Settlement Agreement - Quintiles Transnational Corp., WebMD Corp. and ENVOY Corp.
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement" or "Settlement Agreement") is
made this 12th day of October 2001 by and among Quintiles Transnational Corp.
("Quintiles"), a corporation organized and existing under the laws of the State
of North Carolina; WebMD Corporation ("WebMD"), a corporation organized and
existing under the laws of the State of Delaware; and ENVOY Corporation
("ENVOY"), a corporation organized and existing under the laws of the State of
Delaware. This Agreement shall become binding and take effect as of the date
hereof (the "Effective Date").
BACKGROUND
1. On January 22, 2000, Quintiles and Healtheon/WebMD Corp. ("HWMD")
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which they agreed, inter alia, for Quintiles' wholly-owned subsidiary ENVOY
to become a wholly-owned subsidiary of HWMD (the "Merger").
2. The parties consummated the Merger on May 26, 2000. In connection
therewith the parties entered into (a) a Data Rights Agreement (the "Data Rights
Agreement") under which they agreed, inter alia, that HWMD would furnish certain
data to Quintiles, (b) an Internet Product Development and Marketing Agreement
(the "Internet Agreement") under which they agreed, inter alia, to engage in the
collaborative development, marketing and commercialization of a portfolio of
Internet-based products and services for the pharmaceutical industry, and (c) a
Tax Sharing Agreement (the "Tax Sharing Agreement") under which they agreed,
inter alia, to allocate certain tax burdens and benefits which occurred prior to
the consummation of the Merger and certain other tax matters. Simultaneously,
Quintiles issued HWMD a warrant to purchase ten million (10,000,000) shares of
Quintiles Common Stock (the "Warrant"). Quintiles and HWMD amended the Data
Rights Agreement through a Temporary Addendum to Data Rights Agreement (the
"Temporary Addendum"), dated as of May 22, 2000.
3. On September 12, 2000, HWMD changed its name to WebMD Corporation.
4. On February 24, 2001, WebMD suspended its delivery of data under the
Data Rights Agreement.
5. On or about February 25, 2001, Quintiles commenced a lawsuit against
WebMD in the Superior Court of Wake County, North Carolina captioned Quintiles
Transnational Corp. v. WebMD Corporation, Civil Action No. 01 CVS 2289, which
lawsuit was subsequently removed by WebMD to the United States District Court
for the Eastern District of North Carolina, Western Division, where it is
captioned Quintiles Transnational Corp. v. WebMD Corporation, 5:01 CV 180 BO(3)
(the "Litigation").
6. Quintiles alleges in the Litigation, inter alia, that WebMD's
suspension of the delivery of data on February 24, 2001 constituted a material
breach of the Data Rights Agreement by WebMD.
7. On March 20, 2001, the United States District Court for the Eastern
District of North Carolina entered in the Litigation a written order granting
Quintiles' motion for a preliminary injunction requiring the uninterrupted and
unaltered flow of data (the "Preliminary Injunction").
8. On April 26, 2001 WebMD filed a Notice of Appeal with the United
States Court of Appeals for the Fourth Circuit, appealing the District Court's
March 20, 2001 order (the "Appeal").
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9. On October 9, 2001 Quintiles filed and served its Amended Complaint
in the Litigation asserting various claims against WebMD, ENVOY, Martin J.
Wygod, and W. Michael Long, and on that same date WebMD filed its Appeal Brief.
10. In addition to the matters in dispute in the Litigation, additional
disputes have also arisen between Quintiles and WebMD concerning the parties'
respective rights and obligations under the Data Rights Agreement, Internet
Agreement and Tax Sharing Agreement.
11. Quintiles and WebMD have agreed to resolve and to compromise
between them on a permanent and final basis all matters and issues in dispute
regarding the Litigation, the Data Rights Agreement including the Temporary
Addendum, the Internet Agreement, the Tax Sharing Agreement, the Warrant, and
certain other matters, as set forth in this Agreement.
TERMS
NOW, THEREFORE, for and in consideration of the mutual promises set
forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Quintiles and WebMD hereby agree
as follows:
1. Definitions
As used in this Agreement, the following terms shall have the meanings
set forth below:
(a) "Acquirer" means any person or entity, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
other than Quintiles, WebMD or one of their Affiliates.
(b) "Affiliate" shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, Quintiles or WebMD, respectively, as defined and used under
Rule 405 of Regulation C of the Securities Act of 1933, as amended.
(c) "Closing" shall mean the date WebMD makes payment of the purchase
price for, and Quintiles transfers its title, interest and ownership rights in,
the Shares.
(d) "ENVOY Liquidity Event" means the closing of a transaction pursuant
to which WebMD sells or otherwise transfers to an Acquirer all or substantially
all of the stock or assets of ENVOY in one or a series of related transactions
including through sale, consolidation, merger, business combination or similar
transaction, provided that there may be no more than one ENVOY Liquidity Event
and provided further that there shall be no ENVOY Liquidity Event after or
concurrent with a WebMD Liquidity Event.
(e) "Liquidity Event" means either an ENVOY Liquidity Event or a WebMD
Liquidity Event.
(f) "WebMD Liquidity Event" means the closing of a transaction pursuant
to which (i) WebMD consolidates with, merges into or engages in a business
combination or similar transaction, or a series of related transactions, with an
Acquirer with the effect that the persons who were the shareholders of WebMD
immediately prior to the effective time of such merger, consolidation or other
transaction hold, immediately following the consummation of such transaction,
less than 50% of the combined voting power of the surviving or resulting
corporation (or other entity) ordinarily (and apart from rights accruing
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under special circumstances) having the right to vote in the election of
directors; or (ii) all or substantially all of WebMD's assets or more than 50%
of its common stock are sold or otherwise transferred to any Acquirer.
