose of the Shares shall be within the discretion of
Purchaser.  Purchaser shall not transfer
or otherwise dispose of any of the Shares, or any interest therein, in any
manner as to cause the Parent or the Seller or any affiliate thereof to be in
violation of the registration requirements of the Securities Act of 1933, as
amended, or applicable states securities or blue sky laws.  Mr. Scott Steele is a principal of Parthenon
Capital, LLC and will be so at Closing.

ARTICLE V

COVENANTS

             Section 5.01     Certain Covenants of the
Parent and the Seller.

                           (a)         Except
as otherwise agreed to in writing by the Purchaser, at all times between the
date hereof and the Closing Date, the Parent and the Seller agree that they shall
cause the Company and its Subsidiaries to:

                           (i)          operate
the Company’s and its Subsidiaries’ business only in the usual, regular and
ordinary manner and on a basis consistent with past practice, and use
commercially reasonable efforts to preserve the Company’s and its Subsidiaries’
current business organization, keep available the services of the officers and
employees of the Company and its Subsidiaries and preserve the Company’s and
its Subsidiaries’ present relationships with their customers and all other
persons having business dealings with the Company and its Subsidiaries;

                           (ii)         maintain
the Company’s and its Subsidiaries’ assets and properties in good repair, order
and condition, reasonable wear and tear excepted;

                           (iii)        maintain
the Company’s and its Subsidiaries’ books of account and records in the usual,
regular and ordinary manner, on a basis consistent with past practice, and to
use commercially reasonable efforts to comply with all laws applicable to the
Company and/or its Subsidiaries and perform all the Company’s and its
Subsidiaries’ contractual obligations without default;

                           (iv)       not
change the character of the Company’s and its Subsidiaries’ businesses in any
manner (including their corporate or limited liability existence); and

                           (v)        not,
with respect to the Company and/or its Subsidiaries:

                           (A)       incur
any obligation, debt or liability of any kind or nature whatsoever (whether
fixed, absolute, accrued, contingent, secured or unsecured, known or unknown or
otherwise, and whether due or to become due), except trade payables and/or
other business obligations (other than guarantees, obligations in respect of
letters of credit or debt for borrowed money) incurred in the ordinary course
of business and consistent with past practice;

                           (B)        discharge
or satisfy any Lien or pay any obligation, debt or liability of any kind or
nature whatsoever (whether fixed, absolute, accrued, contingent, secured or
unsecured, known or unknown or otherwise, and whether due or to become due),
other than payments of obligations, debts or liabilities (other than
guarantees, obligations in respect of letters of credit or debt for borrowed
money) in the ordinary course and consistent with past practice;

                           (C)        mortgage,
pledge or subject to any Lien (other than Permitted Liens) any of the assets or
properties of the Company and/or its Subsidiaries;

                           (D)        other
than Permitted Cash Distributions (as defined below), transfer, lease or
otherwise dispose of any of its assets or properties except to persons other
than Related Parties for fair consideration in the ordinary course of business
and consistent with past practice or, except for fair consideration in the
ordinary course of business and consistent with past practice and from persons
other than Related Parties, acquire any assets or properties;

                           (E)        other
than Permitted Cash Distributions, declare, set aside or pay any distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire any of its capital stock or
split, combine or otherwise similarly change its capital stock or authorize the
creation or issuance of or issue or sell any capital stock or any securities or
obligations convertible into or exchangeable therefor, or give any person any
right to acquire any capital stock from the Company or any of its Subsidiaries,
or agree to take any such action;

                           (F)        make
any loan or investment of a capital nature, whether by purchase of stock or
securities, contributions to capital, property transfers or otherwise, in any
other partnership, corporation or other entity;

                           (G)        cancel
or compromise any debt or claim, except, with respect to debts of or claims
against persons other than Related Parties, in the ordinary course of business
and consistent with past practice;

                           (H)        waive
or release any rights of material value, including, or surrender or cause to be
revoked or otherwise terminated any license, 
approval, authorization or consent from any court, administrative agency
or other governmental authority;

                           (I)         other
than in the case of one employee as disclosed verbally to Purchaser, make or
grant any wage, salary or benefit increase or bonus payment applicable to any
group or classification of employees generally, enter into or amend the terms
of any employment contract with, or make any loan to, or grant any severance
benefits to, or enter into or amend the terms of any transaction of any other
nature with, any Related Party;

                           (J)         enter
into any other transaction, contract or commitment, except in the ordinary
course and consistent with past practice;

                           (K)        except
for modifications to contracts with persons who are not Related Parties made in
the ordinary course and consistent with past practice, amend or modify in any
way adverse to the interests of the Company or any of its Subsidiaries any
contract or amend or modify in any way the Certificate or Articles of
Incorporation or Bylaws or comparable governing documents of the Company or any
of its Subsidiaries; or

                           (L)        take
any other action which could reasonably be expected to have a Material Adverse
Effect.

                           (b)        Between
the date of this Agreement and the Closing Date, the Parent and the Seller
shall afford, and shall cause the Company and its Subsidiaries to afford, the
representatives of the Purchaser reasonable access during normal business hours
to the offices, facilities, books and records of the Company and its
Subsidiaries and the opportunity to discuss the affairs of the Company and its
Subsidiaries with officers, employees, accountants, customers, suppliers and
landlords of the Company and its Subsidiaries familiar therewith.

                           (c)         Between
the date hereof and the Closing Date, Parent and the Seller (x) shall not
permit the Company and its Subsidiaries to enter into any transaction or make
any agreement or commitment, or permit any event to occur, which would result
in any of the representations, warranties or covenants of the Parent or the
Seller contained in Articles II and III of this Agreement not being true and
correct in any material respect at and as of the time immediately after the
occurrence of such transaction or event and (y) shall use commercially
reasonable efforts to promptly apply for and cause the Company and its
Subsidiaries to promptly apply for and seek to obtain all authorizations,
consents, waivers and approvals required in connection with the execution,
delivery and performance of this Agreement and the Ancillary Agreements, and to
seek the fairness opinion referred to in Article VI.

             Section 5.02     Books and Records.  Parent and the Seller shall cause the
Company to deliver to the Purchaser or shall cause to be held at the principal
office or other office of the Company where such principal records are normally
kept, all books and records used in the operation of the business of the
Company and its Subsidiaries and all files, documents, papers, agreements,
books of account and other records pertaining to the business of the Company
and its Subsidiaries, to the extent that such books, records, files and other
materials are not theretofore located at the office of the Company.  Notwithstanding the foregoing, the Purchaser
waives, and shall cause the Company and its Subsidiaries to waive, any and all
rights with respect to any of the following, which the Purchaser agrees will
belong to the Seller and its Parent: 
(a) all of the books, files, documents and records of attorneys or
accountants relating to their respective representations of the Seller or the
Parent in connection with the negotiation, execution and delivery of this
Agreement and the transactions contemplated by this Agreement; and (b) the
Company’s tax returns, tax and financial records and reports, and other
documents that Company is required by law to retain, or that will be necessary
or advisable for the Parent or the Seller to retain, in their reasonable
discretion, for tax or related purposes, provided that the Company shall be
given a copy of all such returns, records and reports.

             Section 5.03     Certain Tax Matters.

                           (a)         Transfer
Taxes.  All stamp, documentary, transfer, real
property gains, sales, use and other such Taxes and fees (including any
penalties and interest) imposed upon or incurred by any of the parties hereto
in connection with the transfer of the Shares to the Purchaser under this
Agreement, and any legal and other expenses relating thereto, shall be borne by
the Purchaser.  The Seller and the
Purchaser shall, each at their own expense, prepare and file all necessary Tax
Returns and other documents with respect to all such stamp, documentary,
transfer, real property gains, sales, use and other such Taxes and fees.

