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Medscape Terminates Relationship With Viacom

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Medscape, a provider of online medical information and healthcare applications, has terminated its exclusive relationship with Viacom, effectively eliminating the CBS Healthwatch brand. Under terms of its original agreement with Viacom, Medscape received advertising inventory, health news content and trademark license rights in exchange for shares of common stock.

As a part of the termination agreement, Medscape will return to Viacom the approximately $111 million outstanding balance of CBS advertising inventory it holds, which Medscape execs said the company carries on its books at the value of approximately $56.6 million.

In exchange, Viacom will pay Medscape $10 million in cash and will transfer to Medscape all 4,695,892 shares of MDLI stock that it now holds. These shares were issued by Medscape at the onset of the relationship and subsequently converted into shares of MDLI at the date of the merger of the former Medscape with MedicaLogic.

Viacom will also give up its board seat rights and Andrew Heyward, president of CBS News, will resign from Medscape's board of directors. According to Dan Barnathan, executive vice president of portal sales at Portland, Ore.-based Medscape, the termination of the partnership with Viacom now allows Medscape to better cross-promote its content from the Medscape Web site aimed at medical professionals with its newly revamped site aimed at consumers.

"Although [the] Medscape [site] was written for the professional medical community, we found that there was an appetite from consumers to get the same expert information," Barnathan said. The termination of the agreement will allow sponsors more flexibility on Medscape, allowing them to increase sponsorship packages and better target the Web site's upscale audience, Barnathan said.

In addition, Medscape will cease all uses of the CBS logo and trademark and the "Healthwatch" trademark after a short transition period. Beginning late last week, visitors to CBSHealthwatch.com were redirected to Medscape's consumer site, which is accessible at www.medscapehealth.com.