(g) "WebMD Share Price" means the average of the volume weighted
average trading price per share of common stock of WebMD for the three
consecutive trading days up to and including the trading day that is two trading
days before the date of the Liquidity Event.
2. Delivery of Data
(a) Delivery of Data. WebMD will deliver and provide data to Quintiles,
at no charge, at all times as of and after the Effective Date and through
February 28, 2002 (the "Transition Period"), from the sources, in the manner and
in the de-identified, encrypted format (such format being the "Access
Specifications") as WebMD, ENVOY or any of WebMD's Affiliates (collectively,
"WebMD Companies" and each a "WebMD Company") has been providing under the Data
Rights Agreement and the Preliminary Injunction in the period immediately prior
to the Effective Date, for use by Quintiles internally and in data products. The
data to be delivered pursuant to this Agreement will be delivered free of any
liability to make any royalty payment and will be delivered completely without
charge or cost to Quintiles. The parties hereto agree that after February 28,
2002, Quintiles may continue to use the data previously provided, to the full
extent provided by law, all without any liability to make any royalty payment to
WebMD and all without any charge or cost to Quintiles. Nothing in this Section
2(a) is intended or shall be construed to relieve Quintiles of its obligations
under the Indemnification and Contribution Arrangement (as defined below).
(b) Suspension of Access to Data. Notwithstanding Section 2(a), if
during the Transition Period any existing or future customer of a WebMD Company
(a "WebMD Customer") requests in writing such WebMD Company to cease the flow of
data transmitted to or received from such customer by such WebMD Company to
Quintiles, WebMD may cease the flow of such data to Quintiles to the extent of
such written request, provided that WebMD delivers prompt written notice to
Quintiles of any such request and that WebMD continues or resumes providing such
suspended data (as the case requires) as soon as possible (but not later than
five (5) business days) after receiving authorization and instruction from such
customer to do so on such customer's behalf.
3. Customer Contact
During the Transition Period, the content of any communication by
Quintiles with any WebMD Customer during the Transition Period must be approved
by WebMD in writing, which approval will not be unreasonably withheld or
delayed. In addition, Quintiles agrees to notify WebMD in advance of any such
communication. During the Transition Period, any communication or action with
WebMD Customers by Quintiles and WebMD must be consistent with each party's
desire to maintain good relations with such customers and must not impair either
party's relationship with such customers, provided that this Section 3 is
neither intended to be nor shall be construed as creating an agreement not to
solicit each other's customers (except as provided by this Section 3) or not to
compete. No non-solicitation, except as provided by this Section 3, or
non-competition rights or obligations are imposed on either party by this
Agreement.
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4. Post-Transition Period
After the Transition Period, WebMD shall have no further obligation to
provide data to Quintiles, nor shall WebMD initiate action with a court or
governmental authority that is intended to restrict, prohibit, or otherwise
impair Quintiles' use of data provided on or prior to February 28, 2002;
provided, however, that nothing in this Section 4 or elsewhere in this Agreement
shall be construed to prevent WebMD from (i) responding truthfully to inquiries
from third parties; (ii) providing documents, information or testimony in
response to subpoenas and other requests from governmental authorities or in
connection with judicial or administrative proceedings; or (iii) raising any
claim or defense in connection with enforcement or other actions initiated by
governmental authorities or lawsuits filed by consumers, customers or other
parties.
5. Purchase of WebMD Stock Owned by Quintiles
WebMD agrees to purchase and Quintiles agrees to sell thirty-five
million (35,000,000) shares of WebMD common stock, par value $.0001 per share,
now held by Quintiles (the "Shares") for a purchase price of One Hundred
Eighty-Five Million Dollars ($185,000,000) in immediately available funds. As
soon as practicable following execution of this Agreement, not to exceed three
(3) business days, Quintiles shall transfer its entire title, interest and
ownership rights in the Shares to WebMD by delivery to WebMD or its designee of
share certificate(s) evidencing the Shares and endorsed for transfer to WebMD,
against (and contingent upon) payment of the purchase price therefor by WebMD by
certified check, wire transfer or such other form of payment in same day funds
as shall be mutually agreed upon by Quintiles and WebMD. Quintiles shall deliver
to WebMD all certificates representing the Shares free and clear of any
Encumbrances. WebMD hereby waives any applicable transfer restrictions contained
in Section 8.13 of the Merger Agreement solely to permit the sale of Shares by
Quintiles to WebMD.
6. Quintiles' Liquidity Event Recapture Rights
(a) If (i) a Liquidity Event occurs on or before June 30, 2003 or (ii)
on or before June 30, 2003, WebMD enters into a written definitive agreement
with an Acquirer to consummate a Liquidity Event that closes on or before June
30, 2004, WebMD shall pay Quintiles (in the manner specified below) 100% of the
Liquidity Event Price Difference (defined below) upon the closing of such
Liquidity Event. If on or before June 30, 2004, but after June 30, 2003, WebMD
enters into a written definitive agreement with an Acquirer to consummate a
Liquidity Event that closes on or before June 30, 2004, WebMD shall pay
Quintiles (in the manner specified below) 80% of the Liquidity Event Price
Difference upon the closing of such Liquidity Event.
(b) The Liquidity Event Price Difference will equal:
(i) in the case of a WebMD Liquidity Event, (x) the amount by
which the purchase price per WebMD common share applicable to such
WebMD Liquidity Event exceeds Four Dollars ($4.00) per share times (y)
thirty-five million (35,000,000); or
(ii) in the case of an ENVOY Liquidity Event, 10% of the
amount by which the sale price applicable to such Envoy Liquidity Event
exceeds Five Hundred Million Dollars ($500,000,000).