                           (b)        The
Purchaser shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company and its Subsidiaries for all periods ending on
or prior to the Closing Date which are filed after the Closing Date (other than
income or similar Tax Returns with respect to periods for which a consolidated,
unitary or combined Income Tax Return of the Seller will include the operations
of the Company and its Subsidiaries, in which case the Seller shall prepare or
cause to be prepared and file or cause to be filed all such Tax Returns for the
Company and its Subsidiaries).  The
Purchaser shall permit the Parent and the Seller to review and comment on each
such Tax Return prepared by or at the direction of the Purchaser described in
the preceding sentence prior to filing and shall make such revisions to such
Income Tax Returns as are reasonably requested by the Parent and the
Seller.  The Parent and the Seller shall
be liable for and shall indemnify the Purchaser against all Taxes of the
Company and its Subsidiaries with respect to any period ending on or before the
Closing Date, in all such cases within fifteen (15) days after payment by the
Purchaser or the Company and its Subsidiaries of such Taxes.

                           (c)         The
Purchaser shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns of the Company and its Subsidiaries for Tax periods which begin
before the Closing Date and end after the Closing Date.  The Parent and the Seller shall be liable
for and indemnify the Purchaser against, prior to the date on which Taxes are
paid with respect to such periods, an amount equal to the portion of such
Income Taxes which relates to the portion of such Taxable period ending on the
Closing Date.  For purposes of this
Section, in the case of any Taxes based on gross or net income that are imposed
on a periodic basis and are payable for a Taxable period that includes (but
does not end on) the Closing Date, the portion of such Tax which relates to the
portion of such Taxable period ending on the Closing Date shall be deemed equal
to the amount which would be payable if the relevant Taxable period ended on
the Closing Date.  For purposes of this
Section, any transactions not in the ordinary course of business occurring on
the Closing Date after the Purchaser’s purchase of the Shares shall be deemed
to relate to the Taxable period beginning after the Closing Date.  Any Tax that is not based on gross or net
income (such as real property or other ad valorem Taxes) for any Taxable period
that begins before and ends after the Closing Date shall be allocated between
the Purchaser and the Seller based on the relative numbers of days within such
period that are (i) before or on the Closing Date, to be borne by the Seller,
and (ii) after the Closing Date, to be borne by the Purchaser.  All determinations necessary to give effect
to the foregoing allocations shall be made in a manner consistent with prior practice
of the Company and its Subsidiaries.

                           (d)        From
and after the Closing Date, the Parent and the Seller, on the one hand, and the
Purchaser, the Company and its Subsidiaries, on the other hand, shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes.  Such
cooperation shall include the retention and (upon the other party’s request)
the provision of records and information that are reasonably relevant to any
such filing, audit, litigationor other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any materials provided hereunder.  Each party agrees to retain all books and records with respect to
Tax matters pertinent to the Company and its Subsidiaries relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by the other party, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority.

                           (e)         To
the extent consistent with the regulations promulgated under Section 338(h)(10)
of the Code, the Purchaser and the Seller agree to report all transactions not
in the ordinary course of business occurring on the Closing Date after the
Purchaser’s purchase of the Company stock on the Purchaser’s federal income tax
return to the extent permitted by Treas. Reg. § 1.1502-76(b)(1)(B).

                           (f)         No
Election To Reattribute Losses.  Neither the Parent nor the Seller shall
make, or seek to cause the Company or any of its Subsidiaries to make, any
election under Treas. Reg. § 1.1502-20(g) that would have the effect of
reattributing any portion of any net operating loss carryover or any net
capital loss carryover from the Company or any of its Subsidiaries to the
Parent or the Seller.

                           (g)        Tax
Sharing Agreements.  Any Tax sharing agreement between or among
the Company (and any Subsidiary) and any other person shall be terminated
immediately before the Closing Date and shall have no further effect for any
Taxable period.

                           (h)        
Section 338(h)(10) Election.  At
the request of the Purchaser, the Parent and the Seller will join with the
Purchaser in making an election under Section 338(h)(10) of the Code and the
regulations thereunder (and any corresponding elections under state, local or
foreign law) with respect to the transactions contemplated hereby
(collectively, a “Section 338(h)(10) Election”).  A request by Purchaser for a Section 338(h)(10) Election will be
valid only if made within sixty (60) days of the Closing Date, in writing, to
the Seller.  If Purchaser makes a
request for a 338(h)(10) election, Purchaser will prepare and furnish to Seller
a draft Form 8023 prepared in accordance with Section 338(h)(10) of the Code
and regulations thereunder, no later than 60 days before the filing date for
such Form 8023, for Seller’s review and comment.  Purchaser shall prepare the final Form 8023 and furnish it to
Seller no later than 20 days before the filing date.  Purchaser shall not be required to make any payment to Seller
with respect to Taxes attributable to the making of the Section 338(h)(10) Election.

             Section 5.04     Confidentiality.  Following the Closing, (i) the Parent, the
Seller and the Affiliates shall not, directly or indirectly, disclose, divulge
or make use of any trade secrets or other information of a business, financial,
marketing, technical or other nature pertaining to the transcription services
business of Company or the Subsidiaries, including information of others
relating thereto that the Company or the Subsidiaries has agreed to keep
confidential and (ii) the Purchaser, the Company and the Subsidiaries shall
not, directly or indirectly, disclose, divulge or make use of any trade secrets
or other information of a business, financial, marketing, technical or other
nature pertaining to the Electronic Medical Record (as defined below) business
and the Internet Portal (as defined below) business of the Parent, the Seller
or the Affiliates, including information of others relating thereto that the
Parent, the Seller or the Affiliates has agreed to keep confidential, except,
in each case, to the extent that such information shall have become public
knowledge other than by breach of this Agreement by the party wishing to
disclose, divulge or make use of such information, and except as necessary to
file tax returns or other required reports with governmental agencies or as
otherwise required by law. As used herein, “Electronic Medical Record” means
the entire line of Logician software products and Medscape Mobile software
products.  As used herein, “Internet
Portal” means the current business of medscape.com solely to the extent that it
provides accredited continuing medical education and peer reviewed medical
publications to physicians and other health professionals.

             Section 5.05     Noncompetition;
Nonsolicitation and Use of Trade Name.

                           (a)
Noncompetition.  For a period of
two years after the Closing Date, Parent, Seller and the Affiliates will not,
directly or indirectly, or as a stockholder, partner, employee, consultant or
other owner or participant in any Person, engage in the business of medical
record transcription anywhere in the United States or anywhere the Company or
any Subsidiary currently engages in this business, subject to the following
limitations:

                           (1) the applicability
of this covenant will terminate as to Parent, Seller, an Affiliate or a
business division of Parent upon the closing of a transaction involving a sale
of more than 50% of the outstanding securities or assets or merger of that
entity or division to or with an unrelated party; and

                           (2) this covenant
shall not apply with respect to (i) the ownership or acquisition by Parent,
Seller or an Affiliate of up to ten percent of any Person which is engaged in
the business described in the foregoing covenant; or (ii) the acquisition by
Parent, Seller or an Affiliate of a majority of the stock or a majority of the
assets of a Person that engages in the business described in the foregoing
covenant, provided that the portion of the business of such Person that so
competes does not exceed ten percent of the total business of the Person as of
the date of acquisition.