(c) If a WebMD Liquidity Event occurs, upon the closing of such WebMD
Liquidity Event, WebMD will pay Quintiles the appropriate amount, as determined
pursuant to Sections 6(a) and 6(b) above, at WebMD's option in cash or WebMD
common stock. If WebMD pays Quintiles in WebMD
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common stock, such common stock shall be delivered immediately prior to the
closing of such WebMD Liquidity Event and shall be exchanged as part of such
WebMD Liquidity Event for the same consideration received by other WebMD
shareholders upon the occurrence of the WebMD Liquidity Event and such
consideration will have the same degree of transferability and in all respects
be the same as that received by other non-Affiliate shareholders of WebMD,
provided that WebMD's obligation to pay the Liquidity Event Price Difference for
such WebMD Liquidity Event shall be satisfied if WebMD pays Quintiles the lesser
of (i) the number of shares of WebMD common stock otherwise payable under this
Section 6 and (ii) 35,000,000 shares of WebMD common stock.
(d) If an ENVOY Liquidity Event occurs, upon the closing of such ENVOY
Liquidity Event, WebMD will pay Quintiles the appropriate amount, as determined
pursuant to Sections 6(a) and 6(b) above, at WebMD's option in cash or the
consideration received by WebMD in such ENVOY Liquidity Event or WebMD common
stock (which is freely transferable or subject to an effective resale
registration statement). If WebMD pays Quintiles in the consideration received
by WebMD, such consideration shall have the same degree of transferability and
in all respects be the same as that received by WebMD. If WebMD pays Quintiles
in WebMD common stock, WebMD's obligation to pay the Liquidity Event Price
Difference for such Envoy Liquidity Event shall be satisfied if WebMD pays
Quintiles the lesser of (i) the number of shares of WebMD common stock otherwise
payable under this Section 6 and (ii) 35,000,000 shares of WebMD common stock.
(e) If the WebMD Liquidity Event is the first Liquidity Event to occur
following the date hereof or if a WebMD Liquidity Event occurs concurrent with
an ENVOY Liquidity Event, Quintiles will be entitled to the appropriate amount,
as determined pursuant to Sections 6(a) and 6(b) above, only with respect to the
WebMD Liquidity Event. If an ENVOY Liquidity Event occurs prior to any WebMD
Liquidity Event, the amount of any Liquidity Event Price Difference otherwise
payable by WebMD pursuant to Sections 6(a) and 6(b) above to Quintiles in
respect of a subsequent WebMD Liquidity Event shall be reduced by the prior
amount of any Liquidity Event Price Difference paid by WebMD to Quintiles in
respect of the ENVOY Liquidity Event (except that such reduction shall be
appropriately adjusted to the extent WebMD has made a special distribution to
its shareholders of the consideration received in the ENVOY Liquidity Event).
For the avoidance of doubt, this Section is intended to prevent double payment
to the extent of any amount actually paid by WebMD to Quintiles in respect of an
ENVOY Liquidity Event.
(f) Quintiles' rights to receive any and all payments under this
section will terminate following the occurrence of any WebMD Liquidity Event
(except with respect to such WebMD Liquidity Event) whether or not such WebMD
Liquidity Event gives rise to the payment of a Liquidity Event Price Difference
under this Agreement. For the avoidance of doubt, a Liquidity Event shall not
include any action by WebMD or its Affiliates designed to create an artificial
Liquidity Event avoiding or seeking to avoid the observance or performance of
any of WebMD's obligations regarding the Liquidity Event recapture rights of
Quintiles set forth in this Agreement, including but not limited to, by means of
amendment of WebMD's or an Affiliate's articles of incorporation,
reorganization, transfer of capital stock or assets, consolidation, dissolution,
issue or sale of securities or any other similar action.
(g) If, at any time after the date hereof, WebMD shall (i) pay a
dividend or make a distribution on its common stock in additional shares of
common stock, (ii) subdivide its outstanding shares of common stock into a
larger number of shares of common stock, or (iii) combine its outstanding shares
of common stock into a smaller number of shares of common stock, the Liquidity
Event Price Difference (including the price per share and the number of shares
referred to in Sections 6(b), (c) and (d)) shall be adjusted appropriately, The
adjustments required by this Section 6(g) shall be made whenever and as often as
any specified event requiring an adjustment shall occur, so that a calculation
of
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a Liquidity Event Price Difference made immediately before and immediately after
the event or the record date therefor, as, applicable, requiring adjustment
would be the same.
(h) The following provisions shall apply:
For purposes of Section 6(b)(i), the "purchase price per WebMD common
share" in a WebMD Liquidity Event shall be (A) the cash amount per share paid by
the Acquirer acquiring such shares (or otherwise received by holders of WebMD
common stock), in the event of an acquisition of WebMD common stock for cash;
(B) an amount equal to the WebMD Share Price, in the event of an acquisition of
WebMD common stock for securities or cash and securities of an Acquirer; or (C)
in the case of an acquisition of all or substantially all of the assets of
WebMD, the fair market value, as determined in good faith by the board of
directors of WebMD (and subject to the dispute resolution set forth below) on
the day before the date of the WebMD Liquidity Event, of the consideration paid
by the Acquirer acquiring all or substantially all of the assets of WebMD
divided by the total number of outstanding shares of common stock of WebMD on a
fully diluted basis (using the Treasury method for any unexercised options).
For purposes of Section 6(b)(ii) the "sale price" in an ENVOY Liquidity
Event shall be the fair market value, as determined in good faith by the board
of directors of WebMD (and subject to the dispute resolution set forth below) on
the day before the ENVOY Liquidity Event, of the consideration paid by the
Acquirer acquiring all or substantially all of the assets of ENVOY. If WebMD
elects to pay the Liquidity Event Price Difference in the form of the
consideration received in an ENVOY Liquidity Event, the value of such
consideration shall be the fair market value of such consideration as determined
pursuant to the immediately preceding sentence.