                           (b)
Nonsolicitation.  For a period of
two years after Closing Date, the Parent, the Seller and the Affiliates will
not, directly or indirectly, solicit or endeavor to entice away from the
Company or any Subsidiary any person who is, or was within the one-year period
prior thereto, an employee of the Company or any Subsidiary, subject to the
following limitations:

                           (1) the foregoing
nonsolicitation provision will not prevent Parent, Seller or any Affiliate from
employing any such person who contacts Parent, Seller or an Affiliate on his or
her own initiative without any direct or indirect solicitation by, or
encouragement (not including a general solicitation of employment not
specifically directed towards employees of the Company) from Parent, Seller or
an Affiliate; and

                           (2)  the applicability of foregoing
nonsolicitation provision will terminate as to Parent, Seller, an Affiliate or
a business division of Parent upon the closing of a transaction involving a
sale of more than 50% of the outstanding securities or assets or merger of that
entity or division to or with an unrelated party.

                           (c)  Use of Trade Name.  For a period of one year after the Closing
Date, Parent, Seller and the Affiliates will not and will not permit any of
their affiliates (as such term is defined in Rule 405 under the Securities Act
of 1933, as amended), to use the name “Medscape Transcription” or any name
confusingly similar to such name, provided that this provision shall not limit
the use of the name “Medscape” other than in connection with the term
“Transcription” or any term confusingly similar thereto.

             Section 5.06     No
Use of Names or Marks.

                           (a)         Agreement
by Parent and Seller.  Following the Closing, the Parent, the
Seller and the Affiliates shall not use (i) the corporate names of the Company
or any Subsidiary as set forth on their respective charters, as amended, or
(ii) the trademarks, service marks, trade dress, trade names, logos (in each
case, whether registered or unregistered) of the Company or any Subsidiary
listed on Schedule 2.11 or use the names of any of the Company’s or any
Subsidiary’s employees, stockholders or members, in any press releases,
advertising, promotional or sales literature without prior written consent from
the Company in each case and, if applicable, from such employee, stockholder or
member in each case.

                           (b)        Agreement
by the Purchaser.  Following the Closing and except as provided
in the Transition Services Agreement (as hereafter defined), the Purchaser and
its Affiliates shall not use any trademarks, service marks, trade dress, trade
names, logos and corporate names (in each case whether registered or
unregistered) of Parent, Seller or any Affiliate or use the names of any of
employee or stockholder of Parent, Seller or any Affiliate, in any press
releases, advertising, promotional or sales literature without prior written
consent from the Parent in each case and, if applicable, from such employee or
stockholder in each case.

             Section 5.07     Injunctive
Relief.  The Parent and the Seller on the one hand,
and the Purchaser on the other hand, acknowledge that any breach or threatened
breach of the provisions of Sections 5.04, 5.05 or 5.06 of this Agreement will
cause irreparable injury to the other party for which an adequate monetary
remedy does not exist.  Accordingly, in
the event of any such breach or threatened breach, such other party shall be
entitled, in addition to the exercise of other remedies, to seek and (subject
to court approval) obtain injunctive relief, without necessity of posting a
bond, restraining such other party from committing such breach or threatened
breach.

ARTICLE VI

CONDITIONS PRECEDENT

             Section 6.01     Conditions Precedent to
the Obligations of the Purchaser.  The obligation of the Purchaser to
consummate the purchase of the Shares contemplated by this Agreement are
subject, at the option of the Purchaser, to the satisfaction at or prior to the
Closing of each of the following conditions:

                           (a)         Accuracy
of Representations and Warranties.  The representations and warranties of the Parent
and the Seller contained in Articles II and III of this Agreement shall be true
and correct in all material respects (except that the representations and
warranties in Section 2.01(a), (d), (e) and (g) and in Section 2.04, and each
other representation to the extent qualified by materiality, shall be true and
correct in all respects) on and as of the Closing Date as though made at and as
of that date (except for those representations and warranties that specifically
relate to an earlier date, which shall be as though made at and as of such
earlier date), and the Parent and the Seller shall have each so certified to
the Purchaser in writing.

                           (b)        Compliance
with Covenants.  The Parent and the Seller shall have each
performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at or prior to the Closing, and the Parent and the Seller shall have each so
certified to the Purchaser in writing.

                           (c)         No
Material Adverse Change.  Since June 30, 2001, there shall not have
occurred any event which could reasonably be expected to have a Material
Adverse Effect, and the Parent and the Seller shall have each so certified to
the Purchaser in writing.

                           (d)        Legal
Actions or Proceedings.  No legal action or proceeding shall have
been instituted by any party or threatened in writing by any governmental
department, agency or authority, in either case seeking to restrain, prohibit,
invalidate or otherwise materially affect the consummation of the transactions
contemplated hereby or which could, whether or not adversely decided, adversely
affect the operation of the business of the Company and its Subsidiaries after
the Closing.

                           (e)         Licenses,
Consents, etc. Received.  The Parent and the Seller shall have
obtained and delivered to the Purchaser copies of all consents, licenses,
approvals and permits of other parties required to be obtained for the
transactions contemplated hereby as to which the failure to obtain the same
could reasonably be expected to have a Material Adverse Effect or interfere
with the Company’s right or ability to consummate such transactions, or the
Company’s and its Subsidiaries’ ability to carry on any of their businesses, as
now conducted, after the Closing, and no such consent, license, approval or
permit shall have been withdrawn or suspended.

                           (f)         Management
Arrangements.  The Company shall have entered into
employment, stockholder and other agreements with Dr. Richard Rehm with respect
to his continued employment by the Company, his agreement not to compete with
the Company or any Subsidiary, and his economic interests in the Company in a
form reasonably required by the Purchaser.

                           (g)        Stock
Certificates.  The Purchaser shall have received
certificates from the Seller evidencing the Shares duly endorsed for transfer
and free and clear of all liens, claims, encumbrances and restrictions.

                           (h)        Certificates;
Documents.  The Purchaser shall have received copies of
the following for each of the Seller and the Company certified by its Secretary
to the Purchaser’s satisfaction: 
(i) its Certificate of Incorporation, certified by the Secretary of
State of Delaware; (ii) a certificate of the Secretary of State of Delaware as
to its legal existence and good standing; (iii) its bylaws; and (iv) votes
adopted by its stockholders if necessary and resolutions adopted by its
directors authorizing the execution, delivery and performance of this Agreement
and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby.  The Purchaser
shall have also received each Subsidiary’s organizational documents, certified
by the appropriate governmental authority, a certificate as to each
Subsidiary’s legal existence and good standing certified by the appropriate
governmental authority and each Subsidiary’s bylaws.  The Purchaser shall also have received such other certificates,
documents and materials as it shall reasonably request.

                           (i)          Escrow
Agreement.  The Seller and the escrow agent, Boston Safe
Deposit and Trust (the “Escrow Agent”), shall have entered into an Escrow
Agreement (the “Escrow Agreement”), in substantially the form attached hereto
as Exhibit 6.01(i).

                           (j)          Transition
Services Agreement.  The Parent and the Seller shall have entered
into a Transition Services Agreement (the “Transition Services Agreement”) , in
substantially the form attached hereto as Exhibit 6.01(j).

                           (k)         Opinion
of Counsel to the Company and the Sellers.  The Purchaser shall have received an opinion
of Stoel Rives LLP, counsel to the Parent, the Seller and the Company, dated as
of the date of the Closing, to the effect set forth in Exhibit 6.01(k).

                           (l)          Certificates
of Officers of the Parent and Seller.  The Purchaser shall have received a
certificate from an officer of each of the Parent and the Seller, dated as of
the date of the Closing, to the effect of the second sentence of Section
2.02(b).