In the event Quintiles disputes the determination of the fair market
value made by the board of directors of WebMD upon the occurrence of a Liquidity
Event, then WebMD and Quintiles shall jointly appoint a nationally recognized
accounting firm to determine such fair market value and such determination shall
be final and binding upon the parties. In the event the parties cannot agree on
the appointment of such accounting firm within ten (10) days of the commencement
of the dispute, the parties agree that such appointment shall be referred to the
American Arbitration Association for determination.
If WebMD elects to pay the Liquidity Event Price Difference in the form
of WebMD common stock, the value of each such share of common stock shall be the
WebMD Share Price.
7. Entry of Voluntary Dismissal with Prejudice
Quintiles and WebMD shall cause their respective attorneys of record to
sign and to present to the U.S. District Court for the Eastern District of North
Carolina for entry of a conditional voluntary dismissal with prejudice in the
form attached hereto as Exhibit 1 (the "Voluntary Dismissal"). Such Voluntary
Dismissal shall be entered as soon as practicable after the Closing. Immediately
upon approval and entry of the Voluntary Dismissal by the Court, the parties
shall cause their respective attorneys of record to sign and file with the U.S.
Court of Appeals for the 4th Circuit a motion voluntarily dismissing the Appeal
with prejudice, with each side to bear its own costs and attorneys' fees, all in
the form as attached hereto as Exhibit 4. Notwithstanding the entry of the
Voluntary Dismissal, this Agreement and all terms and conditions hereof shall
survive and be enforceable against the parties. In the event the Court declines
to enter the Voluntary Dismissal in the form proposed, Quintiles and WebMD agree
to retract the proposed Voluntary Dismissal, in which case WebMD and the other
defendants shall not serve an Answer or otherwise respond to Quintiles' Amended
Complaint, Quintiles shall not seek an entry of default or default judgment, the
parties shall not engage in discovery, the parties shall cooperate in placing
the Litigation and Appeal in abeyance during the Transition Period, and the
parties shall, immediately after
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the expiration of the Transition Period, execute and file a stipulation of
dismissal with prejudice of both the Litigation and Appeal wherein the parties
shall each bear their own respective costs and attorneys' fees. In the event of
a delay by the Court in entering the Voluntary Dismissal, WebMD shall consent to
such motion or motions by Quintiles for extension(s) of time to file and serve
Quintiles' responsive brief in the Appeal as Quintiles may reasonably require.
8. Termination of Agreements
Effective upon Closing, the parties agree as follows:
(a) without further action the Data Rights Agreement will terminate and
be of no further force or effect.
(b) without further action the Temporary Addendum will terminate and be
of no further force or effect.
(c) without further action the Internet Agreement will terminate and be
of no further force or effect.
(d) without further action the Tax Sharing Agreement will terminate and
be of no further force or effect. The parties hereby acknowledge and agree that
Quintiles intends to claim all available federal, state and local income tax
deductions for compensation expenses incurred with respect to the exercise of
Quintiles stock options by any current or former employee of (or service
provider to) ENVOY or any of its subsidiaries, and WebMD covenants not to file
any tax returns or take any reporting positions inconsistent with this Section
8(d).
(e) without further action the Warrant will terminate and be of no
further force or effect.
Following Closing, except as otherwise provided herein and
notwithstanding any provisions to the contrary contained in any of the
agreements so terminated (including without limitation survival provisions),
there will be no outstanding obligations, including without limitation any
payment obligations, on the part of either Quintiles or WebMD under any of the
agreements so terminated.
9. Transfer of Software
(a) Upon Closing, WebMD will deliver the Software, as defined in the
Temporary Addendum (including without limitation the MD-5 hashing program), in
source code together with installation instructions, Initialization Vector
documentation (as defined in the Temporary Addendum) and all other related
documentation that ENVOY has prepared to Perot Systems Corporation, 12404 Park
Central Drive, Dallas, Texas 75251, Attention: Mr. Paul Lake (the "Trusted Third
Party"). WebMD will reasonably cooperate with Quintiles and the Trusted Third
Party in connection with the delivery of the Software, installation on the
Trusted Third Party's server and verification that the Software is successfully
functioning after such installation.
(b) Quintiles and the Trusted Third Party have executed an agreement,
dated October 5, 2001, whereby the Trusted Third Party has agreed not to deliver
the Software to Quintiles and not to re-identify any de-identified data.
(c) WebMD will retain a copy of the Software as provided under the
Software License Agreement, dated as of May 26, 2000 by and between the parties
(the "Software License") solely to continue to de-identify data between the date
hereof and March 1, 2002. Notwithstanding Section 6.1 of
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the Software License Agreement the license granted thereunder will extend until
March 1, 2002. Section 6.2 of the Software License is further amended to require
WebMD to (a) cease using the Software on March 1, 2002, and (b) certify to
Quintiles within ten (10) days that (1) WebMD has, at the election of Quintiles,
either delivered to the Trusted Third Party or destroyed all copies of the
Software and (2) that the licensed copy has not been copied or used for any
other purpose.
10. Indemnification
Effective upon Closing, without any further action by either party,
WebMD and Quintiles agree to abide by the terms of the Indemnification and
Contribution Arrangement incorporated herein by reference and attached hereto as
Exhibit 2 (the "Indemnification and Contribution Arrangement").
11. Limitation of Liability
Neither party will be liable to the other for indirect, incidental,
consequential, punitive or special damages, including damages for lost profits,
business interruption or loss of business information. This limitation will not
apply (i) in the event WebMD willfully refuses to provide Quintiles with the
data in accordance with the terms hereof, (ii) to the Indemnification and
Contribution Arrangement, as described in Section 10 above, and (iii) to the
confidentiality provisions relating to the protection of WebMD customer
information.