                           (m)        Leases.  The real property leases (the “Leases”)
with Highwoods/Tennessee Holdings, L.P. and Weeks Realty, L.P., as landlords
for premises located at 5301 Virginia Way, Suite 250, Brentwood, TN and Airpark
Business Center XIV, 5259 Harding Place, Nashville, TN, shall be assigned to
and assumed by the Parent, and, to the extent reasonably practicable, the
Company and the Subsidiaries shall be released therefrom by the landlords, in a
form satisfactory to the Purchaser.

                           (n)        Actions
and Proceedings.  Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated hereby or incident hereto and all other legal matters required for
such transactions shall have been reasonably satisfactory to counsel for the
Purchaser.

                           (o)        Due Diligence.  The Purchaser shall be satisfied with the
scope and results of its investigation and due diligence review of the Company,
the Subsidiaries and their assets, affairs, condition (financial and otherwise), businesses and prospects.

             Section 6.02     Conditions
Precedent to the Obligations of the Seller.  The obligation of the Seller to consummate
the sale and transfer of the Shares contemplated by this Agreement is subject,
at the option of the Seller, to the satisfaction at or prior to the Closing of
each of the following conditions:

                           (a)         Accuracy
of Representations and Warranties.  The representations and warranties of the
Purchaser contained in Article IV of this Agreement shall be true and correct
in all material respects on and as of the Closing Date as though made on and as
of that date (except for those representations and warranties that specifically
relate to an earlier date, which shall be true and correct in all material
respects as of such earlier date) and the Purchaser shall have so certified to
the Parent and the Seller in writing.

                           (b)        Compliance
with Covenants.  The Purchaser shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by the Purchaser
at or prior to the Closing, and the Purchaser shall have so certified to the
Parent and the Seller in writing.

                           (c)         Legal
Actions or Proceedings.  No legal action or proceeding shall have
been instituted by any party or threatened in writing by any governmental
department, agency or authority, in either case seeking to restrain, prohibit,
invalidate or otherwise materially affect the consummation of the transactions
contemplated hereby.

                           (d)        Purchase
Price.  The Purchaser shall have paid the Purchase
Price.

                           (e)         Certificates;
Documents.  The Parent and the Seller shall have received
such certificates, documents and materials as they shall reasonably request.

                           (f)         Escrow
Agreement.  The Purchaser and the Escrow Agent shall
have entered into the Escrow Agreement.

                           (g)        Transition Services Agreement.
The Purchaser shall have entered into the Transition Services Agreement.

                           (h)        Actions
and Proceedings.  Prior to the Closing, all actions,
proceedings, instruments and documents required to carry out the transactions
contemplated hereby or incident hereto and all other legal matters required for
such transactions shall have been reasonably satisfactory to counsel for the
Parent and the Seller.

             Section 6.03     Condition Precedent to
the Obligations of the Seller and the Purchaser.  The obligation of the Seller and the
Purchaser to consummate the sale and transfer of the Shares contemplated by
this Agreement is subject to the condition that the Parent shall have received
an opinion addressed to its Board of Directors that the consideration to be
received by the Parent from the Purchaser in connection with the transaction is
fair as to the Parent from a financial point of view.

ARTICLE VII

SURVIVAL; INDEMNIFICATION

             Section 7.01     Survival.  The representations, warranties, covenants
and agreements contained herein shall survive the Closing and any investigation
made by the Purchaser, the Seller or the Parent.  No action for a breach of the representations and warranties
contained herein, or any covenant contained herein to be performed prior to the
Closing Date, shall be brought more than one year following the Closing Date,
except for (a) claims arising out of the representations and warranties
contained in Sections 2.01(d), 2.01(g) (Capitalization of the Subsidiaries),
2.04 (Capitalization of the Company), 2.12(c) (Indebtedness), 2.17 (Taxes) and
2.23 (Related Party Transactions) and the covenants contained in Article V
(except Section 5.01) (collectively, the “Specified Representations and
Covenants”), which shall not be brought after the expiration of the applicable
statute of limitations, (b) claims of which the Seller has been notified
with reasonable specificity by the Purchaser, or claims of which the Purchaser
has been notified with reasonable specificity by the Seller, within such
one-year period and (c) claims arising out of fraud by Parent or Seller.

             Section 7.02     Limits
on Claims.  If the Closing occurs, the Purchaser shall
not be entitled to recover any damages for a breach of the representations and
warranties contained in Article 2 or for the breach of any covenant to be
performed prior to the Closing unless and until the Purchaser’s aggregate
claims therefor exceed $50,000, at which time the Purchaser shall be entitled
to receive damages for all claims in excess of the $50,000 threshold.  In addition, the aggregate recovery of Purchaser
for all claims under this Agreement shall not exceed $3,000,000, other than
claims arising out of breach of the Specified Representations and Covenants and
in respect of claims arising out of fraud by Parent or Seller.  In the case of a breach of a Specified
Representation and Covenant, the aggregate liability of Parent and Seller to
Purchaser, together with any liability for breach of any other of the
representations, warranties and covenants of Parent and Seller under this
Agreement shall not exceed the Purchase Price, except for any breach of
representation or warranty or obligation under any covenant concerning Taxes
for which there shall be no limit.  In
addition, Parent and Seller shall not have any liability for damages resulting
from a breach of a representation or warranty if both (i) Parthenon Capital,
LLC or any of the owners, members, managers or principals of Parthenon Capital,
LLC (which in any event shall include Mr. Scott Steele) had actual knowledge of
the breach or inaccuracy of the representation or warranty on or prior to the
Closing Date and (ii) none of the Seller, the Parent or the Company had actual
knowledge of such breach or inaccuracy on or prior to the Closing Date.

             Section 7.03     Indemnification by the
Company and the Sellers.  Subject to any applicable limitations set
forth in Sections 7.01 and 7.02, the Parent, the Seller and the Company
hereby jointly and severally indemnify and hold the Purchaser harmless from and
against all claims, liabilities, obligations, costs, damages, losses and
expenses of any nature (including reasonable attorneys fees) (“Damages”)
arising out of or relating to (a) any breach of the representations,
warranties, covenants or agreements of the Parent or the Seller set forth
herein, (b) the failure of any portion of the Closing Debt to be paid or
otherwise satisfied at Closing, (c) the failure of the Company and the
Subsidiaries to have at least $1,723,000 of net working capital (defined as the
excess of current assets over current liabilities, without giving effect to the
transactions at or related to the Closing, any capital infusion by the
Purchaser or any write-up of assets), determined as of immediately prior to
Closing in accordance with GAAP, (d) the Leases or (e) a breach of fiduciary
duty with respect to the Network Health Services, Inc. 401(k) Profit Sharing
Plan occurring before the Closing Date. 
After the Closing, all indemnification obligations will be the
responsibility of the Parent and the Seller, and the Company shall have no
liability for any breach of representations, warranties or covenants.

             Section 7.04     Indemnification by the Purchaser.  The Purchaser hereby indemnifies and holds
Parent and the Seller harmless from and against all Damages arising out of or
relating to any breach of the representations, warranties, covenants or
agreements of the Purchaser set forth herein.

             Section 7.05     Indemnification Procedure.

                           (a)         Third
Party Claims.

                           (i)          Each
indemnified party shall, with reasonable promptness after obtaining knowledge
thereof, provide any indemnifying party against whom a claim for
indemnification is to be made under this Article VII with written notice of all
third party actions, suits, proceedings, claims, demands or assessments that may
be subject to the indemnification provisions of this Article VII (collectively,
“Third Party Claims”), including, in reasonable detail, the basis for
the claim, the nature of Damages and a good faith estimate of the amount of
Damages.

                           (ii)         Each
indemnifying party shall have 15 days after its receipt of the claim notice to
notify the indemnified party in writing whether the indemnifying party agrees
that the claim is subject to this Article VII and, if so, whether the
indemnifying party elects, jointly with any other indemnifying party notified
under this Section to undertake, conduct and control, through counsel of its
choosing (subject to the consent of the indemnified party, such consent not to
be withheld unreasonably) and at its or their sole risk and expense, the good
faith settlement or defense of the Third Party Claim.

                           (iii)        If
within 15 days after its receipt of the claim notice an indemnifying party
notifies the indemnified party that it elects to undertake the good faith
settlement or defense of the Third Party Claim, the indemnified party shall
cooperate reasonably with the indemnifying party in connection therewith
including, without limitation, by making available to the indemnifying party
all relevant information material to the defense of the Third Party Claim.  The indemnified party shall be entitled to
participate in the settlement or defense of the Third Party Claim through
counsel chosen by the indemnified party, at its expense, and to approve any
proposed settlement that would impose any obligation or duty on the indemnified
party, which approval may, in the sole discretion of the indemnified party, be
withheld.  So long as an indemnifying
party is contesting the Third Party Claim in good faith and with reasonable
diligence, the indemnified party shall not pay or settle the Third Party
Claim.  Notwithstanding the foregoing,
the indemnified party shall have the right to pay or settle any Third Party
Claim at any time, provided that in such event it waives any right to
indemnification therefor by the indemnifying party.

                           (iv)       If
an indemnifying party does not provide notice that it elects to undertake the
good faith settlement or defense of the Third Party Claim, or if an
indemnifying party fails to contest the Third Party Claim or undertake or
approve settlement, in good faith and with reasonable diligence, the
indemnified party shall thereafter have the right to contest, settle or
compromise the Third Party Claim at its exclusive discretion, at the risk and
expense of the indemnifying party, and the indemnifying party will thereby
waive any claim, defense or argument that the indemnified party’s settlement or
defense of such Third Party Claim is in any respect inadequate or unreasonable.

                           (v)        A
party’s failure to give timely notice will not constitute a defense, in part or
in whole, to any claim for indemnification by such party, except if, and only
to the extent that, such failure results in any material prejudice to the
indemnifying party.

                           (b)        Non-Third
Party Claims.

                           (i)          Each
indemnified party shall, with reasonable promptness, deliver to any
indemnifying party against whom a claim for indemnification is to be made under
this Article VII written notice of all claims for indemnification under this
Article VII, other than Third Party Claims, including, in reasonable detail,
the basis for the claim, the nature of Damages and a good faith estimate of the
amount of Damages.

                           (ii)         Each
indemnifying party shall have 30 days after its receipt of the claim notice to
notify the indemnified party in writing whether the indemnifying party accepts
liability for all or any part of the Damages described in the claim
notice.  If the indemnifying party does
not so notify the indemnified party, the indemnifying party shall be deemed to
accept liability for all the Damages described in the claim notice.

                           (iii)        A
party’s failure to give timely notice will not constitute a defense, in part or
in whole, to any claim for indemnification by such party, except if, and only
to the extent that, such failure results in any material prejudice to the
indemnifying party.

ARTICLE VIII

TERMINATION OF AGREEMENT

             Section 8.01     Termination of Agreement
Prior to Closing.  This Agreement may be terminated and the
sale and transfer of the Shares contemplated hereby may be abandoned at any
time prior to the Closing:

                           (a)         by
the mutual written consent of the Parent, the Seller and the Purchaser;

                           (b)        by
either (A) the Purchaser if there shall have been a material breach of any of
the representations, warranties, covenants or agreements of the Parent and/or
the Seller contained in this Agreement or (B) the Parent and the Seller if
there shall have been a material breach of any of the representations,
warranties, covenants or agreements of the Purchaser contained in this
Agreement, in either case, only if (x) such breach would result in the failure
to satisfy one or more of the conditions set forth in Section 6.01 (in the case
of a breach by the Parent and/or the Seller) or Section 6.02 (in the case of a
breach by the Purchaser) and (y) such breach (1) by its nature is not capable
of being cured or (2) shall not have been cured within 15 days after written
notice thereof shall have been given by the terminating parties to the party or
parties alleged to be in breach; or

                           (c)         by
either the Purchaser, on the one hand, or the Parent and the Seller, on the
other hand, if the Closing shall not have occurred prior to the close of
business on August 31, 2001, provided that (A) the right to terminate this
Agreement under this Section 8.01(c) shall not be available to the Purchaser if
any breach of the representations, warranties, covenants or agreements of the
Purchaser contained in this Agreement then exists and (B) the right to
terminate this Agreement under this Section 8.01(c) shall not be available to
the Parent and the Seller if any breach of the representations, warranties,
covenants or agreements of the Parent and/or the Seller contained in this
Agreement then exists.

             Section 8.02     Method
and Effect of Termination.

                           (a)         Any
party desiring to terminate this Agreement pursuant to Section 8.01 shall give
notice to each of the other parties hereto in accordance with Section 9.03.

                           (b)        In
the event of the termination of this Agreement pursuant to Section 8.01, this
Agreement, except for the provisions of this Article VIII and Article IX, shall
become void and have no further effect, with no liability on the part of any
party hereto or its partners, directors, officers or stockholders, provided that
nothing in this Section 8.02 or in that certain Non-Solicitation Agreement
dated as of June 26, 2001 by and between Parthenon Capital and the Parent (the
“Non-Solicitation Agreement”) shall relieve any party of liability under
this Agreement for a breach of any provision hereof occurring prior to such
termination, and provided further that nothing herein shall relieve any party
for any willful breach of this Agreement.

ARTICLE IX

MISCELLANEOUS

             Section 9.01     Expenses, Etc.  All costs and expenses, including fees and
disbursements of counsel, advisors, accountants and consultants, incurred in
connection with the negotiation, preparation, execution and delivery of this
Agreement, the Ancillary Agreements and the closing of the transactions
contemplated hereby and thereby (collectively, “Expenses”) shall be paid by the
party incurring such Expenses, whether or not the transactions contemplated by
this Agreement are consummated (except as provided in the Non-Solicitation
Agreement), provided, however, that all Expenses incurred by the Company
shall be borne by the Parent and the Seller. 
In the event of a termination of this Agreement pursuant to Section
8.01, the obligation of each party to pay its own Expenses shall be subject to
any rights that such party may have arising out of a breach of this Agreement
by any other party or parties hereto.

             Section 9.02     Execution in
Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

             Section 9.03     Notices.  All notices, requests, instructions and
other documents that are required to be or may be given or delivered pursuant
to the terms of this Agreement shall be in writing and shall be sufficient in
all respects if delivered by hand or national overnight courier service,
transmitted by facsimile (confirmed by another method of delivery permitted
hereunder) or mailed by registered or certified mail, postage prepaid, as
follows:

 

	 	if
  to either the Parent or the Seller, to it at:
	 	 
	 	 	224
  West 30th Street
	 	 	New
  York, NY  10001
	 	 	Attention:  Mark Boulding, General Counsel
	 	 	Facsimile:  (212) 760-3222
	 	 	With
  an electronic copy to: 
  legal@medscapeinc.com
	 	 	 
	 	with
  a copy to:
	 	 
	 	 	Stoel
  Rives LLP
	 	 	900
  SW Fifth Avenue, Suite 2600
	 	 	Portland,
  OR  97204-1268
	 	 	Attention:  John Schweitzer, Esq.
	 	 	Facsimile:  (503) 220-2480
	 	 	With
  an electronic copy to: jmschweitzer@stoel.com
	 	 	 
	 	if
  to the Purchaser to it at:
	 	 