12. General Mutual Release
(a) Upon Closing and except as provided in Section 12(d), WebMD (for
itself and its subsidiaries, and its and their respective successors and
assigns, and any persons or entities controlling, controlled by or under common
control with, WebMD) and each of ENVOY, Martin J. Wygod and W. Michael Long (the
"WebMD Releasors") hereby release and forever discharge Quintiles and Quintiles'
directors, officers, shareholders, present and former parent corporations,
present and former subsidiary corporations, present and former sister
corporations, present and former affiliated entities, principals, employees,
insurers, subrogors, subrogees, predecessors, successors, assigns, agents,
attorneys, and any persons controlling, controlled by or under common control
with, Quintiles (hereinafter the "Quintiles Released Parties"), from (i) any and
all actions, causes of actions, suits, debts, dues, sums of money, accounts,
costs, contracts, agreements, controversies, liens, damages, judgments, claims
and demands whatsoever whether in law or in equity, whether known or unknown,
which the WebMD Releasors ever had or now have against the Quintiles Released
Parties, or any one or group of the Quintiles Released Parties, for any reason
whatsoever and (ii) any and all actions, causes of actions, suits, debts, dues,
sums of money, accounts, costs, contracts, agreements, controversies, liens,
damages, judgments, claims and demands whatsoever whether in law or in equity,
whether known or unknown, which the WebMD Releasors ever had, now have or may in
the future have against the Quintiles Released Parties, or any one or group of
the Quintiles Released Parties arising from or relating to:
(1) The Litigation (or matters which could have been alleged
in the Litigation);
(2) The Appeal (or matters which could have been alleged in
the Appeal);
(3) The Data Rights Agreement and the Temporary Addendum,
including but not limited to any representation or warranty thereunder;
any party's performance or non-performance of any obligation
thereunder; the transmittal of data thereunder by WebMD to Quintiles;
and any amount due and payable or alleged to be due and payable
thereunder by any party;
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(4) The Internet Agreement, including but not limited to any
representation or warranty thereunder; any party's performance or
non-performance any obligation thereunder; and any amount due and
payable or alleged to be due and payable thereunder by any party;
(5) The Tax Sharing Agreement;
(6) The Warrant;
(7) Any claim arising in whole or in part from, or relating in
any way to, the acquisition, purchase, ownership, sale or disposition
of WebMD, ENVOY or Quintiles securities.
The release set forth in this Section 12 is agreed to by the WebMD Releasors
with full knowledge and understanding on the part of the WebMD Releasors that
there may be more serious consequences, damages, or injuries than alleged or
perceived in the Litigation or the Appeal.
(b) Upon Closing and except as provided in Section 12(d), Quintiles
(for itself and its subsidiaries, and its and their respective successors and
assigns, and any persons or entities controlling, controlled by or under common
control with, Quintiles) and Dennis B. Gillings (the "Quintiles Releasors")
hereby release and forever discharge WebMD and WebMD's directors, officers,
shareholders, present and former parent corporations, present and former
subsidiary corporations, present and former sister corporations, present and
former affiliated entities, principals, employees, insurers, subrogors,
subrogees, predecessors, successors, assigns, agents, attorneys, and any persons
controlling, controlled by or under common control with, WebMD (including, but
not limited to, ENVOY, Martin J. Wygod and W. Michael Long) (hereinafter the
"WebMD Released Parties"), from (i) any and all actions, causes of actions,
suits, debts, dues, sums of money, accounts, costs, contracts, agreements,
controversies, liens, damages, judgments, claims and demands whatsoever whether
in law or in equity, whether known or unknown, which the Quintiles Releasors
ever had or now have against the WebMD Released Parties, or any one or group of
the WebMD Released Parties, for any reason whatsoever and (ii) any and all
actions, causes of actions, suits, debts, dues, sums of money, accounts, costs,
contracts, agreements, controversies, liens, damages, judgments, claims and
demands whatsoever whether in law or in equity, whether known or unknown, which
the Quintiles Releasors ever had, now have or may in the future have against the
WebMD Released Parties, or any one or group of the WebMD Released Parties
arising from or relating to:
(1) The Litigation (or matters which could have been alleged
in the Litigation);
(2) The Appeal (or matters which could have been alleged in
the Appeal);
(3) The Data Rights Agreement and the Temporary Addendum,
including but not limited to any representation or warranty thereunder;
any party's performance or non-performance of any obligation
thereunder; the transmittal of data thereunder by WebMD to Quintiles;
and any amount due and payable or alleged to be due and payable
thereunder by any party;
(4) The Internet Agreement, including but not limited to any
representation or warranty thereunder; any party's performance or
non-performance any obligation thereunder; and any amount due and
payable or alleged to be due and payable thereunder by any party;
(5) The Tax Sharing Agreement;
(6) The Warrant;
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(7) Any claim arising in whole or in part from, or relating in
any way to, the acquisition, purchase, ownership, sale or disposition
of WebMD, ENVOY or Quintiles securities.
The release set forth in this Section 12 is agreed to by the Quintiles Releasors
with full knowledge and understanding on the part of the Quintiles Releasors
that there may be more serious consequences, damages, or injuries than alleged
or perceived in the Litigation or the Appeal.
(c) The parties hereto acknowledge that the claims released herein
encompass any and all claims that each party does not know or suspect to exist
in its favor at the time of the release that, if known, might have affected that
party's decision to enter into this Settlement Agreement and the mutual releases
contained in this Section 12. As to any and all claims released herein, each
party shall be deemed to have expressly waived and relinquished, to the fullest
extent permitted by law, the provisions, rights and benefits of California Civil
Code Section 1542, which provides:
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.