	 	 	TEM
  Holdings, LLC
	 	 	c/o
  Parthenon Capital, Inc.
	 	 	200
  State Street
	 	 	Boston,
  MA  02109
	 	 	Attention:  Scott Steele
	 	 	Facsimile:  (617) 478-7010
	 	 	With
  an electronic copy to: scotts@parthenoncapital.com
	 	 	 
	 	with
  a copy to:
	 	 
	 	 	Choate,
  Hall & Stewart
	 	 	Exchange
  Place
	 	 	53
  State Street
	 	 	Boston,
  MA  02109
	 	 	Attention:  Stephen M. L. Cohen, Esq.
	 	 	Facsimile:  (617) 248-4000
	 	 	With
  an electronic copy to: scohen@choate.com

 

or such other address or addresses as any
party hereto shall have designated by notice in writing to the other parties
hereto.  Such notices, requests,
instructions and other documents shall be deemed given or delivered (i) five
business days following sending by registered or certified mail, postage
prepaid, (ii) one business day following sending by national overnight courier
service, (iii) when sent, if sent by facsimile (but only if such facsimile is
promptly confirmed by such other method of delivery) or (iv) when delivered, if
delivered by hand.

             Section 9.04     Waivers.  The Parent and the Seller, on the one hand,
and the Purchaser, on the other hand, may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; (iii) waive compliance with
any of the conditions or covenants of the other contained in this Agreement; or
(iv) waive performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including without limitation any investigation by
or on behalf of the Parent and the Seller, on the one hand, and the Purchaser,
on the other hand, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. 
The waiver by the Parent and the Seller, on the one hand, and the
Purchaser, on the other hand, of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.

             Section 9.05     Amendments, Supplements,
Etc.  At any time this Agreement may be amended or
supplemented by such additional agreements, articles or certificates as may be
determined by the parties hereto to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto, or to add to or modify the covenants, terms or conditions
hereof or to effect or facilitate the consummation of any of the transactions
contemplated hereby.  Any such
instrument must be in writing and signed by the Parent, the Seller and the
Purchaser.

             Section 9.06     Entire Agreement.  This Agreement, its exhibits and schedules,
and the Ancillary Agreements constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto
with respect to the subject matter hereof, except for the Non-Solicitation
Agreement.  The Holding Period (as
defined in the Non-Solicitation Agreement) shall extend to the later of (i) the
Holding Period as defined in the Non-Solicitation Agreement and (ii) the
termination of this Agreement.

             Section 9.07     Applicable Law; Consent to Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principals thereof.

             Section 9.08     Further Assurances.  The parties hereto agree (i) to furnish upon
request to each other such further information, (ii) to execute and deliver to
each other such other documents and (iii) to do or cause to be done such other
acts and things, all as the other parties hereto may from time to time
reasonably request for the purpose of carrying out the intent of this Agreement
and the Ancillary Agreements.

             Section 9.09     Interpretation.

                           (a)         As
used herein, the words “hereof”, “herein”, “herewith” and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and the words
“Article”, “Section” and “Schedule” references are to the articles, sections
and schedules of this Agreement unless otherwise specified.  Whenever the words “include”, “includes” or
“including” are used in this Agreement they shall be deemed to be followed by
the words “without limitation”.  The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms. 
Any agreement, instrument or statute defined or referred to herein means
such agreement, instrument or statute as from time to time amended, qualified
or supplemented, including (in the case of agreements and instruments) by
waiver or consent and (in the case of statutes) by succession of comparable
successor statutes.  References to a
person are also to its successors and permitted assigns.

                           (b)        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 provisions of this Agreement.

             Section 9.10     Binding Effect; Benefits.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns and nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under
or by reason of this Agreement.

             Section 9.11     Assignability.  Neither this Agreement nor any of the
parties’ rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.

             Section 9.12     Release.  Effective as of the Closing, the Parent, the
Seller and the Affiliates each release the Company and the Subsidiaries, from
any and all claims, liabilities, obligations, damages, expenses and other
amounts of every kind or description arising or existing prior to the Closing
Date, except that this release shall not apply as specifically set forth
herein.  In addition, effective as of the
Closing, Parent, Seller and the Affiliates each release the officers, directors
and employees of the Company and the Subsidiaries from obligations to or
agreements with Parent, Seller or the Affiliates that, if enforced, would
materially interfere with such individual’s ability to conduct the business of
the Company and the Subsidiaries after Closing.

             Section 9.13     Schedules.  Disclosure by Parent, Seller or the Company
of any fact or item in any schedule hereto shall be deemed to have been
disclosed in any other schedule hereto made by Parent, Seller or the Company,
provided that disclosure of such fact or item on such schedule contains fair
disclosure of the facts that would otherwise be required to be disclosed in
such other schedule.  In the view of the
Parent and the Seller, matters reflected in the schedules hereto are not
necessarily limited to matters required by this Agreement to be disclosed.  Such additional matters are provided for
information purposes only.

             Section 9.14     Assignment of Certain
Employment Contracts.  The parties acknowledge that certain
employees of the Company or the Subsidiaries inadvertently entered into
employment agreements with the Parent or the Seller rather than the Company or
a Subsidiary.  Effective as of the
Closing, the Parent and the Seller will be deemed to have assigned to the
Company all of their rights under the employment agreements between the Parent
or the Seller and any employee of the Company or any Subsidiary, including
without limitation all rights which may have arisen at any time under any assignment
of invention or similar provisions contained in such agreements.

[the
remainder of this page is intentionally blank]

             IN
WITNESS WHEREOF, this Stock Purchase Agreement has been duly executed and
delivered by the parties hereto as of the date first above written.

	 	THE
  PARENT:
	 	 
	 	MEDICALOGIC/MEDSCAPE,
  INC.
	 	 
	 	 
	 	By
	 	 	

	 	 	Name:
	 	 	Title:
	 	 
	 	 
	 	THE
  SELLER:
	 	 	 
	 	MEDSCAPE
  ENTERPRISES, INC.
	 	 
	 	 
	 	By
	 	 	

	 	 	Name:
	 	 	Title:
	 	 
	 	 
	 	THE
  PURCHASER:
	 	 	 
	 	TEM
  HOLDINGS, LLC
	 	 
	 	 
	 	By
	 	 	

	 	 	Name:
	 	 	Title:Prepared by MerrillDirect

 

 

 

 

 

 

 

             May 24, 2001

Christopher T. Lutes

Chief Financial Officer

Dear Chris:

This letter agreement (the “Agreement”)
sets out the terms and conditions of your resignation from full-time employment
with Silicon Valley Bank and Silicon Valley Bancshares (collectively “SVB”) and
your subsequent part-time working arrangement with SVB:

1.          Voluntary
Resignation.  You’ve informed
us that you will voluntarily resign from your full-time position as SVB’s Chief
Financial Officer, effective June 30, 2001.

2.          Term and Cancellation. In exchange and
consideration for your executing the release attached as Exhibit A to
this Agreement (the “Release”), SVB is offering you part-time employment
(“Part-time Employment”).  Your
part-time employment period will be for twelve (12) months, beginning on July
1, 2001 and ending on June 30, 2002 (the “Part-time Employment Period”). Either
party may terminate this Agreement at any time without cause with 30 days prior
written notice.  Sections 4(d), 4(e),
17, 19, 22, 23, 24, 25, 26, 27, 28, and 29 survive any termination of this
Agreement by either party without cause. SVB may terminate this Agreement
immediately for cause.  Any decision by
SVB to terminate this Agreement prior to June 30, 2002 will be made by Silicon
Valley Bancshares’ Chief Executive Officer (the “CEO”) with the concurrence of
the Board Executive Committee.