Each party shall be deemed to waive any and all provisions, rights and benefits
conferred by any law or any state or territory of the United States, or
principle of common law, that is similar, comparable or equivalent to Section
1542 of the California Civil Code. Each party may hereafter discover facts
relating to the claims released herein in addition to or different from those
which such persons believed to be true on the date of the execution of this
Settlement Agreement. The claims released herein shall, nonetheless, be deemed
to be fully, finally and forever settled and released upon the execution of this
Settlement Agreement, without regard to the subsequent discovery or existence of
such additional or different facts.
(d) Nothing contained in this Section 12 shall release, acquit,
discharge, waive, relinquish, diminish, or modify:
(1) Any obligation, covenant, representation or warranty by
Quintiles or WebMD in this Agreement (including any exhibits or
attachment hereto) or any instrument required to be executed pursuant
to this Agreement;
(2) Any term or provision of the Voluntary Dismissal entered
in the Litigation by the Court;
(3) WebMD's obligations to indemnify officers and directors as
set forth in Section 8.12 of the Merger Agreement, except with respect
to those matters that are subject to Quintiles' indemnification
obligations described under the Indemnification and Contribution
Arrangement;
(4) Quintiles' indemnification obligation in connection with
the ENVOY class action litigation, as provided in Section 8.16 of the
Merger Agreement and in Schedule 8.16 of the ENVOY Disclosure Letter
delivered by Quintiles in connection with the Merger Agreement; or
(5) WebMD's obligations to indemnify Dennis B. Gillings,
pursuant to WebMD's Certificate of Incorporation, By-laws and the
Indemnification Agreement between WebMD and Dennis B. Gillings, as a
result of his having been a director of WebMD, except with respect to
those matters that are subject to Quintiles' indemnification
obligations described under the Indemnification and Contribution
Arrangement.
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13. Representations and Warranties by Quintiles
Quintiles represents and warrants to WebMD as follows:
(a) Quintiles has been represented in this matter by attorneys at law,
whom it has selected; it has consulted its respective legal counsel as to the
effects of this Agreement; it has received advice of its legal counsel as to the
effects of this Agreement; and it has had full opportunity to seek any other
advice it might consider to be desirable in connection with this matter.
(b) Quintiles has fully investigated to its own satisfaction all facts
surrounding the various claims, controversies, and disputes.
(c) Quintiles has read this Agreement; it is entering into this
Agreement freely and voluntarily; it has ascertained and weighed all facts and
circumstances likely to influence its judgment herein; it has given due
consideration to the provisions herein; it has been fully informed and has full
knowledge of the terms, conditions, and effects of this Agreement; it thoroughly
understands and consents to all provisions hereof; and it is fully satisfied
with the terms of this Agreement.
(d) No promise or agreement has been made by WebMD as a consideration
for this Agreement except as herein recited, and the execution hereof has not
been induced by any representation of WebMD except as herein recited.
(e) Quintiles has all requisite power and authority to execute, deliver
this Agreement and to perform the transactions contemplated herein; the
execution, delivery and performance of his Agreement does not, and the
consummation of the transactions contemplated herein will not, violate any
provision of Quintiles' Articles of Incorporation or By-laws or any applicable
law or regulation, or any agreement, mortgage, lease, instrument, order,
judgment, or decree to which Quintiles or any of its Affiliates is a party or by
which Quintiles or any of its Affiliates is bound.
(f) Quintiles has duly and properly taken all action required by law,
its Articles of Incorporation, its By-laws, or otherwise to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein; and when so executed, this Agreement
constitutes Quintiles' legal, valid and binding obligation in accordance with
the terms hereof.
(g) There has been no assignment, transfer, conveyance or other
disposition, in whole or in part, of any of the accounts, actions, agreements,
bills, bonds, causes of action, claims, contracts, controversies, covenants,
damages, debts, demands, doings, dues, executions, expense, indemnities,
judgments, liabilities, omission, promises, reckonings, suits, sums, sums of
money, trespasses, and variances, in law or in equity, released, relieved,
waived, relinquished, and discharged by this Agreement.
(h) This Agreement, when duly executed by Quintiles and WebMD, will
constitute legal, valid and binding obligations of Quintiles enforceable against
it in accordance with its terms.
(i) Quintiles is the true and lawful beneficial and record owner of the
Shares and has good and marketable title thereto, free and clear of mortgages,
pledges, liens, charges, security interests or other encumbrances (each, an
"Encumbrance"). Quintiles has full right and power and authority to sell,
transfer and deliver the Shares. Upon delivery of the purchase price as
contemplated in Section 5 of this Agreement, Quintiles will transfer to WebMD
valid and marketable title thereto, including all voting and other rights to the
Shares, free and clear of all Encumbrances. The Shares constitute all of
Quintiles' and its subsidiaries' shares of any class of stock, capital interest,
ownership rights or securities of or in
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WebMD, and after sale of the Shares, neither Quintiles nor any of its
subsidiaries will have any interest in WebMD. There are no outstanding options,
warrants, stock rights, agreements, contracts, puts, calls, commitments,
pre-emptive rights, or demands of any character to which Quintiles or any of its
subsidiaries is a party or under which Quintiles or its subsidiaries have any
rights relating to any capital stock or other securities of WebMD, and, except
for the restrictions contained in Section 8.13 of the Merger Agreement which
have been waived by this Agreement, there are no agreements to which Quintiles
is a party that restrict the transfer of shares or voting of the capital stock
of WebMD held by Quintiles. Neither Quintiles nor any of its subsidiaries has
granted to any person any proxies, powers of attorney, or similar rights or
powers with respect to Shares.
(j) Quintiles represents and warrants to WebMD that the Software will
not be used to "re-identify" data, unless pursuant to U.S. Federal government
instruction consistent with law where prior written notice (including a complete
explanation of the government instruction and reasons for it) is provided to
WebMD.
(k) Quintiles has had access to such information from WebMD regarding
the sale of the Shares as it has requested.