3.          Duties.

             a)          Standard Duties. During the Part-time
Employment Period, you will work a maximum of twenty (20) hours per week.  Your duties will include being reasonably
available to Ken Wilcox and other executives of SVB to provide advisory and
other services related to the financial operations of SVB.

             b)          Special Engagements.  During the Part-time Employment Period, SVB
may engage you for projects (other than the standard duties contemplated
above).  Such an engagement will be on
terms (including fees) as then agreed upon by SVB and you.

4.          Compensation.

             a)          Compensation.  You will be paid $87,500.00 during the Part-time Employment
Period, payable bi-weekly on SVB’s normal payroll dates with all applicable
federal and state withholding amounts deducted. If SVB terminates this
Agreement without cause, you will continue to be paid for six (6) months from
the date of the notice of termination (the “Six Month Payment Period”).

             b)          Stock Options.  Pursuant to the Silicon Valley Bancshares Stock Option Plans (the
“Plans”), your SVB options and/or stock grants will continue to vest during the
Part-time Employment Period.

             c)          Incentive Compensation.  You will be eligible in February 2002 for an
incentive compensation award, in accordance with the applicable terms of the
Bank’s Incentive Compensation Plan, pro rated for your time spent in 2001 as
both a full-time and part-time employee. You will not be eligible for an incentive
award in February 2003 for your time spent as a part-time employee in
2002.  Also, you will not be eligible to
receive new Retention Program allocations under the 2003 Retention Programs.

             d)          Retention Program. You will be entitled to
“Continued Participation” under the Retention Programs (as defined in SVB’s
1998, 1999, 2000, 2001 and 2002 Retention Programs) during the Part-time
Employment Period, as well for the remainder of the Retention Programs’ terms,
provided you:  (1) do not disclose
Confidential Information (as defined in Section 8(a) below), (2) do “not
compete” with SVB (as defined in Section 8(b) below), and (3) do not disparage
SVB (as discussed in Section 8(c) below), in each case for three (3) years
following your termination of employment with SVB.  Provided you do comply with the three (3) provisions above for
the requisite three (3) year period, you will thereafter be entitled to
Continued Participation without limitation. 
If you do breach any of these provisions during this three (3) year
period, you will forfeit any right to then-future distributions under the 1998,
1999, 2000, 2001, and 2002 Retention Programs.

             e)          Qualified Investors Fund.  SVB agrees to waive any vesting requirements
for your interest in the 2000 Qualified Investors Fund.

5.          Retirement
Benefits. You will be eligible to participate in SVB’s Money
Purchase Plan, the 401(k) and Employee Stock Ownership Plan, and Employee Stock
Purchase Program during the Part-time Employment Period.

6.          Group
Medical, Vision and Dental Benefits.  You will be eligible to continue your current SVB group health
insurance benefits (including group medical, disability, life insurance, vision
and dental benefits) during the Part-time Employment Period.  If SVB terminates this Agreement without cause,
you will continue to be eligible for these benefits for the Six Month Payment
Period.

7.          Change in
Control Policy. You will continue to be eligible to receive benefits
under SVB’s Change In Control Severance Benefits Policy during your Part-time
Employment Period.  However, as you will
no longer be a member of SVB’s Operating Committee, you will be entitled to
benefits under such policy only to the extent provided to employees at Grade 16
level.  You will also be entitled to
immediate vesting of Retention Program interests in the event of a change in
control (as that term is defined in SVB’s Change In Control Severance Benefits
Policy).

8.          Confidential
Information/Competition with SVB

             a)          Disclosure of Confidential Information. SVB
may immediately terminate the Part-time Employment Period, if you disclose
“Confidential Information.” 
“Confidential Information” includes all technical and non-technical
information related to the current, future and proposed services of SVB,
including financial information and business forecasts and strategies.

             b)          Competition with SVB. SVB may immediately
terminate the Part-time Employment Period, if, during your Part-time Employment
Period, you become employed by, or become a consultant for, any entity that is
in “competition with” SVB, unless you obtain the prior written approval of the
CEO (who shall obtain the concurrence of the Executive Committee of the
Board.).  The CEO will use best efforts
to respond to your approval request within thirty (30) days. (While not required,
you are encouraged to seek SVB’s approval on any prospective employment or
consulting arrangement so you do not inadvertently breach this section of the
Agreement.)    An entity will be deemed
“in competition with” SVB if:  (1) the
entity is a significant provider of financial products or services, or other
products and services offered by SVB, to early-stage technology companies,
whether nationally or in one or more regions served by SVB’s offices (with SVB
determining in its reasonable discretion whether in fact an entity is a
significant provider of such products or services);   (2) the entity is otherwise a direct competitor of SVB in any of
SVB’s then-substantial lines of business, or (3) the entity has recruited you
to create or build a business line which will be in direct competition with a
substantial line of business of SVB.

 

                           Upon
notice from SVB that you are in competition with SVB (the “Notice”), you may,
in the sole discretion of the CEO (with the concurrence of the Board Executive
Committee):  (1) be provided with up to
thirty (30) days to leave such competing entity (the “Cure Period”); or (2) up
to six (6) months to leave such competing entity, if you had obtained SVB’s
prior written approval for the subject employment or consulting arrangement and
SVB has since become competitive with such employing entity or consulting firm
due to a change in SVB’s substantial line of business (with the length of such
periods to be determined in the 
reasonable discretion the CEO, with the concurrence of the Board
Executive Committee) (also, the “Cure Period”). If you leave such competitor
within the Cure Period, this Agreement will remain in full force and
effect.  If you do not leave such
competitor within the Cure Period, SVB thereafter may immediately terminate
this Agreement, with such decision to be made by the CEO with the concurrence
of the Board Executive Committee.

             c)          Nondisparagement.  SVB may immediately terminate the Part-time Employment Period,
if, during your Part-time Employment Period, (1) you mention to any other
person in a business-related context any negative or disparaging comments or
statements about SVB, or any of its officers, agents or employees, including
disparaging or negative comments regarding business practices, or (2) you
communicate to any other person any facts or opinions that might tend to
reflect adversely upon SVB or to harm the reputation of SVB or its officers,
agents or employees in the conduct of their respective personal, business or
professional affairs.

             d)          Consulting for a Non-Competitor.  During your Part-time Employment
Period, prior to accepting a consulting position with a non-competitor of SVB,
you will discuss the proposed consulting position with the CEO (who will report
on the proposed position to the Executive Committee of the Board).  The CEO, in such CEO’s sole discretion,
shall determine if you may pursue the consulting position, considering, among
other factors, whether such consulting position will interfere with your
part-time employment responsibilities.

9.          Expense
Reimbursement. SVB will reimburse you for reasonable out-of-pocket
expenses related to your SVB employment and incurred during the Part-time
Employment Period, pursuant to SVB’s expense policies and procedures.

10.        Investments.   During the Part-time Employment Period, you
maybuy  (i) stock of any private tech/life sciences
company, or (ii) a venture capital fund, if you first offered the investment
opportunity to SVB (and SVB has invested all that it chooses).  You may buy publicly traded stock of a SVB
client.

11.        Outside
Boards/Outside Employment and Consulting Arrangements.  During the Part-time Employment Period, you
may sit on the Board of Directors or Advisory Board or become an employee or
consultant of an outside company with the approval of the CEO (who will report
on the proposed position to the Executive Committee of the Board). You will be
able to retain any compensation in connection with such role as a director,
employee or consultant.  You will play
such role in your individual capacity, and specifically, not as a
representative of SVB.

12.        Remote
Connectivity/Cubicle Space. 
You will be provided with remote connectivity to SVB’s computer network
and with access to guest cubicle space at SVB during the Part-time Employment
Period.  If SVB terminates this
Agreement without cause, SVB, in its sole discretion, may continue to provide
these benefits during the Six Month Payment Period.

13.        Payment of
Wages Due.  You acknowledge
and represent that the consideration for this Agreement is not accrued salary,
wages or vacation, and is in excess of any established severance practice or
policy of SVB, and you further acknowledge that California Labor Code Section
206.5 is not applicable to this Agreement or to the parties hereto.  That section provides in pertinent part:

             No
employer shall require the execution of any release of any claim or

             right on account of wages
due, or to become due, or made as an advance

             on wages to be earned, unless
payment of such wages has been made.

14.        No Reliance on Representations.  SVB and you represent that each has had the
opportunity to consult with an attorney, and has carefully read and understand
the scope and effect of the provisions of this Agreement.  In entering into this Agreement, SVB and you
each rely upon their own judgement and have not been influenced by any
statement made by the other or by any person representing or employed by the
other.  You do not waive rights or
claims that arise after the effective date of this Agreement as set forth in
Paragraph 15 below.  You acknowledge
that you were given a period of at least twenty-one (21) days within which to
consider this Agreement and that you have specifically been advised to consult
with an attorney before executing it. 
In executing this Agreement, you waive said twenty-one (21) day
consideration period. To the extent that
you have taken less than twenty-one (21) days to consider this Agreement, you
acknowledge that you are entering into this Agreement voluntarily and with
knowledge of and a full understanding of its terms.

15.        Revocability/Effective Date of this Agreement.  For seven (7) days following the execution
of this Agreement, you may revoke it by submitting written notice of such
revocation to SVB on or before the 7th day following the date of
this Agreement.  This Agreement shall
become effective or enforceable on the eighth (8th) calendar day
after you have signed this Agreement.

16.        Non-Insider.  During the Part-time Employment Period, you shall not be deemed
an “insider” for purposes of compliance with SVB’s Insider Trading Policy.  Notwithstanding the foregoing, you shall
continue to be bound by applicable provisions of federal and state securities
laws, including, without limitation, (a) Section 16 of the Securities Exchange
Act of 1934, (b) Rule 144 promulgated under the Securities Act of 1933, and (c)
such laws prohibiting trading in Silicon Valley Bancshares’ stock while you
then are in possession of material non-public information.

17.        Non-Solicitation.  During the Part-time Employment Period and for two (2) years from
termination of the Part-time Employment Period, you shall not directly, or
indirectly, cause any party to solicit (other than through a general
solicitation not directed to SVB personnel), offer, engage, or employ either as
an employee or independent contractor, any employee of SVB without the prior
written approval of SVB.  This section
will not apply if SVB personnel solicit employment from you (without you first soliciting
them).  Breach of this Section, in the
discretion of the CEO, may lead to you forfeiting any right to then-future
distributions under the 1998, 1999, 2000, 2001, and 2002 Retention Programs.

18.        Headings. 
The various headings of this Agreement are inserted for convenience only
and shall not be deemed a part of, or in any manner affect, this Agreement or
any provision thereof.

19.        Governing Law.  This Agreement shall be governed by the laws of the State of
California.

20.        Materiality.  This Agreement would not have been agreed upon but for the
inclusion of each and every one of its conditions.

21.        Voluntary Execution of this Agreement.  You agree you have executed this Agreement
voluntarily and without any duress or undue influence on the part of or on
behalf of SVB with the full intent of releasing all claims.  You acknowledge that: (a) you have read this
Agreement; (b) you have been given a reasonable period of time to consider the
legal effects of this Agreement; (c) you have been given the opportunity to be
represented in the preparation, negotiation, and execution of this Agreement by
legal counsel of your own choice; (d) you understand the terms and consequences
of this Agreement and of the releases it contains; and (e) you are fully aware
of the legal and binding effects of this Agreement.

22.        Successors.  This Agreement and the respective rights and obligations of the
parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.  This provision, with respect to your right
of successorship, shall, however, inure only to the benefit of your estate,
executor, administrator, and heirs. You may assign the economic benefits
conferred by this Agreement to a trust. 
SVB makes no representations or warranties involving the tax
implications of making such an assignment, and recommends that you consult your
personal tax and legal advisors.

23.        Notices.  Any notices will be written and delivered
by:  (i) personal delivery; (ii)
overnight courier;  (iii) telecopy or
facsimile transmission with acknowledgment of receipt; or (iv) certified or
registered mail, return receipt requested.

24.        Severability.  If any provision of this Agreement is
illegal, invalid or unenforceable, the legality, validity and enforceability of
the remaining provisions continue.

25.        Waiver.  Waiver by SVB of a breach of this Agreement
is not a waiver of any other breach.

26.        Entire
Agreement.  This is the
entire Agreement (including Exhibit A attached hereto) between the parties on
this subject and supersedes all prior and contemporaneous understandings and
agreements, whether oral or written. 
This Agreement may only be modified in writing signed by you and SVB.

27.        Indemnity.  You will indemnify and hold harmless SVB
against all liability to third parties (other than liability solely the fault
of SVB) arising from or in connection with this Agreement.

28.        Arbitration.  Any dispute between the parties arising out
of or in connection with this Agreement shall be submitted to binding
arbitration in Santa Clara County, California in accordance with the Commercial
Rules of the American Arbitration Association and pursuant to then prevailing
California law.  The award shall be
final and binding upon the parties and judgment for such award may be entered
in any court having jurisdiction.

29.        Costs and
Attorneys’ Fees.  Should any
action be brought to enforce any of the rights or obligations set forth in this
Agreement, the prevailing party shall be entitled to recover all costs and
expenses incurred in the prosecution or defense of that action, including
attorneys’ fees.

Chris, let me take this opportunity to
thank you for your outstanding years of service to the Bank.  We look forward to continuing to work with
you.

	 	Sincerely,	 	 
	 	 	 	 
	 	SILICON
  VALLEY BANK	 	 
	 	 	 	 
	 	  /s/ John C. Dean	 	 
	 	 	 	 
	 	John C. Dean	 	 
	 	Chairman of the Board of Directors	 	 

 

 

 

	 	 	Agreed
  to and Accepted
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	by:	/s/
  Christopher T. Lutes

 

Exhibit A

EMPLOYEE AGREEMENT AND
RELEASE

             Except as
otherwise set forth in this Agreement, effective on July 1, 2001 and for any
claims pending on that date, I hereby release, acquit and forever discharge
Silicon Valley Bancshares and Silicon Valley Bank (collectively, the
“Company”), its parents and subsidiaries, and its and their officers,
directors, agents, servants, employees, attorneys, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of
or in any way related to agreements, events, acts or conduct at any time prior
to and including the date this Agreement is signed, including but not limited
to:  all such claims and demands
directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment; claims or demands
related to salary, bonuses, commissions, stock, stock options, or any other
ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law, statute or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Americans with Disabilities Act of 1990; the California
Fair Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; harassment; fraud; defamation; emotional distress;
and breach of the implied covenant of good faith and fair dealing.

             In giving this
release, which includes claims that may be unknown to me at present, I
acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows:  “A general
release does not extend to claims which the creditor does not know or suspect
to exist in his favor at the time of executing the release, which if known by
him must have materially affected his settlement with the debtor.”  I expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any unknown or unsuspected claims I may
have against the Company.

	 	By:

	 	 	Christopher T. Lutes
	 	 	 
	 	 	 
	 	 	 
	 	Date:

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