(l) Quintiles has knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of the sale of the
Shares.
14. Representations and Warranties and Covenants by WebMD
WebMD represents and warrants and covenants to Quintiles as follows:
(a) WebMD has been represented in this matter by attorneys at law, whom
it has selected; it has consulted its respective legal counsel as to the effects
of this Agreement; it has received advice of its legal counsel as to the effects
of this Agreement; and it has had full opportunity to seek any other advice it
might consider to be desirable in connection with this matter.
(b) WebMD has fully investigated to its own satisfaction all facts
surrounding the various claims, controversies, and disputes.
(c) WebMD has read this Agreement; it is entering into this Agreement
freely and voluntarily; it has ascertained and weighed all facts and
circumstances likely to influence its judgment herein; it has given due
consideration to the provisions herein; it has been fully informed and has full
knowledge of the terms, conditions, and effects of this Agreement; it thoroughly
understands and consents to all provisions hereof; and it is fully satisfied
with the terms of this Agreement.
(d) No promise or agreement has been made by Quintiles as a
consideration for this Agreement except as herein recited, and the execution
hereof has not been induced by any representation by Quintiles except as herein
recited.
(e) WebMD has all requisite power and authority to execute, deliver
this Agreement and to perform the transactions contemplated herein; the
execution, delivery and performance of his Agreement does not, and the
consummation of the transactions contemplated herein will not, violate any
provision of WebMD's Articles of Incorporation or By-laws or any applicable law
or regulation, or any agreement, mortgage, lease, instrument, order, judgment,
or decree to which WebMD or any of its Affiliates is a party or by which WebMD
or any of its Affiliates is bound.
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<PAGE>
(f) WebMD has duly and properly taken all action required by law, its
Articles of Incorporation, its By-laws, or otherwise to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein; and when so executed, this Agreement
constitutes WebMD's legal, valid and binding obligation in accordance with the
terms hereof.
(g) There has been no assignment, transfer, conveyance or other
disposition, in whole or in part, of any of the accounts, actions, agreements,
bills, bonds, causes of action, claims, contracts, controversies, covenants,
damages, debts, demands, doings, dues, executions, expense, indemnities,
judgments, liabilities, omission, promises, reckonings, suits, sums, sums of
money, trespasses, and variances, in law or in equity, released, relieved,
waived, relinquished, and discharged by this Agreement.
(h) This Agreement, when duly executed by Quintiles and WebMD, will
constitute legal, valid and binding obligations of WebMD enforceable against it
in accordance with its terms.
(i) WebMD is an "accredited investor", as such term in defined in
Regulation D promulgated under the Securities Act of 1933, as amended.
(j) WebMD has had access to such information from Quintiles regarding
the purchase of the Shares as it has requested.
(k) WebMD has knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of the purchase of the
Shares and is able to bear the economic risks of the purchase of the Shares,
including without limitation, the risk of complete loss on its investment.
(l) WebMD acquired its interest in the Shares for its own account for
investment and not with a view to, or in connection with, any distribution of
such interest.
(m) WebMD has not acquired its interest in the Shares for another
entity.
15. Irreparable Harm
Quintiles and WebMD each acknowledge that its failure to abide by the
provisions of this Agreement would cause immediate and irreparable harm to the
other, for which legal remedies would be inadequate. Therefore, in addition to
any legal or other relief to which either party may be entitled by virtue of the
other party's failure to abide by these provisions, the injured party shall be
entitled to equitable relief, including but not limited to preliminary and
permanent injunctive relief and specific performance, for the other party's
actual or threatened failure to abide by these provisions.
16. Cooperation and Confidentiality
Quintiles and WebMD hereby agree to cooperate fully in good faith to
execute any and all supplementary documents and to take all additional actions
not inconsistent with the terms set forth in this Agreement that are necessary
and appropriate to give full force and effect to the terms and intent of this
Agreement. Quintiles will not attempt to re-identify, or authorize third parties
to attempt to re-identify, any de-identified data received from any WebMD
Company, and will not disclose any confidential information of any WebMD
Customer to any third party except pursuant to a binding confidentiality
agreement with such third party, unless pursuant to U.S. Federal government
instruction consistent with law where prior written notice (including a complete
explanation of the government instruction and reasons for it) is provided to
WebMD. Furthermore, Quintiles will not use any confidential information
regarding the business relationship between WebMD and a WebMD Customer that it
received from a
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WebMD Company, such as claims transaction volume for such customer, for the
purpose of engaging in the claims clearinghouse business or disclose such
information to a claims clearinghouse.
17. Compliance with Emergency Requests
In the event that the U.S. government seeks to obtain certain data
products from Quintiles to assist it in confronting a national emergency, the
parties agree to work together in good faith for WebMD to provide Quintiles data
for use in such data products, consistent with legal requirements. If Quintiles
seeks compensation for providing such data products to the U.S. government, the
parties agree to share the operating income generated from their sale as
follows: 70% to Quintiles and 30% to WebMD. If the parties do not work together
in this area, then no payments shall be due WebMD in such area. The parties
acknowledge that this Section 17 is an expression of intent and neither party is
bound by this Section 17 or obligated in any way with respect to it.
18. Public Announcement
Quintiles and WebMD hereby agree to issue the joint press release
attached hereto as Exhibit 3 as soon as practicable following the execution of
this Agreement.
19. Binding Effect
The warranties and representations contained in this Agreement and the
documents referenced herein shall survive the Closing anticipated herein. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing herein shall be construed
to limit Quintiles' right to transfer or assign to others for lawful use the
data it receives hereunder or under the Data Rights Agreement. The individual
Released Parties identified in Section 12 above and the Indemnified Parties
identified in the Indemnification and Contribution Arrangement shall be intended
third party beneficiaries with respect to the rights and obligations contained
in the mutual release (in the case of such Released Parties) and Indemnification
and Contribution Arrangement (in the case of such Indemnified Parties) and shall
be entitled to rely upon and enforce the terms and conditions of that provision.
20. Applicable Law
This Agreement shall be governed by and shall be construed and
interpreted according to the laws of the State of Delaware, without reference to
any conflicts of law principles that would operate to make the internal laws of
any other jurisdiction applicable and the parties consent to the exclusive
jurisdiction and venue of the state and federal courts of Delaware to adjudicate
any claims pursuant to this Agreement; provided however, that the
Indemnification and Contribution Arrangement shall be governed by and shall be
construed and interpreted according to the laws of the State of New York,
without reference to any conflicts of law principles that would operate to make
the internal laws of any other jurisdiction applicable and the parties consent
to the exclusive jurisdiction and venue of the state and federal courts of New
York to adjudicate any claims pursuant to the Indemnification and Contribution
Arrangement.
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21. Entire Agreement
This Agreement, together with the exhibits and attachments hereto,
constitutes the entire understanding among and between the parties hereto
concerning the subject matter set forth herein, and this Agreement supersedes
any and all prior understandings, written or oral, and any and all
contemporaneous oral understandings, pertaining to the subject matter set forth
herein. The terms of this Agreement are contractual and not a mere recital.
22. Modification
This Agreement shall not be altered, amended, modified or rescinded
except by an instrument in writing signed by each of the parties.
23. Severability
If, after the date hereof, any provision of this Agreement, is for any
reason found or held to be illegal, invalid or unenforceable under present or
future laws, such provision shall be fully severable and such finding and/or
holding shall not affect the legality, validity or enforceability of the
remaining portions of this Agreement. In lieu of any such illegal, invalid or
unenforceable provision, a substitute or similar provision that is legal, valid
and enforceable shall be supplied by agreement of the parties, to the extent
possible.
24. Descriptive Headings
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
25. Drafting
Each party acknowledges that it has participated in the negotiation and
drafting of this Agreement, and agrees that this Agreement shall be construed
without regard to the identity(s) of those who drafted the various provisions,
that each and every provision of this Agreement shall be construed as though all
of the parties participated equally in the drafting of them, and that any rule
of construction that a document is to be construed against, interpreted less
favorably toward, or applied to the disadvantage of any party hereto by reason
of such person having or being deemed to have structured, dictated, or drafted
such provision shall not apply to this Agreement.
26. Counterparts
This Agreement may be executed in two (2) counterpart copies, each of
which shall be deemed an original for all purposes. In making proof of this
Agreement, it shall not be necessary to produce or account in any way for the
other counterpart copy.
IN WITNESS WHEREOF, Quintiles and WebMD have executed this Agreement,
by and through their duly authorized representatives, each intending to be
legally bound.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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QUINTILES TRANSNATIONAL CORP.
By: /s/ Dennis Gillings (Signature)
--------------------------
Name: Dennis Gillings (Printed/Typed)
------------------------
Title: Chairman
-----------------------
ATTEST:
/s/ John Russell (CORPORATE SEAL)
------------------------------
Secretary
STATE OF NORTH CAROLINA
COUNTY OF DURHAM
I, a Notary Public, in and for said county and state, do hereby certify
that John S. Russell, Secretary of QUINTILES TRANSNATIONAL CORP., personally
appeared before me this day and acknowledged that by authority duly given and as
the act of the corporation, the foregoing was signed in its name by its
Secretary, sealed with its corporate seal and attested by its (Assistant)
Secretary.
Witness my hand and seal this 12th day of October, 2001.
(signature illegible)
-------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: 7/13/02
-------
16
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WEBMD CORPORATION
By: /s/ Anthony Vuolo (Signature)
--------------------------
Name: Anthony Vuolo (Printed/Typed)
------------------------
Title: Exec. VP & CFO
-----------------------
ATTEST:
/s/ Lewis Leicher (CORPORATE SEAL)
------------------------------
(Assistant) Secretary
STATE OF NEW JERSEY
COUNTY BERGEN
I, a Notary Public, in and for said county and state, do hereby certify
that Lewis Leicher, (Assistant) Secretary of WEBMD CORPORATION,
personally appeared before me this day and acknowledged that by authority duly
given and as the act of the corporation, the foregoing was signed in its name by
its Exec. VP & CFO, sealed with its corporate seal and attested by its
(Assistant) Secretary.
Witness my hand and seal this 12th day of October, 2001.
/s/ Michelle Rea
-------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: October 5, 2003
---------------
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ENVOY CORPORATION
By: /s/ Anthony Vuolo (Signature)
--------------------------
Name: Anthony Vuolo (Printed/Typed)
------------------------
Title: Exec. VP & CFO
-----------------------
ATTEST:
/s/ Charles A. Mele (CORPORATE SEAL)
------------------------------
(Assistant) Secretary
STATE OF NEW JERSEY
COUNTY BERGEN
I, a Notary Public, in and for said county and state, do hereby certify
that Charles A. Mele, (Assistant) Secretary of ENVOY CORPORATION,
personally appeared before me this day and acknowledged that by authority duly
given and as the act of the corporation, the foregoing was signed in its name by
its Exec. VP & CFO, sealed with its corporate seal and attested by its
(Assistant) Secretary.
Witness my hand and seal this 12th day of October, 2001.
/s/ Michelle Rea
-------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: October 5, 2003
---------------
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Each of the undersigned hereby agrees to be bound by the provisions of
Sections 7 and 12 they relate to such:
Undersigned:
/s/ Martin J. Wygod /s/ W. Michael Long
--------------------------------------- ------------------------------------
Martin J. Wygod, Individually W. Michael Long, Individually
/s/ Dennis B. Gillings
---------------------------------------
Dennis B. Gillings, Ph.D., Individually